UNITED STATES
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CURRENT REPORT
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On July 29, 2020, McGrath RentCorp (the "Company") announced via press release the Company's results for its second quarter ended June 30, 2020. 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 Item 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.
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Press Release of McGrath RentCorp, dated July 29, 2020. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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 | ||
| Date: July 29, 2020 | By: | /s/ Keith E. Pratt |
| Keith E. Pratt | ||
| Executive Vice President and Chief Financial Officer | ||
EXHIBIT 99.1
McGrath RentCorp Announces Results for Second Quarter 2020
LIVERMORE, Calif., July 29, 2020 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended June 30, 2020 of $137.7 million, an increase of 8%, compared to the second quarter of 2019. The Company reported net income of $22.5 million, or $0.92 per diluted share, for the second quarter of 2020, compared to net income of $19.5 million, or $0.79 per diluted share, for the second quarter of 2019.
SECOND QUARTER 2020 COMPANY HIGHLIGHTS:
- Income from operations increased 12% year-over-year to $32.7 million.
- Rental revenues decreased 3% year-over-year to $85.6 million.
- Adjusted EBITDA1 increased 11% year-over-year to $58.1 million.
- Dividend rate increased 12% year-over-year to $0.42 per share for the second quarter of 2020. On an annualized basis, this dividend represents a 3.0% yield on the July 28, 2020 close price of $55.36 per share.
Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“During the second quarter, we were pleased that we successfully navigated an uncertain economic environment due to the COVID-19 pandemic while delivering an Adjusted EBITDA increase of 11%. Across the business, our teams adapted to new and challenging requirements to operate safely while serving our customers. The teams across the Company did impressive work in the quarter and we were able to deliver solid results despite unusually challenging market conditions.
For the second quarter, rental revenue growth of 4% at Mobile Modular and 2% at TRS-RenTelco was offset by a decline at Adler of 27%, resulting in an overall 3% decrease for the Company. We realized strong sales in the quarter at Mobile Modular and our classroom manufacturer Enviroplex, which accounted for the overall Company growth in gross profit for the quarter compared to a year ago. Even though some customer projects were halted at the start of the quarter due to the various statewide shelter in place orders, towards the middle of the quarter many projects resumed as customer sites gradually re-opened.
Looking forward to the second half of 2020, overall business conditions appear to have stabilized compared to April, however, we still face uncertainty as the pandemic remains an issue. While we will continue to closely monitor evolving regional conditions, we are very well positioned to provide rental solutions to our customers, which is what many are looking for in a more uncertain and capital constrained environment. We made good progress through unprecedented economic disruption in the second quarter and we are hoping for conditions to improve slowly but steadily through the remainder of the year.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended June 30, 2020 to the quarter ended June 30, 2019 unless otherwise indicated.
MOBILE MODULAR
For the second quarter of 2020, the Company’s Mobile Modular division reported income from operations of $20.6 million, an increase of $4.3 million, or 26%. Rental revenues increased 4% to $46.6 million, depreciation expense increased 5% to $5.7 million and other direct costs decreased 13% to $12.4 million, which resulted in an increase in gross profit on rental revenues of 14% to $28.5 million. The rental revenue growth came from both commercial and education markets. Rental related services revenues decreased 9% to $14.5 million, with associated gross profit decreasing 2% to $4.1 million. Sales revenues more than doubled to $15.3 million, primarily due to higher new equipment sales with gross margin on sales decreasing to 29% from 37%, resulting in an 81% increase in gross profit on sales revenues to $4.5 million. Selling and administrative expenses increased 8% to $16.9 million, primarily due to higher allocated corporate expenses.
TRS-RENTELCO
For the second quarter of 2020, the Company’s TRS-RenTelco division reported income from operations of $8.3 million, a decrease of $0.4 million, or 5%. Rental revenues increased 2% to $26.0 million, depreciation expense increased 16% to $11.8 million and other direct costs decreased 11% to $3.6 million, which resulted in a 5% decrease in gross profit on rental revenues to $10.7 million. The rental revenue growth was due to increased demand from the general purpose test equipment customers. Sales revenues increased 11% to $5.9 million. Gross margin on sales was 49% in 2020 compared to 51% in 2019, resulting in a 6% increase in gross profit on sales revenues to $2.9 million. Selling and administrative expenses decreased 4% to $5.9 million, primarily due to lower marketing and administrative expenses.
