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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): February 22, 2007
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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)
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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 February 22, 2007, McGrath RentCorp (the "Company") announced via press
release the Company's results for its fourth quarter ended December 31, 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 February 22, 2007.
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: February 22, 2007 By: /s/ Keith E. Pratt
----------------------------------
Keith E. Pratt
Vice President and Chief Financial
Officer
3
Exhibit 99.1
McGrath RentCorp Announces Results for Fourth Quarter and Year-end
EPS of $0.47 for the Fourth Quarter and $1.63 for the Year
Rental Revenues Increase 11% for the Year
Company Announces 12.5% Dividend Increase
LIVERMORE, Calif.--(BUSINESS WIRE)--Feb. 22, 2007--McGrath
RentCorp (NASDAQ:MGRC) today announced revenues for the quarter ended
December 31, 2006, of $70.7 million, compared to $77.6 million in the
fourth quarter 2005. The Company reported net income for the fourth
quarter 2006 of $11.9 million, or $0.47 per diluted share, compared to
net income of $12.1 million, or $0.47 per diluted share, in the fourth
quarter 2005. Rental revenue, the key driver of sustainable revenue
and earnings levels, rose 10% compared to the fourth quarter of 2005.
Total revenues for the twelve months ended December 31, 2006, were
$267.1 million, compared to $272.2 million in the same twelve-month
period in 2005. Net income for the twelve months ended December 31,
2006, increased 1% to $41.1 million, or $1.63 per diluted share,
compared to net income of $40.8 million, or $1.61 per diluted share,
in the prior-year period.
Several items impacted 2005 and 2006 results, and should be
considered when assessing year over year core business performance. In
2005, sales of modular classrooms related to hurricanes in the
southeastern U.S. contributed $14.3 million of revenue and $0.09 of
EPS. In addition, a lower effective tax rate increased EPS by $0.04 in
2005, caused by favorable revenue distribution by state due to the TRS
acquisition. In 2006, the Company began expensing employee stock
options as required by SFAS 123R, which reduced EPS by $0.08. In
addition, the 2006 effective tax rate was reduced to 36.9% from 39.0%
due primarily to a franchise tax law change in Texas, increasing EPS
by $0.05.
The Company also announced that the board of directors declared a
quarterly cash dividend of $0.18 per share for the quarter ending
March 31, 2007, an increase of 12.5% over last year's same period. On
an annualized basis, this dividend represents a 2.3% yield based on
the February 21, 2007, closing stock price. The cash dividend will be
payable on April 30, 2007, to all shareholders of record on April 16,
2007.
For the fourth quarter of 2006, the Company's Mobile Modular
division reported a 12% increase in rental revenues to $24.3 million
compared with $21.7 million in the fourth quarter 2005, with gross
profit on rental revenues increasing 18% to $16.4 million from $14.0
million in the fourth quarter 2005. Sales revenues decreased $4.7
million from $14.4 million in the fourth quarter 2005 to $9.7 million,
with gross profit on sales decreasing $1.3 million to $2.5 million in
the fourth quarter 2006. The decrease in sales revenues was primarily
due to $8.4 million of sales revenue related to damages caused by
Hurricane Katrina during the fourth 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 7% from $20.2 million in
the fourth quarter 2005 to $21.5 million in the fourth quarter 2006.
Selling and administrative expenses increased $1.2 million to $6.4
million in the fourth quarter 2006, due primarily to $0.5 million of
non-cash stock compensation expense related to the adoption of SFAS
123R. Allocated interest expense increased $0.4 million due to higher
average interest rates and average debt levels experienced by the
Company. As a result, Mobile Modular pre-tax income decreased 2% from
$13.4 million to $13.2 million in the fourth quarter 2006.
For the fourth quarter of 2006, the Company's TRS-RenTelco
division reported a 7% increase in rental revenues to $19.9 million
compared to $18.6 million in the fourth quarter of 2005, with gross
profit on rental revenues increasing 8% to $8.7 million from $8.0
million in the fourth quarter 2005. Sales revenues decreased $8.1
million from $12.1 million in the fourth quarter 2005 to $4.0 million
in the fourth quarter 2006, with gross profit on sales decreasing $0.4
million to $1.9 million from $2.3 million in the fourth quarter 2005.
