Release Details

McGrath RentCorp Announces Results for Fourth Quarter 2019

February 25, 2020 at 4:01 PM EST

Company Announces 12% Dividend Increase; 29th Consecutive Year Increase

LIVERMORE, Calif., Feb. 25, 2020 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2019 of $147.2 million, an increase of 11%, compared to the fourth quarter of 2018.  The Company reported net income of $26.4 million, or $1.07 per diluted share, for the fourth quarter of 2019, compared to net income of $24.2 million, or $0.99 per diluted share, for the fourth quarter of 2018. 

Total revenues for the year ended December 31, 2019 increased to $570.2 million from $498.3 million in 2018, with income from operations increasing 20% to $141.4 million.  Net income for the year ended December 31, 2019 increased to $96.8 million, or $3.93 per diluted share, from $79.4 million, or $3.24 per diluted share, in 2018. 

The Company also announced that the board of directors declared a quarterly cash dividend of $0.42 per share for the quarter ending March 31, 2020, an increase of $0.045, or 12%, over the prior year period.  The cash dividend will be payable on April 30, 2020 to all shareholders of record on April 15, 2020.  This marks the 29th consecutive year the Company has increased its annual dividend.

FOURTH QUARTER 2019 COMPANY HIGHLIGHTS:

  • Income from operations increased 9% year-over-year to $38.2 million.
  • Rental revenues increased 8% year-over-year to $92.2 million.
  • Adjusted EBITDA1 increased 11% year-over-year to $63.7 million.   
  • Dividend rate increased 10% year-over-year to $0.375 per share for the fourth quarter of 2019.  On an annualized basis, this dividend represents a 1.9% yield on the February 24, 2020 close price of $78.54 per share.

Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:

“We were pleased with our fourth quarter 2019 results as our teams delivered impressive revenue and operating profit growth over the strong fourth quarter results of 2018.  The positive trends seen earlier in the year at Mobile Modular and TRS-RenTelco continued into the fourth quarter, more than offsetting weaker market demand conditions for Adler Tank Rentals. 

Full year results reflected overall healthy demand for the markets we serve, coupled with continued focus on performance improvement and disciplined capital allocation.  Our 20% growth in income from operations was driven by strong rental operations revenue growth of 13% and a notably strong year for equipment sales revenues, which grew by 19%.

Looking ahead we expect overall business conditions to support further growth for the Company in 2020, despite softer demand conditions for Adler Tank Rentals.  We will maintain our focus on performance improvement and execution, and I believe that we will continue to build upon 2019’s successes.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2019 to the quarter ended December 31, 2018 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2019, the Company’s Mobile Modular division reported income from operations of $23.9 million, an increase of $4.5 million, or 23%.  Rental revenues increased 14% to $48.6 million, depreciation expense increased 5% to $5.6 million and other direct costs increased 22% to $11.4 million, which resulted in an increase in gross profit on rental revenues of 13% to $31.5 million.  The rental revenue growth came from both commercial and education markets.   Rental related services revenues increased 16% to $16.4 million, with associated gross profit increasing 17% to $4.1 million.  Sales revenues increased 78% to $15.6 million and gross margin on sales increased to 30% from 28%, resulting in a 94% increase in gross profit on sales revenues to $4.7 million.  Selling and administrative expenses increased 19% to $17.7 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.

TRS-RENTELCO

For the fourth quarter of 2019, the Company’s TRS-RenTelco division reported income from operations of $9.5 million, an increase of $1.0 million, or 11%.  Rental revenues increased 15% to $27.7 million, depreciation expense increased 20% to $11.4 million and other direct costs increased 6% to $4.1 million, which resulted in a 14% increase in gross profit on rental revenues to $12.1 million.  The rental revenue growth came from both general purpose and communications test equipment market.  Sales revenues decreased 17% to $5.4 million.  Gross margin on sales increased to 62% from 47%, resulting in a 9% increase in gross profit on sales revenues to $3.3 million.  Selling and administrative expenses increased 8% to $6.5 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.

ADLER TANKS

For the fourth quarter of 2019, the Company’s Adler Tanks division reported income from operations of $3.4 million, a decrease of $1.9 million, or 36%.  Rental revenues decreased 13% to $16.0 million, depreciation expense increased 3% to $4.1 million and other direct costs decreased 1% to $2.7 million, which resulted in a decrease in gross profit on rental revenues of 21% to $9.1 million.  The rental revenue decrease was across all end markets.  Rental related services revenues increased 2% to $7.0 million, with gross profit on rental related services decreasing 2% to $1.4 million.  Selling and administrative expenses decreased 7% to $7.3 million, primarily due to decreased salaries and employee benefit costs.

