UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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): May 8, 2008
McGRATH RENTCORP
(Exact
name of registrant as specified in its Charter)
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California |
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(State or other jurisdiction of incorporation) |
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0-13292 |
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94-2579843 |
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(Commission File Number) |
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(I.R.S. Employee Identification No.) |
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5700 Las Positas Road, Livermore, CA 94551-7800 |
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(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))
Item
2.02 Results of Operations and Financial Condition.
On May 8, 2008, McGrath RentCorp (the “Company”) announced via press
release the Company’s results for its first quarter ended March 31,
2008. 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.
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Exhibit No. |
Description |
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| 99.1 | Press Release of McGrath RentCorp, dated May 8, 2008. |
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.
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McGRATH RENTCORP |
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Dated: |
May 8, 2008 |
By: |
/s/ |
Keith E. Pratt |
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Keith E. Pratt |
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Senior Vice President and Chief Financial Officer |
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Exhibit 99.1
McGrath RentCorp Announces Results for First Quarter 2008
EPS Increases 16% to $0.43 for the Quarter
Rental Revenues Increase 11%
LIVERMORE, Calif.--(BUSINESS WIRE)--McGrath RentCorp (NASDAQ:MGRC) today announced revenues for the quarter ended March 31, 2008, of $65.4 million, an increase of 8%, compared to $60.8 million in the first quarter 2007. The Company reported net income for the first quarter 2008 of $10.3 million, or $0.43 per diluted share, compared to net income of $9.3 million, or $0.37 per diluted share, in the first quarter 2007.
For the first quarter of 2008, the Company’s Mobile Modular division reported a 9% increase in rental revenues to $25.9 million compared with $23.8 million in the first quarter 2007, with gross profit on rental revenues increasing 9% to $17.2 million from $15.7 million in the first quarter 2007. Sales revenues decreased $1.3 million from $4.2 million in the first quarter 2007 to $2.9 million, and gross profit on sales decreased $0.4 million to $0.9 million in the first quarter 2008. Total gross profit increased 4% from $19.5 million in the first quarter 2007 to $20.3 million in the first quarter 2008. Selling and administrative expenses increased $0.5 million from $6.4 million to $6.9 million in the first quarter 2008. As a result, Mobile Modular’s pre-tax income increased 5% from $11.2 million to $11.7 million in the first quarter 2008.
For the first quarter of 2008, the Company’s TRS-RenTelco division reported a 15% increase in rental revenues to $22.3 million from $19.5 million in the first quarter of 2007, with gross profit on rental revenues increasing 20% to $9.6 million from $7.9 million in the first quarter 2007. Sales revenues increased 10% from $4.1 million to $4.5 million in the first quarter 2008, with gross profit on sales increasing $0.4 million to $1.8 million from $1.4 million in the first quarter 2007. Selling and administrative expenses increased $1.1 million to 5.9 million in the first quarter 2008. As a result, TRS-RenTelco’s pre-tax income increased 21% from $4.3 million to $5.2 million in the first quarter 2008.
Dennis Kakures, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“Our first quarter results reflect the continuing growth of our modulars and electronics rental businesses. Our long-term success has been and will continue to be driven by rental revenue growth, higher levels of gross profit and healthy gross margin on rents.
Mobile Modular’s 9% increase in rental revenues over the first quarter of last year is primarily related to classroom and commercial building shipments in the second and third quarters of 2007. We should experience a full 12 months of rental revenues on a large number of these orders. Gross profit on rents increasing 9% compared to a year ago was driven by the higher rental revenue level, and lower direct costs of rental operations to maintain and process rental equipment, as a percentage of rents.
TRS-RenTelco’s 15% increase in rental revenues over the first quarter of last year reflects a higher base of business entering 2008 and a healthy market environment during the first quarter. Gross profit on rents increasing 20% compared to a year ago was the result of higher rental revenues, and lower depreciation and direct costs of rental operations to calibrate and process rental equipment, as a percentage of rents.
We had strong operating performances in both rental divisions during the first quarter that led to an increase in net income compared to a year ago. Our quarter over quarter EPS growth also benefited from our buyback of approximately 1.7 million shares of the Company’s stock over the past two quarters. This reduction in outstanding shares compared to a year ago provided approximately a $0.02 diluted earnings per share benefit in our first quarter results.”