Selling and administrative expenses increased $0.4 million, primarily
due to $0.3 million of non-cash stock compensation expense related to
the adoption of SFAS 123R. Allocated interest expense increased $0.2
million due to higher average interest rates and average debt levels
experienced by the Company. As a result, TRS-RenTelco pre-tax income
decreased 4% from $5.5 million to $5.3 million in the fourth quarter
2006.
Dennis Kakures, President and CEO of McGrath RentCorp, made the
following comments regarding these results and future expectations:
"Our fourth quarter results reflect the continuing growth of our
rental businesses in both modulars and electronics. Our long-term
success has been and will continue to be driven by rental revenue
growth and higher gross profit and margin on rents. These metrics
provide the best gauge of the health and sustainable earnings
potential of both Mobile Modular and TRS-RenTelco.
"Our full year results in 2006 show the strength of our core
rental operations, contributing to combined increases of 11% in rental
revenues to $168.9 million and 14% in gross profit on rents to $90.0
million. Mobile Modular rental revenues increased 12% to $91.1 million
and gross profit on rents 10% to $56.7 million. This was accomplished
in spite of a challenging California classroom rental environment in
2006 due to limited modernization bond funding at the state level.
TRS-RenTelco rental revenues increased 9% to $77.8 million and gross
profit on rents 23% to $33.3 million. These results reflect a healthy
rental environment and lower depreciation expense and equipment
processing costs, as a percentage of rents.
"Starting in 2007, and continuing through 2008, we will be making
key strategic growth and infrastructure investments to support
longer-term earnings. As a result, our 2007 EPS guidance range of
$1.65 to $1.73 masks the strength of our continuing core rental
operations due to the impact of these initiatives. These new
investments include geographic market and segment expansion of our
modular rental business, a new ERP application platform, IT
infrastructure upgrades, and greater management bandwidth and
staffing. In 2007, although we expect our continuing core modular and
electronics rental operations to contribute approximately a 12%
increase in EPS over 2006 levels, a large portion of this earnings
growth is being offset by the collective amount of these key
investments and a return to a more normalized effective tax rate.
"For Mobile Modular in 2007, our outlook for the California
classroom rental market is very favorable. With passage of the
November 2006 school facilities bond measure supporting school
modernization, the cloud of uncertainty on the backlog of school
reconstruction projects moving forward in 2007 and 2008 has now been
lifted. We anticipate higher California classroom booking levels in
2007 with the majority of equipment shipping beginning late in the
second and third quarters. While this means that we will only see
approximately three to six months of rental billings in 2007, we
should see a full twelve months of rental revenues from the great
majority of these orders in 2008. We also anticipate a healthy flow of
new school modernization project opportunities continuing through 2008
from the bond funding now in place. School modernization and
reconstruction projects typically have rental terms from 18 to 36
months or longer. We are also expecting another strong year in the
Florida educational market due to the popularity of our hybrid
classroom product, the demand for class size reduction and other
facility needs, and our growing base of customers.
"The strength we saw in the California and Texas commercial
markets in 2006 has continued into 2007. We are also optimistic
regarding the over $30 billion in non-educational infrastructure bond
monies passed by California voters at the end of 2006 that could
benefit commercial market activity for many years.
"In 2007, we are looking forward to launching our first new
modular geographic market since our entry into the Florida educational
market in 2004. We have identified several U.S. markets that we
believe will be attractive long-term opportunities for our educational
and commercial modular business. We are actively preparing for launch
in select markets and we will be updating our progress during 2007. We
are also excited about our recent entry into the commercial modular
rental market in Florida. We believe the Florida commercial market is
of significant size and customer diversity to add favorably to our
long-term profitability in the state. This year, we will also complete
the development of our central Florida regional sales and inventory
center to support our growing business levels.
