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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 2, 2006
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McGRATH RENTCORP
(Exact name of registrant as specified in its Charter)
California
(State or other jurisdiction of incorporation)
0-13292 94-2579843
(Commission File Number) (I.R.S. Employee Identification No.)
5700 Las Positas Road, Livermore, CA 94551-7800
(Address of principal executive offices)
(925) 606-9200
(Registrant's Telephone Number, Including Area Code)
-------------------------------------------------------
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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1
Item 2.02 Results of Operations and Financial Condition.
On November 2, 2006, McGrath RentCorp (the "Company") announced via press
release the Company's results for its third quarter ended September 30, 2006. A
copy of the Company's press release is attached hereto as Exhibit 99.1. This
Form 8-K and the attached exhibit are provided under Items 2.02 and 9.01 of Form
8-K and are furnished to, but not filed with, the Securities and Exchange
Commission, and shall not be incorporated by reference in any filing under the
Securities Act of 1934 or the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
----------- -----------
99.1 Press Release of McGrath RentCorp, dated
November 2, 2006.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McGRATH RENTCORP
Dated: November 2, 2006 By: /s/ Keith E. Pratt
----------------------------
Keith E. Pratt
Vice President and
Chief Financial Officer
3
Exhibit 99.1
McGrath RentCorp Announces Results for Third Quarter 2006
Q3 EPS of $0.50
Rental Revenues Increase 12%
LIVERMORE, Calif.--(BUSINESS WIRE)--Nov. 2, 2006--McGrath RentCorp
(NASDAQ:MGRC) today announced revenues for the quarter ended September
30, 2006, of $77.9 million, compared to $77.8 million in the third
quarter 2005, $5.8 million of which were modular building sales
arising from damages caused by Hurricane Katrina. The Company reported
net income for the third quarter 2006 of $12.7 million, or $0.50 per
diluted share, the most profitable quarter in the Company's history.
Third quarter 2006 results included $0.8 million of non-cash stock
compensation recognized under SFAS 123R, which reduced net income by
$0.5 million, or $0.02 per diluted share. This compares to net income
of $12.1 million, or $0.48 per diluted share, in the third quarter
2005, which included $0.9 million, or $0.04 per share, contribution
from Hurricane Katrina related sales. Rental revenue, the key driver
of sustainable revenue and earnings levels, rose 12% for the quarter
and 11% year-to-date.
For the Company's Mobile Modular division, rental revenues
increased 14%, or $3.0 million to $23.9 million, with gross profit on
rental revenues increasing 13% to $15.0 million from $13.3 million in
the third quarter 2005. Sales revenues decreased $8.6 million from
$20.9 million in the third quarter 2005 to $12.4 million, with gross
profit on sales decreasing $1.4 million to $3.5 million in the third
quarter 2006. The decrease in sales revenues was primarily due to a
$5.8 million sale related to damages caused by Hurricane Katrina
during the third quarter 2005. The Company views these types of large
sale projects as unique opportunities and generally does not expect
sale projects of a similar size to occur on a regular basis. Total
gross profit increased 3% from $20.8 million in the third quarter 2005
to $21.4 million in the third quarter 2006. Selling and administrative
expenses increased $0.6 million to $6.3 million in the third quarter
2006, primarily due to $0.5 million of non-cash stock compensation
expense related to the adoption of SFAS 123R. Allocated interest
expense increased $0.6 million due to higher average interest rates
and average debt levels experienced by the Company. As a result,
Mobile Modular pre-tax income decreased 5% to $12.9 million from $13.6
million in the third quarter 2005.
"For our modular rental business, we produced a 14% increase in
rental revenues over the third quarter 2005," stated Dennis Kakures,
President & CEO. "This was primarily a result of new educational
rentals coming online and the impact of higher commercial activity. We
had favorable rental revenue growth in our three modular rental
markets, California, Texas and Florida, compared to both last year's
third quarter, as well as sequentially from this year's second
quarter. I couldn't be more pleased with the organizational culture
created over the years in our modular division in serving our
customers at a level that creates a strong competitive advantage. This
is especially evident in our business levels to date in newer markets
we have entered.
"Additionally, modular gross margin on rental revenues returned to
the low sixty percent range, to 63%, in the third quarter from 55% in
the second quarter 2006. We lowered inventory center expenses by
approximately $1.1 million during the third quarter compared to the
second quarter and at the same time benefited from rental revenue
stream growth from the higher spend in the second quarter in preparing
equipment for rental."
