LIVERMORE, Calif., Aug. 02, 2017 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ:MGRC) (the “Company”), a diversified business to business rental company, today announced total revenues for the quarter ended June 30, 2017 of $109.6 million, an increase of 6%, compared to the second quarter of 2016.  The Company reported net income of $11.5 million, or $0.48 per diluted share for the second quarter of 2017, compared to net income of $9.1 million, or $0.38 per diluted share, in the second quarter of 2016.

SECOND QUARTER 2017 COMPANY HIGHLIGHTS:

• Income from operations increased 21% year-over-year to $21.8 million.
• Rental revenues increased 5% year-over-year to $70.0 million.
• Adjusted EBITDA¹ increased 7% million to $41.9 million for the second quarter of 2017.   
• Dividend rate increased 2% year-over-year to $0.26 per share for the second quarter of 2017. On an annualized basis, this dividend represents a 2.8% yield on the August 1, 2017 close price of $36.54 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 second quarter performance.  Mobile Modular accounted for the majority of the Company’s 21% operating profit increase compared to a year ago, as a result of higher gross profit from rental operations and higher sales gross profit.  TRS-RenTelco also achieved operating profit growth through effective management of depreciation expense, while the contribution from Adler Tank Rentals was down slightly compared to a year ago.

Mobile Modular rental revenues for the quarter increased 11% from a year ago as rental rates, fleet utilization and equipment on rent all increased.  Rental revenue growth continued to be healthy across commercial and education markets, as well as in our Portable Storage business.

TRS-RenTelco rental revenues for the quarter declined 2% as a result of lower communications test equipment business activity.  Communications test equipment rental revenues declined by 9%, but were partly offset by a 5% increase for general-purpose test equipment.  While average equipment utilization increased, average rental rates declined for the quarter, primarily due to the business activity mix shift from communications to general-purpose test equipment. 

Adler Tank Rentals rental revenues for the quarter increased 2% from a year ago.  Upstream oil and natural gas rental revenue declined from 11% to 9% of total Adler rental revenues, but was more than offset by growth in other market verticals.  Average equipment on rent increased 10% to $167 million from $152 million a year ago and average utilization improved, although rental rates declined as a result of competitive price pressure and product mix shifts.

Our second quarter results are beginning to reflect some impact from initiatives that we have launched through our return on invested capital (or ROIC) work, particularly for Mobile Modular.  We are also maintaining discipline on new rental equipment capital spending while selectively selling some non-core equipment.

While end market conditions remain challenging for Adler Tank Rentals, and to a lesser extent TRS-RenTelco, we are encouraged by our second quarter and year to date results.  Based on these results and our current outlook for the second half of the year we are raising our financial outlook and expect 2017 total Company operating profit to increase 9% to 12% above 2016, compared to our prior expectation of a 3% to 5% increase.”

________________________________

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-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.

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended June 30, 2017 to the quarter ended June 30, 2016 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2017, the Company’s Mobile Modular division reported income from operations of $11.3 million, an increase of $3.0 million, or 36%.  Rental revenues increased 11% to $35.0 million, depreciation expense increased 2% to $5.3 million and other direct costs decreased 9% to $10.2 million, which resulted in an increase in gross profit on rental revenues of 28% to $19.5 million.  Rental related services revenues decreased 1% to $12.0 million, with associated gross profit decreasing 20% to $3.0 million.  Sales revenues increased 64% to $9.5 million and gross margin on sales of 26% was comparable to 2016, resulting in increased gross profit on sales revenues of $1.0 million.  Selling and administrative expenses increased 12% to $13.8 million, primarily due to increased salaries and employee benefit costs and higher allocated corporate expenses. 

TRS-RENTELCO

For the second quarter of 2017, the Company’s TRS-RenTelco division reported income from operations of $7.1 million, an increase of $1.1 million, or 19%.  Rental revenues decreased 2% to $19.8 million, depreciation expense decreased 11% to $8.0 million and other direct costs decreased 2% to $3.3 million, which resulted in an increase in gross profit on rental revenues of 8% to $8.6 million.  Sales revenues decreased 13% to $5.6 million.  Gross margin on sales increased to 61% from 47% in 2016 primarily due to higher margins on used equipment sales, resulting in a 13% increase in gross profit on sales revenues to $3.4 million.  Selling and administrative expenses decreased 4% to $5.3 million, primarily due to lower allocated corporate expenses.

