McGrath RentCorp Announces Results for Second Quarter 2008
EPS Increases 17% to $0.42 for the Quarter
Rental Revenues Increase 9%
LIVERMORE, Calif.--(BUSINESS WIRE)--Aug. 7, 2008--McGrath RentCorp (NASDAQ:MGRC) today announced revenues for the quarter ended June 30, 2008, of $74.0 million, an increase of 10%, compared to $67.4 million in the second quarter 2007. The Company reported net income for the second quarter 2008 of $10.1 million, or $0.42 per diluted share, compared to net income of $9.1 million, or $0.36 per diluted share, in the second quarter 2007.
For the second quarter of 2008, the Company's Mobile Modular division reported a 2% increase in rental revenues to $25.3 million from $24.7 million in the second quarter 2007, with gross profit on rental revenues increasing 1% to $15.5 million from $15.3 million in the second quarter 2007. Sales revenues decreased 20% from $6.1 million in the second quarter 2007 to $4.9 million, and gross profit on sales decreased $0.4 million to $1.3 million in the second quarter 2008. Total gross profit decreased 4% from $19.7 million in the second quarter 2007 to $19.0 million in the second quarter 2008. Selling and administrative expenses increased $0.4 million to $7.1 million in the second quarter 2008. As a result, Mobile Modular's pre-tax income decreased 6% from $11.0 million to $10.3 million in the second quarter 2008.
For the second quarter of 2008, the Company's TRS-RenTelco division reported a 16% increase in rental revenues to $23.6 million from $20.3 million in the second quarter of 2007, with gross profit on rental revenues increasing 22% to $9.7 million from $7.9 million in the second quarter 2007. Sales revenues increased 33% from $5.6 million to $7.5 million in the second quarter 2008, with gross profit on sales increasing $0.5 million to $2.2 million from $1.7 million in the second quarter 2007. Total gross profit increased 22% from $10.1 million in the second quarter 2007 to $12.3 million in the second quarter 2008. Selling and administrative expenses increased $1.1 million to $6.4 million in the second quarter 2008. As a result, TRS-RenTelco's pre-tax income increased 32% from $3.8 million to $5.1 million in the second quarter 2008.
Dennis Kakures, President and CEO of McGrath RentCorp, made the following comments regarding these results:
"Our second quarter results reflect the benefits of both rental product and geographic diversity in our business makeup today.
TRS-RenTelco's 16% increase in rental revenues over the second quarter of last year is related to the continuing favorable market conditions across a fairly broad base of customer segments including communications network, aerospace and defense applications and semiconductor and consumer electronics product development and manufacturing. Divisional gross profit increasing approximately 23% for the quarter reflected improved key rental operating metrics as well as higher sales of equipment with improved margin levels.
Mobile Modular's 2% increase in rental revenues over the second quarter of last year reflects the continuing strength in our Florida and Texas markets, offset by challenging commercial and educational markets in California. Divisional gross profit decreasing approximately 4% for the quarter was chiefly due to significantly lower residential construction business levels as well as lower sales of equipment with reduced margin levels.
Our quarter over quarter EPS results also benefited from reduced interest expense due to lower rates, as well as from fewer outstanding shares related to our buyback activities during the fourth quarter of 2007 and first quarter of 2008."
SECOND QUARTER 2008 HIGHLIGHTS (AS COMPARED TO SECOND QUARTER 2007)
- Rental revenues increased 9% to $48.8 million. Within rental
revenues, Mobile Modular increased 2% from $24.7 million to
$25.3 million; TRS-RenTelco increased 16% from $20.3 million
to $23.6 million.
Sales revenues increased 29% to $17.0 million, resulting from
higher sales volume in TRS-RenTelco and Enviroplex, partly
offset by lower sales volume in Mobile Modular. The higher
sales volume and higher gross margin percentage of 31.4%
compared with 30.4% in 2007, resulted in a gross profit
increase of $1.3 million. Sales revenues and related gross
margins can fluctuate from quarter to quarter depending on
customer requirements, equipment availability and funding.