For the Company's TRS-RenTelco division, rental revenues increased
9% to $20.0 million compared to $18.4 million in the third quarter of
2005, with gross profit on rental revenues increasing 14% to $9.0
million from $7.9 million in the third quarter 2005. Sales revenues
decreased slightly from $5.8 million in the third quarter 2005 to $5.7
million in the third quarter 2006. Higher sales margins in the third
quarter 2006 resulted in $0.1 million higher gross profit on sales of
$1.8 million compared to the third quarter 2005. Selling and
administrative expenses increased $0.1 million due to $0.3 million of
non-cash stock compensation expense related to the adoption of SFAS
123R. Allocated interest expense increased $0.3 million due to higher
average interest rates and average debt levels experienced by the
Company. As a result, TRS-RenTelco pre-tax income increased 16% to
$5.9 million from $5.1 million in the third quarter 2005.
"TRS-RenTelco's rental revenue increase of 9% from the third
quarter 2005 reflects continuing favorable market conditions across a
broad range of electronic test equipment product and market segments,"
Mr. Kakures further stated. "Our gross margin on rents increased to
45% for the quarter, our highest quarterly level since the merger of
TRS and RenTelco in mid-2004. We are continuing to buy the latest
technology test equipment to support demand and invest in our North
America market leadership position. We are also beginning to see
improvement in our day-to-day rigor in managing our opportunity
pipeline. Ultimately, this should result in closing more opportunities
and lead to higher rental revenue levels.
"I would like to congratulate all of our employees for McGrath
RentCorp's recent listing in Forbes Magazine's 200 Best Small
Companies for 2006. This is our sixth time making the listing.
Although there are many different financial metrics that are measured
in making the list, we are most proud of what we have accomplished
with our return on equity. Our ability to achieve a high return on
equity over an extended period of time says a great deal about our
ability to make intelligent rental equipment investments and to
operate our businesses with increasing precision."
THIRD QUARTER 2006 HIGHLIGHTS (AS COMPARED TO THIRD QUARTER 2005)
-- Rental revenues increased 12% to $43.9 million. Within rental
revenues, Mobile Modular increased 14% from $20.9 million to
$23.9 million; TRS-RenTelco increased 9% from $18.4 million to
$20.0 million.
-- Sales revenues decreased 19% to $25.1 million, resulting from
lower sales volume at Mobile Modular partially offset by
higher sales at Enviroplex. In the third quarter 2005, Mobile
Modular sales revenues included a $5.8 million sale related to
damages caused by Hurricane Katrina. Lower sales volume was
offset by a higher gross margin percentage of 32.7% in 2006
compared to 26.5% in 2005, resulting in a comparable gross
profit of $8.2 million in 2006 and 2005. 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 6% to $11.4
million, with Mobile Modular increasing 17% to $2.8 million
from $2.4 million in 2005, and TRS-RenTelco increasing 3% to
$8.6 million from $8.4 million in 2005.
-- Debt decreased $11.4 million during the quarter to $178.1
million, with the Company's total liabilities to equity ratio
decreasing from 1.71 to 1 as of June 30, 2006 to 1.66 to 1 at
September 30, 2006. As of September 30, 2006, the Company,
under its lines of credit, had capacity to borrow an
additional $76.9 million.
-- Dividend rate increased 14% to $0.16 per share for the third
quarter 2006, as compared to $0.14 per share for the third
quarter of 2005. On an annualized basis, this dividend
represents a 2.4% yield on the November 1, 2006 close price of
$26.13.
-- EBITDA increased 11% to $36.9 million for the third quarter
2006 compared to $33.2 million for the third quarter 2005.
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
compensation. A reconciliation of net income to EBITDA can be
found at the end of this release.
It is suggested that this press release be read in conjunction
with the financial statements and notes thereto included in the
Company's latest Form 10-K and Forms 10-Q. You can visit the Company's
web site at www.mgrc.com to access information on McGrath RentCorp,
including the latest filings on Form 10-K and Form 10-Q.