"For TRS-RenTelco in 2007, we are anticipating favorable U.S. and
Canadian rental markets. We believe broad based demand will be driven
by emerging wireless communication technologies, semiconductor and
consumer electronics product development and manufacturing, and the
impact of increasing volumes of broadband, wireless and video traffic
on communication networks. In addition, we will continue to assess
options for geographic and product line expansion.
"Looking ahead in 2007, we will be nurturing our new modular
geographic launches and expansion into the Florida commercial modular
rental market. On a parallel track, we will continue our "growth
laboratory" and "incubation" work on potential new initiatives in
order to create a continuum of future earnings growth opportunities.
In turn, the investments we are making in creating greater management
bench strength, and in our IT infrastructure, staffing and new ERP
application platform, are essential to support the Company's future
growth."
FOURTH QUARTER 2006 HIGHLIGHTS (AS COMPARED TO FOURTH QUARTER
2005)
-- Rental revenues increased 10% to $44.2 million. Within rental
revenues, Mobile Modular increased 12% from $21.7 million to
$24.3 million; TRS-RenTelco increased 7% from $18.6 million to
$19.9 million.
-- Sales revenues decreased 42% to $16.7 million, resulting from
lower sales volume at Mobile Modular and TRS-RenTelco. In the
fourth quarter 2005, Mobile Modular sales revenues included
$8.4 million of sales revenues related to damages caused by
Hurricane Katrina. Lower sales volume was partially offset by
a higher gross margin percentage of 30.0% in 2006 compared to
22.7% in 2005, resulting in gross profit decreasing 23% to
$5.0 million in 2006 from $6.5 million in 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 $11.8
million, with Mobile Modular increasing 5% to $2.9 million
from $2.8 million in 2005, and TRS-RenTelco increasing 7% to
$8.9 million from $8.3 million in 2005.
-- Debt decreased $12.5 million during the quarter to $165.6
million, with the Company's total liabilities to equity ratio
decreasing from 1.66 to 1 as of September 30, 2006 to 1.54 to
1 at December 31, 2006. As of December 31, 2006, the Company,
under its lines of credit, had capacity to borrow an
additional $89.4 million.
-- Dividend rate increased 14% to $0.16 per share for the fourth
quarter 2006, as compared to $0.14 per share for the fourth
quarter of 2005. On an annualized basis, this dividend
represents a 2.0% yield on the February 21, 2006 close price
of $31.67.
-- EBITDA increased 6% to $34.6 million for the fourth quarter
2006 compared to $32.8 million for the fourth 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.
You should read this press release 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 expects 2007 financial results to be driven by
continued growth in its core rental operations, partly offset by
increases in selling and administrative expenses, with full-year
earnings per share to be in a range of $1.65 to $1.73 per diluted
share.
In 2007, we expect low double-digit percentage growth in rental
revenues to be somewhat offset by higher selling and administrative
costs as we invest in geographic market and segment expansion of our
modular rental business, a new ERP application platform, IT
infrastructure upgrades, and greater management bandwidth and
staffing. Selling and administrative costs are expected to increase by
approximately 15% compared to 2006. In addition, we expect a higher
estimated effective tax rate of 39.0%, compared to 36.9% in 2006. Our
lower 2006 tax rate was primarily due to a one-time reduction to the
Company's deferred tax liability as a result of a franchise tax law
change enacted by the state of Texas in May 2006. These
forward-looking statements reflect McGrath RentCorp's expectations as
of February 22, 2007. Actual 2007 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 January 25, 2007, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 22, 2007
to discuss the fourth quarter 2006 results. To participate in the
teleconference, dial 1-800-218-9073 (in the U.S.), or 1-303-262-2139
(outside the US), or visit the investor relations section of the
Company's website at www.mgrc.com. Telephone replay of the call will
be available for 48 hours following the call by dialing 1-800-405-2236
(in the U.S.), or 1-303-590-3000 (outside the U.S.). The pass code for
the call replay is 11081107.