Depreciation of rental equipment increased 10% to $14.0
million, with Mobile Modular increasing 8% to $3.2 million
from $3.0 million in 2007, and TRS-RenTelco increasing 11% to
$10.8 million from $9.7 million in 2007.
Debt increased $16.0 million during the quarter to $234.7
million, with the Company's funded debt (notes payable) to
equity ratio increasing from 0.96 to 1 at March 31, 2008 to
1.00 to 1 as of June 30, 2008. As of June 30, 2008, the
Company had capacity to borrow an additional $156.3 million
under its lines of credit.
Dividend rate increased 11% to $0.20 per share for the second
quarter 2008, as compared to $0.18 per share for the second
quarter of 2007. On an annualized basis, this dividend
represents a 2.8% yield on the August 6, 2008 close price of
$28.17.
Adjusted EBITDA increased 8% to $34.6 million for the second
quarter of 2008 compared to $31.9 million for the second
quarter of 2007. At June 30, 2008, the Company's ratio of
funded debt to the last twelve months Adjusted EBITDA was 1.63
compared to 1.55 at March 31, 2008. Adjusted EBITDA is defined
as net income before minority interest in income of
subsidiary, interest expense, provision for income taxes,
depreciation, amortization and other non-cash stock-based
compensation. A reconciliation of net income to Adjusted
EBITDA and Adjusted EBITDA to net cash provided by operating
activities can be found at the end of this release.
You should read this press release in conjunction with the financial statements and notes thereto included in the Company's latest Form 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 Form 10-K, 10-Q and other SEC filings.
FINANCIAL GUIDANCE
The Company reconfirms its expectation that 2008 full-year earnings per share will be in a range from $1.72 to $1.82 per diluted share. Such a forward-looking statement reflects McGrath RentCorp's expectations as of August 7, 2008. Actual 2008 full-year earnings per share results may be materially different and affected by many factors, including those factors outlined in the "forward-looking statements" paragraph at the end of this press release.
About McGrath RentCorp
Founded in 1979, McGrath RentCorp is a diversified rental company. Under the trade name Mobile Modular Management Corporation (Mobile Modular), it rents and sells modular buildings to fulfill customers' temporary and permanent classroom and office space needs in California, Texas, Florida, North Carolina and Georgia. In 2008, under the Mobile Modular Portable Storage trade name, the Company entered the portable storage rental business in Northern California. The Company's TRS-RenTelco division rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas. In 2008, under the trade name TRS-Environmental, the Company entered the environmental test equipment rental business serving the Americas.
CONFERENCE CALL NOTE: As previously announced in its press release of July 9, 2008, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on August 7, 2008 to discuss the second quarter 2008 results. To participate in the teleconference, dial 1-800-257-7063 (in the U.S.), or 1-303-262-2149 (outside the US), or visit the investor relations section of the Company's website at www.mgrc.com. Telephone replay of the call will be available for 48 hours following the call by dialing 1-800-405-2236 (in the U.S.), or 1-303-590-3000 (outside the U.S.). The pass code for the call replay is 11116860.
This press release contains statements, which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to a number of risks and uncertainties. These statements appear in a number of places. Such statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "estimates", "will", "should", "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. Actual results may vary materially from those in the forward-looking statements as a result of various factors. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed under "Risk Factors" and elsewhere in the Company's 10-K, 10-Q and other SEC filings, including the following: the effectiveness of management's strategies and decisions, general economic, stock market and business conditions, including in the states and countries where we sell or rent our products; continuing demand for our products; hiring, retention and motivation of key personnel; failure by third parties to manufacture our products in a timely manner and to our specifications; our ability to successfully implement information system upgrades; our ability to finance expansion and to locate and consummate acquisitions; fluctuations in interest rates and the Company's ability to manage credit risk; our ability to effectively manage our rental assets; the risk that we may be subject to litigation and claims from employees, vendors and other third parties; fluctuations in the Company's effective tax rate; changes in financial accounting standards; our failure to comply with internal control requirements; catastrophic loss to our facilities; state funding for education; new or modified statutory or regulatory requirements; success of the Company's strategic growth initiatives; risks associated with doing business with government entities; seasonality of our educational and electronics business; intense industry competition; our ability to timely deliver, install and redeploy our modular products; significant increases in raw materials, labor, and other costs; and risks associated with operating internationally. There may be other factors not listed above that could cause actual results to vary materially from the forward-looking statements described in this press release. The Company assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events, or developments.