ADLER TANKS

For the second quarter of 2017, the Company’s Adler Tanks division reported income from operations of $3.0 million, a decrease of $0.2 million, or 7%.  Rental revenues increased 2% to $15.1 million, depreciation expense decreased 2% to $3.9 million and other direct costs increased 17% to $2.5 million, which together resulted in a comparable gross profit on rental revenues of $8.7 million.  Rental related services revenues decreased 4% to $6.2 million, with gross profit on rental related services increasing 1% to $1.5 million.  Selling and administrative expenses increased 5% to $7.3 million, primarily due to increased salaries and benefit costs.

FINANCIAL OUTLOOK:

Based upon the Company’s year to date results and current outlook for the second half of the year, the Company is raising its financial outlook and expects 2017 total Company operating profit to increase 9% to 12% above 2016, compared to our prior expectation of a 3% to 5% increase.   

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company with four rental divisions.  Mobile Modular rents and sells modular buildings to fulfill customers' temporary and permanent classroom and office space needs in California, Texas, Florida, and the Mid-Atlantic from Washington D.C. to Georgia.  TRS-RenTelco rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas.  Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations serving key markets throughout the United States.  Mobile Modular Portable Storage provides portable storage solutions in the California, Texas, Florida, Northern Illinois, New Jersey, North Carolina and Georgia markets.  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 July 6, 2017, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on August 2, 2017 to discuss the second quarter 2017 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 www.mgrc.com.  A 7-day replay will be available 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 call replay is 51612343.  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 http://mgrc.com/Investor/EventsAndArchive

FORWARD-LOOKING STATEMENTS:

Statements in this press release which are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.  All statements, other than statements of historical facts, regarding McGrath RentCorp’s business strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, plans and objectives are forward looking statements.  These forward-looking statements appear in a number of places and can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “hopes,” “goals” or “certain” or the negative of these terms or other variations or comparable terminology.  In particular, the full year 2017 operating profit outlook in the CEO comments and “Financial Outlook” sections are forward-looking.

Management cautions that forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements including, without limitation, the following:  the extent of and timetable for the recovery underway in our modular building division; the continued recovery of the California market; the impact of the bond initiative passed in California on the modular building division;  the state of the wireless communications network upgrade environment; the utilization levels of our Adler Tanks liquid and sold containment tank and box rental assets; the potential for continuing softness in communications test equipment rental demand in our electronics division; our customers’ need and ability to rent our products; failure by third parties to manufacture and deliver our products in a timely manner and to our specifications; our ability to successfully integrate and operate acquisitions, as well as manage expansions; our ability to effectively manage our rental assets; the risk that we may be subject to litigation under environmental, health and safety and product liability laws and claims from employees, vendors and other third parties; effect on our businesses from reductions to the price of oil or gas or the volatility of the oil industry generally; new or modified statutory or regulatory requirements; success of our strategic growth initiatives; risks associated with doing business with government entities; seasonality of our businesses; intense industry competition including increasing price pressure; our ability to timely deliver, install and redeploy our rental products; significant increases in raw materials, labor, and other costs; and risks associated with operating internationally. 

Our future business, financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties including the risks set forth above, those discussed in Part II—Item 1A “Risk Factors” and elsewhere in our Form 10-K for the year ended December 31, 2016, and those that may be identified from time to time in our reports and registration statements filed with the SEC.  Forward-looking statements are made only as of the date of this press release and are based on management’s reasonable assumptions; however, these assumptions can be wrong or affected by known or unknown risks and uncertainties.  Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance.  Except as otherwise required by law, we do not undertake any duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results or to changes in our expectations.

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
	Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except per share amounts)	2017				2016				2017				2016
Revenues
Rental	$	69,953			$	66,747			$	137,931			$	133,279
Rental related services		18,796				19,315				36,731				36,906
Rental operations		88,749				86,062				174,662				170,185
Sales		20,187				16,396				28,482				25,430
Other		646				647				1,275				1,189
Total revenues		109,582				103,105				204,419				196,804
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		17,242				18,231				34,621				36,771
Rental related services		14,312				14,677				28,145				28,402
Other		16,039				16,020				31,398				31,302
Total direct costs of rental operations		47,593				48,928				94,164				96,475
Costs of sales		12,778				10,421				17,374				15,918
Total costs of revenues		60,371				59,349				111,538				112,393
Gross profit		49,211				43,756				92,881				84,411
Selling and administrative expenses		27,365				25,683				55,213				52,080
Income from operations		21,846				18,073				37,668				32,331
Other income (expense):
Interest expense		(2,949	)			(2,990	)			(5,738	)			(6,546	)
Foreign currency exchange gain (loss)		11				(77	)			237				74
Income before provision for income taxes		18,908				15,006				32,167				25,859
Provision for income taxes		7,447				5,927				12,733				10,214
Net income	$	11,461			$	9,079			$	19,434			$	15,645
Earnings per share:
Basic	$	0.48			$	0.38			$	0.81			$	0.66
Diluted	$	0.48			$	0.38			$	0.80			$	0.65
Shares used in per share calculation:
Basic		23,985				23,900				23,968				23,881
Diluted		24,092				23,949				24,164				23,931
Cash dividends declared per share	$	0.260			$	0.255			$	0.520			$	0.510