FINANCIAL OUTLOOK:

For the full-year 2020, the Company expects:

  • Total revenue: $575 million - $595 million, compared to $570 million in 2019.
  • Adjusted EBITDA1: $240 million - $248 million, compared to $237 million in 2019.
  • Net capital expenditures2: $110 million to $120 million, compared to $135 million in 2019.
 

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.  A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
2. Net capital expenditure is purchases of rental equipment and property, plant and equipment less proceeds from sales of used rental equipment

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions.  The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions.  For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.com

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings.  You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.

CONFERENCE CALL NOTE:

As previously announced in its press release of January 27, 2020, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 25, 2020 to discuss the fourth quarter 2019 results.  To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/.  A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.).  The pass code for the conference call replay is 1079158.  In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements.  These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminologyIn particular, Mr. Hanna’s comments on the expectation of overall business conditions supporting further growth for the Company in 2020, despite softer demand conditions for Adler Tank Rentals, as well as the full year 2020 outlook in the “Financial Outlook” section are forward-looking. 

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and sold containment tank and box rental assets; continued execution of our performance improvement initiatives; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.

Forward-looking statements are made only as of the date hereof.  Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.


MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

    Three Months Ended December 31,     Twelve Months Ended December 31,  
(in thousands, except per share amounts)   2019     2018     2019     2018  
Revenues                                
Rental   $ 92,231     $ 85,091     $ 353,889     $ 318,774  
Rental related services     24,300       22,110       101,038       82,907  
Rental operations     116,531       107,201       454,927       401,681  
Sales     28,842       24,896       110,229       92,618  
Other     1,848       1,018       5,074       4,031  
Total revenues     147,221       133,115       570,230       498,330  
Costs and Expenses                                
Direct costs of rental operations:                                
Depreciation of rental equipment     21,169       18,852       80,391       73,139  
Rental related services     18,734       16,894       76,241       64,298  
Other     18,237       15,982       79,365       68,678  
Total direct costs of rental operations     58,140       51,728       235,997       206,115  
Costs of sales     18,084       16,284       68,068       58,964  
Total costs of revenues     76,224       68,012       304,065       265,079  
Gross profit     70,997       65,103       266,165       233,251  
Selling and administrative expenses     32,749       29,937       124,793       115,770  
Income from operations     38,248       35,166       141,372       117,481  
Other income (expense):                                
Interest expense     (2,924 )     (3,164 )     (12,331 )     (12,297 )
Foreign currency exchange gain (loss)     130       16       84       (489 )
Income before provision for income taxes     35,454       32,018       129,125       104,695  
Provision for income taxes     9,053       7,769       32,319       25,289  
Net income   $ 26,401     $ 24,249     $ 96,806     $ 79,406  
Earnings per share:                                
Basic   $ 1.09     $ 1.00     $ 3.99     $ 3.29  
Diluted   $ 1.07     $ 0.99     $ 3.93     $ 3.24  
Shares used in per share calculation:                                
Basic     24,290       24,179       24,250       24,141  
Diluted     24,697       24,514       24,623       24,540  
Cash dividends declared per share   $ 0.375     $ 0.340     $ 1.50     $ 1.36  
                                 


MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

    December 31,  
(in thousands)   2019     2018  
Assets                
Cash   $ 2,342     $ 1,508  
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2019 and 2018     128,099       121,016  
Rental equipment, at cost:                
Relocatable modular buildings     868,807       817,375  
Electronic test equipment     335,343       285,052  
Liquid and solid containment tanks and boxes     316,261       313,573  
      1,520,411       1,416,000  
Less accumulated depreciation     (552,911 )     (514,985 )
Rental equipment, net     967,500       901,015  
Property, plant and equipment, net     131,047       126,899  
Prepaid expenses and other assets     45,356       31,816  
Intangible assets, net     7,334       7,254  
Goodwill     28,197       27,808  
Total assets   $ 1,309,875     $ 1,217,316  
Liabilities and Shareholders' Equity                
Liabilities:                
Notes payable   $ 293,431     $ 298,564  
Accounts payable and accrued liabilities     109,174       90,844  
Deferred income     54,964       49,709  
Deferred income taxes, net     218,270       206,664  
Total liabilities     675,839       645,781  
Shareholders’ equity:                
Common stock, no par value - Authorized 40,000 shares                
Issued and outstanding - 24,296 shares as of December 31, 2019 and 24,182 shares as of December 31, 2018     106,360       103,801  
Retained earnings     527,746       467,783  
Accumulated other comprehensive loss     (70 )     (49 )
Total shareholders’ equity     634,036       571,535  
Total liabilities and shareholders’ equity   $ 1,309,875     $ 1,217,316  
                 