ADLER TANKS
For the second quarter of 2020, the Company’s Adler Tanks division reported income from operations of $1.7 million, a decrease of $3.1 million, or 65%. Rental revenues decreased 27% to $13.0 million, depreciation expense was flat at $4.1 million and other direct costs decreased 35% to $2.2 million, which resulted in a 36% decrease in gross profit on rental revenues to $6.7 million. The rental revenue decrease was primarily due to COVID-19 related business disruptions and a decrease in the price of oil and gas, which contributed to weaker activities in multiple geographic and market segments. Rental related services revenues decreased 31% to $5.3 million, with gross profit on rental related services decreasing 33% to $1.3 million. Selling and administrative expenses decreased 19% to $6.4 million, primarily due to decreased allocated corporate expenses, lower marketing and administrative costs and decreased salaries and employee benefit costs.
FINANCIAL OUTLOOK:
For the third quarter 2020, the Company expects:
- Total revenue: $140 million - $160 million
- Adjusted EBITDA1,2: $54 million - $64 million
- Gross rental equipment capital expenditures: $10 million to $15 million
| 1. | Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. |
| 2. | Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release. |
ABOUT MCGRATH RENTCORP:
Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions. The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions. For more information on McGrath RentCorp and its operating units, please visit our websites:
Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.com
You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.
CONFERENCE CALL NOTE:
As previously announced in its press release of July 1, 2020, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 29, 2020 to discuss the second quarter 2020 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the conference call replay is 8995217. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.
FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s comments about the Company being very well positioned to provide rental solutions to its customers which is what many are looking for in a more uncertain capital constrained environment and the Company hoping for conditions to improve slowly but steadily through the remainder of the year, as well as the statement regarding the third quarter of 2020 outlook in the “Financial Outlook” section, are forward-looking.
These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the duration of the COVID-19 pandemic and its economic impact, the extent and length of the shelter-in and other restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our performance improvement initiatives; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K, Form 10-Q and other SEC filings.
Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in thousands, except per share amounts) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Revenues | ||||||||||||||||
| Rental | $ | 85,629 | $ | 88,105 | $ | 175,135 | $ | 170,801 | ||||||||
| Rental related services | 20,475 | 24,467 | 44,986 | 45,922 | ||||||||||||
| Rental operations | 106,104 | 112,572 | 220,121 | 216,723 | ||||||||||||
| Sales | 30,669 | 13,707 | 45,035 | 30,532 | ||||||||||||
| Other | 900 | 1,160 | 1,970 | 2,192 | ||||||||||||
| Total revenues | 137,673 | 127,439 | 267,126 | 249,447 | ||||||||||||
| Costs and Expenses | ||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||
| Depreciation of rental equipment | 21,583 | 19,726 | 43,221 | 38,687 | ||||||||||||