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
----------------------------------------------------------------------
Three Months Six Months Ended
Ended June 30, June 30,
----------------------------------
(in thousands, except per share
amounts) 2008 2007 2008 2007
----------------------------------------------------------------------
REVENUES
-----------------------------------
Rental $48,846 $44,995 $ 97,082 $ 88,303
Rental Related Services 7,490 8,598 14,832 16,020
------- ------- -------- ---------
Rental Operations 56,336 53,593 111,914 104,323
Sales 17,001 13,224 26,174 22,567
Other 616 630 1,280 1,310
------- ------- -------- ---------
Total Revenues 73,953 67,447 139,368 128,200
------- ------- -------- ---------
COSTS AND EXPENSES
-----------------------------------
Direct Costs of Rental Operations
Depreciation of Rental
Equipment 14,044 12,730 27,462 24,749
Rental Related Services 5,536 6,166 10,751 11,259
Other 9,591 8,996 17,681 16,594
------- ------- -------- ---------
Total Direct Costs of
Rental Operations 29,171 27,892 55,894 52,602
Costs of Sales 11,667 9,203 17,465 15,729
------- ------- -------- ---------
Total Costs 40,838 37,095 73,359 68,331
------- ------- -------- ---------
Gross Profit 33,115 30,352 66,009 59,869
Selling and Administrative
Expenses 14,230 12,607 27,774 24,255
------- ------- -------- ---------
Income from Operations 18,885 17,745 38,235 35,614
Interest Expense 2,291 2,832 4,758 5,453
------- ------- -------- ---------
Income Before Provision for
Income Taxes 16,594 14,913 33,477 30,161
Provision for Income Taxes 6,505 5,816 13,123 11,763
------- ------- -------- ---------
Income Before Minority Interest 10,089 9,097 20,354 18,398
Minority Interest in Income
(Loss) of Subsidiary -- 12 -- (15)
------- ------- -------- ---------
Net Income $10,089 $ 9,085 $ 20,354 $ 18,413
======= ======= ======== =========
Earnings Per Share:
Basic $ 0.43 $ 0.36 $ 0.85 $ 0.73
Diluted $ 0.42 $ 0.36 $ 0.85 $ 0.72
Shares Used in Per Share
Calculation:
Basic 23,641 25,233 23,810 25,174
Diluted 23,890 25,491 23,977 25,431
Cash Dividends Declared Per Share $ 0.20 $ 0.18 $ 0.40 $ 0.36
MCGRATH RENTCORP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
----------------------------------------------------------------------
June 30, December 31,
---------- ------------
(in thousands) 2008 2007
----------------------------------------------------------------------
ASSETS
-----------------------------------------------
Cash $ 1,302 $ 5,090
Accounts Receivable, net of allowance for
doubtful accounts of $1,300 in 2008 and $1,400
in 2007 68,717 67,061
Rental Equipment, at cost:
Relocatable Modular Buildings 492,774 475,077
Electronic Test Equipment 256,267 232,349
---------- ------------
749,041 707,426
Less Accumulated Depreciation (240,529) (221,412)
---------- ------------
Rental Equipment, net 508,512 486,014
---------- ------------
Property, Plant and Equipment, net 76,501 66,480
Prepaid Expenses and Other Assets 19,698 17,591
---------- ------------
Total Assets $ 674,730 $ 642,236
========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------
Liabilities:
Notes Payable $ 234,725 $ 197,729
Accounts Payable and Accrued Liabilities 53,784 55,642
Deferred Income 24,021 28,948
Deferred Income Taxes, net 126,462 115,886
---------- ------------
Total Liabilities 438,992 398,205
---------- ------------
Shareholders' Equity:
Common Stock, no par value -
Authorized -- 40,000 shares
Issued and Outstanding -- 23,657 shares in
2008 and 24,578 shares in 2007 42,968 41,917
Retained Earnings 192,770 202,114
---------- ------------
Total Shareholders' Equity 235,738 244,031
---------- ------------
Total Liabilities and Shareholders'
Equity $ 674,730 $ 642,236
========== ============
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
-------------------
(in thousands) 2008 2007
----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
--------------------------------------------------
Net Income $ 20,354 $ 18,413
