Company Announces 4% Dividend Increase and 30^th Consecutive Year Increase

LIVERMORE, Calif.--(BUSINESS WIRE)--Feb. 23, 2021-- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2020 of $149.0 million, an increase of 1%, compared to the fourth quarter of 2019. The Company reported net income of $31.2 million, or $1.27 per diluted share, for the fourth quarter of 2020, compared to net income of $26.4 million, or $1.07 per diluted share, for the fourth quarter of 2019.

Total revenues for the year ended December 31, 2020 increased to $572.6 million from $570.2 million in 2019, with income from operations decreasing $0.6 million to $140.8 million. Net income for the year ended December 31, 2020 increased to $102.0 million, or $4.16 per diluted share, from $96.8 million, or $3.93 per diluted share, in 2019.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.435 per share for the quarter ending March 31, 2021, an increase of $0.015, or 4%, over the prior year period. The cash dividend will be payable on April 30, 2021 to all shareholders of record on April 15, 2021. This marks the 30^th consecutive year the Company has increased its annual dividend.

FOURTH QUARTER 2020 COMPANY HIGHLIGHTS:

• Income from operations increased 7% year-over-year to $41.0 million.
• Total revenues increased 1% year-over-year to $149.0 million.
• Rental revenues decreased 4% year-over-year to $88.5 million.
• Adjusted EBITDA¹ increased 3% year-over-year to $65.3 million.
• Dividend rate increased 12% year-over-year to $0.42 per share for the fourth quarter of 2020. On an annualized basis, this dividend represents a 2.1% yield on the February 22, 2021 close price of $80.48 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 results. Strong sales revenues, primarily at Enviroplex, more than offset some softness in rental demand, primarily at Adler, compared to a year ago. The growth in total revenues, coupled with good management of costs, enabled us to grow operating income by 7%.

Our full year results demonstrated the resilience in our business and the dedication of our teams. Despite the many disruptions arising from the pandemic, we grew total revenues and delivered operating income comparable to the prior year. Growth in sales revenues, primarily at Mobile Modular, more than offset slightly lower rental revenue. I am grateful to our employees who persevered and adapted to the new work conditions arising from the pandemic, and who continued to provide excellent service to our customers.

We are entering 2021 with a solid business, an experienced leadership team, and a strong balance sheet. Our track record of execution combined with an improving economy should drive healthy free cash flow generation while we invest in additional fleet to meet customer needs. We are well positioned to continue growing the business as demand conditions improve during the year.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2020 to the quarter ended December 31, 2019 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2020, the Company’s Mobile Modular division reported income from operations of $22.5 million, a decrease of $1.4 million, or 6%. Rental revenues decreased 2% to $47.5 million, depreciation expense increased 3% to $5.8 million and other direct costs decreased 4% to $11.0 million, which resulted in a decrease in gross profit on rental revenues of 2% to $30.8 million. The rental revenue decline was due to decreased demand from commercial and education customers. Rental related services revenues decreased 1% to $16.2 million, with associated gross profit increasing 10% to $4.5 million. Sales revenues decreased 23% to $12.0 million, primarily due to lower used equipment sales with gross margin on sales decreasing to 27% from 30%, resulting in a 30% decrease in gross profit on sales revenues to $3.3 million. Selling and administrative expenses decreased 7% to $16.5 million, primarily due to lower allocated corporate expenses.

TRS-RENTELCO

For the fourth quarter of 2020, the Company’s TRS-RenTelco division reported income from operations of $10.8 million, an increase of $1.3 million, or 14%. Rental revenues increased 1% to $27.9 million, depreciation expense decreased 1% to $11.3 million and other direct costs increased 7% to $4.4 million, which resulted in a 1% increase in gross profit on rental revenues to $12.2 million. The rental revenue growth was due to increased demand from general purpose test equipment customers. Sales revenues increased 62% to $8.7 million. Gross margin on sales was 47% in 2020 compared to 62% in 2019, resulting in a 23% increase in gross profit on sales revenues to $4.1 million. Selling and administrative expenses decreased 7% to $6.1 million, primarily due to lower salaries and benefit costs and lower travel, meals and meeting expenses.

