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): February 28, 2017
McGRATH RENTCORP
(Exact Name of Registrant as Specified in Charter)
| California | 000-13292 | 94-2579843 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 5700 Las Positas Road, Livermore, CA 94551-7800 |
| (Address of Principal Executive Offices) (Zip Code) |
(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: | ||
| [ ] | 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 February 28, 2017, McGrath RentCorp (the “Company”) announced via press release the Company’s results for its fourth quarter ended December 31, 2016. 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 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 1933 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 28, 2017.
SIGNATURE
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 28, 2017 | By: | /s/ Keith E. Pratt |
| Keith E. Pratt | ||
| Executive Vice President and Chief Financial Officer | ||
EXHIBIT 99.1
McGrath RentCorp Announces Results for Fourth Quarter 2016
Income from Operations increases 6%
EPS decreases 17% to $0.40 due to income tax expense increase
Company announces 2% dividend increase; 25th consecutive year increase
LIVERMORE, Calif., Feb. 28, 2017 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ:MGRC) (the “Company”), a diversified business to business rental company, today announced total revenues for the quarter ended December 31, 2016 of $105.3 million, which was unchanged from the fourth quarter of 2015. The Company reported net income of $9.7 million, or $0.40 per diluted share for the fourth quarter of 2016, compared to net income of $11.5 million, or $0.48 per diluted share, in the fourth quarter of 2015.
Total revenues for the year ended December 31, 2016 were $424.1 million, compared to $404.5 million in 2015. Rental revenues decreased 1% to $271.4 million in 2016, compared to $273.7 million in 2015, with income from operations increasing 3% to $79.3 million. Net income for the year ended December 31, 2016 decreased 5% to $38.3 million, compared to 2015. Diluted earnings per share increased 1% to $1.60 in 2016 from $1.59 in 2015.
The Company’s effective tax rate for the fourth quarter 2016 was 50.8% compared to 37.8% in the fourth quarter 2015. This increase was driven by the full year 2016 effective tax rate rising to 42.9% as compared to 39.0 % for 2015, which increased the provision for income taxes in 2016 by $2.6 million and reduced earnings by $0.11 per diluted share in the fourth quarter results. The increased effective tax rate in 2016 was primarily a result of a change in business mix by state and the decision to exit TRS-RenTelco’s branch operations in India. Higher business levels in states with higher tax rates, in particular growth in California, and the resulting re-pricing of deferred tax liabilities accounted for approximately $1.6 million. In addition, the decision to exit branch operations in India accounted for approximately $0.7 million. The Company estimates an effective tax rate of 40.0% for calendar year 2017.
The Company also announced that the board of directors declared a quarterly cash dividend of $0.26 per share for the quarter ending March 31, 2017, an increase of 2% over the prior year period. On an annualized basis, the 2017 dividend represents a 2.7% yield, based on the February 27, 2017 closing stock price. The cash dividend will be payable on April 28, 2017 to all shareholders of record on April 14, 2017. This marks the 25th consecutive year the Company has increased its annual dividend.
Fourth quarter operating profit increased 6% compared to a year ago as higher operating profit at Mobile Modular and Enviroplex was partly offset by lower operating profit at Adler Tank Rentals and TRS-RenTelco.
Modular division-wide rental revenues for the quarter increased $2.8 million, or 9%, to $34.5 million from a year ago. Gross profit from rental revenues increased by 24% as rental revenue margins increased from 54% to 62%, partly due to lower equipment preparation expenses. Modular division income from operations grew 27% to $13.2 million from a year ago as a result of 18% growth in total gross profit, primarily from higher gross profit from rental revenues, partly offset by higher SG&A expenses. Modular division average rental equipment utilization for the quarter was flat compared to a year ago at 77.5%.
Mobile Modular Portable Storage continued to make good progress during the fourth quarter and grew rental revenues 13% compared to the same period a year ago. Progress continued towards making each of the portable storage operating geographies increasingly successful.
Rental revenues for TRS-RenTelco declined $1.9 million for the quarter, or 8%, to $20.7 million from a year ago. The year over year reduction in rental revenues was driven primarily by lower communications test equipment business activity and a continuing highly competitive environment. Communications test equipment rental revenues declined by 19% while general-purpose increased 5% for the quarter compared to the same period a year ago. Average equipment utilization was 62.3% compared to 61.2% in the same period in 2015. Average rental rates declined for the quarter to 4.46% from 4.67% for the fourth quarter of 2015, primarily due to the business activity mix shift from communications to general-purpose test equipment as well as a highly competitive communications test equipment marketplace. Income from operations declined 5% to $6.3 million as lower rental and sales revenues were partly offset by lower rental equipment depreciation, lower SG&A expenses and higher gross margins on equipment sales as compared to a year ago.