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 28,749 25,902
Provision for Doubtful Accounts 654 430
Non-Cash Stock-Based Compensation 1,919 1,704
Gain on Sale of Rental Equipment (4,824) (4,350)
Change In:
Accounts Receivable (2,312) (4,755)
Prepaid Expenses and Other Assets (2,107) (1,047)
Accounts Payable and Accrued Liabilities (2,725) (4,434)
Deferred Income (4,927) (7,391)
Deferred Income Taxes 10,576 4,303
--------- ---------
Net Cash Provided by Operating Activities 45,357 28,775
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
--------------------------------------------------
Purchase of Rental Equipment (54,665) (54,965)
Purchase of Property, Plant and Equipment (11,308) (1,511)
Proceeds from Sale of Rental Equipment 12,558 11,040
--------- ---------
Net Cash Used in Investing Activities (53,415) (45,436)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
--------------------------------------------------
Net Borrowings Under Bank Lines of Credit 36,996 20,424
Proceeds from the Exercise of Stock Options 663 3,374
Excess Tax Benefit from Exercise and
Disqualifying Disposition of Stock Options 133 1,385
Repurchase of Common Stock (24,418) --
Payment of Dividends (9,104) (8,550)
--------- ---------
Net Cash Provided by Financing Activities 4,270 16,633
--------- ---------
Net Decrease in Cash (3,788) (28)
Cash Balance, beginning of period 5,090 349
--------- ---------
Cash Balance, end of period $ 1,302 $ 321
========= =========
Interest Paid, during the period $ 5,059 $ 5,632
========= =========
Income Taxes Paid, during the period $ 2,415 $ 6,076
========= =========
Dividends Declared, not yet paid $ 4,713 $ 4,558
========= =========
Rental Equipment Acquisitions, not yet paid $ 10,432 $ 8,970
========= =========
Mobile Modular - Q2 2008 compared to Q2 2007 (Unaudited)
----------------------------------------------------------------------
(dollar amounts in thousands) Three Months
Ended Increase
June 30, (Decrease)
----------------- -------------
2008 2007 $ %
----------------- -------------
Revenues
--------------------------------------
Rental $ 25,277 $ 24,730 $ 547 2%
Rental Related Services 7,029 8,116 (1,087) -13%
----------------- --------
Rental Operations 32,306 32,846 (540) -2%
Sales 4,861 6,085 (1,224) -20%
Other 159 157 2 1%
----------------- --------
Total Revenues $ 37,326 $ 39,088 $(1,762) -5%
----------------- --------
Gross Profit
--------------------------------------
Rental $ 15,509 $ 15,328 $ 181 1%
Rental Related Services 1,970 2,448 (478) -20%
----------------- --------
Rental Operations 17,479 17,776 (297) -2%
Sales 1,327 1,767 (440) -25%
Other 159 157 2 1%
----------------- --------
Total Gross Profit $ 18,965 $ 19,700 $ (735) -4%
----------------- --------
----------------- --------
Pre-tax Income $ 10,287 $ 10,981 $ (694) -6%
----------------- --------
Other Information
--------------------------------------
Depreciation of Rental Equipment $ 3,248 $ 3,019 $ 229 8%
Interest Expense Allocation $ 1,541 $ 2,000 $ (459) -23%
Average Rental Equipment (1) $454,107 $417,320 $ 36,787 9%
Average Rental Equipment on Rent (1) $372,551 $342,683 $ 29,868 9%
Average Monthly Total Yield (2) 1.86% 1.98% -6%
Average Utilization (3) 82.0% 82.1% 0%
Average Monthly Rental Rate (4) 2.26% 2.41% -6%
Period End Rental Equipment (1) $455,714 $421,170 $ 34,544 8%
Period End Utilization (3) 82.0% 82.8% -1%
Period End Floors (1) 26,528 25,200 1,328 5%
----------------------------------------------------------------------
(1) Average and Period End Rental Equipment represents the cost of
rental equipment excluding new equipment inventory and accessory
equipment. Period End Floors 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) Period End Utilization is calculated by dividing the cost of
rental equipment on rent by the total cost of rental equipment
excluding new equipment inventory and accessory equipment. Average
Utilization for the period is calculated using the average costs of
the 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.
