LIVERMORE, Calif., Oct. 29, 2019 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended September 30, 2019 of $173.6 million, an increase of 21%, compared to the third quarter of 2018.  The Company reported net income of $32.5 million, or $1.32 per diluted share, for the third quarter of 2019, compared to net income of $24.8 million, or $1.01 per diluted share, for the third quarter of 2018. 

THIRD QUARTER 2019 COMPANY HIGHLIGHTS:

• Income from operations increased 30% year-over-year to $46.7 million.
• Rental revenues increased 11% year-over-year to $90.9 million.
• Adjusted EBITDA¹ increased 24% year-over-year to $70.8 million.   
• Dividend rate increased 10% year-over-year to $0.375 per share for the third quarter of 2019.  On an annualized basis, this dividend represents a 2.1% yield on the October 28, 2019 close price of $69.99 per share.

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

“The third quarter underscored the benefit of our diverse portfolio as companywide total revenues increased 21%.  Mobile Modular, TRS-RenTelco, and Enviroplex delivered significant operating profit growth compared to a year ago, contributing to the Company’s overall 30% operating profit increase.  Our operating profit growth was driven by strong gross profit increases in both rental operations and sales.

Mobile Modular rental revenues for the quarter increased 13% from a year ago, driven by improvement in average rental rates, a larger fleet and improved utilization with equipment on rent increasing 7%.  Commercial and education rentals grew compared to a year ago, and reflected healthy overall business conditions.  Portable Storage rental revenues grew by 11%. 

TRS-RenTelco rental revenues for the quarter increased 21%, primarily driven by higher average rental equipment and improved utilization.  Demand for both general purpose and communications test equipment was healthy, as we serviced testing demand for both R&D needs as well as communications network upgrades.

Adler Tank Rentals rental revenues for the quarter decreased 8% from a year ago, driven primarily by lower utilization, partly offset by higher rental rates.  Weaker activity levels across multiple market segments contributed to a slower quarter compared to a year ago.

Sales revenues increased 41%, driven by seasonally strong demand for education projects at Enviroplex.

Our portfolio enabled us to deliver strong top line and operating profit growth despite softness in one of our businesses.  We remain positive about our overall momentum entering the fourth quarter.  Despite some economic uncertainty, many fundamentals remain healthy and our activity levels are good. We look forward to finishing 2019 on solid footing.”

____________

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 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 September 30, 2019 to the quarter ended September 30, 2018 unless otherwise indicated.

MOBILE MODULAR

For the third quarter of 2019, the Company’s Mobile Modular division reported income from operations of $22.2 million, an increase of $3.0 million, or 16%.  Rental revenues increased 13% to $46.7 million, depreciation expense increased 5% to $5.6 million and other direct costs increased 20% to $12.8 million, which resulted in an increase in gross profit on rental revenues of 12% to $28.4 million.   Rental related services revenues increased 39% to $22.6 million, with associated gross profit increasing 55% to $5.8 million.  Sales revenues decreased 3% to $16.7 million while gross margin on sales increased to 28% from 24%, resulting in a 13% increase in gross profit on sales revenues to $4.7 million.  Selling and administrative expenses increased 19% to $17.0 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.

TRS-RENTELCO

For the third quarter of 2019, the Company’s TRS-RenTelco division reported income from operations of $10.1 million, an increase of $2.4 million, or 32%.  Rental revenues increased 21% to $26.9 million, depreciation expense increased 19% to $10.8 million and other direct costs increased 9% to $4.1 million, which resulted in a 28% increase in gross profit on rental revenues to $12.0 million.  Sales revenues increased 25% to $5.7 million.  Gross margin on sales decreased to 60% from 63%, resulting in an 18% increase in gross profit on sales revenues to $3.4 million.  Selling and administrative expenses increased 16% to $6.0 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.