Rental revenues at Adler Tank Rentals declined $1.2 million for the quarter, or 8%, to $15.1 million from a year ago but were up from $14.2 million in the third quarter of 2016. Average utilization was 51.3% for the quarter compared to 54.0% a year ago, and 49.4% for the third quarter of 2016. Fourth quarter average equipment on rent declined to $157 million from $166 million a year ago, but was up from $152 million in the third quarter of 2016. Upstream oil and natural gas rental revenue declined from 11% of total Adler rental revenues in the fourth quarter of 2015 to 8% for the same period in 2016. Weak demand in the upstream oil and natural gas market put downward pressure on 21K multi-purpose tank utilization and rental rates in upstream, midstream and downstream energy sectors, as well as in other market verticals. Income from operations for the quarter decreased $2.1 million, or 48%, to $2.2 million from a year ago, primarily due to lower gross profit on rental revenues.
Despite very challenging end market conditions throughout the year for Adler Tank Rentals, and to a lesser extent TRS-RenTelco, positive results at Mobile Modular and Enviroplex enabled the Company to grow full year 2016 income from operations to $79 million from $77 million in 2015. Strong cash flows enabled the Company to reduce debt by $55 million, while paying dividends of $24 million and selectively deploying new capital to increase the size of the modular division rental equipment fleet by $32 million.
All comparisons presented below are for the quarter ended December 31, 2016 to the quarter ended December 31, 2015 unless otherwise indicated.
MOBILE MODULAR
For the fourth quarter of 2016, the Company’s Mobile Modular division reported a $2.8 million increase in income from operations, or 27%, to $13.2 million. Rental revenues increased 9% to $34.5 million, depreciation expense increased 7% to $5.4 million and other direct costs decreased 17% to $7.8 million, which resulted in an increase in gross profit on rental revenues of 24% to $21.3 million. Rental related services revenues increased 4% to $12.2 million, with gross profit on rental related services revenues increasing 11% to $3.8 million. Sales revenues decreased 36% to $4.3 million, with gross profit on sales revenues decreasing 29% to $1.3 million, primarily due to lower new equipment sales in the fourth quarter of 2016. Selling and administrative expenses increased 10% to $13.3 million, primarily due to higher allocated corporate expenses.
TRS-RENTELCO
For the fourth quarter of 2016, the Company’s TRS-RenTelco division reported a $0.4 million decrease in income from operations, or 5%, to $6.3 million. Rental revenues decreased 8% to $20.7 million, depreciation expense decreased 14% to $8.3 million and other direct costs increased 9% to $3.8 million, which resulted in a decrease in gross profit on rental revenues of 9% to $8.6 million. Sales revenues decreased 24% to $4.5 million. Gross profit on sales revenues increased 5% to $2.7 million, with gross margin percentage increasing to 60% from 43%, primarily due to higher margins on new and used equipment sales in the fourth quarter of 2016. Selling and administrative expenses decreased 7% to $5.5 million, primarily due to lower bad debt expense.
ADLER TANKS
For the fourth quarter of 2016, the Company’s Adler Tanks division reported a $2.1 million decrease in income from operations, or 48%, to $2.2 million. Rental revenues decreased 8% to $15.1 million, depreciation expense decreased 3% to $3.9 million and other direct costs increased 26% to $3.1 million, which resulted in a decrease in gross profit on rental revenues of 18% to $8.0 million. Rental related services revenues decreased 6% to $6.0 million, with gross profit on rental related services decreasing 12% to $1.1 million. Selling and administrative expenses increased 1% to $6.8 million.
OTHER HIGHLIGHTS
- Debt decreased $19.0 million during the quarter to $326.4 million, with the Company’s funded debt (notes payable) to equity ratio decreasing from 0.88 to 1 at September 30, 2016 to 0.82 to 1 at December 31, 2016. As of December 31, 2016, the Company had capacity to borrow an additional $245.6 million under its lines of credit.
- Share Repurchases of the Company’s common stock during the fourth quarter 2015 were 551,685 shares for an aggregate repurchase price of $15.2 million, or an average repurchase price of $27.50 per share. There were no repurchases of the Company’s common stock made during the fourth quarter of 2016.
- Dividend rate increased 2% to $0.255 per share for the fourth quarter of 2016 compared to the fourth quarter of 2015. On an annualized basis, this dividend represents a 2.7% yield on the February 27, 2017 close price of $37.95 per share.