| Rental related services | 14,894 | 18,137 | 33,157 | 34,500 | ||||||||||||
| Other | 18,165 | 21,741 | 37,618 | 41,474 | ||||||||||||
| Total direct costs of rental operations | 54,642 | 59,604 | 113,996 | 114,661 | ||||||||||||
| Costs of sales | 19,799 | 7,954 | 28,242 | 17,900 | ||||||||||||
| Total costs of revenues | 74,441 | 67,558 | 142,238 | 132,561 | ||||||||||||
| Gross profit | 63,232 | 59,881 | 124,888 | 116,886 | ||||||||||||
| Selling and administrative expenses | 30,540 | 30,815 | 62,494 | 60,510 | ||||||||||||
| Income from operations | 32,692 | 29,066 | 62,394 | 56,376 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (2,184 | ) | (3,138 | ) | (4,836 | ) | (6,246 | ) | ||||||||
| Foreign currency exchange gain (loss) | 117 | 37 | (319 | ) | 86 | |||||||||||
| Income before provision for income taxes | 30,625 | 25,965 | 57,239 | 50,216 | ||||||||||||
| Provision for income taxes | 8,076 | 6,477 | 14,531 | 12,279 | ||||||||||||
| Net income | $ | 22,549 | $ | 19,488 | $ | 42,708 | $ | 37,937 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.93 | $ | 0.8 | $ | 1.76 | $ | 1.57 | ||||||||
| Diluted | $ | 0.92 | $ | 0.79 | $ | 1.74 | $ | 1.54 | ||||||||
| Shares used in per share calculation: | ||||||||||||||||
| Basic | 24,121 | 24,246 | 24,207 | 24,221 | ||||||||||||
| Diluted | 24,471 | 24,579 | 24,612 | 24,561 | ||||||||||||
| Cash dividends declared per share | $ | 0.420 | $ | 0.375 | $ | 0.840 | $ | 0.750 | ||||||||
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, | December 31, | |||||||
| (in thousands) | 2020 | 2019 | ||||||
| Assets | ||||||||
| Cash | $ | 694 | $ | 2,342 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $2,200 in 2020 and $1,883 in 2019 | 125,940 | 128,099 | ||||||
| Rental equipment, at cost: | ||||||||
| Relocatable modular buildings | 892,339 | 868,807 | ||||||
| Electronic test equipment | 337,987 | 335,343 | ||||||
| Liquid and solid containment tanks and boxes | 316,497 | 316,261 | ||||||
| 1,546,823 | 1,520,411 | |||||||
| Less accumulated depreciation | (577,142 | ) | (552,911 | ) | ||||
| Rental equipment, net | 969,681 | 967,500 | ||||||
| Property, plant and equipment, net | 133,610 | 131,047 | ||||||
| Prepaid expenses and other assets | 46,997 | 45,356 | ||||||
| Intangible assets, net | 7,223 | 7,334 | ||||||
| Goodwill | 28,197 | 28,197 | ||||||
| Total assets | $ | 1,312,342 | $ | 1,309,875 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Liabilities: | ||||||||
| Notes payable | $ | 272,149 | $ | 293,431 | ||||
| Accounts payable and accrued liabilities | 116,825 | 109,174 | ||||||
| Deferred income | 60,779 | 54,964 | ||||||
| Deferred income taxes, net | 218,753 | 218,270 | ||||||
| Total liabilities | 668,506 | 675,839 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value - Authorized 40,000 shares | ||||||||
| Issued and outstanding - 24,085 shares as of June 30, 2020 and 24,296 shares as of December 31, 2019 | 106,010 | 106,360 | ||||||
| Retained earnings | 537,775 | 527,746 | ||||||
| Accumulated other comprehensive income (loss) | 51 | (70 | ) | |||||
| Total shareholders’ equity | 643,836 | 634,036 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,312,342 | $ | 1,309,875 | ||||
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended June 30, | ||||||||
| (in thousands) | 2020 | 2019 | ||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 42,708 | $ | 37,937 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 47,663 | 43,087 | ||||||
| Provision for doubtful accounts | 833 | 371 | ||||||
| Share-based compensation | 3,224 | 2,746 | ||||||