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		June 30,				December 31,
(in thousands)		2017				2016
Assets
Cash		$	1,871			$	852
Accounts receivable, net of allowance for doubtful accounts of $1,987 in 2017   and $2,087 in 2016			96,539				96,877
Rental equipment, at cost:
Relocatable modular buildings			782,503				769,190
Electronic test equipment			249,935				246,325
Liquid and solid containment tanks and boxes			309,784				308,542
			1,342,222				1,324,057
Less accumulated depreciation			(479,015	)			(467,686	)
Rental equipment, net			863,207				856,371
Property, plant and equipment, net			118,117				112,190
Prepaid expenses and other assets			34,422				25,583
Intangible assets, net			8,159				8,595
Goodwill			27,808				27,808
Total assets		$	1,150,123			$	1,128,276
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	330,287			$	326,266
Accounts payable and accrued liabilities			82,332				78,205
Deferred income			42,533				37,499
Deferred income taxes, net			292,606				292,019
Total liabilities			747,758				733,989
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 23,992 shares as of June 30, 2017 and 23,948   shares as of December 31, 2016			103,040				101,821
Retained earnings			299,452				292,521
Accumulated other comprehensive loss			(127	)			(55	)
Total shareholders’ equity			402,365				394,287
Total liabilities and shareholders’ equity		$	1,150,123			$	1,128,276

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Six Months Ended June 30,
(in thousands)		2017				2016
Cash Flows from Operating Activities :
Net income		$	19,434			$	15,645
Adjustments to reconcile net income to net cash provided by   operating activities:
Depreciation and amortization			38,752				41,417
Provision for doubtful accounts			597				987
Share-based compensation			1,538				1,586
Gain on sale of used rental equipment			(7,914	)			(6,282	)
Foreign currency exchange gain			(237	)			(74	)
Amortization of debt issuance costs			25				26
Change in:
Accounts receivable			(259	)			(1,584	)
Income taxes receivable			—				11,000
Prepaid expenses and other assets			(8,839	)			(2,863	)
Accounts payable and accrued liabilities			680				4,361
Deferred income			5,034				2,061
Deferred income taxes			587				6,105
Net cash provided by operating activities			49,398				72,385
Cash Flows from Investing Activities:
Purchases of rental equipment			(46,118	)			(45,715	)
Purchases of property, plant and equipment			(9,623	)			(8,698	)
Proceeds from sales of used rental equipment			16,057				13,059
Net cash used in investing activities			(39,684	)			(41,354	)
Cash Flows from Financing Activities:
Net borrowings under bank lines of credit			23,996				1,814
Principal payments on Series A senior notes			(20,000	)			(20,000	)
Proceeds from the exercise of stock options			—				37
Taxes paid related to net share settlement of stock awards			(319	)			(486	)
Payment of dividends			(12,390	)			(12,253	)
Net cash used in financing activities			(8,713	)			(30,888	)
Effect of foreign currency exchange rate changes on cash			18				(8	)
Net increase in cash			1,019				135
Cash balance, beginning of period			852				1,103
Cash balance, end of period		$	1,871			$	1,238
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	5,817			$	6,646
Net income taxes paid, during the period		$	18,141			$	5,679
Dividends accrued during the period, not yet paid		$	6,214			$	6,135
Rental equipment acquisitions, not yet paid		$	6,359			$	3,935