- Adjusted EBITDA was flat at $42.9 million for the fourth quarter of 2016 compared to the fourth quarter of 2015. At December 31, 2016, the Company’s ratio of funded debt to the last twelve months actual Adjusted EBITDA was 2.00 to 1, compared to 2.11 to 1 at September 30, 2016. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation. A reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.
FINANCIAL OUTLOOK
Comparing 2017 with 2016, the Company currently expects operating profits to be higher at Mobile Modular and roughly flat at TRS-RenTelco and Adler Tanks.
For the full-year 2017, the Company expects:
- Rental revenues to increase between 1% and 3% over 2016.
- Sales revenues to be comparable to 2016.
- Rental equipment depreciation expense to be between $67 and $69 million.
- “Other” direct costs of rental operations, primarily for rental equipment maintenance and repair, to be between $62 and $64 million.
- Selling and administrative costs to be between $110 and $112 million.
- Operating profit to increase between 3% and 5% over 2016.
- Full year interest expense to be approximately $12 million.
- Effective tax rate to be 40%, excluding any potential impact from ASU 2016-09.
- Diluted share count to be between 24.1 and 24.3 million shares.
These forward-looking statements reflect McGrath RentCorp’s expectations as of February 28, 2017. Actual 2017 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, McGrath RentCorp is a diversified business-to-business rental company. The Company’s Mobile Modular division rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs in California, Texas, Florida, and the Mid-Atlantic from Washington D.C. to Georgia. The Company’s TRS-RenTelco division rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas. The Company’s Adler Tank Rentals subsidiary rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations today serving key markets throughout the United States. In 2008, the Company entered the portable storage container rental business under the trade name Mobile Modular Portable Storage. Today, the business is located in the key markets of California, Texas, Florida, Northern Illinois, New Jersey and most recently entered the North Carolina region. For more information on McGrath RentCorp and its operating units, please visit our websites:
Corporate – www.mgrc.com
Tanks and Boxes – www.adlertankrentals.com
Modular Buildings – www.mobilemodular.com
Portable Storage – www.mobilemodularcontainers.com
Electronic Test Equipment – www.trsrentelco.com
School Facilities Manufacturing – www.enviroplex.com
CONFERENCE CALL NOTE
As previously announced in its press release of January 26, 2017, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 28, 2017 to discuss the fourth quarter 2016 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or visit the investor relations section of the Company’s website at www.mgrc.com. Telephone replay of the call will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the call replay is 61399095. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at http://mgrc.com/Investor/EventsAndArchive
FORWARD-LOOKING STATEMENTS
Statements in this press release which are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, regarding McGrath RentCorp’s business strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, plans and objectives are forward looking statements. These forward-looking statements appear in a number of places and can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “hopes,” “goals” or “certain” or the negative of these terms or other variations or comparable terminology. In particular, statements about the full year 2017 outlook in the section of the press release entitled “Financial Outlook” are forward-looking statements.
Management cautions that forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements including, without limitation, the following: the extent of and timetable for the recovery underway in our modular building division; the continued recovery of the California market; the impact of the bond initiative passed in California on the modular building division; the state of the wireless communications network upgrade environment; the utilization levels of our Adler Tanks liquid and sold containment tank and box rental assets; the potential for continuing softness in communications test equipment rental demand in our electronics division; our customers’ need and ability to rent our products; failure by third parties to manufacture and deliver our products in a timely manner and to our specifications; our ability to successfully integrate and operate acquisitions, as well as manage expansions; our ability to effectively manage our rental assets; the risk that we may be subject to litigation under environmental, health and safety and product liability laws and claims from employees, vendors and other third parties; effect on our businesses from reductions to the price of oil or gas or the volatility of the oil industry generally; new or modified statutory or regulatory requirements; success of our strategic growth initiatives; risks associated with doing business with government entities; seasonality of our businesses; intense industry competition including increasing price pressure; our ability to timely deliver, install and redeploy our rental products; significant increases in raw materials, labor, and other costs; and risks associated with operating internationally.