TRS-RenTelco - Q2 2008 compared to Q2 2007 (Unaudited)
----------------------------------------------------------------------
(dollar amounts in thousands) Three Months
Ended Increase
June 30, (Decrease)
----------------- ------------
2008 2007 $ %
----------------- ------------
Revenues
---------------------------------------
Rental $ 23,569 $ 20,265 $ 3,304 16%
Rental Related Services 461 482 (21) -4%
----------------- -------
Rental Operations 24,030 20,747 3,283 16%
Sales 7,491 5,636 1,855 33%
Other 457 473 (16) -3%
----------------- -------
Total Revenues $ 31,978 $ 26,856 $ 5,122 19%
----------------- -------
Gross Profit
---------------------------------------
Rental $ 9,702 $ 7,941 $ 1,761 22%
Rental Related Services (16) (16) -- 0%
----------------- -------
Rental Operations 9,686 7,925 1,761 22%
Sales 2,201 1,689 512 30%
Other 457 473 (16) -3%
----------------- -------
Total Gross Profit $ 12,344 $ 10,087 2,257 22%
----------------- -------
----------------- -------
Pre-tax Income $ 5,055 $ 3,830 $ 1,225 32%
----------------- -------
Other Information
---------------------------------------
Depreciation of Rental Equipment $ 10,796 $ 9,711 $ 1,085 11%
Interest Expense Allocation $ 852 $ 959 $ (107) -11%
Average Rental Equipment (1) $248,182 $203,688 $44,494 22%
Average Rental Equipment on Rent (1) $172,253 $135,366 $36,887 27%
Average Monthly Total Yield (2) 3.17% 3.32% -5%
Average Utilization (3) 69.4% 66.5% 4%
Average Monthly Rental Rate (4) 4.56% 4.99% -9%
Period End Rental Equipment (1) $253,975 $207,937 $46,038 22%
Period End Utilization (3) 70.0% 67.2% 4%
----------------------------------------------------------------------
(1) Average and Period End Rental Equipment represents the cost of
rental equipment excluding accessory equipment.
(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) Period End Utilization is calculated by dividing the cost of
rental equipment on rent by the total cost of rental equipment
excluding accessory equipment. Average Utilization for the period is
calculated using the average costs of the 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.