 


MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

    Twelve Months Ended December 31,
(in thousands)   2019     2018
Cash Flows from Operating Activities:                
Net income   $ 96,806     $ 79,406  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     89,476       81,975  
Impairment of rental assets           39  
Provision for doubtful accounts     1,013       581  
Share-based compensation     5,892       4,111  
Gain on sale of used rental equipment     (21,309 )     (19,559 )
Foreign currency exchange (gain) loss     (84 )     489  
Amortization of debt issuance costs     11       20  
Change in:                
Accounts receivable     (7,323 )     (15,725 )
Prepaid expenses and other assets     (13,530 )     (9,351 )
Accounts payable and accrued liabilities     20,298       (1,612
Deferred income     5,138       10,258  
Deferred income taxes     11,606       12,035  
Net cash provided by operating activities     187,994       142,667  
Cash Flows from Investing Activities:                
Purchases of rental equipment     (167,703 )     (123,071 )
Purchases of property, plant and equipment     (12,080 )     (15,664
Cash paid for acquisition of business assets     (7,808 )     (7,543
Proceeds from sales of used rental equipment     44,447       41,786  
Net cash used in investing activities     (143,144 )     (104,492 )
Cash Flows from Financing Activities:                
Net borrowings (repayment) under bank lines of credit     (5,144 )     15,130  
Principal payments on Series A senior notes           (20,000 )
Taxes paid related to net share settlement of stock awards     (3,333 )     (3,257)  
Payment of dividends     (35,539 )     (30,939 )
Net cash used in financing activities     (44,016 )     (39,066 )
Effect of foreign currency exchange rate changes on cash           (102 )
Net increase (decrease) in cash     834       (993
Cash balance, beginning of period     1,508       2,501  
Cash balance, end of period   $ 2,342     $ 1,508  
Supplemental Disclosure of Cash Flow Information:                
Interest paid, during the period   $ 12,475     $ 12,598  
Net income taxes paid, during the period   $ 17,528     $ 18,157  
Dividends accrued during the period, not yet paid   $ 9,489     $ 8,388  
Rental equipment acquisitions, not yet paid   $ 6,496     $ 9,695  
                 

 


MCGRATH RENTCORP                                                
BUSINESS SEGMENT DATA (unaudited)                                                
Three months ended December 31, 2019                                                
(dollar amounts in thousands)   Mobile Modular       TRS-RenTelco       Adler Tanks   Enviroplex   Consolidated
                                                 
Revenues                                                
Rental   $ 48,580         $ 27,654         $ 15,997     $     $ 92,231  
Rental related services     16,449           835           7,016             24,300  
Rental operations     65,029           28,489           23,013             116,531  
Sales     15,642           5,361           263       7,576       28,842  
Other     1,223           557           68             1,848  
Total revenues     81,894           34,407           23,344       7,576       147,221  
                                                 
Costs and Expenses                                                
Direct costs of rental operations:                                                
Depreciation     5,622           11,415           4,132             21,169  
Rental related services     12,333           783           5,618             18,734  
Other     11,415           4,097           2,725             18,237  
Total direct costs of rental operations     29,370           16,295           12,475             58,140  
Costs of sales     10,935           2,037           235       4,877       18,084  
Total costs of revenues     40,305           18,332           12,710       4,877       76,224  
                                                 
Gross Profit                                                
Rental     31,543           12,142           9,140             52,825  
Rental related services     4,116           52           1,398             5,566  
Rental operations     35,659           12,194           10,538             58,391  
Sales     4,707           3,324           28       2,699       10,758  
Other     1,223           557           68             1,848  
Total gross profit     41,589           16,075           10,634       2,699       70,997  
Selling and administrative expenses     17,686           6,544           7,267       1,252       32,749  
Income from operations   $ 23,903         $ 9,531         $ 3,367     $ 1,447     $ 38,248  
Interest expense                                             (2,924 )
Foreign currency exchange gain                                             130  
Provision for income taxes                                             (9,053 )
Net income                                           $ 26,401  
                                                 
Other Information                                                
Average rental equipment 1   $ 813,535         $ 328,038         $ 314,906                  
Average monthly total yield 2     1.99 %         2.81 %         1.69 %                
Average utilization 3     79.3 %         66.8 %         50 %                
Average monthly rental rate 4     2.51 %         4.2 %         3.39 %                

 

1. Average rental equipment represents the cost of rental equipment excluding accessory equipment.  For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.