ADLER TANKS

For the third quarter of 2019, the Company’s Adler Tanks division reported income from operations of $5.1 million, a decrease of $0.4 million, or 7%.  Rental revenues decreased 8% to $17.2 million, depreciation expense increased 3% to $4.1 million and other direct costs decreased 15% to $2.8 million, which resulted in a decrease in gross profit on rental revenues of 10% to $10.3 million.  Rental related services revenues increased 7% to $7.4 million, with gross profit on rental related services increasing 28% to $1.9 million.  Selling and administrative expenses decreased 6% to $7.2 million, primarily due to decreased salaries and employee benefit costs.

FINANCIAL OUTLOOK:

Based upon the Company’s year-to-date results and current outlook for the remainder of the year, the Company is raising its financial outlook and expects its 2019 total operating profit to increase 15% to 19% above 2018 results, as compared to our prior expectation of a 9% to 14% increase.  

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 October 1, 2019, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 29, 2019 to discuss the third quarter 2019 results.  To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/.  A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.).  The pass code for the conference call replay is 8298548.  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 “believes,” “expects,” “will,” or “anticipates” or the negative of these terms or other comparable terminology.  In particular, Mr. Hanna’s comments on remaining positive about the Company’s overall momentum entering the fourth quarter, economic fundamentals remaining healthy with good activity levels, finishing 2019 on solid footing, as well as the updated full year 2019 outlook in the “Financial Outlook” section are forward-looking. 

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the extent of the recovery underway in our modular building division; the state of the wireless communications network upgrade environment; the utilization levels and rental rates of our Adler Tanks liquid and sold containment tank and box rental assets; continued execution of our performance improvement initiatives; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.

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

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands, except per share amounts)		2019				2018				2019				2018
Revenues
Rental		$	90,857			$	82,155			$	261,658			$	233,683
Rental related services			30,816				23,880				76,738				60,797
Rental operations			121,673				106,035				338,396				294,480
Sales			50,855				36,085				81,387				67,722
Other			1,034				1,027				3,226				3,013
Total revenues			173,562				143,147				423,009				365,215
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			20,535				18,407				59,222				54,287
Rental related services			23,007				18,618				57,507				47,404
Other			19,654				17,674				61,128				52,696
Total direct costs of rental operations			63,196				54,699				177,857				154,387
Costs of sales			32,084				24,398				49,984				42,680
Total costs of revenues			95,280				79,097				227,841				197,067
Gross profit			78,282				64,050				195,168				168,148
Selling and administrative expenses			31,534				28,226				92,044				85,833
Income from operations			46,748				35,824				103,124				82,315
Other income (expense):
Interest expense			(3,161	)			(3,142	)			(9,407	)			(9,133	)
Foreign currency exchange loss			(132	)			(129	)			(46	)			(505	)
Income before provision for income taxes			43,455				32,553				93,671				72,677
Provision for income taxes			10,987				7,774				23,266				17,520
Net income		$	32,468			$	24,779			$	70,405			$	55,157
Earnings per share:
Basic		$	1.34			$	1.03			$	2.90			$	2.29
Diluted		$	1.32			$	1.01			$	2.86			$	2.25
Shares used in per share calculation:
Basic			24,268				24,172				24,237				24,128
Diluted			24,632				24,563				24,592				24,550
Cash dividends declared per share		$	0.375			$	0.340			$	1.125			$	1.020

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

		September 30,				December 31,
(in thousands)		2019				2018
Assets
Cash		$	2,290			$	1,508
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2019 and 2018			138,114				121,016
Rental equipment, at cost:
Relocatable modular buildings			865,254				817,375
Electronic test equipment			321,677				285,052
Liquid and solid containment tanks and boxes			315,838				313,573
			1,502,769				1,416,000
Less accumulated depreciation			(544,159	)			(514,985	)
Rental equipment, net			958,610				901,015
Property, plant and equipment, net			127,977				126,899
Prepaid expenses and other assets			43,553				31,816
Intangible assets, net			7,554				7,254
Goodwill			28,125				27,808
Total assets		$	1,306,223			$	1,217,316
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	301,469			$	298,564
Accounts payable and accrued liabilities			111,320				90,844
Deferred income			60,775				49,709
Deferred income taxes, net			215,944				206,664
Total liabilities			689,508				645,781
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,285 shares as of September 30, 2019 and 24,182 shares as of December 31, 2018			106,033				103,801
Retained earnings			510,702				467,783
Accumulated other comprehensive loss			(20	)			(49	)
Total shareholders’ equity			616,715				571,535
Total liabilities and shareholders’ equity		$	1,306,223			$	1,217,316