Mobile Modular - Six Months Ended 6/30/08 compared to Six Months Ended
6/30/07 (Unaudited)
----------------------------------------------------------------------
(dollar amounts in thousands) Six Months Ended Increase
June 30, (Decrease)
----------------- -------------
2008 2007 $ %
----------------- -------------
Revenues
--------------------------------------
Rental $ 51,192 $ 48,566 $ 2,626 5%
Rental Related Services 13,930 15,165 (1,235) -8%
----------------- --------
Rental Operations 65,122 63,731 1,391 2%
Sales 7,733 10,251 (2,518) -25%
Other 304 319 (15) -5%
----------------- --------
Total Revenues $ 73,159 $ 74,301 $(1,142) -2%
----------------- --------
Gross Profit
--------------------------------------
Rental $ 32,676 $ 31,070 1,606 5%
Rental Related Services 4,039 4,768 (729) -15%
----------------- --------
Rental Operations 36,715 35,838 877 2%
Sales 2,257 3,074 (817) -27%
Other 304 319 (15) -5%
----------------- --------
Total Gross Profit $ 39,276 $ 39,231 $ 45 0%
----------------- --------
----------------- --------
Pre-tax Income $ 21,992 $ 22,163 $ (171) -1%
----------------- --------
Other Information
--------------------------------------
Depreciation of Rental Equipment $ 6,488 $ 5,948 $ 540 9%
Interest Expense Allocation $ 3,220 $ 3,893 $ (673) -17%
Average Rental Equipment (1) $452,704 $414,981 $ 37,723 9%
Average Rental Equipment on Rent (1) $372,354 $339,166 $ 33,188 10%
Average Monthly Total Yield (2) 1.88% 1.95% -4%
Average Utilization (3) 82.3% 81.7% 1%
Average Monthly Rental Rate (4) 2.29% 2.39% -4%
Period End Rental Equipment (1) $455,714 $421,170 $ 34,544 8%
Period End Utilization (3) 82.0% 82.8% -1%
Period End Floors (1) 26,528 25,200 1,328 5%
----------------------------------------------------------------------
(1) Average and Period End Rental Equipment represents the cost of
rental equipment excluding new equipment inventory and accessory
equipment. Period End Floors 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) Period End Utilization is calculated by dividing the cost of
rental equipment on rent by the total cost of rental equipment
excluding new equipment inventory and accessory equipment. Average
Utilization for the period is calculated using the average costs of
the 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.
TRS-RenTelco - Six Months Ended 6/30/08 compared to Six Months Ended
6/30/07 (Unaudited)
----------------------------------------------------------------------
(dollar amounts in thousands) Six Months Ended Increase
June 30, (Decrease)
----------------- -----------
2008 2007 $ %
----------------- -----------
Revenues
----------------------------------------
Rental $ 45,890 $ 39,737 $ 6,153 15%
Rental Related Services 902 855 47 5%
----------------- -------
Rental Operations 46,792 40,592 6,200 15%
Sales 11,969 9,727 2,242 23%
Other 976 991 (15) -2%
----------------- -------
Total Revenues $ 59,737 $ 51,310 $ 8,427 16%
----------------- -------
Gross Profit
----------------------------------------
Rental $ 19,263 $ 15,890 $ 3,373 21%
Rental Related Services 42 (7) 49 nm
----------------- -------
Rental Operations 19,305 15,883 3,422 22%
Sales 4,015 3,140 875 28%
Other 976 991 (15) -2%
----------------- -------
Total Gross Profit $ 24,296 $ 20,014 $ 4,282 21%
----------------- -------
----------------- -------
Pre-tax Income $ 10,220 $ 8,118 $ 2,102 26%
----------------- -------
Other Information
----------------------------------------
Depreciation of Rental Equipment $ 20,974 $ 18,801 $ 2,173 12%
Interest Expense Allocation $ 1,746 $ 1,837 $ (91) -5%
Average Rental Equipment (1) $242,037 $197,581 $44,456 23%
Average Rental Equipment on Rent (1) $167,447 $131,333 $36,114 27%
Average Monthly Total Yield (2) 3.16% 3.35% -6%
Average Utilization (3) 69.2% 66.5% 4%
Average Monthly Rental Rate (4) 4.57% 5.04% -9%
Period End Rental Equipment (1) $253,975 $207,937 $46,038 22%
Period End Utilization (3) 70.0% 67.2% 4%
----------------------------------------------------------------------
(1) Average and Period End Rental Equipment represents the cost of
rental equipment excluding accessory equipment.