ADLER TANKS

For the fourth quarter of 2020, the Company’s Adler Tanks division reported income from operations of $2.2 million, a decrease of $1.2 million, or 35%. Rental revenues decreased 18% to $13.1 million, depreciation expense decreased 1% to $4.1 million and other direct costs decreased 16% to $2.3 million, which resulted in a 27% decrease in gross profit on rental revenues to $6.7 million. The rental revenue decrease was primarily due to continued COVID-19 related market disruptions and a decrease in the price of oil and gas, which contributed to weaker activities in multiple geographic and market segments. Rental related services revenues decreased 24% to $5.3 million, with gross profit on rental related services decreasing 9% to $1.3 million. Selling and administrative expenses decreased 21% to $5.8 million, primarily due to lower allocated corporate expenses, decreased salaries and employee benefit costs and lower marketing and administrative costs.

FINANCIAL OUTLOOK:

For the full year 2021, the Company currently expects:

• Total revenue: $560 million - $595 million
• Adjusted EBITDA^1,2: $230 million - $245 million
• Gross rental equipment capital expenditures: $90 million to $110 million

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.

Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.

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 26, 2021, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 23, 2021 to discuss the fourth quarter 2020 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 3349708. 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 terminology. In particular, Mr. Hanna’s statements about entering 2021 with a solid business, an experienced leadership team, and a strong balance sheet, the Company’s track record of execution combined with an improving economy driving healthy free cash flow generation while investing in additional fleet to meet customer needs and being well positioned to continue growing the business as demand conditions improve during 2021 as well as the statements regarding the full year 2021 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 duration of the COVID-19 pandemic and its economic impact, the extent and length of the shelter-in and other restrictions associated with COVID-19 pandemic, 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 solid 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)		2020				2019				2020				2019
Revenues
Rental		$	88,517			$	92,231			$	351,790			$	353,889
Rental related services			22,367				24,300				92,393				101,038
Rental operations			110,884				116,531				444,183				454,927
Sales			37,238				28,842				124,604				110,229
Other			858				1,848				3,767				5,074
Total revenues			148,980				147,221				572,554				570,230
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			21,226				21,169				85,866				80,391
Rental related services			16,345				18,734				68,105				76,241
Other			17,647				18,237				73,818				79,365
Total direct costs of rental operations			55,218				58,140				227,789				235,997
Costs of sales			23,108				18,084				81,019				68,068
Total costs of revenues			78,326				76,224				308,808				304,065
Gross profit			70,653				70,997				263,746				266,165
Selling and administrative expenses			29,628				32,749				122,993				124,793
Income from operations			41,025				38,248				140,753				141,372
Other income (expense):
Interest expense			(1,983	)			(2,924	)			(8,787	)			(12,331	)
Foreign currency exchange gain			267				130				78				84
Income before provision for income taxes			39,309				35,454				132,044				129,125
Provision for income taxes			8,133				9,053				30,060				32,319
Net income		$	31,176			$	26,401			$	101,984			$	96,806
Earnings per share:
Basic		$	1.29			$	1.09			$	4.22			$	3.99
Diluted		$	1.27			$	1.07			$	4.16			$	3.93
Shares used in per share calculation:
Basic			24,119				24,290				24,157				24,250
Diluted			24,453				24,697				24,531				24,623
Cash dividends declared per share		$	0.420			$	0.375			$	1.68			$	1.50

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		December 31,
(in thousands)		2020				2019
Assets
Cash		$	1,238			$	2,342
Accounts receivable, net of allowance for doubtful accounts of $2,100 in 2020 and $1,883 in 2019			123,316				128,099
Rental equipment, at cost:
Relocatable modular buildings			882,115				868,807
Electronic test equipment			333,020				335,343
Liquid and solid containment tanks and boxes			315,706				316,261
			1,530,841				1,520,411
Less accumulated depreciation			(592,725	)			(552,911	)
Rental equipment, net			938,116				967,500
Property, plant and equipment, net			136,210				131,047
Prepaid expenses and other assets			41,549				45,356
Intangible assets, net			7,118				7,334
Goodwill			28,197				28,197
Total assets		$	1,275,744			$	1,309,875
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	222,754			$	293,431
Accounts payable and accrued liabilities			108,334				109,174
Deferred income			45,975				54,964
Deferred income taxes, net			216,077				218,270
Total liabilities			593,140				675,839
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,128 shares as of December 31, 2020 and 24,296 shares as of December 31, 2019			106,289				106,360
Retained earnings			576,419				527,746
Accumulated other comprehensive loss			(104	)			(70	)
Total shareholders’ equity			682,604				634,036
Total liabilities and shareholders’ equity		$	1,275,744			$	1,309,875