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Nine Months Ended September 30,
(in thousands)		2019				2018
Cash Flows from Operating Activities:
Net income		$	70,405			$	55,157
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			65,960				60,896
Impairment of rental assets			—				39
Provision for doubtful accounts			655				297
Share-based compensation			4,096				2,810
Gain on sale of used rental equipment			(15,168	)			(15,044	)
Foreign currency exchange loss			46				505
Amortization of debt issuance costs			8				18
Change in:
Accounts receivable			(16,929	)			(9,514	)
Prepaid expenses and other assets			(11,734	)			(10,195	)
Accounts payable and accrued liabilities			19,304				148
Deferred income			10,946				8,741
Deferred income taxes			9,280				2,982
Net cash provided by operating activities			136,869				96,840
Cash Flows from Investing Activities:
Purchases of rental equipment			(127,243	)			(84,658	)
Purchases of property, plant and equipment			(6,845	)			(12,521	)
Cash paid for acquisition of business assets			(7,401	)			(7,543	)
Proceeds from sales of used rental equipment			30,844				30,067
Net cash used in investing activities			(110,645	)			(74,655	)
Cash Flows from Financing Activities:
Net borrowings under bank lines of credit			2,897				25,575
Principal payments on Series A senior notes			—				(20,000	)
Taxes paid related to net share settlement of stock awards			(1,864	)			(3,004	)
Payment of dividends			(26,432	)			(22,719	)
Net cash used in financing activities			(25,399	)			(20,148	)
Effect of foreign currency exchange rate changes on cash			(43	)			(139	)
Net increase in cash			782				1,898
Cash balance, beginning of period			1,508				2,501
Cash balance, end of period		$	2,290			$	4,399
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	9,359			$	9,193
Net income taxes paid, during the period		$	10,030			$	16,055
Dividends accrued during the period, not yet paid		$	9,241			$	8,349
Rental equipment acquisitions, not yet paid		$	9,450			$	9,643

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2019
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	46,738			$	26,938			$	17,181			$	—			$	90,857
Rental related services			22,574				863				7,379				—				30,816
Rental operations			69,312				27,801				24,560				—				121,673
Sales			16,676				5,678				140				28,361				50,855
Other			314				611				109				—				1,034
Total revenues			86,302				34,090				24,809				28,361				173,562
Costs and Expenses
Direct costs of rental operations:
Depreciation			5,572				10,849				4,114				—				20,535
Rental related services			16,799				695				5,513				—				23,007
Other			12,804				4,088				2,762				—				19,654
Total direct costs of rental operations			35,175				15,632				12,389				—				63,196
Costs of  sales			11,963				2,277				126				17,718				32,084
Total costs of revenues			47,138				17,909				12,515				17,718				95,280
Gross Profit
Rental			28,362				12,001				10,305				—				50,668
Rental related services			5,775				168				1,866				—				7,809
Rental operations			34,137				12,169				12,171				—				58,477
Sales			4,713				3,401				14				10,643				18,771
Other			314				611				109				—				1,034
Total gross profit			39,164				16,181				12,294				10,643				78,282
Selling and administrative expenses			16,966				6,038				7,160				1,370				31,534
Income from operations		$	22,198			$	10,143			$	5,134			$	9,273				46,748
Interest expense																			(3,161	)
Foreign currency exchange loss																			(132	)
Provision for income taxes																			(10,987	)
Net income																		$	32,468
Other Information
Average rental equipment 1		$	802,718			$	314,428			$	314,314
Average monthly total yield 2			1.94	%			2.86	%			1.82	%
Average utilization 3			79.4	%			66.9	%			54.5	%
Average monthly rental rate 4			2.45	%			4.27	%			3.34	%