Our future business, financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties including the risks set forth above, those discussed in Part II—Item 1A “Risk Factors” and elsewhere in our Form 10-K for the year ended December 31, 2016, and those that may be identified from time to time in our reports and registration statements filed with the SEC. Forward-looking statements are made only as of the date of this press release and are based on management’s reasonable assumptions; however, these assumptions can be wrong or affected by known or unknown risks and uncertainties. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. Except as otherwise required by law, we do not undertake any duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results or to changes in our expectations.
| MCGRATH RENTCORP | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (dollar amounts in thousands, except per share amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Revenues | ||||||||||||||||
| Rental | $ | 70,352 | $ | 70,694 | $ | 271,388 | $ | 273,696 | ||||||||
| Rental related services | 18,831 | 18,858 | 75,859 | 73,314 | ||||||||||||
| Rental operations | 89,183 | 89,552 | 347,247 | 347,010 | ||||||||||||
| Sales | 15,494 | 15,204 | 74,410 | 55,385 | ||||||||||||
| Other | 606 | 526 | 2,423 | 2,149 | ||||||||||||
| Total revenues | 105,283 | 105,282 | 424,080 | 404,544 | ||||||||||||
| Costs and Expenses | ||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||
| Depreciation of rental equipment | 17,607 | 18,706 | 72,197 | 75,213 | ||||||||||||
| Rental related services | 13,970 | 14,117 | 56,374 | 54,719 | ||||||||||||
| Other | 14,785 | 15,467 | 62,800 | 60,936 | ||||||||||||
| Total direct costs of rental operations | 46,362 | 48,290 | 191,371 | 190,868 | ||||||||||||
| Costs of sales | 9,598 | 10,236 | 48,542 | 36,769 | ||||||||||||
| Total costs of revenues | 55,960 | 58,526 | 239,913 | 227,637 | ||||||||||||
| Gross profit | 49,323 | 46,756 | 184,167 | 176,907 | ||||||||||||
| Selling and administrative expenses | 26,627 | 25,289 | 104,908 | 99,950 | ||||||||||||
| Income from operations | 22,696 | 21,467 | 79,259 | 76,957 | ||||||||||||
| Other expenses: | ||||||||||||||||
| Interest expense | (2,721 | ) | (2,910 | ) | (12,207 | ) | (10,092 | ) | ||||||||
| Foreign currency exchange loss | (180 | ) | (34 | ) | (121 | ) | (488 | ) | ||||||||
| Income before provision for income taxes | 19,795 | 18,523 | 66,931 | 66,377 | ||||||||||||
| Provision for income taxes | 10,061 | 7,005 | 28,680 | 25,907 | ||||||||||||
| Net income | $ | 9,734 | $ | 11,518 | $ | 38,251 | $ | 40,470 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.41 | $ | 0.48 | $ | 1.60 | $ | 1.60 | ||||||||
| Diluted | $ | 0.40 | $ | 0.48 | $ | 1.60 | $ | 1.59 | ||||||||
| Shares used in per share calculation: | ||||||||||||||||
| Basic | 23,927 | 23,932 | 23,900 | 25,369 | ||||||||||||
| Diluted | 24,123 | 24,015 | 23,976 | 25,457 | ||||||||||||
| Cash dividend declared per share | $ | 0.255 | $ | 0.250 | $ | 1.02 | $ | 1.00 | ||||||||
| MCGRATH RENTCORP | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (UNAUDITED) | ||||||||
| December 31, | December 31, | |||||||
| (in thousands) | 2016 | 2015 | ||||||
| Assets | ||||||||
| Cash | $ | 852 | $ | 1,103 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $2,087 in 2016 and 2015 | 96,877 | 95,017 | ||||||
| Income taxes receivable | — | 11,000 | ||||||
| Rental equipment, at cost: | ||||||||
| Relocatable modular buildings | 769,190 | 736,875 | ||||||
| Electronic test equipment | 246,325 | 262,945 | ||||||
| Liquid and solid containment tanks and boxes | 308,542 | 310,263 | ||||||
| 1,324,057 | 1,310,083 | |||||||
| Less accumulated depreciation | (467,686 | ) | (440,482 | ) | ||||
| Rental equipment, net | 856,371 | 869,601 | ||||||
| Property, plant and equipment, net | 112,190 | 109,753 | ||||||
| Prepaid expenses and other assets | 25,583 | 28,802 | ||||||
| Intangible assets, net | 8,595 | 9,465 | ||||||