(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) Period End Utilization is calculated by dividing the cost of
rental equipment on rent by the total cost of rental equipment
excluding accessory equipment. Average Utilization for the period is
calculated using the average costs of the 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.
nm = not meaningful
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company's financial data presented on a basis consistent with Generally Accepted Accounting Principles ("GAAP"), the Company presents Adjusted EBITDA which is defined by the Company as net income before minority interest in income of subsidiary, interest expense, provision for income taxes, depreciation, amortization, and non-cash stock-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 and evaluate the Company's ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including stock-based compensation, is useful in measuring the Company's cash available to operations and the performance of the Company. Because we find 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 generally accepted accounting principles in the United States 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 stock-based compensation charges and income from the minority interest in the Company's Enviroplex subsidiary. 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. Therefore, Adjusted EBITDA should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. The presentation of Adjusted EBITDA is not meant to be considered in isolation or as a substitute for the most directly comparable 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. Since Adjusted EBITDA is a non-GAAP financial measure as defined by the Securities and Exchange Commission, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States.
Reconciliation of Net Income to Adjusted EBITDA
----------------------------------------------------------------------
(dollar amounts in Three Months Six Months Twelve Months
thousands) Ended Ended Ended
June 30, June 30, June 30,
--------------- --------------- -----------------
2008 2007 2008 2007 2008 2007
------- ------- ------- ------- -------- --------
Net Income $10,089 $ 9,085 $20,354 $18,413 $ 44,351 $ 42,985
Minority Interest
in Income (Loss)
of Subsidiary -- 12 -- (15) 79 330
Provision for
Income Taxes 6,505 5,816 13,123 11,763 28,697 26,903
Interest 2,291 2,832 4,758 5,453 10,024 11,087
------- ------- ------- ------- -------- --------
Income from
Operations 18,885 17,745 38,235 35,614 83,151 81,305
Depreciation and
Amortization 14,699 13,314 28,749 25,902 56,850 50,140
Non-Cash Stock-
Based
Compensation 987 854 1,919 1,704 3,672 3,281
------- ------- ------- ------- -------- --------
Adjusted EBITDA (1) $34,571 $31,913 $68,903 $63,220 $143,673 $134,726
======= ======= ======= ======= ======== ========
Adjusted EBITDA
Margin (2) 47% 47% 49% 49% 49% 49%
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating
Activities
----------------------------------------------------------------------
(dollar Three Months
amounts in Ended Six Months Ended Twelve Months Ended
thousands) June 30, June 30, June 30,
----------------- ----------------- -------------------
2008 2007 2008 2007 2008 2007
-------- -------- -------- -------- --------- ---------
Adjusted
EBITDA (1) $34,571 $31,913 $68,903 $63,220 $143,673 $134,726
Interest Paid (2,899) (3,727) (5,059) (5,632) (10,144) (11,125)
Income Taxes
Paid (1,576) (5,481) (2,415) (6,076) (10,762) (14,750)
Gain on Sale
of Rental
Equipment (2,484) (2,293) (4,824) (4,350) (10,500) (10,740)
Change in
certain
assets and
liabilities:
Accounts
Receivable,
net (8,339) (3,925) (1,657) (4,325) (4,558) (10,516)
Prepaid
Expenses
and Other
Assets (3,102) (1,380) (2,104) (1,047) (2,780) 733
Accounts
Payable and
Other
Liabilities 4,857 344 (2,560) (5,624) 984 (2,077)
Deferred
Income (1,272) (3,098) (4,927) (7,391) 5,560 (1,474)
-------- -------- -------- -------- --------- ---------
Net Cash
Provided by
Operating
Activities $19,756 $12,352 $45,357 $28,775 $111,473 $ 84,777
======== ======== ======== ======== ========= =========
(1) Adjusted EBITDA is defined as net income before minority interest in income of subsidiary, interest expense, provision for income taxes, depreciation, amortization, and non-cash stock-based compensation. (2) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
CONTACT:
McGrath RentCorp
Keith E. Pratt, 925-606-9200
Chief Financial Officer
SOURCE: McGrath RentCorp