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 September 30, 2018
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	41,205			$	22,225			$	18,725			$	—			$	82,155
Rental related services			16,188				773				6,919				—				23,880
Rental operations			57,393				22,998				25,644				—				106,035
Sales			17,140				4,549				294				14,102				36,085
Other			358				590				79				—				1,027
Total revenues			74,891				28,137				26,017				14,102				143,147
Costs and Expenses
Direct costs of rental operations:
Depreciation			5,320				9,093				3,994				—				18,407
Rental related services			12,457				697				5,464				—				18,618
Other			10,662				3,767				3,245				—				17,674
Total direct costs of rental operations			28,439				13,557				12,703				—				54,699
Costs of  sales			12,987				1,667				195				9,549				24,398
Total costs of revenues			41,426				15,224				12,898				9,549				79,097
Gross Profit
Rental			25,223				9,365				11,486				—				46,074
Rental related services			3,731				76				1,455				—				5,262
Rental operations			28,954				9,441				12,941				—				51,336
Sales			4,153				2,882				99				4,553				11,687
Other			358				590				79				—				1,027
Total gross profit			33,465				12,913				13,119				4,553				64,050
Selling and administrative expenses			14,261				5,220				7,587				1,158				28,226
Income from operations		$	19,204			$	7,693			$	5,532			$	3,395				35,824
Interest expense																			(3,142	)
Foreign currency exchange loss																			(129	)
Provision for income taxes																			(7,774	)
Net income																		$	24,779
Other Information
Average rental equipment 1		$	759,542			$	280,377			$	311,086
Average monthly total yield 2			1.81	%			2.64	%			2.01	%
Average utilization 3			78.6	%			61.9	%			62.5	%
Average monthly rental rate 4			2.30	%			4.27	%			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)
Nine months ended September 30, 2019
(dollar amounts in thousands)		Mobile Modular				TRS-RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	133,736			$	76,050			$	51,872			$	—			$	261,658
Rental related services			52,946				2,425				21,367				—				76,738
Rental operations			186,682				78,475				73,239				—				338,396
Sales			31,401				16,745				1,003				32,238				81,387
Other			1,033				1,856				337				—				3,226
Total revenues			219,116				97,076				74,579				32,238				423,009
Costs and Expenses
Direct costs of rental operations:
Depreciation			16,449				30,533				12,240				—				59,222
Rental related services			39,454				2,008				16,045				—				57,507
Other			39,721				12,206				9,201				—				61,128
Total direct costs of rental operations			95,624				44,747				37,486				—				177,857
Costs of  sales			21,463				7,656				713				20,152				49,984
Total costs of revenues			117,087				52,403				38,199				20,152				227,841
Gross Profit
Rental			77,566				33,311				30,431				—				141,308
Rental related services			13,492				417				5,322				—				19,231
Rental operations			91,058				33,728				35,753				—				160,539
Sales			9,938				9,089				290				12,086				31,403
Other			1,033				1,856				337				—				3,226
Total gross profit			102,029				44,673				36,380				12,086				195,168
Selling and administrative expenses			48,013				18,101				22,054				3,876				92,044
Income from operations		$	54,016			$	26,572			$	14,326			$	8,210				103,124
Interest expense																			(9,407	)
Foreign currency exchange loss																			(46	)
Provision for income taxes																			(23,266	)
Net income																		$	70,405
Other Information
Average rental equipment 1		$	789,664			$	299,210			$	313,475
Average monthly total yield 2			1.88	%			2.82	%			1.84	%
Average utilization 3			79.1	%			66.0	%			56.2	%
Average monthly rental rate 4			2.38	%			4.28	%			3.27	%