MCGRATH RENTCORP                                        
BUSINESS SEGMENT DATA (unaudited)                                        
Three months ended December 31, 2018                                        
(dollar amounts in thousands)   Mobile Modular   TRS-RenTelco   Adler Tanks   Enviroplex   Consolidated
                                         
Revenues                                        
Rental   $ 42,700     $ 24,018     $ 18,373     $     $ 85,091  
Rental related services     14,186       1,013       6,911             22,110  
Rental operations     56,886       25,031       25,284             107,201  
Sales     8,773       6,493       415       9,215       24,896  
Other     302       606       110             1,018  
Total revenues     65,961       32,130       25,809       9,215       133,115  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     5,359       9,475       4,018             18,852  
Rental related services     10,670       742       5,482             16,894  
Other     9,352       3,865       2,765             15,982  
Total direct costs of rental operations     25,381       14,082       12,265             51,728  
Costs of sales     6,345       3,430       520       5,989       16,284  
Total costs of revenues     31,726       17,512       12,785       5,989       68,012  
                                         
Gross Profit (Loss)                                        
Rental     27,989       10,678       11,590             50,257  
Rental related services     3,516       271       1,429             5,216  
Rental operations     31,505       10,949       13,019             55,473  
Sales     2,428       3,063       (105 )     3,226       8,612  
Other     302       606       110             1,018  
Total gross profit     34,235       14,618       13,024       3,226       65,103  
Selling and administrative expenses     14,826       6,043       7,781       1,287       29,937  
Income from operations   $ 19,409     $ 8,575     $ 5,243     $ 1,939       35,166  
Interest expense                                     (3,164 )
Foreign currency exchange gain                                     16  
Provision for income taxes                                     (7,769 )
Net income                                   $ 24,249  
                                         
Other Information                                        
Average rental equipment 1   $ 770,355     $ 284,959     $ 311,815                  
Average monthly total yield 2     1.85 %     2.81 %     1.96 %                
Average utilization 3     79.2 %     63.1 %     61 %                
Average monthly rental rate 4     2.33 %     4.45 %     3.22 %                

 

1. Average rental equipment represents the cost of rental equipment excluding accessory equipment.  For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. 


MCGRATH RENTCORP                                                        
BUSINESS SEGMENT DATA (unaudited)                                                        
Twelve months ended December 31, 2019                                                        
(dollar amounts in thousands)   Mobile Modular         TRS-RenTelco         Adler Tanks         Enviroplex         Consolidated  
                                                         
Revenues                                                        
Rental   $ 182,316         $ 103,704         $ 67,869         $         $ 353,889  
Rental related services     69,395           3,260           28,383                     101,038  
Rental operations     251,711           106,964           96,252                     454,927  
Sales     47,043           22,106           1,266           39,814           110,229  
Other     2,256           2,413           405                     5,074  
Total revenues     301,010           131,483           97,923           39,814           570,230  
                                                         
Costs and Expenses                                                        
Direct costs of rental operations:                                                        
Depreciation     22,071           41,948           16,372                     80,391  
Rental related services     51,787           2,791           21,663                     76,241  
Other     51,136           16,303           11,926                     79,365  
Total direct costs of rental operations     124,994           61,042           49,961                     235,997  
Costs of sales     32,398           9,693           948           25,029           68,068  
Total costs of revenues     157,392           70,735           50,909           25,029           304,065  
                                                         
Gross Profit                                                        
Rental     109,109           45,453           39,571                     194,133  
Rental related services     17,608           469           6,720                     24,797  
Rental operations     126,717           45,922           46,291                     218,930  
Sales     14,645           12,413           318           14,785           42,161  
Other     2,256           2,413           405                     5,074  
Total gross profit     143,618           60,748           47,014           14,785           266,165  
Selling and administrative expenses     65,699           24,645           29,321           5,128           124,793  
Income from operations   $ 77,919         $ 36,103         $ 17,693         $ 9,657         $ 141,372  
Interest expense                                                     (12,331 )
Foreign currency exchange gain                                                     84  
Provision for income taxes                                                     (32,319 )
Net income                                                   $ 96,806  
                                                         
Other Information                                                        
Average rental equipment 1   $ 795,250         $ 306,426         $ 313,810                          
Average monthly total yield 2     1.9 %         2.82 %         1.8 %                        
Average utilization 3     79.2 %         66.2 %         54.7 %                        
Average monthly rental rate 4     2.41 %         4.26 %         3.29 %                        

 

1. Average rental equipment represents the cost of rental equipment excluding accessory equipment.  For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. 