FINANCIAL GUIDANCE
The Company revises its previous full-year 2006 guidance range of
$1.42 to $1.49 to an updated range of $1.48 to $1.55 per diluted
share. Such a forward-looking statement reflects McGrath RentCorp's
expectations as of November 2, 2006. Actual 2006 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, the Company, under the trade name Mobile Modular
Management Corporation, rents and sells modular buildings to fulfill
customers' temporary and permanent space needs in California, Texas
and Florida. Mobile Modular believes it is the largest provider of
relocatable classrooms for rental to school districts for grades K -
12 in California. The Company's TRS-RenTelco division rents and sells
electronic test equipment and is one of the leading providers of
general purpose and communications test equipment in North America.
CONFERENCE CALL NOTE: As previously announced in its press release
of October 5, 2006, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on November 2, 2006 to
discuss the third quarter 2006 results. To participate in the
teleconference, dial 1-800-218-4007 (in the U.S.), or 1-303-262-2075
(outside the U.S.), 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 11071763.
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 include: our
expectation that rental revenue growth is the key driver of higher and
more sustainable earnings levels; our expectation that our results
reflect continuing favorable market conditions across a broad range of
electronic test equipment product and market segments; our expectation
that improvement in our day-to-day rigor in managing our opportunity
pipeline should result in closing more opportunities and lead to
higher rental revenue levels; our expectation that we will be able to
continue to implement our business strategies and that our
organizational culture will continue to be a source of competitive
advantage; our belief that we will continue to succeed in new markets;
and our belief that our ability to make intelligent capital
investments and to operate our businesses with increasing precision
will achieve a high return on equity over an extended period of time.
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
effectiveness of management's strategies and decisions, general
economic and business conditions, state funding for education,
economic conditions in the markets in which the Company conducts the
majority of its business, fluctuations in interest rates and the
Company's ability to manage credit risk, retention and motivation of
key personnel, ability to finance expansion and to locate and
consummate acquisitions, the condition of the telecommunications
industry, new or modified statutory or regulatory requirements,
continuing demand for modular products, timely delivery and
installation of modular products, delays of future sales projects, and
intense industry competition,. 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.
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
- ----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
(in thousands, except per share
amounts) 2006 2005 2006 2005
- ------------------------------------------ -------- ------------------
Revenues
- -------------------------------
Rental $43,896 $39,240 $124,735 $112,000
Rental Related Services 8,278 6,929 22,444 18,439
----------- -------- ------------------
Rental Operations 52,174 46,169 147,179 130,439
Sales 25,110 30,986 47,377 62,093
Other 591 607 1,848 2,033
----------- -------- ------------------
Total Revenues 77,875 77,762 196,404 194,565
----------- -------- ------------------
Costs and Expenses
- -------------------------------
Direct Costs of Rental
Operations
Depreciation of Rental
Equipment 11,399 10,763 33,571 33,090
Rental Related Services 5,587 4,474 15,295 12,206
Other 8,489 7,338 26,258 22,062
----------- -------- ------------------
Total Direct Costs of
Rental Operations 25,475 22,575 75,124 67,358
Costs of Sales 16,890 22,767 32,778 45,175
----------- -------- ------------------
Total Costs 42,365 45,342 107,902 112,533
----------- -------- ------------------
Gross Profit 35,510 32,420 88,502 82,032
Selling and Administrative 11,278 10,543 33,634 29,524
----------- -------- ------------------
Income from Operations 24,232 21,877 54,868 52,508
Interest 2,959 2,095 8,085 5,726
----------- -------- ------------------
Income Before Provision for
Income Taxes 21,273 19,782 46,783 46,782