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)
Nine months ended September 30, 2018
(dollar amounts in thousands)		Mobile Modular				TRS-RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	116,436			$	65,919			$	51,328			$	—			$	233,683
Rental related services			40,510				2,287				18,000				—				60,797
Rental operations			156,946				68,206				69,328				—				294,480
Sales			30,694				16,568				629				19,831				67,722
Other			973				1,753				287				—				3,013
Total revenues			188,613				86,527				70,244				19,831				365,215
Costs and Expenses
Direct costs of rental operations:
Depreciation			15,841				26,536				11,910				—				54,287
Rental related services			31,031				1,956				14,417				—				47,404
Other			33,460				10,834				8,402				—				52,696
Total direct costs of rental operations			80,332				39,326				34,729				—				154,387
Costs of  sales			21,766				7,046				484				13,384				42,680
Total costs of revenues			102,098				46,372				35,213				13,384				197,067
Gross Profit
Rental			67,134				28,549				31,017				—				126,700
Rental related services			9,479				331				3,583				—				13,393
Rental operations			76,613				28,880				34,600				—				140,093
Sales			8,929				9,522				144				6,447				25,042
Other			973				1,753				287				—				3,013
Total gross profit			86,515				40,155				35,031				6,447				168,148
Selling and administrative expenses			43,191				16,780				22,245				3,617				85,833
Income from operations		$	43,324			$	23,375			$	12,786			$	2,830				82,315
Interest expense																			(9,133	)
Foreign currency exchange loss																			(505	)
Provision for income taxes																			(17,520	)
Net income																		$	55,157
Other Information
Average rental equipment 1		$	752,076			$	273,142			$	309,943
Average monthly total yield 2			1.72	%			2.68	%			1.84	%
Average utilization 3			77.8	%			62.4	%			59.8	%
Average monthly rental rate 4			2.21	%			4.29	%			3.08	%

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

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

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

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

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

Reconciliation of Net Income to Adjusted EBITDA

(dollar amounts in thousands)		Three Months Ended September 30,								Nine Months Ended September 30,								Twelve Months Ended September 30,
		2019				2018				2019				2018				2019				2018
Net income		$	32,468			$	24,779			$	70,405			$	55,157			$	94,654			$	172,881
Provision (benefit) for income taxes			10,987				7,774				23,266				17,520				31,035				(76,255	)
Interest expense			3,161				3,142				9,407				9,133				12,571				12,031
Depreciation and amortization			22,873				20,608				65,960				60,896				87,039				80,887
EBITDA			69,489				56,303				169,038				142,706				225,299				189,544
Impairment of rental assets			—				—				—				39				—				1,678
Share-based compensation			1,350				982				4,096				2,810				5,397				3,763
Adjusted EBITDA 1		$	70,839			$	57,285			$	173,134			$	145,555			$	230,696			$	194,985
Adjusted EBITDA margin 2			41	%			40	%			41	%			40	%			41	%			40	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)		Three Months Ended September 30,								Nine Months Ended September 30,								Twelve Months Ended September 30,
		2019				2018				2019				2018				2019				2018
Adjusted EBITDA 1		$	70,839			$	57,285			$	173,134			$	145,555			$	230,696			$	194,985
Interest paid			(3,149	)			(3,070	)			(9,359	)			(9,193	)			(12,764	)			(12,455	)
Income taxes paid, net of refunds received			(3,857	)			(4,380	)			(10,030	)			(16,055	)			(12,132	)			(22,049	)
Gain on sale of used rental equipment			(6,000	)			(5,169	)			(15,168	)			(15,044	)			(19,683	)			(19,771	)
Foreign currency exchange loss			132				129				46				505				30				444
Amortization of debt issuance cost			3				3				8				18				10				30
Change in certain assets and liabilities:
Accounts receivable, net			(16,272	)			(9,994	)			(16,274	)			(9,217	)			(22,201	)			(7,676	)
Prepaid expenses and other assets			9,512				4,743				(11,734	)			(10,195	)			(10,890	)			(5,810	)
Accounts payable and other liabilities			(363	)			(359	)			15,300				1,725				17,167				4,618
Deferred income			(5,963	)			3,887				10,946				8,741				12,463				5,772
Net cash provided by operating activities		$	44,882			$	43,075			$	136,869			$	96,840			$	182,696			$	138,088

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

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

 

Source: McGrath RentCorp