FIRST QUARTER 2008 HIGHLIGHTS (AS COMPARED TO FIRST QUARTER 2007)
- Rental revenues increased 11% to $48.3 million. Within rental revenues, Mobile Modular increased 9% from $23.8 million to $25.9 million; TRS-RenTelco increased 15% from $19.5 million to $22.3 million.
- Sales revenues decreased 2% to $9.2 million, resulting from lower sales volume in Mobile Modular, partly offset by higher sales volume in TRS-RenTelco and Enviroplex. The lower sales volume and higher gross margin percentage of 36.8% compared with 30.2% in 2007, resulted in a gross profit increase of $0.6 million. Sales revenues and related gross margins can fluctuate from quarter to quarter depending on customer requirements, equipment availability and funding.
- Depreciation of rental equipment increased 12% to $13.4 million, with Mobile Modular increasing 11% to $3.2 million from $2.9 million in 2007, and TRS-RenTelco increasing 12% to $10.2 million from $9.1 million in 2007.
- Debt increased $21.0 million during the quarter to $218.8 million, with the Company’s funded debt (notes payable) to equity ratio increasing from 0.81 to 1 at December 31, 2007 to 0.96 to 1 as of March 31, 2008. As of March 31, 2008, the Company had capacity to borrow an additional $24.2 million under its lines of credit.
- Repurchases of Common Stock totaled 968,749 shares for the first quarter of 2008 for an aggregate repurchase price of $21.9 million, or an average price of $22.61 per share. As of March 31, 2008, 210,878 shares remain authorized for repurchase.
- Dividend rate increased 11% to $0.20 per share for the first quarter 2008, as compared to $0.18 per share for the first quarter of 2007. On an annualized basis, this dividend represents a 3.3% yield on the May 7, 2008 close price of $23.99.
- Adjusted EBITDA increased 10% to $34.3 million for the first quarter of 2008 compared to $31.3 million for the first quarter of 2007. At March 31, 2008, the Company’s ratio of funded debt to the last twelve months Adjusted EBITDA was 1.55 compared to 1.43 at December 31, 2007. Adjusted EBITDA is defined as net income before minority interest in income of subsidiary, interest expense, provision for income taxes, depreciation, amortization and other non-cash stock-based compensation. A reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Form 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Form 10-K, 10-Q and other SEC filings.
FINANCIAL GUIDANCE
The Company reconfirms its 2008 full-year earnings per share to be in a range of $1.72 to $1.82 per diluted share. Such a forward-looking statement reflects McGrath RentCorp’s expectations as of May 8, 2008. Actual 2008 full-year earnings per share results may be materially different and affected by many factors, including those factors outlined in the “forward-looking statements” paragraph at the end of this press release.
About McGrath RentCorp
Founded in 1979, 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, Florida, North Carolina and Georgia. 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 April 9, 2008, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on May 8, 2008 to discuss the first quarter 2008 results. To participate in the teleconference, dial 1-800-257-7063 (in the U.S.), or 1-303-262-2138 (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 11111984.
This press release contains statements, which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to a number of risks and uncertainties. These statements appear in a number of places. Such statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “estimates”, “will”, “should”, “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. Actual results may vary materially from those in the forward-looking statements as a result of various factors. Important factors that could cause actual results to differ materially from the Company’s expectations are disclosed under "Risk Factors" and elsewhere in the Company’s 10-K, 10-Q and other SEC filings, including the following: the effectiveness of management’s strategies and decisions, general economic, stock market and business conditions, including in the states and countries where we sell or rent our products; continuing demand for our products; hiring, retention and motivation of key personnel; failure by third parties to manufacture our products in a timely manner and to our specifications; our ability to successfully implement information system upgrades; our ability to finance expansion and to locate and consummate acquisitions; fluctuations in interest rates and the Company’s ability to manage credit risk; our ability to effectively manage our rental assets; the risk that we may be subject to litigation and claims from employees, vendors and other third parties; fluctuations in the Company’s effective tax rate; changes in financial accounting standards; our failure to comply with internal control requirements; catastrophic loss to our facilities; state funding for education; new or modified statutory or regulatory requirements; success of the Company’s strategic growth initiatives; risks associated with doing business with government entities; seasonality of our educational and electronics business; intense industry competition; our ability to timely deliver, install and redeploy our modular products; significant increases in raw materials, labor, and other costs; and risks associated with operating internationally. There may be other factors not listed above that could cause actual results to vary materially from the forward-looking statements described in this press release. The Company assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events, or developments.