| Gain on sale of used rental equipment | (9,602 | ) | (9,168 | ) | ||||
| Foreign currency exchange loss (gain) | 319 | (86 | ) | |||||
| Amortization of debt issuance costs | 5 | 5 | ||||||
| Change in: | ||||||||
| Accounts receivable | 1,326 | (373 | ) | |||||
| Prepaid expenses and other assets | (1,641 | ) | (21,246 | ) | ||||
| Accounts payable and accrued liabilities | 6,389 | 18,468 | ||||||
| Deferred income | 5,815 | 16,909 | ||||||
| Deferred income taxes | 483 | 3,337 | ||||||
| Net cash provided by operating activities | 97,522 | 91,987 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of rental equipment | (57,564 | ) | (90,701 | ) | ||||
| Purchases of property, plant and equipment | (6,893 | ) | (3,961 | ) | ||||
| Proceeds from sales of used rental equipment | 21,921 | 18,280 | ||||||
| Net cash used in investing activities | (42,536 | ) | (76,382 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net (repayment) borrowing under bank lines of credit | (21,288 | ) | 3,309 | |||||
| Repurchase of common stock | (13,501 | ) | — | |||||
| Taxes paid related to net share settlement of stock awards | (2,340 | ) | (1,563 | ) | ||||
| Payment of dividends | (19,526 | ) | (17,337 | ) | ||||
| Net cash used in financing activities | (56,655 | ) | (15,591 | ) | ||||
| Effect of foreign currency exchange rate changes on cash | 21 | (26 | ) | |||||
| Net decrease in cash | (1,648 | ) | (12 | ) | ||||
| Cash balance, beginning of period | 2,342 | 1,508 | ||||||
| Cash balance, end of period | $ | 694 | $ | 1,496 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Interest paid, during the period | $ | 5,031 | $ | 6,210 | ||||
| Net income taxes paid, during the period | $ | 2,153 | $ | 6,173 | ||||
| Dividends accrued during the period, not yet paid | $ | 10,255 | $ | 9,163 | ||||
| Rental equipment acquisitions, not yet paid | $ | 6,654 | $ | 8,930 | ||||
| MCGRATH RENTCORP | ||||||||||||||||||||
| BUSINESS SEGMENT DATA (unaudited) | ||||||||||||||||||||
| Three months ended June 30, 2020 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile | TRS- | Adler | Enviroplex | Consolidated | |||||||||||||||
| Modular | RenTelco | Tanks | ||||||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 46,628 | $ | 26,012 | $ | 12,989 | $ | — | $ | 85,629 | ||||||||||
| Rental related services | 14,463 | 670 | 5,342 | — | 20,475 | |||||||||||||||
| Rental operations | 61,091 | 26,682 | 18,331 | — | 106,104 | |||||||||||||||
| Sales | 15,316 | 5,922 | 232 | 9,199 | 30,669 | |||||||||||||||
| Other | 355 | 475 | 70 | — | 900 | |||||||||||||||
| Total revenues | 76,762 | 33,079 | 18,633 | 9,199 | 137,673 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 5,737 | 11,750 | 4,096 | — | 21,583 | |||||||||||||||
| Rental related services | 10,362 | 517 | 4,015 | — | 14,894 | |||||||||||||||
| Other | 12,376 | 3,562 | 2,227 | — | 18,165 | |||||||||||||||
| Total direct costs of rental operations | 28,475 | 15,829 | 10,338 | — | 54,642 | |||||||||||||||
| Costs of sales | 10,845 | 3,049 | 228 | 5,677 | 19,799 | |||||||||||||||
| Total costs of revenues | 39,320 | 18,878 | 10,566 | 5,677 | 74,441 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 28,514 | 10,700 | 6,666 | — | 45,880 | |||||||||||||||
| Rental related services | 4,101 | 153 | 1,327 | — | 5,581 | |||||||||||||||
| Rental operations | 32,615 | 10,853 | 7,993 | — | 51,461 | |||||||||||||||
| Sales | 4,471 | 2,873 | 4 | 3,522 | 10,870 | |||||||||||||||
| Other | 356 | 475 | 70 | — | 901 | |||||||||||||||
| Total gross profit | 37,442 | 14,201 | 8,067 | 3,522 | 63,232 | |||||||||||||||