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Twelve Months Ended December 31,
(in thousands)		2020				2019
Cash Flows from Operating Activities:
Net income		$	101,984			$	96,806
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			94,643				89,476
Provision for doubtful accounts			1,343				1,013
Share-based compensation			5,549				5,892
Gain on sale of used rental equipment			(19,329	)			(21,309	)
Foreign currency exchange gain			(78	)			(84	)
Amortization of debt issuance costs			11				11
Change in:
Accounts receivable			3,440				(7,323	)
Prepaid expenses and other assets			3,807				(13,530	)
Accounts payable and accrued liabilities			316				20,298
Deferred income			(8,989	)			5,138
Deferred income taxes			(2,193	)			11,606
Net cash provided by operating activities			180,504				187,994
Cash Flows from Investing Activities:
Purchases of rental equipment			(86,329	)			(167,703	)
Purchases of property, plant and equipment			(13,724	)			(12,080	)
Cash paid for acquisition of business assets			—				(7,808	)
Proceeds from sales of used rental equipment			47,052				44,447
Net cash used in investing activities			(53,001	)			(143,144	)
Cash Flows from Financing Activities:
Net (repayment) borrowing under bank lines of credit			(70,689	)			(5,144	)
Repurchase of common stock			(13,617	)			—
Taxes paid related to net share settlement of stock awards			(4,376	)			(3,333	)
Payment of dividends			(39,769	)			(35,539	)
Net cash used in financing activities			(128,451	)			(44,016	)
Effect of foreign currency exchange rate changes on cash			(156	)			-
Net (decrease) increase in cash			(1,104	)			834
Cash balance, beginning of period			2,342				1,508
Cash balance, end of period		$	1,238			$	2,342
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	9,050			$	12,475
Net income taxes paid, during the period		$	34,903			$	17,528
Dividends accrued during the period, not yet paid		$	10,083			$	9,489
Rental equipment acquisitions, not yet paid		$	4,373			$	6,496

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2020
(dollar amounts in thousands)		Mobile Modular						TRS-RenTelco						Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	47,548					$	27,916					$	13,054			$	—			$	88,518
Rental related services			16,236						784						5,347				—				22,367
Rental operations			63,784						28,700						18,401				—				110,885
Sales			12,016						8,675						426				16,121				37,238
Other			351						438						68				—				857
Total revenues			76,151						37,813						18,895				16,121				148,980
Costs and Expenses
Direct costs of rental operations:
Depreciation			5,790						11,343						4,093				—				21,226
Rental related services			11,688						583						4,074				—				16,345
Other			10,989						4,371						2,287				—				17,647
Total direct costs of rental operations			28,467						16,297						10,454				—				55,218
Costs of sales			8,737						4,573						478				9,320				23,108
Total costs of revenues			37,204						20,870						10,932				9,320				78,326
Gross Profit
Rental			30,769						12,202						6,674				—				49,645
Rental related services			4,548						201						1,273				—				6,022
Rental operations			35,317						12,403						7,947				—				55,667
Sales			3,279						4,102						(52	)			6,801				14,130
Other			351						438						68				—				857
Total gross profit			38,947						16,943						7,963				6,801				70,654
Selling and administrative expenses			16,456						6,108						5,766				1,298				29,628
Income from operations		$	22,491					$	10,835					$	2,197			$	5,503			$	41,026
Interest expense																							(1,983	)
Foreign currency exchange gain																							267
Provision for income taxes																							(8,134	)
Net income																						$	31,176
Other Information
Average rental equipment 1		$	834,599					$	333,505					$	314,647
Average monthly total yield 2			1.90	%					2.74	%					1.38	%
Average utilization 3			76.2	%					68.4	%					42.6	%
Average monthly rental rate 4			2.49	%					4.08	%					3.25	%