| MCGRATH RENTCORP | |||||||
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CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) |
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| Three Months Ended March 31, | |||||||
| (in thousands, except per share amounts) | 2008 | 2007 | |||||
| REVENUES | |||||||
| Rental | $ | 48,236 | $ | 43,308 | |||
| Rental Related Services | 7,342 | 7,422 | |||||
| Rental Operations | 55,578 | 50,730 | |||||
| Sales | 9,173 | 9,343 | |||||
| Other | 664 | 680 | |||||
| Total Revenues | 65,415 | 60,753 | |||||
| COSTS AND EXPENSES | |||||||
| Direct Costs of Rental Operations: | |||||||
| Depreciation of Rental Equipment | 13,418 | 12,019 | |||||
| Rental Related Services | 5,215 | 5,093 | |||||
| Other | 8,090 | 7,598 | |||||
| Total Direct Costs of Rental Operations | 26,723 | 24,710 | |||||
| Costs of Sales | 5,798 | 6,526 | |||||
| Total Costs | 32,521 | 31,236 | |||||
| Gross Profit | 32,894 | 29,517 | |||||
| Selling and Administrative | 13,544 | 11,648 | |||||
| Income from Operations | 19,350 | 17,869 | |||||
| Interest | 2,467 | 2,621 | |||||
| Income Before Provision for Income Taxes | 16,883 | 15,248 | |||||
| Provision for Income Taxes | 6,618 | 5,947 | |||||
| Income Before Minority Interest | 10,265 | 9,301 | |||||
| Minority Interest in Loss of Subsidiary | — | (27 | ) | ||||
| Net Income | $ | 10,265 | $ | 9,328 | |||
| Earnings Per Share: | |||||||
| Basic | $ | 0.43 | $ | 0.37 | |||
| Diluted | $ | 0.43 | $ | 0.37 | |||
| Shares Used in Per Share Calculation: | |||||||
| Basic | 23,978 | 25,114 | |||||
| Diluted | 24,094 | 25,387 | |||||
| Cash Dividends Declared Per Share | $ | 0.20 | $ | 0.18 | |||
| MCGRATH RENTCORP | ||||||||
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CONSOLIDATED BALANCE SHEETS
(UNAUDITED) |
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| March 31, | December 31, | |||||||
| (in thousands) | 2008 | 2007 | ||||||
| ASSETS | ||||||||
| Cash | $ | 333 | $ | 5,090 | ||||
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Accounts Receivable, net of allowance for doubtful accounts of $1,100 in 2008 and $1,400 in 2007 |
60,378 | 67,061 | ||||||
| Rental Equipment, at cost: | ||||||||
| Relocatable Modular Buildings | 481,819 | 475,077 | ||||||
| Electronic Test Equipment | 242,755 | 232,349 | ||||||
| 724,574 | 707,426 | |||||||
| Less Accumulated Depreciation | (231,329 | ) | (221,412 | ) | ||||
| Rental Equipment, net | 493,245 | 486,014 | ||||||
| Property, Plant and Equipment, net | 72,637 | 66,480 | ||||||
| Prepaid Expenses and Other Assets | 16,596 | 17,591 | ||||||
| Total Assets | $ | 643,189 | $ | 642,236 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Liabilities: | ||||||||
| Notes Payable | $ | 218,755 | $ | 197,729 | ||||
| Accounts Payable and Accrued Liabilities | 48,489 | 55,642 | ||||||
| Deferred Income | 25,293 | 28,948 | ||||||
| Deferred Income Taxes, net | 121,641 | 115,886 | ||||||
| Total Liabilities | 414,178 | 398,205 | ||||||
| Shareholders’ Equity: | ||||||||
| Common Stock, no par value - | ||||||||
| Authorized -- 40,000 shares | ||||||||
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Issued and Outstanding -- 23,635 shares in 2008 and 24,578 shares in 2007 |
41,596 | 41,917 | ||||||
| Retained Earnings | 187,415 | 202,114 | ||||||
| Total Shareholders’ Equity | 229,011 | 244,031 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 643,189 | $ | 642,236 | ||||