| Selling and administrative expenses | 16,857 | 5,875 | 6,353 | 1,455 | 30,540 | |||||||||||||||
| Income from operations | $ | 20,585 | $ | 8,326 | $ | 1,714 | $ | 2,067 | 32,692 | |||||||||||
| Interest expense | (2,184 | ) | ||||||||||||||||||
| Foreign currency exchange gain | 117 | |||||||||||||||||||
| Provision for income taxes | (8,076 | ) | ||||||||||||||||||
| Net income | $ | 22,549 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 822,743 | $ | 338,919 | $ | 314,780 | ||||||||||||||
| Average monthly total yield 2 | 1.89 | % | 2.56 | % | 1.38 | % | ||||||||||||||
| Average utilization 3 | 77.7 | % | 63.9 | % | 44.3 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.43 | % | 4.00 | % | 3.10 | % | ||||||||||||||
- 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 June 30, 2019 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile | TRS- | Adler | Enviroplex | Consolidated | |||||||||||||||
| Modular | RenTelco | Tanks | ||||||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 44,737 | $ | 25,489 | $ | 17,879 | $ | — | $ | 88,105 | ||||||||||
| Rental related services | 15,901 | 854 | 7,712 | — | 24,467 | |||||||||||||||
| Rental operations | 60,638 | 26,343 | 25,591 | — | 112,572 | |||||||||||||||
| Sales | 6,725 | 5,317 | 593 | 1,072 | 13,707 | |||||||||||||||
| Other | 359 | 650 | 151 | — | 1,160 | |||||||||||||||
| Total revenues | 67,722 | 32,310 | 26,335 | 1,072 | 127,439 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 5,469 | 10,164 | 4,093 | — | 19,726 | |||||||||||||||
| Rental related services | 11,728 | 686 | 5,723 | — | 18,137 | |||||||||||||||
| Other | 14,282 | 4,018 | 3,441 | — | 21,741 | |||||||||||||||
| Total direct costs of rental operations | 31,479 | 14,868 | 13,257 | — | 59,604 | |||||||||||||||
| Costs of sales | 4,257 | 2,617 | 415 | 665 | 7,954 | |||||||||||||||
| Total costs of revenues | 35,736 | 17,485 | 13,672 | 665 | 67,558 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 24,986 | 11,307 | 10,345 | — | 46,638 | |||||||||||||||
| Rental related services | 4,173 | 168 | 1,989 | — | 6,330 | |||||||||||||||
| Rental operations | 29,159 | 11,475 | 12,334 | — | 52,968 | |||||||||||||||
| Sales | 2,468 | 2,700 | 178 | 407 | 5,753 | |||||||||||||||
| Other | 359 | 650 | 151 | — | 1,160 | |||||||||||||||
| Total gross profit | 31,986 | 14,825 | 12,663 | 407 | 59,881 | |||||||||||||||
| Selling and administrative expenses | 15,677 | 6,093 | 7,814 | 1,231 | 30,815 | |||||||||||||||
| Income (loss) from operations | $ | 16,309 | $ | 8,732 | $ | 4,849 | $ | (824 | ) | 29,066 | ||||||||||
| Interest expense | (3,138 | ) | ||||||||||||||||||
| Foreign currency exchange gain | 37 | |||||||||||||||||||
| Provision for income taxes | (6,477 | ) | ||||||||||||||||||
| Net income | $ | 19,488 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 786,512 | $ | 297,379 | $ | 313,552 | ||||||||||||||
| Average monthly total yield 2 | 1.90 | % | 2.86 | % | 1.90 | % | ||||||||||||||
| Average utilization 3 | 79.2 | % | 67.2 | % | 57.5 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.39 | % | 4.25 | % | 3.31 | % | ||||||||||||||
- 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) | ||||||||||||||||||||
| Six months ended June 30, 2020 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile | TRS- | Adler | Enviroplex | Consolidated | |||||||||||||||
| Modular | RenTelco | Tanks | ||||||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 94,038 | $ | 53,548 | $ | 27,549 | $ | — | $ | 175,135 | ||||||||||
| Rental related services | 32,607 | 1,496 | 10,883 | — | 44,986 | |||||||||||||||