| Goodwill | 27,808 | 27,808 | ||||||
| Total assets | $ | 1,128,276 | $ | 1,152,549 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Notes payable | $ | 326,266 | $ | 381,281 | ||||
| Accounts payable and accrued liabilities | 78,205 | 71,942 | ||||||
| Deferred income | 37,499 | 36,288 | ||||||
| Deferred income taxes, net | 292,019 | 283,351 | ||||||
| Total liabilities | 733,989 | 772,862 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value - Authorized 40,000 shares | ||||||||
| Issued and outstanding - 23,948 shares as of December 31, 2016 and 23,851 shares as of December 31, 2015 | 101,821 | 101,046 | ||||||
| Retained earnings | 292,521 | 278,708 | ||||||
| Accumulated other comprehensive loss | (55 | ) | (67 | ) | ||||
| Total shareholders’ equity | 394,287 | 379,687 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,128,276 | $ | 1,152,549 | ||||
| MCGRATH RENTCORP | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (UNAUDITED) | ||||||||
| Year Ended December 31, | ||||||||
| (in thousands) | 2016 | 2015 | ||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 38,251 | $ | 40,470 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 81,179 | 84,280 | ||||||
| Provision for doubtful accounts | 1,892 | 2,149 | ||||||
| Share-based compensation | 3,091 | 3,399 | ||||||
| Gain on sale of used rental equipment | (13,739 | ) | (11,902 | ) | ||||
| Foreign currency exchange loss | 121 | 488 | ||||||
| Amortization of debt issuance cost | 51 | 52 | ||||||
| Change in: | ||||||||
| Accounts receivable | (3,752 | 3,628 | ||||||
| Income taxes receivable | 11,000 | (11,000 | ) | |||||
| Prepaid expenses and other assets | 3,219 | 12,910 | ||||||
| Accounts payable and accrued liabilities | 11,492 | (1,520 | ) | |||||
| Deferred income | 1,211 | 7,149 | ||||||
| Deferred income taxes | 7,745 | 14,449 | ||||||
| Net cash provided by operating activities | 141,761 | 144,552 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of rental equipment | (79,038 | ) | (131,037 | ) | ||||
| Purchases of property, plant and equipment | (10,548 | ) | (9,321 | ) | ||||
| Proceeds from sale of used rental equipment | 29,406 | 26,214 | ||||||
| Net cash used in investing activities | (60,180 | ) | (114,144 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net borrowings (repayments) under bank lines of credit | (35,066 | ) | 18,963 | |||||
| Principal payments on Series A senior notes | (20,000 | ) | (20,000 | ) | ||||
| Borrowings under Series C senior notes | — | 60,000 | ||||||
| Proceeds from the exercise of stock options | 37 | 2,149 | ||||||
| Excess tax shortfall from exercise of stock awards | (1,066 | ) | (292 | ) | ||||
| Taxes paid related to net share settlement of stock awards | (1,287 | ) | (1,560 | ) | ||||
| Repurchase of common stock | — | (63,953 | ) | |||||
| Payment of dividends | (24,448 | ) | (25,779 | ) | ||||
| Net cash used in financing activities | (81,830 | ) | (30,472 | ) | ||||
| Effect of foreign currency exchange rate changes on cash | (2 | ) | — | |||||
| Net decrease in cash | (251 | ) | (64 | ) | ||||
| Cash balance, beginning of period | 1,103 | 1,167 | ||||||
| Cash balance, end of period | $ | 852 | $ | 1,103 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Interest paid, during the period | $ | 12,436 | $ | 10,041 | ||||
| Net income taxes paid, during the period | $ | 15,555 | $ | 2,498 | ||||
| Dividends accrued during the period, not yet paid | $ | 6,147 | $ | 6,019 | ||||
| Rental equipment acquisitions, not yet paid | $ | 2,876 | $ | 7,280 | ||||
| MCGRATH RENTCORP | ||||||||||||||||||||
| BUSINESS SEGMENT DATA (unaudited) | ||||||||||||||||||||
| Three months ended December 31, 2016 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS- RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 34,494 | $ | 20,745 | $ | 15,113 | $ | — | $ | 70,352 | ||||||||||
| Rental related services | 12,172 | 690 | 5,969 | — | 18,831 | |||||||||||||||