Provision for Income Taxes 8,296 7,517 17,365 17,777
----------- -------- ------------------
Income Before Minority
Interest 12,977 12,265 29,418 29,005
Minority Interest in Income
of Subsidiary 302 194 237 291
----------- -------- ------------------
Net Income $12,675 $12,071 $ 29,181 $ 28,714
=========== ======== ==================
Earnings Per Share:
Basic $ 0.51 $ 0.49 $ 1.17 $ 1.17
Diluted $ 0.50 $ 0.48 $ 1.16 $ 1.14
Shares Used in Per Share
Calculation:
Basic 24,960 24,678 24,927 24,626
Diluted 25,152 25,382 25,190 25,255
Cash Dividends Declared Per
Share $ 0.16 $ 0.14 $ 0.48 $ 0.42
MCGRATH RENTCORP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
------------- ------------
(in thousands) 2006 2005
- ----------------------------------------------------------------------
Assets
- --------------------------------------------
Cash $ 426 $ 276
Accounts Receivable, net of allowance for
doubtful accounts of $1,000 in 2006 and
2005 63,607 63,702
Rental Equipment, at cost:
Relocatable Modular Buildings 445,175 408,227
Electronic Test Equipment 180,185 154,708
------------- ------------
625,360 562,935
Less Accumulated Depreciation (180,136) (156,502)
------------- ------------
Rental Equipment, net 445,224 406,433
------------- ------------
Property, Plant and Equipment, net 57,167 56,008
Prepaid Expenses and Other Assets 17,810 16,019
------------- ------------
Total Assets $ 584,234 $ 542,438
============= ============
Liabilities and Shareholders' Equity
- --------------------------------------------
Liabilities:
Notes Payable $ 178,057 $ 163,232
Accounts Payable and Accrued Liabilities 47,878 51,690
Deferred Income 30,631 27,410
Minority Interest in Subsidiary 3,436 3,199
Deferred Income Taxes, net 104,684 98,438
------------- ------------
Total Liabilities 364,686 343,969
------------- ------------
Shareholders' Equity:
Common Stock, no par value -
Authorized -- 40,000 shares
Issued and Outstanding -- 24,941 shares
in 2006 and 24,832 shares in 2005 30,601 26,224
Retained Earnings 188,947 172,245
------------- ------------
Total Shareholders' Equity 219,548 198,469
------------- ------------
Total Liabilities and Shareholders'
Equity $ 584,234 $ 542,438
============= ============
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
--------------------
(in thousands) 2006 2005
- ----------------------------------------------------------------------
Cash Flows from Operating Activities:
- --------------------------------------------------
Net Income $ 29,181 $ 28,714
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 35,140 34,809
Provision for Doubtful Accounts 364 628
Non-Cash Stock Compensation 2,334 --
Gain on Sale of Rental Equipment (7,689) (7,123)
Change In:
Accounts Receivable (269) (20,992)
Prepaid Expenses and Other Assets (1,791) (1,433)
Accounts Payable and Accrued Liabilities 4,990 8,524
Deferred Income 3,221 8,279
Deferred Income Taxes 6,246 8,301
---------- ---------
Net Cash Provided by Operating Activities 71,727 59,707
---------- ---------
Cash Flows from Investing Activities:
- --------------------------------------------------
Purchase of Rental Equipment (91,703) (77,119)
Purchase of Property, Plant and Equipment (2,728) (1,593)
Proceeds from Sale of Rental Equipment 17,953 22,242
---------- ---------
Net Cash Used in Investing Activities (76,478) (56,470)
---------- ---------
Cash Flows from Financing Activities:
- --------------------------------------------------
Net Borrowings Under Bank Lines of Credit 14,825 2,735
Proceeds from the Exercise of Stock Options 1,441 2,609
Excess Tax Benefit from Exercise and
Disqualifying
Disposition of Stock Options 626 1,090
Repurchase of Common Stock (526) --
Payment of Dividends (11,465) (9,598)
---------- ---------
Net Cash Provided by (Used in) Financing
Activities 4,901 (3,164)
---------- ---------
Net Increase in Cash 150 73
Cash Balance, beginning of period 276 189
---------- ---------
Cash Balance, end of period $ 426 $ 262
========== =========
Interest Paid, during the period $ 7,362 $ 4,907
========== =========
Income Taxes Paid, during the period $ 10,493 $ 12,934
========== =========
Dividends Declared, not yet paid $ 3,991 $ 3,469
========== =========
Rental Equipment Acquisitions, not yet paid $ 5,615 $ 10,099
========== =========
Mobile Modular - Q3 2006 compared to Q3 2005 (Unaudited)
(dollar amounts in thousands) Three Months Ended
September 30, Increase (Decrease)
------------------ -------------------