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, 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	%			50.0	%
Average monthly rental rate 4			2.51	%			4.20	%			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)
Twelve months ended December 31, 2020
(dollar amounts in thousands)		Mobile Modular						TRS-RenTelco						Adler Tanks						Enviroplex						Consolidated
Revenues
Rental		$	188,719					$	109,083					$	53,988					$	—					$	351,790
Rental related services			67,527						3,080						21,786						—						92,393
Rental operations			256,246						112,163						75,774						—						444,183
Sales			63,863						26,618						1,386						32,737						124,604
Other			1,415						2,030						322						—						3,767
Total revenues			321,524						140,811						77,482						32,737						572,554
Costs and Expenses
Direct costs of rental operations:
Depreciation			22,967						46,472						16,427						—						85,866
Rental related services			48,910						2,419						16,776						—						68,105
Other			47,762						17,133						8,923						—						73,818
Total direct costs of rental operations			119,639						66,024						42,126						—						227,789
Costs of sales			46,011						13,923						1,277						19,808						81,019
Total costs of revenues			165,650						79,947						43,403						19,808						308,808
Gross Profit
Rental			117,990						45,478						28,638						—						192,106
Rental related services			18,617						661						5,010						—						24,288
Rental operations			136,607						46,139						33,648						—						216,394
Sales			17,852						12,695						109						12,929						43,585
Other			1,415						2,030						322						—						3,767
Total gross profit			155,874						60,864						34,079						12,929						263,746
Selling and administrative expenses			68,470						24,306						24,764						5,453						122,993
Income from operations		$	87,404					$	36,558					$	9,315					$	7,476					$	140,753
Interest expense																											(8,787	)
Foreign currency exchange gain																											78
Provision for income taxes																											(30,060	)
Net income																										$	101,984
Other Information
Average rental equipment 1		$	825,614					$	336,399					$	314,797
Average monthly total yield 2			1.88	%					2.70	%					1.43	%
Average utilization 3			77.2	%					66.2	%					44.6	%
Average monthly rental rate 4			2.47	%					4.08	%					3.21	%

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 loss																			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			1.90	%			2.82	%			1.80	%
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.

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 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 December 31,								Twelve Months Ended December 31,
		2020				2019				2020				2019
Net income		$	31,175			$	26,401			$	101,984			$	96,806
Provision for income taxes			8,134				9,053				30,060				32,319
Interest expense			1,983				2,924				8,787				12,331
Depreciation and amortization			23,394				23,516				94,643				89,476
EBITDA			64,686				61,894				235,474				230,932
Share-based compensation			655				1,796				5,549				5,892
Adjusted EBITDA 1		$	65,341			$	63,690			$	241,023			$	236,824
Adjusted EBITDA margin 2			44	%			43	%			42	%			42	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)		Three Months Ended December 31,								Twelve Months Ended December 31,
		2020				2019				2020				2019
Adjusted EBITDA 1		$	65,341			$	63,690			$	241,023			$	236,824
Interest paid			(2,221	)			(3,116	)			(9,050	)			(12,475	)
Income taxes paid, net of refunds received			(10,199	)			(7,498	)			(34,903	)			(17,528	)
Gain on sale of used rental equipment			(5,219	)			(6,141	)			(19,329	)			(21,309	)
Foreign currency exchange loss (gain)			(267	)			(130	)			(78	)			(84	)
Amortization of debt issuance costs			3				3				11				11
Change in certain assets and liabilities:
Accounts receivable, net			6,117				9,964				4,783				(6,310	)
Prepaid expenses and other assets			5,121				(1,796	)			3,807				(13,530	)
Accounts payable and other liabilities			2,871				1,957				3,229				17,257
Deferred income			(12,580	)			(5,808	)			(8,989	)			5,138
Net cash provided by operating activities		$	48,967			$	51,125			$	180,504			$	187,994

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210223005929/en/

Keith E. Pratt
EVP & Chief Financial Officer
925-606-9200

Source: McGrath RentCorp