This press release contains statements, which constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to a number
of risks and uncertainties. These statements appear in a number of
places. Such statements can be identified by the use of
forward-looking terminology such as "believes", "expects", "may",
"estimates", "will", "should", "plans" or "anticipates" or the
negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. These forward-looking
statements are not guarantees of future performance and involve
significant risks and uncertainties. Actual results may vary
materially from those in the forward-looking statements as a result of
various factors. Important factors that could cause actual results to
differ materially from the Company's expectations are disclosed under
"Risk Factors" and elsewhere in the company's 10-K, 10-Q and other SEC
filings, including, the 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, continuing demand for modular
products, timely delivery and installation of modular products, delays
of future sales projects, intense industry competition, fluctuations
in interest rates and the Company's ability to manage credit risk,
fluctuations in the Company's effective tax rate, hiring, retention
and motivation of key personnel, success of the Company's strategic
growth initiatives, successful implementation of information system
upgrades, ability to finance expansion and to locate and consummate
acquisitions, and new or modified statutory or regulatory
requirements. There may be other factors not listed above that could
cause actual results to vary materially from the forward-looking
statements described in this press release. The Company assumes no
obligation to update any forward-looking statements contained in this
press release as a result of new information, future events, or
developments.
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------------------
(in thousands, except per share
amounts) 2006 2005 2006 2005
-------- --------- --------- ---------
REVENUES
Rental $44,205 $40,316 $168,940 $152,316
Rental Related Services 9,155 8,021 31,599 26,460
-------- --------- --------- ---------
Rental Operations 53,360 48,337 200,539 178,776
Sales 16,708 28,730 64,085 90,823
Other 594 548 2,442 2,581
-------- --------- --------- ---------
Total Revenues 70,662 77,615 267,066 272,180
-------- --------- --------- ---------
COSTS AND EXPENSES
Direct Costs of Rental
Operations
Depreciation of Rental
Equipment 11,782 11,088 45,353 44,178
Rental Related Services 6,535 5,687 21,830 17,893
Other 7,318 7,230 33,576 29,292
-------- --------- --------- ---------
Total Direct Costs of
Rental Operations 25,635 24,005 100,759 91,363
Costs of Sales 11,703 22,203 44,481 67,378
-------- --------- --------- ---------
Total Costs 37,338 46,208 145,240 158,741
-------- --------- --------- ---------
Gross Profit 33,324 31,407 121,826 113,439
Selling and Administrative 11,865 10,295 45,499 39,819
-------- --------- --------- ---------
Income from Operations 21,459 21,112 76,327 73,620
Interest 2,675 2,164 10,760 7,890
-------- --------- --------- ---------
Income Before Provision for
Income Taxes 18,784 18,948 65,567 65,730
Provision for Income Taxes 6,844 6,872 24,209 24,649
-------- --------- --------- ---------
Income Before Minority
Interest 11,940 12,076 41,358 41,081
Minority Interest in Income
(Loss) of Subsidiary 43 (29) 280 262
Net Income $11,897 $12,105 $41,078 $40,819
========= ======== ========= =========
Earnings Per Share:
Basic $0.48 $0.49 $1.65 $1.65
Diluted $0.47 $0.47 $1.63 $1.61
Shares Used in Per Share
Calculation:
Basic 25,008 24,795 24,948 24,668