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2017
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	35,030			$	19,805			$	15,118			$	—			$	69,953
Rental related services			11,966				654				6,176				—				18,796
Rental operations			46,996				20,459				21,294				—				88,749
Sales			9,504				5,605				926				4,152				20,187
Other			138				475				33				—				646
Total revenues			56,638				26,539				22,253				4,152				109,582
Costs and Expenses
Direct costs of rental operations:
Depreciation			5,333				7,980				3,929				—				17,242
Rental related services			8,930				657				4,725				—				14,312
Other			10,247				3,272				2,520				—				16,039
Total direct costs of rental operations			24,510				11,909				11,174				—				47,593
Costs of  sales			6,994				2,176				802				2,806				12,778
Total costs of revenues			31,504				14,085				11,976				2,806				60,371
Gross Profit (Loss)
Rental			19,451				8,553				8,669				—				36,673
Rental related services			3,036				(3	)			1,450				—				4,483
Rental operations			22,487				8,550				10,119				—				41,156
Sales			2,509				3,429				125				1,346				7,409
Other			138				475				33				—				646
Total gross profit			25,134				12,454				10,277				1,346				49,211
Selling and administrative expenses			13,817				5,330				7,261				957				27,365
Income from operations		$	11,317			$	7,124			$	3,016			$	389				21,846
Interest expense																			(2,949	)
Foreign currency exchange gain																			11
Provision for income taxes																			(7,447	)
Net income																		$	11,461
Other Information
Average rental equipment 1		$	746,358			$	248,117			$	307,263
Average monthly total yield 2			1.56	%			2.66	%			1.64	%
Average utilization 3			76.5	%			62.4	%			54.4	%
Average monthly rental rate 4			2.05	%			4.27	%			3.01	%

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 June 30, 2016
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex					Consolidated
Revenues
Rental		$	31,637			$	20,269			$	14,841			$	—				$	66,747
Rental related services			12,132				717				6,466				—					19,315
Rental operations			43,769				20,986				21,307				—					86,062
Sales			5,785				6,428				184					3,999				16,396
Other			125				494				28				—					647
Total revenues			49,679				27,908				21,519					3,999				103,105
Costs and Expenses
Direct costs of rental operations:
Depreciation			5,221				8,998				4,012				—					18,231
Rental related services			9,024				629				5,024				—					14,677
Other			10,536				3,337				2,147				—					16,020
Total direct costs of rental operations			24,781				12,964				11,183				—					48,928
Costs of  sales			4,264				3,402				201					2,554				10,421
Total costs of revenues			29,045				16,366				11,384					2,554				59,349
Gross Profit (Loss)
Rental			15,881				7,933				8,682				—					32,496
Rental related services			3,108				88				1,442				—					4,638
Rental operations			18,989				8,021				10,124				—					37,134
Sales			1,520				3,027				(17	)				1,445				5,975
Other			125				494				28				—					647
Total gross profit			20,634				11,542				10,135					1,445				43,756
Selling and administrative expenses			12,336				5,546				6,893					908				25,683
Income from operations		$	8,298			$	5,996			$	3,242			$		537				18,073
Interest expense																				(2,990	)
Foreign currency exchange loss																				(77	)
Provision for income taxes																				(5,927	)
Net income																			$	9,079
Other Information
Average rental equipment 1		$	717,755			$	254,970			$	307,868
Average monthly total yield 2			1.47	%			2.65	%			1.61	%
Average utilization 3			75.8	%			59.5	%			49.4	%
Average monthly rental rate 4			1.94	%			4.45	%			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)
Six months ended June 30, 2017
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	68,684			$	39,551			$	29,696			$	—			$	137,931
Rental related services			23,554				1,312				11,865				—				36,731
Rental operations			92,238				40,863				41,561				—				174,662
Sales			12,468				9,988				1,115				4,911				28,482
Other			235				1,002				38				—				1,275
Total revenues			104,941				51,853				42,714				4,911				204,419
Costs and Expenses
Direct costs of rental operations:
Depreciation			10,666				16,071				7,884				—				34,621
Rental related services			17,727				1,254				9,164				—				28,145
Other			19,894				6,605				4,899				—				31,398
Total direct costs of rental operations			48,287				23,930				21,947				—				94,164
Costs of  sales			9,076				4,076				935				3,287				17,374
Total costs of revenues			57,363				28,006				22,882				3,287				111,538
Gross Profit
Rental			38,125				16,875				16,913				—				71,913
Rental related services			5,827				58				2,700				—				8,585
Rental operations			43,952				16,933				19,613				—				80,498
Sales			3,391				5,912				181				1,624				11,108
Other			235				1,002				38				—				1,275
Total gross profit			47,578				23,847				19,832				1,624				92,881
Selling and administrative expenses			27,617				11,019				14,528				2,049				55,213
Income (loss) from operations		$	19,961			$	12,828			$	5,304			$	(425	)			37,668
Interest expense																			(5,738	)
Foreign currency exchange gain																			237
Provision for income taxes																			(12,733	)
Net income																		$	19,434
Other Information
Average rental equipment 1		$	745,508			$	247,099			$	307,048
Average monthly total yield 2			1.54	%			2.67	%			1.61	%
Average utilization 3			76.7	%			62.3	%			53.4	%
Average monthly rental rate 4			2.00	%			4.28	%			3.02	%