2006 2005 $ %
------------------ -------------------
Revenues
- --------------------------------
Rental $ 23,857 $ 20,886 $ 2,971 14%
Rental Related Services 7,902 6,670 1,232 18%
------------------ -----------
Rental Operations 31,759 27,556 4,203 15%
Sales 12,372 20,949 (8,577) -41%
Other 184 163 21 13%
------------------ -----------
Total Revenues $ 44,315 $ 48,668 $ (4,353) -9%
------------------ -----------
Gross Profit
- --------------------------------
Rental $ 15,004 $ 13,263 $ 1,741 13%
Rental Related Services 2,727 2,487 240 10%
------------------ -----------
Rental Operations 17,731 15,750 1,981 13%
Sales 3,473 4,911 (1,438) -29%
Other 184 163 21 13%
------------------ -----------
Total Gross Profit $ 21,388 $ 20,824 $ 564 3%
------------------ -----------
------------------ -----------
Pre-tax Income $ 12,920 $ 13,615 $ (695) -5%
------------------ -----------
Other Information
- --------------------------------
Depreciation of Rental Equipment$ 2,835 $ 2,422 $ 413 17%
Interest Expense Allocation 2,160 1,514 646 43%
Average Rental Equipment (1) $392,979 $348,115 $ 44,864 13%
Average Rental Equipment on Rent
(1) 328,762 294,903 33,859 11%
Average Monthly Total Yield (2) 2.02% 2.00% 1%
Average Utilization (3) 83.7% 84.7% -1%
Average Monthly Rental Rate (4) 2.42% 2.36% 2%
Period End Rental Equipment (1) $404,086 $360,168 $ 43,918 12%
Period End Utilization (3) 82.9% 84.1% -1%
Period End Floors (1) 24,721 22,887 1,834 8%
- ----------------------------------------------------------------------
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 -Q3 2006 compared to Q3 2005 (Unaudited)
(dollar amounts in thousands) Three Months Ended
September 30, Increase (Decrease)
------------------ -------------------
2006 2005 $ %
--------------------------------------
Revenues
- --------------------------------
Rental $20,039 $18,354 $1,685 9%
Rental Related Services 376 259 117 45%
---------------------------
Rental Operations 20,415 18,613 1,802 10%
Sales 5,734 5,807 (73) -1%
Other 407 444 (37) -8%
---------------------------
Total Revenues 26,556 24,864 1,692 7%
---------------------------
Gross Profit
- --------------------------------
Rental 9,004 7,876 1,128 14%
Rental Related Services (36) (32) (4) -13%
---------------------------
Rental Operations 8,968 7,844 1,124 14%
Sales 1,831 1,729 102 6%
Other 407 444 (37) -8%
---------------------------
Total Gross Profit 11,206 10,017 1,189 12%
---------------------------
---------------------------
Pre-tax Income $5,877 $5,068 $809 16%
---------------------------
Other Information
- --------------------------------
Depreciation of Rental Equipment $8,564 $8,341 $223 3%
Interest Expense Allocation 927 638 289 45%
Average Rental Equipment (1) $175,827 $151,250 $24,577 16%
Average Rental Equipment on Rent
(1) 123,038 $103,281 19,757 19%
Average Monthly Total Yield (2) 3.80% 4.04% -6%
Average Utilization (3) 70.0% 68.3% 2%
Average Monthly Rental Rate (4) 5.43% 5.92% -8%
Period End Rental Equipment (1) $178,568 $151,250 $27,318 18%
Period End Utilization (3) 68.8% 70.9% -3%
- ----------------------------------------------------------------------
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 - Nine Months Ended 9/30/06 compared to Nine Months
Ended 9/30/05 (Unaudited)
(dollar amounts in thousands) Nine Months Ended
September 30, Increase (Decrease)
------------------ -------------------
2006 2005 $ %
------------------ -------------------
Revenues
- --------------------------------
Rental $66,867 $59,498 $7,369 12%
Rental Related Services 21,447 17,449 3,998 23%
------------------ ----------
Rental Operations 88,314 76,947 11,367 15%
Sales 24,467 34,730 (10,263) -30%
Other 545 463 82 18%
------------------ ----------
Total Revenues 113,326 $112,140 $1,186 1%
------------------ ----------
Gross Profit
- --------------------------------
Rental $40,238 $37,793 $2,445 6%
Rental Related Services 7,362 6,019 1,343 22%
------------------ ----------
Rental Operations 47,600 43,812 3,788 9%
Sales 6,608 8,307 (1,699) -20%
Other 545 463 82 18%
------------------ ----------
Total Gross Profit $54,753 $52,582 $2,171 4%
------------------ ----------
------------------ ----------
Pre-tax Income $30,284 $33,401 $(3,117) -9%
------------------ ----------
Other Information
- --------------------------------
Depreciation of Rental Equipment $7,973 $6,814 $1,159 17%
Interest Expense Allocation 5,949 4,089 1,860 45%