Diluted 25,313 25,542 25,231 25,331
Cash Dividends Declared Per
Share $0.16 $0.14 $0.64 $0.56
MCGRATH RENTCORP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31,
-------------------
(in thousands) 2006 2005
-------------------
Assets
Cash $349 $276
Accounts Receivable, net of allowance for doubtful
accounts of $1,000 in 2006 and 2005 59,834 64,424
Rental Equipment, at cost:
Relocatable Modular Buildings 451,828 408,227
Electronic Test Instruments 186,673 154,708
--------- ---------
638,501 562,935
Less Accumulated Depreciation (187,159) (156,502)
--------- ---------
Rental Equipment, net 451,342 406,433
--------- ---------
Property, Plant and Equipment, net 58,146 56,008
Prepaid Expenses and Other Assets 15,871 16,019
--------- ---------
Total Assets $585,542 $543,160
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Notes Payable $165,557 $163,232
Accounts Payable and Accrued Liabilities 55,509 51,690
Deferred Income 25,852 28,132
Minority Interest in Subsidiary 3,479 3,199
Deferred Income Taxes, net 104,353 98,438
--------- ---------
Total Liabilities 354,750 344,691
--------- ---------
Shareholders' Equity:
Common Stock, no par value --
Authorized -- 40,000 shares
Issued and Outstanding -- 25,090 shares in
2006 and 24,832 shares in 2005 33,963 26,224
Retained Earnings 196,829 172,245
--------- ---------
Total Shareholders' Equity 230,792 198,469
--------- ---------
Total Liabilities and Shareholders'
Equity $585,542 $543,160
========= =========
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- ----------------------------------------------------------------------
Year Ended December 31,
-----------------------
(in thousands) 2006 2005
- ----------------------------------------------------------------------
Cash Flow from Operating Activities:
Net Income $41,078 $40,819
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 47,461 46,433
Provision for Doubtful Accounts 863 845
Non-Cash Stock Compensation 3,125 44
Gain on Sale of Rental Equipment (9,747) (9,662)
Change In:
Accounts Receivable 3,727 (9,979)
Prepaid Expenses and Other Assets 148 (1,312)
Accounts Payable and Accrued Liabilities 8,829 2,646
Deferred Income (2,280) 2,311
Deferred Income Taxes 5,915 9,708
------------- ---------
Net Cash Provided by Operating
Activities 99,119 81,853
------------- ---------
Cash Flow from Investing Activities:
Purchase of Rental Equipment (109,920) (105,501)
Purchase of Property, Plant and Equipment (4,247) (10,512)
Proceeds from Sale of Rental Equipment 24,144 31,406
------------- ---------
Net Cash Used in Investing Activities (90,023) (84,607)
------------- ---------
Cash Flow from Financing Activities:
Net Borrowings Under Bank Lines of Credit 2,325 11,344
Proceeds from the Exercise of Stock Options 3,591 3,325
Excess Tax Benefit from Exercise of
Disqualifying Disposition of Stock Options 1,047 1,270
Repurchase of Common Stock (526) (30)
Payment of Dividends (15,460) (13,068)
------------- ---------
Net Cash Provided by (Used in)
Financing Activities (9,023) 2,841
------------- ---------
Net Increase in Cash 73 87
Cash Balance, beginning of period 276 189
------------- ---------
Cash Balance, end of period $349 $276
============= =========
Interest Paid, during the period $10,511 $7,799
============= =========
Income Taxes Paid, during the period $17,248 $22,871
============= =========
Dividends Declared, not yet paid $4,016 $3,479
============= =========
Rental Equipment Acquisitions, not yet paid $9,432 $14,694
============= =========
Mobile Modular - Q4 2006 compared to Q4 2005 (Unaudited)
(dollar amounts in thousands) Three Months Ended Increase