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)
Six months ended June 30, 2016
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex					Consolidated
Revenues
Rental		$	62,792			$	41,197			$	29,290			$	—				$	133,279
Rental related services			23,337				1,501				12,068				—					36,906
Rental operations			86,129				42,698				41,358				—					170,185
Sales			8,432				12,262				589					4,147				25,430
Other			202				932				55				—					1,189
Total revenues			94,763				55,892				42,002					4,147				196,804
Costs and Expenses
Direct costs of rental operations:
Depreciation			10,347				18,386				8,038				—					36,771
Rental related services			17,559				1,265				9,578				—					28,402
Other			19,552				6,976				4,774				—					31,302
Total direct costs of rental operations			47,458				26,627				22,390				—					96,475
Costs of  sales			6,018				6,707				535					2,658				15,918
Total costs of revenues			53,476				33,334				22,925					2,658				112,393
Gross Profit
Rental			32,894				15,834				16,478				—					65,206
Rental related services			5,778				236				2,490				—					8,504
Rental operations			38,672				16,070				18,968				—					73,710
Sales			2,413				5,556				54					1,489				9,512
Other			202				932				55				—					1,189
Total gross profit			41,287				22,558				19,077					1,489				84,411
Selling and administrative expenses			24,798				11,343				14,155					1,784				52,080
Income (loss) from operations		$	16,489			$	11,215			$	4,922			$		(295	)			32,331
Interest expense																				(6,546	)
Foreign currency exchange gain																				74
Provision for income taxes																				(10,214	)
Net income																			$	15,645
Other Information
Average rental equipment 1		$	713,503			$	257,767			$	307,752
Average monthly total yield 2			1.47	%			2.66	%			1.60	%
Average utilization 3			76.0	%			59.5	%			49.7	%
Average monthly rental rate 4			1.93	%			4.48	%			3.19	%

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 June 30,								Six Months Ended June 30,								Twelve Months Ended June 30,
		2017				2016				2017				2016				2017				2016
Net income		$	11,461			$	9,079			$	19,434			$	15,645			$	42,040			$	40,779
Provision for income taxes			7,447				5,927				12,733				10,214				31,199				26,108
Interest			2,949				2,990				5,738				6,546				11,399				11,900
Depreciation and amortization			19,348				20,557				38,752				41,417				78,514				83,526
EBITDA			41,205				38,553				76,657				73,822				163,152				162,313
Share-based compensation			732				730				1,538				1,586				3,043				3,032
Adjusted EBITDA 1		$	41,937			$	39,283			$	78,195			$	75,408			$	166,195			$	165,345
Adjusted EBITDA margin 2			38	%			38	%			38	%			38	%			38	%			40	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)		Three Months Ended June 30,								Six Months Ended June 30,								Twelve Months Ended June 30,
		2017				2016				2017				2016				2017				2016
Adjusted EBITDA 1		$	41,937			$	39,283			$	78,195			$	75,408			$	166,195			$	165,345
Interest paid			(3,397	)			(3,660	)			(5,817	)			(6,646	)			(11,607	)			(11,791	)
Net income taxes paid			(12,576	)			(4,973	)			(18,141	)			(5,679	)			(28,017	)			(6,687	)
Gain on sale of used rental equipment			(4,971	)			(3,316	)			(7,914	)			(6,282	)			(15,371	)			(12,619	)
Foreign currency exchange loss (gain)			(11	)			77				(237	)			(74	)			(42	)			161
Amortization of debt financing cost			12				13				25				26				51				51
Change in certain assets and liabilities:
Accounts receivable, net			(3,987	)			(3,977	)			338				(597	)			(925	)			(2,140	)
Income taxes receivable		—				—				—					11,000			—				—
Prepaid expenses and other assets			(7,303	)			(4,812	)			(8,839	)			(2,863	)			(4,027	)			2,066
Accounts payable and other liabilities			11,218				13,451				6,754				6,031				7,943				9,515
Deferred income			2,646				1,525				5,034				2,061				3,509				8,623
Net cash provided by operating activities		$	23,568			$	33,611			$	49,398			$	72,385			$	117,709			$	152,524

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.

FOR INFORMATION CONTACT:          

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

McGrath RentCorp