| Rental operations | 46,666 | 21,435 | 21,082 | — | 89,183 | |||||||||||||||
| Sales | 4,261 | 4,532 | 367 | 6,334 | 15,494 | |||||||||||||||
| Other | 133 | 441 | 32 | — | 606 | |||||||||||||||
| Total revenues | 51,060 | 26,408 | 21,481 | 6,334 | 105,283 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 5,359 | 8,317 | 3,931 | — | 17,607 | |||||||||||||||
| Rental related services | 8,376 | 675 | 4,919 | — | 13,970 | |||||||||||||||
| Other | 7,828 | 3,820 | 3,137 | — | 14,785 | |||||||||||||||
| Total direct costs of rental operations | 21,563 | 12,812 | 11,987 | — | 46,362 | |||||||||||||||
| Costs of sales | 3,010 | 1,832 | 447 | 4,309 | 9,598 | |||||||||||||||
| Total costs of revenues | 24,573 | 14,644 | 12,434 | 4,309 | 55,960 | |||||||||||||||
| Gross Profit (Loss) | ||||||||||||||||||||
| Rental | 21,307 | 8,608 | 8,045 | — | 37,960 | |||||||||||||||
| Rental related services | 3,796 | 15 | 1,050 | — | 4,861 | |||||||||||||||
| Rental operations | 25,103 | 8,623 | 9,095 | — | 42,821 | |||||||||||||||
| Sales | 1,251 | 2,700 | (80 | ) | 2,025 | 5,896 | ||||||||||||||
| Other | 133 | 441 | 32 | — | 606 | |||||||||||||||
| Total gross profit | 26,487 | 11,764 | 9,047 | 2,025 | 49,323 | |||||||||||||||
| Selling and administrative expenses | 13,270 | 5,452 | 6,824 | 1,081 | 26,627 | |||||||||||||||
| Income from operations | $ | 13,217 | $ | 6,312 | $ | 2,223 | $ | 944 | 22,696 | |||||||||||
| Interest expense | (2,721 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (180 | ) | ||||||||||||||||||
| Provision for income taxes | (10,061 | ) | ||||||||||||||||||
| Net income | $ | 9,734 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 739,728 | $ | 248,841 | $ | 306,681 | ||||||||||||||
| Average monthly total yield 2 | 1.55 | % | 2.78 | % | 1.64 | % | ||||||||||||||
| Average utilization 3 | 77.5 | % | 62.3 | % | 51.3 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.01 | % | 4.46 | % | 3.20 | % | ||||||||||||||
- Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
- Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
| MCGRATH RENTCORP | ||||||||||||||||||||
| BUSINESS SEGMENT DATA (unaudited) | ||||||||||||||||||||
| Three months ended December 31, 2015 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS- RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 31,744 | $ | 22,596 | $ | 16,354 | $ | — | $ | 70,694 | ||||||||||
| Rental related services | 11,712 | 784 | 6,362 | — | 18,858 | |||||||||||||||
| Rental operations | 43,456 | 23,380 | 22,716 | — | 89,552 | |||||||||||||||
| Sales | 6,618 | 5,964 | 376 | 2,246 | 15,204 | |||||||||||||||
| Other | 93 | 405 | 28 | — | 526 | |||||||||||||||
| Total revenues | 50,167 | 29,749 | 23,120 | 2,246 | 105,282 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 5,028 | 9,639 | 4,039 | — | 18,706 | |||||||||||||||
| Rental related services | 8,283 | 668 | 5,166 | — | 14,117 | |||||||||||||||
| Other | 9,483 | 3,498 | 2,486 | — | 15,467 | |||||||||||||||
| Total direct costs of rental operations | 22,794 | 13,805 | 11,691 | — | 48,290 | |||||||||||||||
| Costs of sales | 4,865 | 3,401 | 415 | 1,555 | 10,236 | |||||||||||||||
| Total costs of revenues | 27,659 | 17,206 | 12,106 | 1,555 | 58,526 | |||||||||||||||
| Gross Profit (Loss) | ||||||||||||||||||||
| Rental | 17,233 | 9,459 | 9,829 | — | 36,521 | |||||||||||||||
| Rental related services | 3,429 | 116 | 1,196 | — | 4,741 | |||||||||||||||
| Rental operations | 20,662 | 9,575 | 11,025 | — | 41,262 | |||||||||||||||
| Sales | 1,753 | 2,563 | (39 | ) | 691 | 4,968 | ||||||||||||||
| Other | 93 | 405 | 28 | — | 526 | |||||||||||||||
| Total gross profit | 22,508 | 12,543 | 11,014 | 691 | 46,756 | |||||||||||||||
| Selling and administrative expenses | 12,060 | 5,871 | 6,739 | 619 | 25,289 | |||||||||||||||
| Income from operations | $ | 10,448 | $ | 6,672 | $ | 4,275 | $ | 72 | 21,467 | |||||||||||
| Interest expense | (2,910 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (34 | ) | ||||||||||||||||||