| MCGRATH RENTCORP | ||||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
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| Three Months Ended March 31, | ||||||||
| (in thousands) | 2008 | 2007 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income | $ | 10,265 | $ | 9,328 | ||||
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Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |
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| Depreciation | 14,050 | 12,588 | ||||||
| Provision for Doubtful Accounts | 254 | 20 | ||||||
| Non-Cash Stock Compensation | 932 | 850 | ||||||
| Gain on Sale of Rental Equipment | (2,340 | ) | (2,057 | ) | ||||
| Change In: | ||||||||
| Accounts Receivable | 6,429 | (420 | ) | |||||
| Prepaid Expenses and Other Assets | 995 | 334 | ||||||
| Accounts Payable and Accrued Liabilities | (7,085 | ) | (4,809 | ) | ||||
| Deferred Income | (3,655 | ) | (4,293 | ) | ||||
| Deferred Income Taxes | 5,755 | 4,882 | ||||||
| Net Cash Provided by Operating Activities | 25,600 | 16,423 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of Rental Equipment | (21,605 | ) | (27,295 | ) | ||||
| Purchase of Property, Plant and Equipment | (6,789 | ) | (815 | ) | ||||
| Proceeds from Sale of Rental Equipment | 5,374 | 5,181 | ||||||
| Net Cash Used in Investing Activities | (23,020 | ) | (22,929 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net Borrowings Under Bank Lines of Credit | 21,026 | 8,660 | ||||||
| Proceeds from the Exercise of Stock Options | 386 | 1,407 | ||||||
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Excess Tax Benefit from Exercise and Disqualifying Disposition of Stock Options |
25 | 471 | ||||||
| Repurchase of Common Stock | (24,418 | ) |
— |
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| Payment of Dividends | (4,356 | ) | (4,016 | ) | ||||
| Net Cash Provided by (Used in) Financing Activities | (7,337 | ) | 6,522 | |||||
| Net Increase (Decrease) in Cash | (4,757 | ) | 16 | |||||
| Cash Balance, beginning of period | 5,090 | 349 | ||||||
| Cash Balance, end of period | $ | 333 | $ | 365 | ||||
| Interest Paid, during the period | $ | 2,160 | $ | 1,904 | ||||
| Income Taxes Paid, during the period | $ | 838 | $ | 594 | ||||
| Dividends Declared, not yet paid | $ | 4,727 | $ | 4,533 | ||||
| Rental Equipment Acquisitions, not yet paid | $ | 9,482 | $ | 8,847 | ||||
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Mobile Modular – Q1 2008 compared to Q1 2007 (Unaudited) |
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| (dollar amounts in thousands) |
Three Months Ended
March 31, |
Increase (Decrease) |
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| 2008 | 2007 | $ | % | ||||||||||||
| Revenues | |||||||||||||||
| Rental | $ | 25,915 | $ | 23,836 | $ | 2,079 | 9 | % | |||||||
| Rental Related Services | 6,901 | 7,049 | (148 | ) | -2 | % | |||||||||
| Rental Operations | 32,816 | 30,885 | 1,931 | 6 | % | ||||||||||
| Sales | 2,872 | 4,166 | (1,294 | ) | -31 | % | |||||||||
| Other | 145 | 162 | (17 | ) | -11 | % | |||||||||
| Total Revenues | $ | 35,833 | $ | 35,213 | $ | 620 | 2 | % | |||||||
| Gross Profit | |||||||||||||||
| Rental | $ | 17,167 | $ | 15,742 | $ | 1,425 | 9 | % | |||||||
| Rental Related Services | 2,069 | 2,320 | (251 | ) | -11 | % | |||||||||
| Rental Operations | 19,236 | 18,062 | 1,174 | 7 | % | ||||||||||
| Sales | 930 | 1,307 | (377 | ) | -29 | % | |||||||||