Average Rental Equipment (1) $378,962 $333,944 $45,018 13%
Average Rental Equipment on Rent
(1) 315,040 284,737 30,303 11%
Average Monthly Total Yield (2) 1.96% 1.98% -1%
Average Utilization (3) 83.1% 85.3% -3%
Average Monthly Rental Rate (4) 2.36% 2.32% 2%
Period End Rental Equipment (1) $404,086 $360,168 $43,918 12%
Period End Utilization (3) 82.9% 84.1% -1%
Period End Floors (1) 24,721 22,887 1,834 8%
- ----------------------------------------------------------------------
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 - Nine Months Ended 9/30/06 compared to Nine Months Ended
9/30/05 (Unaudited)
(dollar amounts in thousands) Nine Months Ended
September 30, Increase (Decrease)
------------------ -------------------
2006 2005 $ %
------------------ -------------------
Revenues
- --------------------------------
Rental $57,868 $52,502 $5,366 10%
Rental Related Services 997 990 7 1%
------------------ ---------
Rental Operations 58,865 53,492 5,373 10%
Sales 13,436 19,026 (5,590) -29%
Other 1,303 1,570 (267) -17%
------------------ ---------
Total Revenues $73,604 $74,088 $(484) -1%
------------------ ---------
Gross Profit
- --------------------------------
Rental $24,668 $19,055 $5,613 29%
Rental Related Services (213) 214 (427) -200%
------------------ ---------
Rental Operations 24,455 19,269 5,186 27%
Sales 4,672 5,412 (740) -14%
Other 1,303 1,570 (267) -17%
------------------ ---------
Total Gross Profit $30,430 $26,251 $4,179 16%
------------------ ---------
------------------ ---------
Pre-tax Income $14,557 $11,721 $2,836 24%
------------------ ---------
Other Information
- --------------------------------
Depreciation of Rental Equipment $25,598 $26,276 $(678) -3%
Interest Expense Allocation 2,507 1,810 697 39%
Average Rental Equipment (1) $166,660 $150,301 $16,359 11%
Average Rental Equipment on Rent
(1) 116,715 97,488 19,227 20%
Average Monthly Total Yield (2) 3.86% 3.88% -1%
Average Utilization (3) 70.0% 64.9% 8%
Average Monthly Rental Rate (4) 5.51% 5.98% -8%
Period End Rental Equipment (1) $178,568 $151,250 $27,318 18%
Period End Utilization (3) 68.8% 70.9% -3%
- ----------------------------------------------------------------------
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.
Reconciliation of Net Income to EBITDA
The Company presents EBITDA as a financial measure as management
believes it provides useful information 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 business. EBITDA 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 compensation. In addition, several of the loan covenants and
the determination of the interest rate related to the Company's
revolving line of credit are expressed by reference to this financial
measure, similarly calculated. 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. The Company's
EBITDA may not be comparable to similarly titled measures presented
by other companies. Since EBITDA is a non-GAAP financial measure as
defined by the Securities and Exchange Commission, the following
table reconciles EBITDA to the most directly comparable financial
measures calculated and presented in accordance with accounting
principles generally accepted in the United States for the three,
nine and twelve months ended September 30, 2006 and 2005.
(dollar amounts Three Months Nine Months Ended Twelve Months Ended
in thousands) Ended September 30, September 30,
September 30,
----------------- ----------------- -------------------
2006 2005 2006 2005 2006 2005
-------- -------- -------- -------- --------- ---------
Net Income $12,675 $12,071 $29,181 $28,714 $41,286 $37,472
Minority
Interest in
Income of
Subsidiary 302 194 237 291 208 256
Provision for
Income Taxes 8,296 7,517 17,365 17,777 24,237 22,465
Interest 2,959 2,095 8,085 5,726 10,249 7,389
-------- -------- -------- -------- --------- ---------
Income from
Operations 24,232 21,877 54,868 52,508 75,980 67,582
Depreciation
and
Amortization 11,917 11,332 35,140 34,809 46,765 47,125
Non-Cash
Stock
Compensation 786 -- 2,334 -- 2,334 57
-------- -------- -------- -------- --------- ---------
EBITDA (1) $36,935 $33,209 $92,342 $87,317 $125,079 $114,764
======== ======== ======== ======== ========= =========
EBITDA Margin
(2) 47% 43% 47% 45% 46% 45%
1 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 compensation.
2 EBITDA Margin is calculated as EBITDA divided by total revenues for
the period.
CONTACT: McGrath RentCorp
Keith E. Pratt, 925-606-9200 (Chief Financial Officer)