| Provision for income taxes | (7,005 | ) | ||||||||||||||||||
| Net income | $ | 11,518 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 696,482 | $ | 263,567 | $ | 307,390 | ||||||||||||||
| Average monthly total yield 2 | 1.52 | % | 2.86 | % | 1.77 | % | ||||||||||||||
| Average utilization 3 | 77.5 | % | 61.2 | % | 54.0 | % | ||||||||||||||
| Average monthly rental rate 4 | 1.96 | % | 4.67 | % | 3.28 | % | ||||||||||||||
- Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
- Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
| MCGRATH RENTCORP | ||||||||||||||||||||
| BUSINESS SEGMENT DATA (unaudited) | ||||||||||||||||||||
| Twelve months ended December 31, 2016 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS- RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 130,496 | $ | 82,307 | $ | 58,585 | $ | — | $ | 271,388 | ||||||||||
| Rental related services | 49,206 | 2,846 | 23,807 | — | 75,859 | |||||||||||||||
| Rental operations | 179,702 | 85,153 | 82,392 | — | 347,247 | |||||||||||||||
| Sales | 29,393 | 21,582 | 1,314 | 22,121 | 74,410 | |||||||||||||||
| Other | 417 | 1,882 | 124 | — | 2,423 | |||||||||||||||
| Total revenues | 209,512 | 108,617 | 83,830 | 22,121 | 424,080 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 21,001 | 35,256 | 15,940 | — | 72,197 | |||||||||||||||
| Rental related services | 34,722 | 2,640 | 19,012 | — | 56,374 | |||||||||||||||
| Other | 38,353 | 14,320 | 10,127 | — | 62,800 | |||||||||||||||
| Total direct costs of rental operations | 94,076 | 52,216 | 45,079 | — | 191,371 | |||||||||||||||
| Costs of sales | 21,620 | 10,604 | 1,342 | 14,976 | 48,542 | |||||||||||||||
| Total costs of revenues | 115,696 | 62,820 | 46,421 | 14,976 | 239,913 | |||||||||||||||
| Gross Profit (Loss) | ||||||||||||||||||||
| Rental | 71,143 | 32,730 | 32,518 | — | 136,391 | |||||||||||||||
| Rental related services | 14,484 | 206 | 4,795 | — | 19,485 | |||||||||||||||
| Rental operations | 85,627 | 32,936 | 37,313 | — | 155,876 | |||||||||||||||
| Sales | 7,772 | 10,979 | (28 | ) | 7,145 | 25,868 | ||||||||||||||
| Other | 417 | 1,882 | 124 | — | 2,423 | |||||||||||||||
| Total gross profit | 93,816 | 45,797 | 37,409 | 7,145 | 184,167 | |||||||||||||||
| Selling and administrative expenses | 51,432 | 21,896 | 27,610 | 3,970 | 104,908 | |||||||||||||||
| Income from operations | $ | 42,384 | $ | 23,901 | $ | 9,799 | $ | 3,175 | 79,259 | |||||||||||
| Interest expense | (12,207 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (121 | ) | ||||||||||||||||||
| Provision for income taxes | (28,680 | ) | ||||||||||||||||||
| Net income | $ | 38,251 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 724,333 | $ | 254,019 | $ | 307,416 | ||||||||||||||
| Average monthly total yield 2 | 1.50 | % | 2.70 | % | 1.59 | % | ||||||||||||||
| Average utilization 3 | 76.6 | % | 60.6 | % | 50.1 | % | ||||||||||||||
| Average monthly rental rate 4 | 1.96 | % | 4.45 | % | 3.17 | % | ||||||||||||||
- Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
- Average monthly rental Rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
| MCGRATH RENTCORP | ||||||||||||||||||||
| BUSINESS SEGMENT DATA (unaudited) | ||||||||||||||||||||
| Twelve months ended December 31, 2015 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS- RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 115,986 | $ | 89,208 | $ | 68,502 | $ | — | $ | 273,696 | ||||||||||
| Rental related services | 45,616 | 3,055 | 24,643 | — | 73,314 | |||||||||||||||
| Rental operations | 161,602 | 92,263 | 93,145 | — | 347,010 | |||||||||||||||
| Sales | 22,248 | 21,137 | 1,388 | 10,612 | 55,385 | |||||||||||||||
| Other | 434 | 1,617 | 98 | — | 2,149 | |||||||||||||||
| Total revenues | 184,284 | 115,017 | 94,631 | 10,612 | 404,544 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 19,246 | 39,974 | 15,993 | — | 75,213 | |||||||||||||||
| Rental related services | 32,576 | 2,722 | 19,421 | — | 54,719 | |||||||||||||||
| Other | 37,233 | 13,619 | 10,084 | — | 60,936 | |||||||||||||||