December 31, (Decrease)
------------------ -------------
2006 2005 $ %
------------------ -------- ----
Revenues
Rental $24,257 $21,682 $2,575 12%
Rental Related Services 8,466 7,604 862 11%
------------------ --------
Rental Operations 32,723 29,286 3,437 12%
Sales 9,742 14,377 (4,635) -32%
Other 184 162 22 14%
------------------ --------
Total Revenues $42,649 $43,825 $(1,176) -3%
------------------ --------
Gross Profit
Rental $16,434 $13,963 $2,471 18%
Rental Related Services 2,420 2,240 180 8%
------------------ --------
Rental Operations 18,854 16,203 2,651 16%
Sales 2,461 3,793 (1,332) -35%
Other 184 162 22 14%
------------------ --------
Total Gross Profit $21,499 $20,158 $1,341 7%
------------------ --------
------------------ --------
Pre-tax Income $13,155 $13,393 $(238) -2%
------------------ --------
Other Information
Depreciation of Rental Equipment $2,925 $2,773 $152 5%
Interest Expense Allocation $1,958 $1,590 $368 23%
Average Rental Equipment (1) $406,913 $363,768 $43,145 12%
Average Rental Equipment on Rent (1) $335,204 $305,008 $30,196 10%
Average Monthly Total Yield (2) 1.99% 1.99% 0%
Average Utilization (3) 82.4% 83.8% -2%
Average Monthly Rental Rate (4) 2.41% 2.37% 2%
Period End Rental Equipment (1) $410,205 $366,253 $43,952 12%
Period End Utilization (3) 81.4% 83.5% -3%
Period End Floors (1) 24,854 23,135 1,719 7%
- ----------------------------------------------------------------- ----
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 - Q4 2006 compared to Q4 2005 (Unaudited)
(dollar amounts in thousands) Three Months Ended Increase
December 31, (Decrease)
------------------ -------------
2006 2005 $ %
------------------ -------- ----
Revenues
Rental $19,948 $18,634 $1,314 7%
Rental Related Services 689 417 272 65%
------------------ --------
Rental Operations 20,637 19,051 1,586 8%
Sales 4,047 12,128 (8,081) -67%
Other 410 386 24 6%
------------------ --------
Total Revenues $25,094 $31,565 $(6,471) -21%
------------------ --------
Gross Profit
Rental 8,671 8,035 636 8%
Rental Related Services 200 94 106 113%
------------------ --------
Rental Operations 8,871 8,129 742 9%
Sales 1,931 2,277 (346) -15%
Other 410 386 24 6%
------------------ --------
Total Gross Profit $11,212 $10,792 $420 4%
------------------ --------
------------------ --------
Pre-tax Income $5,270 $5,490 $(220) -4%
------------------ --------
Other Information
Depreciation of Rental Equipment $8,857 $8,315 $542 7%
Interest Expense Allocation $878 $665 $213 32%
Average Rental Equipment (1) $182,783 $153,094 $29,689 19%
Average Rental Equipment on Rent (1) $125,029 $108,007 $17,022 16%
Average Monthly Total Yield (2) 3.64% 4.06% -10%
Average Utilization (3) 68.4% 70.5% -3%
Average Monthly Rental Rate (4) 5.32% 5.75% -7%
Period End Rental Equipment (1) $186,085 $154,119 $31,966 21%
Period End Utilization (3) 66.3% 68.9% -4%
- ----------------------------------------------------------------- ----
1 Average and Period End Rental Equipment represents the cost of
rental equipment excluding accessory equipment.
2 Average Monthly Total Yield is calculated by dividing the averages
of monthly rental revenues by the cost of rental equipment, for the
period.
3 Period End Utilization is calculated by dividing the cost of rental
equipment on rent by the total cost of rental equipment excluding
accessory equipment. Average Utilization for the period is calculated
using the average costs of the rental equipment.
4 Average Monthly Rental Rate is calculated by dividing the averages
of monthly rental revenues by the cost of rental equipment on rent,
for the period.