| Rental operations | 126,645 | 55,044 | 38,432 | — | 220,121 | |||||||||||||||
| Sales | 22,572 | 11,031 | 730 | 10,702 | 45,035 | |||||||||||||||
| Other | 743 | 1,067 | 160 | — | 1,970 | |||||||||||||||
| Total revenues | 149,960 | 67,142 | 39,322 | 10,702 | 267,126 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 11,406 | 23,582 | 8,233 | — | 43,221 | |||||||||||||||
| Rental related services | 23,712 | 1,163 | 8,282 | — | 33,157 | |||||||||||||||
| Other | 24,993 | 7,942 | 4,683 | — | 37,618 | |||||||||||||||
| Total direct costs of rental operations | 60,111 | 32,687 | 21,198 | — | 113,996 | |||||||||||||||
| Costs of sales | 15,548 | 5,497 | 548 | 6,649 | 28,242 | |||||||||||||||
| Total costs of revenues | 75,659 | 38,184 | 21,746 | 6,649 | 142,238 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 57,638 | 22,024 | 14,633 | — | 94,295 | |||||||||||||||
| Rental related services | 8,895 | 333 | 2,601 | — | 11,829 | |||||||||||||||
| Rental operations | 66,533 | 22,357 | 17,234 | — | 106,124 | |||||||||||||||
| Sales | 7,024 | 5,534 | 182 | 4,053 | 16,793 | |||||||||||||||
| Other | 744 | 1,067 | 160 | — | 1,971 | |||||||||||||||
| Total gross profit | 74,301 | 28,958 | 17,576 | 4,053 | 124,888 | |||||||||||||||
| Selling and administrative expenses | 34,275 | 12,236 | 13,177 | 2,806 | 62,494 | |||||||||||||||
| Income from operations | $ | 40,026 | $ | 16,722 | $ | 4,399 | $ | 1,247 | 62,394 | |||||||||||
| Interest expense | (4,836 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (319 | ) | ||||||||||||||||||
| Provision for income taxes | (14,531 | ) | ||||||||||||||||||
| Net income | $ | 42,708 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 819,212 | $ | 338,066 | $ | 314,823 | ||||||||||||||
| Average monthly total yield 2 | 1.90 | % | 2.64 | % | 1.46 | % | ||||||||||||||
| Average utilization 3 | 78.2 | % | 64.7 | % | 45.9 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.45 | % | 4.08 | % | 3.18 | % | ||||||||||||||
- 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) | ||||||||||||||||||||
| Six months ended June 30, 2019 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile | TRS- | Adler | Enviroplex | Consolidated | |||||||||||||||
| Modular | RenTelco | Tanks | ||||||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 86,998 | $ | 49,112 | $ | 34,691 | $ | — | $ | 170,801 | ||||||||||
| Rental related services | 30,372 | 1,562 | 13,988 | — | 45,922 | |||||||||||||||
| Rental operations | 117,370 | 50,674 | 48,679 | — | 216,723 | |||||||||||||||
| Sales | 14,725 | 11,067 | 863 | 3,877 | 30,532 | |||||||||||||||
| Other | 719 | 1,245 | 228 | — | 2,192 | |||||||||||||||
| Total revenues | 132,814 | 62,986 | 49,770 | 3,877 | 249,447 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 10,877 | 19,684 | 8,126 | — | 38,687 | |||||||||||||||
| Rental related services | 22,655 | 1,313 | 10,532 | — | 34,500 | |||||||||||||||
| Other | 26,917 | 8,118 | 6,439 | — | 41,474 | |||||||||||||||
| Total direct costs of rental operations | 60,449 | 29,115 | 25,097 | — | 114,661 | |||||||||||||||
| Costs of sales | 9,500 | 5,379 | 587 | 2,434 | 17,900 | |||||||||||||||
| Total costs of revenues | 69,949 | 34,494 | 25,684 | 2,434 | 132,561 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 49,204 | 21,310 | 20,126 | — | 90,640 | |||||||||||||||
| Rental related services | 7,717 | 249 | 3,456 | — | 11,422 | |||||||||||||||
| Rental operations | 56,921 | 21,559 | 23,582 | — | 102,062 | |||||||||||||||
| Sales | 5,225 | 5,688 | 276 | 1,443 | 12,632 | |||||||||||||||