| Other | 145 | 162 | (17 | ) | -11 | % | |||||||||
| Total Gross Profit | $ | 20,311 | $ | 19,531 | $ | 780 | 4 | % | |||||||
| Pre-tax Income | $ | 11,705 | $ | 11,182 | $ | 523 | 5 | % | |||||||
| Other Information | |||||||||||||||
| Depreciation of Rental Equipment | $ | 3,240 | $ | 2,929 | $ | 311 | 11 | % | |||||||
| Interest Expense Allocation | $ | 1,679 | $ | 1,893 | $ | (214 | ) | -11 | % | ||||||
| Average Rental Equipment 1 | $ | 451,325 | $ | 412,202 | $ | 39,123 | 10 | % | |||||||
| Average Rental Equipment on Rent 1 | $ | 372,186 | $ | 335,017 | $ | 37,169 | 11 | % | |||||||
| Average Monthly Total Yield 2 | 1.91 | % | 1.93 | % | -1 | % | |||||||||
| Average Utilization 3 | 82.5 | % | 81.3 | % | 1 | % | |||||||||
| Average Monthly Rental Rate 4 | 2.32 | % | 2.37 | % | -2 | % | |||||||||
| Period End Rental Equipment 1 | $ | 452,801 | $ | 413,227 | $ | 39,574 | 10 | % | |||||||
| Period End Utilization 3 | 82.3 | % | 81.5 | % | 1 | % | |||||||||
| Period End Floors 1 | 26,460 | 24,910 | 1,550 | 6 | % | ||||||||||
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.
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TRS-RenTelco – Q1 2008 compared to Q1 2007 (Unaudited) |
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| (dollar amounts in thousands) |
Three Months Ended
March 31, |
Increase (Decrease) |
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| 2008 | 2007 | $ | % | |||||||||||
| Revenues | ||||||||||||||
| Rental | $ | 22,321 | $ | 19,472 | $ | 2,849 | 15 | % | ||||||
| Rental Related Services | 441 | 373 | 68 | 18 | % | |||||||||
| Rental Operations | 22,762 | 19,845 | 2,917 | 15 | % | |||||||||
| Sales | 4,478 | 4,091 | 387 | 10 | % | |||||||||
| Other | 519 | 518 | 1 | 0 | % | |||||||||
| Total Revenues | $ | 27,759 | $ | 24,454 | $ | 3,305 | 14 | % | ||||||
| Gross Profit | ||||||||||||||
| Rental | $ | 9,561 | $ | 7,949 | $ | 1,612 | 20 | % | ||||||
| Rental Related Services | 58 | 9 | 49 | nm | ||||||||||
| Rental Operations | 9,619 | 7,958 | 1,661 | 21 | % | |||||||||
| Sales | 1,814 | 1,451 | 363 | 25 | % | |||||||||
| Other | 519 | 518 | 1 | 0 | % | |||||||||
| Total Gross Profit | $ | 11,952 | $ | 9,927 | $ | 2,025 | 20 | % | ||||||
| Pre-tax Income | $ | 5,165 | $ | 4,288 | $ | 877 | 21 | % | ||||||
| Other Information | ||||||||||||||
| Depreciation of Rental Equipment | $ | 10,178 | $ | 9,090 | $ | 1,088 | 12 | % | ||||||
| Interest Expense Allocation | $ | 894 | $ | 878 | $ | 16 | 2 | % | ||||||
| Average Rental Equipment 1 | $ | 235,122 | $ | 191,574 | $ | 43,548 | 23 | % | ||||||
| Average Rental Equipment on Rent 1 | $ | 161,658 | $ | 127,567 | $ | 34,091 | 27 | % | ||||||
| Average Monthly Total Yield 2 | 3.16 | % | 3.39 | % | -7 | % | ||||||||
| Average Utilization 3 | 68.8 | % | 66.6 | % | 3 | % | ||||||||
| Average Monthly Rental Rate 4 | 4.60 | % | 5.09 | % | -10 | % | ||||||||
| Period End Rental Equipment 1 | $ | 238,960 | $ | 197,980 | $ | 40,980 | 21 | % | ||||||
| Period End Utilization 3 | 68.4 | % | 66.9 | % | 2 | % | ||||||||
1 Average and Period End Rental Equipment represents the cost of rental equipment excluding accessory equipment.
2 Average Monthly Total Yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.
3 Period End Utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding accessory equipment. Average Utilization for the period is calculated using the average costs of the rental equipment.