| Total direct costs of rental operations | 89,055 | 56,315 | 45,498 | — | 190,868 | |||||||||||||||
| Costs of sales | 16,458 | 10,866 | 1,736 | 7,709 | 36,769 | |||||||||||||||
| Total costs of revenues | 105,513 | 67,181 | 47,234 | 7,709 | 227,637 | |||||||||||||||
| Gross Profit (Loss) | ||||||||||||||||||||
| Rental | 59,507 | 35,615 | 42,425 | — | 137,547 | |||||||||||||||
| Rental related services | 13,040 | 333 | 5,222 | — | 18,595 | |||||||||||||||
| Rental operations | 72,547 | 35,948 | 47,647 | — | 156,142 | |||||||||||||||
| Sales | 5,790 | 10,271 | (348 | ) | 2,903 | 18,616 | ||||||||||||||
| Other | 434 | 1,617 | 98 | — | 2,149 | |||||||||||||||
| Total gross profit | 78,771 | 47,836 | 47,397 | 2,903 | 176,907 | |||||||||||||||
| Selling and administrative expenses | 46,496 | 22,930 | 27,494 | 3,030 | 99,950 | |||||||||||||||
| Income (loss) from operations | $ | 32,275 | $ | 24,906 | $ | 19,903 | $ | (127 | ) | 76,957 | ||||||||||
| Interest expense | (10,092 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (488 | ) | ||||||||||||||||||
| Provision for income taxes | (25,907 | ) | ||||||||||||||||||
| Net income | $ | 40,470 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 667,953 | $ | 265,832 | $ | 304,001 | ||||||||||||||
| Average monthly total yield 2 | 1.45 | % | 2.80 | % | 1.88 | % | ||||||||||||||
| Average utilization 3 | 75.8 | % | 60.5 | % | 58.3 | % | ||||||||||||||
| Average monthly rental rate 4 | 1.91 | % | 4.62 | % | 3.22 | % | ||||||||||||||
- Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
- Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, and share-based compensation. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.
Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.
| Reconciliation of Net Income to Adjusted EBITDA | |||||||||||||||||
| (dollar amounts in thousands) | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net income | $ | 9,734 | $ | 11,518 | $ | 38,251 | $ | 40,470 | |||||||||
| Provision for income taxes | 10,061 | 7,005 | 28,680 | 25,907 | |||||||||||||
| Interest | 2,721 | 2,910 | 12,207 | 10,092 | |||||||||||||
| Depreciation and amortization | 19,651 | 20,977 | 81,179 | 84,280 | |||||||||||||
| EBITDA | 42,167 | 42,410 | 160,317 | 160,749 | |||||||||||||
| Share-based compensation | 764 | 536 | 3,091 | 3,399 | |||||||||||||
| Adjusted EBITDA 1 | $ | 42,931 | $ | 42,946 | $ | 163,408 | $ | 164,148 | |||||||||
| Adjusted EBITDA margin 2 | 41 | % | 41 | % | 39 | % | 41 | % | |||||||||
| Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities | |||||||||||||||||
| (dollar amounts in thousands) | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Adjusted EBITDA 1 | $ | 42,931 | $ | 42,946 | $ | 163,408 | $ | 164,148 | |||||||||
| Interest paid | (3,394 | ) | (2,817 | ) | (12,436 | ) | (10,041 | ) | |||||||||
| Net income taxes paid | (7,804 | ) | (258 | ) | (15,555 | ) | (2,498 | ) | |||||||||
| Gain on sale of rental equipment | (2,941 | ) | (2,836 | ) | (13,739 | ) | (11,902 | ) | |||||||||
| Foreign currency exchange loss | 180 | 34 | 121 | 488 | |||||||||||||
| Amortization of debt issuance cost | 13 | 13 | 51 | 52 | |||||||||||||
| Change in certain assets and liabilities: | |||||||||||||||||
| Accounts receivable, net | 6,881 | 12,043 | (1,860 | ) | 5,777 | ||||||||||||
| Income taxes receivable | — | (11,000 | ) | 11,000 | (11,000 | ) | |||||||||||
| Prepaid expenses and other assets | 1,845 | 5 | 3,219 | 12,910 | |||||||||||||
| Accounts payable and other liabilities | 1,761 | 9,664 | 6,341 | (10,531 | ) | ||||||||||||
| Deferred income | (3,980 | ) | (3,885 | ) | 1,211 | 7,149 | |||||||||||
| Net cash provided by operating activities | $ | 35,492 | $ | 43,909 | $ | 141,761 | $ | 144,552 | |||||||||
- Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, and share-based compensation.
- Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
FOR INFORMATION CONTACT:
Keith E. Pratt
Chief Financial Officer
925 606 9200