| Other | 719 | 1,245 | 228 | — | 2,192 | |||||||||||||||
| Total gross profit | 62,865 | 28,492 | 24,086 | 1,443 | 116,886 | |||||||||||||||
| Selling and administrative expenses | 31,047 | 12,063 | 14,894 | 2,506 | 60,510 | |||||||||||||||
| Income (loss) from operations | $ | 31,818 | $ | 16,429 | $ | 9,192 | $ | (1,063 | ) | 56,376 | ||||||||||
| Interest expense | (6,246 | ) | ||||||||||||||||||
| Foreign currency exchange gain | 86 | |||||||||||||||||||
| Provision for income taxes | (12,279 | ) | ||||||||||||||||||
| Net income | $ | 37,937 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 782,562 | $ | 291,590 | $ | 313,032 | ||||||||||||||
| Average monthly total yield 2 | 1.85 | % | 2.81 | % | 1.85 | % | ||||||||||||||
| Average utilization 3 | 79.1 | % | 65.7 | % | 57.1 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.34 | % | 4.27 | % | 3.23 | % | ||||||||||||||
- 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 | Six Months Ended | Twelve Months Ended | |||||||||||||||||||||
| June 30, | June 30, | June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Net income | $ | 22,549 | $ | 19,488 | $ | 42,708 | $ | 37,937 | $ | 101,577 | $ | 86,965 | ||||||||||||
| Provision for income taxes | 8,076 | 6,477 | 14,531 | 12,279 | 34,571 | 27,822 | ||||||||||||||||||
| Interest expense | 2,184 | 3,138 | 4,836 | 6,246 | 10,921 | 12,552 | ||||||||||||||||||
| Depreciation and amortization | 23,801 | 21,987 | 47,663 | 43,087 | 94,052 | 84,774 | ||||||||||||||||||
| EBITDA | 56,610 | 51,090 | 109,738 | 99,549 | 241,121 | 212,113 | ||||||||||||||||||
| Share-based compensation | 1,501 | 1,354 | 3,224 | 2,746 | 6,370 | 5,029 | ||||||||||||||||||
| Adjusted EBITDA 1 | $ | 58,111 | $ | 52,444 | $ | 112,962 | $ | 102,295 | $ | 247,491 | $ | 217,142 | ||||||||||||
| Adjusted EBITDA margin 2 | 42 | % | 41 | % | 42 | % | 41 | % | 42 | % | 41 | % | ||||||||||||
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
| (dollar amounts in thousands) | Three Months Ended | Six Months Ended | Twelve Months Ended | |||||||||||||||||||||
| June 30, | June 30, | June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Adjusted EBITDA 1 | $ | 58,111 | $ | 52,444 | $ | 112,962 | $ | 102,295 | $ | 247,491 | $ | 217,142 | ||||||||||||
| Interest paid | (2,172 | ) | (3,382 | ) | (5,031 | ) | (6,210 | ) | (11,296 | ) | (12,685 | ) | ||||||||||||
| Income taxes paid, net of refunds received | (1,790 | ) | (5,463 | ) | (2,153 | ) | (6,173 | ) | (13,508 | ) | (12,655 | ) | ||||||||||||
| Gain on sale of used rental equipment | (4,814 | ) | (4,553 | ) | (9,602 | ) | (9,168 | ) | (21,743 | ) | (18,852 | ) | ||||||||||||
| Foreign currency exchange loss (gain) | (117 | ) | (37 | ) | 319 | (86 | ) | 321 | 27 | |||||||||||||||
| Amortization of debt issuance cost | 2 | 2 | 5 | 5 | 11 | 10 | ||||||||||||||||||
| Change in certain assets and liabilities: | ||||||||||||||||||||||||
| Accounts receivable, net | (106 | ) | (1,615 | ) | 2,159 | (2 | ) | (4,149 | ) | (15,923 | ) | |||||||||||||
| Prepaid expenses and other assets | (2,004 | ) | (9,726 | ) | (1,641 | ) | (21,246 | ) | 6,075 | (15,659 | ) | |||||||||||||
| Accounts payable and other liabilities | 5,858 | 9,380 | (5,311 | ) | 15,663 | (3,717 | ) | 17,171 | ||||||||||||||||
| Deferred income | (1,128 | ) | 8,431 | 5,815 | 16,909 | (5,956 | ) | 22,313 | ||||||||||||||||
| Net cash provided by operating activities | $ | 51,840 | $ | 45,481 | $ | 97,522 | $ | 91,987 | $ | 193,529 | $ | 180,889 | ||||||||||||
- 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 |
| EVP & Chief Financial Officer | |
| 925-606-9200 |