Mobile Modular - Twelve Months 2006 compared to Twelve Months 2005
(Unaudited)
(dollar amounts in thousands) Twelve Months Increase
Ended (Decrease)
December 31,
------------------ -------------
2006 2005 $ %
------------------ -------- ----
Revenues
Rental $91,124 $81,180 $9,944 12%
Rental Related Services 29,913 25,053 4,860 19%
------------------ --------
Rental Operations 121,037 106,233 14,804 14%
Sales 34,209 49,107 (14,898) -30%
Other 729 625 104 17%
------------------ --------
Total Revenues $155,975 $155,965 $10 0%
------------------ --------
Gross Profit
Rental $56,672 $51,756 $4,916 9%
Rental Related Services 9,782 8,259 1,523 18%
------------------ --------
Rental Operations 66,454 60,015 6,439 11%
Sales 9,069 12,100 (3,031) -25%
Other 729 625 104 17%
------------------ --------
Total Gross Profit $76,252 $72,740 $3,512 5%
------------------ --------
------------------ --------
Pre-tax Income $43,439 $46,794 $(3,355) -7%
------------------ --------
Other Information
Depreciation of Rental Equipment $10,898 $9,587 $1,311 14%
Interest Expense Allocation $7,907 $5,679 $2,228 39%
Average Rental Equipment (1) $385,630 $341,103 $44,527 13%
Average Rental Equipment on Rent (1) $319,716 $289,584 $30,132 10%
Average Monthly Total Yield (2) 1.97% 1.98% -1%
Average Utilization (3) 82.9% 84.9% -2%
Average Monthly Rental Rate (4) 2.38% 2.34% 2%
Period End Rental Equipment (1) $410,205 $366,253 $43,952 12%
Period End Utilization (3) 81.4% 83.5% -3%
Period End Floors (1) 24,854 23,135 1,719 7%
- ----------------------------------------------------------------- ----
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 - Twelve Months 2006 compared to Twelve Months 2005
(Unaudited)
(dollar amounts in thousands) Twelve Months Increase
Ended (Decrease)
December 31,
------------------ --------------
2006 2005 $ %
------------------ -------- -----
Revenues
Rental $77,816 $71,136 $6,680 9%
Rental Related Services 1,686 1,407 279 20%
------------------ --------
Rental Operations 79,502 72,543 6,959 10%
Sales 17,483 31,154 (13,671) -44%
Other 1,713 1,956 (243) -12%
------------------ --------
Total Revenues $98,698 $105,653 $(6,955) -7%
------------------ --------
Gross Profit
Rental $33,339 $27,090 $6,249 23%
Rental Related Services (13) 308 (321) -104%
------------------ --------
Rental Operations 33,326 27,398 5,928 22%
Sales 6,603 7,689 (1,086) -14%
Other 1,713 1,956 (243) -12%
------------------ --------
Total Gross Profit $41,642 $37,043 $4,599 12%
------------------ --------
------------------ --------
Pre-tax Income $19,827 $17,211 $2,616 15%
------------------ --------
Other Information
Depreciation of Rental Equipment $34,455 $34,591 $(136) 0%
Interest Expense Allocation $3,385 $2,475 $910 37%
Average Rental Equipment (1) $170,705 $151,087 $19,618 13%
Average Rental Equipment on Rent (1) $118,798 $99,980 $18,818 19%
Average Monthly Total Yield (2) 3.80% 3.92% -3%
Average Utilization (3) 69.6% 66.2% 5%
Average Monthly Rental Rate (4) 5.46% 5.93% -8%
Period End Rental Equipment (1) $186,085 $154,119 $31,966 21%
Period End Utilization (3) 66.3% 68.9% -4%
- ---------------------------------------------------------------- -----
1 Average and Period End Rental Equipment represents the cost of
rental equipment excluding accessory equipment.
2 Average Monthly Total Yield is calculated by dividing the averages
of monthly rental revenues by the cost of rental equipment, for the
period.
3 Period End Utilization is calculated by dividing the cost of rental
equipment on rent by the total cost of rental equipment excluding
accessory equipment. Average Utilization for the period is calculated
using the average costs of the rental equipment.
4 Average Monthly Rental Rate is calculated by dividing the averages
of monthly rental revenues by the cost of rental equipment on rent,
for the period.
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 and twelve months ended
December 31, 2006 and 2005.
(dollar amounts in thousands) Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Net Income $11,897 $12,105 $41,078 $40,819
Minority Interest in Income
(Loss) of
Subsidiary 43 (29) 280 262
Provision for Income Taxes 6,844 6,872 24,209 24,649
Interest 2,675 2,164 10,760 7,890
--------- -------- --------- ---------
Income from Operations 21,459 21,112 76,327 73,620
Depreciation and Amortization 12,321 11,624 47,461 46,433
Non-Cash Stock Compensation 791 44 3,125 44
--------- -------- --------- ---------
EBITDA (1) $34,571 $32,780 $126,913 $120,097
========= ======== ========= =========
EBITDA Margin (2) 49% 42% 48% 44%
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