4 Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.
nm = Not Meaningful
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company’s financial data presented on a basis consistent with Generally Accepted Accounting Principles (“GAAP”), the Company presents Adjusted EBITDA which is defined by the Company as net income before minority interest in income of subsidiary, interest expense, provision for income taxes, depreciation, amortization, and non-cash stock-based compensation.
The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders use this measure in evaluating the performance of the Company.
Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance and evaluate the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including stock-based compensation, is useful in measuring the Company’s cash available to operations and the performance of the Company. Because we find Adjusted EBITDA useful the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles in the United States or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non−GAAP measures used by other companies. Unlike EBITDA which may be used by other companies or investors, Adjusted EBITDA does not include stock-based compensation charges and income from the minority interest in the Company’s Enviroplex subsidiary. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The presentation of Adjusted EBITDA is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Since Adjusted EBITDA is a non-GAAP financial measure as defined by the Securities and Exchange Commission, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States.
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Reconciliation of Net Income to Adjusted EBITDA |
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| (dollar amounts in thousands) |
Three Months Ended
March 31, |
Twelve Months Ended
March 31, |
||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Net Income | $ | 10,265 | $ | 9,328 | $ | 43,347 | $ | 42,569 | ||||||||
| Minority Interest in Income (Loss) of Subsidiary |
— |
(27 | ) | 91 | 285 | |||||||||||
| Provision for Income Taxes | 6,618 | 5,947 | 28,009 | 25,165 | ||||||||||||
| Interest | 2,467 | 2,621 | 10,565 | 11,028 | ||||||||||||
| Income from Operations | 19,350 | 17,869 | 82,012 | 79,047 | ||||||||||||
| Depreciation and Amortization | 14,050 | 12,588 | 55,465 | 48,666 | ||||||||||||
| Non-Cash Stock-Based Compensation | 932 | 850 | 3,538 | 3,147 | ||||||||||||
| Adjusted EBITDA 1 | $ | 34,332 | $ | 31,307 | $ | 141,015 | $ | 130,860 | ||||||||
| Adjusted EBITDA Margin 2 | 52 | % | 52 | % | 49 | % | 49 | % | ||||||||
|
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities |
||||||||||||||||
| (dollar amounts in thousands) |
Three Months Ended
March 31, |
Twelve Months Ended
March 31, |
||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Adjusted EBITDA 1 | $ | 34,332 | $ | 31,307 | $ | 141,015 | $ | 130,860 | ||||||||
| Interest Paid | (2,160 | ) | (1,904 | ) | (10,973 | ) | (10,913 | ) | ||||||||
| Income Taxes Paid | (838 | ) | (594 | ) | (14,668 | ) | (14,493 | ) | ||||||||
| Gain on Sale of Rental Equipment | (2,340 | ) | (2,057 | ) | (10,309 | ) | (10,080 | ) | ||||||||
| Change in certain assets and liabilities: | ||||||||||||||||
| Accounts Receivable, net | 6,683 | (400 | ) | (144 | ) | (9,150 | ) | |||||||||
| Prepaid Expenses and Other Assets | 995 | 334 | (1,057 | ) | (261 | ) | ||||||||||
| Accounts Payable and Other Liabilities | (7,417 | ) | (5,970 | ) | (3,527 | ) | 3,976 | |||||||||
| Deferred Income | (3,655 | ) | (4,293 | ) | 3,734 | 1,099 | ||||||||||
| Net Cash Provided by Operating Activities | $ | 25,600 | $ | 16,423 | $ | 104,071 | $ | 91,038 | ||||||||
1 Adjusted EBITDA is defined as net income before minority interest in income of subsidiary, interest expense, provision for income taxes, depreciation, amortization, and other non-cash stock-based compensation.
2 Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
CONTACT:
McGrath RentCorp
Keith E. Pratt, 925-606-9200
Chief
Financial Officer