MCGRATH RENTCORP                                        
BUSINESS SEGMENT DATA (unaudited)                                        
Twelve months ended December 31, 2018                                        
(dollar amounts in thousands)   Mobile Modular     TRS-RenTelco     Adler Tanks     Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 159,136     $ 89,937     $ 69,701     $     $ 318,774  
Rental related services     54,696       3,300       24,911             82,907  
Rental operations     213,832       93,237       94,612             401,681  
Sales     39,467       23,061       1,044       29,046       92,618  
Other     1,275       2,359       397             4,031  
Total revenues     254,574       118,657       96,053       29,046       498,330  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     21,200       36,011       15,928             73,139  
Rental related services     41,701       2,698       19,899             64,298  
Other     42,812       14,699       11,167             68,678  
Total direct costs of rental operations     105,713       53,408       46,994             206,115  
Costs of sales     28,111       10,476       1,004       19,373       58,964  
Total costs of revenues     133,824       63,884       47,998       19,373       265,079  
                                         
Gross Profit                                        
Rental     95,123       39,227       42,607             176,957  
Rental related services     12,995       602       5,012             18,609  
Rental operations     108,118       39,829       47,619             195,566  
Sales     11,357       12,585       39       9,673       33,654  
Other     1,275       2,359       397             4,031  
Total gross profit     120,750       54,773       48,055       9,673       233,251  
Selling and administrative expenses     58,017       22,823       30,026       4,904       115,770  
Income from operations   $ 62,733     $ 31,950     $ 18,029     $ 4,769     $ 117,481  
Interest expense                                     (12,297 )
Foreign currency exchange loss                                     (489 )
Provision for income taxes                                     (25,289 )
Net income                                   $ 79,406  
                                         
Other Information                                        
Average rental equipment 1   $ 756,513     $ 275,891     $ 310,401                  
Average monthly total yield 2     1.75 %     2.72 %     1.87 %                
Average utilization 3     78.2 %     62.7 %     59.9 %                
Average monthly rental rate 4     2.24 %     4.33 %     3.13 %                
                                         

 

1. Average rental equipment represents the cost of rental equipment excluding accessory equipment.  For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.  The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company. 

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements.  Management believes the exclusion of non-cash charges, including share-based compensation, is useful in measuring the Company’s cash available for operations and performance of the Company.  Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.  

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges.  The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow.  In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance.  Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP. 

Reconciliation of Net Income to Adjusted EBITDA

(dollar amounts in thousands)   Three Months Ended   Twelve Months Ended
December 31,
December 31,
    2019   2018   2019   2018
Net income   $ 26,401     $ 24,249     $ 96,806     $ 79,406  
Provision for income taxes     9,053       7,769       32,319       25,289  
Interest expense     2,924       3,164       12,331       12,297  
Depreciation and amortization     23,516       21,079       89,476       81,975  
EBITDA     61,894       56,261       230,932       198,967  
Impairment of rental assets                       39  
Share-based compensation     1,796       1,301       5,892       4,111  
Adjusted EBITDA 1   $ 63,690     $ 57,562     $ 236,824     $ 203,117  
Adjusted EBITDA margin 2     43 %     43 %     42 %     41 %
                                 

 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)   Three Months Ended   Twelve Months Ended
December 31,
December 31,
    2019   2018   2019   2018
Adjusted EBITDA 1   $ 63,690     $ 57,562     $ 236,824     $ 203,117  
Interest paid     (3,116 )     (3,405 )     (12,475 )     (12,598 )
Income taxes paid, net of refunds received     (7,498 )     (2,102 )     (17,528 )     (18,157 )
Gain on sale of used rental equipment     (6,141 )     (4,515 )     (21,309 )     (19,559 )
Foreign currency exchange loss     (130 )     (16 )     (84 )     489  
Amortization of debt issuance cost     3       2       11       20  
Change in certain assets and liabilities:                                
Accounts receivable, net     9,964       (5,927 )     (6,310 )     (15,144 )
Prepaid expenses and other assets     (1,796 )     844       (13,530 )     (9,351 )
Accounts payable and other liabilities     1,957       1,867       17,257       3,592  
Deferred income     (5,808 )     1,517       5,138       10,258  
Net cash provided by operating activities   $ 51,125     $ 45,827     $ 187,994     $ 142,667  
                                 

 

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

FOR INFORMATION CONTACT: Keith E. Pratt
  EVP & Chief Financial Officer 
  925-606-9200

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Source: McGrath RentCorp