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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): April 30, 2003
McGRATH RENTCORP
(Exact name of registrant as specified in its Charter)
California
(State or other jurisdiction of incorporation)
0-13292 94-2579843
(Commission File Number) (I.R.S. Employee Identification No.)
5700 Las Positas Road, Livermore, CA 94551-7800
(Address of principal executive offices)
(925) 606-9200
(Registrant's Telephone Number, Including Area Code)
================================================================================
Item 7. Financial statements and exhibits
(c) Exhibits.
Exhibit No. Description
---------- ------------
99.1 Press Release of McGrath RentCorp, dated April 30, 2003.
Item 9. REGULATION FD DISCLOSURE (THE FOLLOWING DISCUSSION IS FURNISHED UNDER
"ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION").
In accordance with SEC Release No. 33-8216, the following information,
required to be furnished under "Item 12. Results of Operations and Financial
Condition," is furnished under "Item 9. Regulation FD Disclosure."
On April 30, 2003, McGrath RentCorp (the "Company") announced via press
release the Company's preliminary results for its first quarter ended March 31,
2003. 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 12 of Form 8-K
and are furnished to, but not filed with, the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McGRATH RENTCORP
Dated: April 30, 2003 By: /s/ Thomas J. Sauer
-------------------------------------
Thomas J. Sauer
Vice President and Chief Financial Officer
Exhibit 99.1
McGrath RentCorp Announces First Quarter Results; Q1 2003 EPS of $0.40
LIVERMORE, Calif.--(BUSINESS WIRE)--April 30, 2003--McGrath
RentCorp (Nasdaq:MGRC), a leading rental provider of modular buildings
for classroom and office space, and test equipment for communications,
fiber optic and general purpose needs, today announced revenues for
the quarter ended March 31, 2003 of $27.5 million, compared to $31.8
million in first quarter 2002. The Company reported net income of $4.9
million, or $0.40 per share, compared to a net loss of $2.4 million,
or $0.19 per share in first quarter 2002.
First quarter 2002 results included a noncash impairment charge of
$11.9 million by the Company's RenTelco segment which primarily
affected the carrying value of its communications rental equipment,
reducing net income by $7.2 million or $0.56 per share, and
nonrecurring expenses related to the terminated merger with Tyco
International, reducing net income by $0.3 million or $0.02 per share.
For comparability, excluding impairment and merger expenses, first
quarter net income would have decreased 4% from $5.1 million in 2002
to $4.9 million in 2003 with earnings per share increasing 3% from
$0.39 per share in 2002 to $0.40 per share in 2003 resulting from
fewer outstanding shares.
The Company's Mobile Modular division's total revenues declined 8%
resulting in an 8% decline of pre-tax income to $7.8 million,
representing 97% of the Company's pre-tax income for the quarter.
Sales at Enviroplex, the Company's classroom manufacturer, increased
to $0.8 million with quarter-end backlog 23% higher than a year ago at
$12.2 million. The Company's RenTelco division contributed pre-tax
earnings primarily as a result of selling underutilized equipment,
despite continuing difficult conditions throughout the
telecommunications industry, as rental revenues declined 45% from the
first quarter of 2002.
"Our consolidated net income for the quarter, excluding impairment
and merger expenses, was comparable to the same period a year ago, and
continued strong cash flow enabled us to increase our dividend,"
stated Dennis Kakures, President and CEO. "Even though the operating
trends in our modular business declined during the quarter just ended,
we believe that recent strong order activity, stemming from the
November 2002 passage of state and local bond measures to fund public
school facilities in California, will facilitate a rebound in these
trends for the balance of the year. Consequently, we are reconfirming
our earlier full-year earnings guidance for 2003 of $2.12 to $2.17 per
diluted share. Achieving these results assumes, among other factors,
continued strong demand for modular classrooms in California, timely
delivery and installation of classroom rental product for the new
school year, and minimal delays of fourth quarter sale projects into
2004. At RenTelco, we have limited visibility as to when the business
will recover. Nevertheless, we continue to believe that having
right-sized equipment and overhead expense levels, RenTelco is
positioned to increase its earnings as the telecommunications industry
recovers."
FIRST QUARTER 2003 HIGHLIGHTS (AS COMPARED TO FIRST QUARTER 2002)
-- Rental revenues decreased 13% to $18.4 million. Within rental
revenues, Mobile Modular decreased 4% to $15.7 million, and
RenTelco decreased 45% to $2.7 million as a result of the
severe and prolonged broad-based weakness in the
telecommunications industry.
-- Sales revenues decreased 14% to $5.3 million resulting from
decreased equipment sales by Mobile Modular and RenTelco.
Overall gross margin on sales remained consistent at 30.5% in
2002 and 30.2% in 2003. Sales can fluctuate from quarter to
quarter and year to year depending on customer requirements
and funding.
-- Depreciation of rental equipment decreased 42% to $3.1
million. Within depreciation expense, Mobile Modular's
depreciation expense decreased 1% to $1.7 million and
RenTelco's depreciation expense decreased 62% to $1.4 million,
resulting primarily from the write-down of electronics
equipment occurring in the first and second quarters 2002.
-- Operating cash flow declined 30% to $9.5 million, directly
attributable to lower revenues. Debt increased $3.2 million to
$58.7 million as a result of the Company's $10.2 million stock
repurchase, increasing the Company's total liabilities to
equity ratio to from 1.25 to 1 at December 31, 2002 to 1.32 to
1 as of March 31, 2003. At March 31, 2003, the Company, under
existing bank lines of credit, has capacity to borrow up to an
additional $90.3 million.
-- Dividend rate increased to $0.20 per share for the first
quarter 2003. On an annualized basis, this dividend represents
a 3.3% yield on the April 29, 2003 close price of $24.25.
It is suggested that the press release be read in conjunction with
the financial statements and notes thereto included in the Company's
latest Form 10-K and Forms 10-Q. You can visit the Company's web site
at www.mgrc.com to access information on McGrath RentCorp, including
the latest filings on Form 10-K and Form 10-Q.
About McGrath RentCorp
Founded in 1979, the Company, under the trade name Mobile Modular
Management Corporation, rents and sells modular buildings to fulfill
customer's temporary and permanent space needs in California and
Texas. Mobile Modular believes it is the largest provider of
relocatable classrooms for rental to school districts for grades K -
12 in California. McGrath RentCorp's majority owned subsidiary,
Enviroplex, Inc., manufactures and sells classrooms directly to school
districts in California.
The Company's RenTelco division rents and sells electronic test
equipment and is recognized as the leader in communications and
fiber-optic test equipment rentals throughout the U.S.
CONFERENCE CALL NOTE: As previously announced in its press release
of April 16, 2003, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on April 30, 2003 to
discuss the first quarter 2003 results. To participate in the
teleconference, dial 800/218-9073 (international callers dial
303/262-2076). In addition, a live Web cast and replay of the call may
be found in 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 800/405-2236 (in the U.S.) or
303/590-3000 (outside the U.S.). The pass code for the call replay is
535508#.
This press release contains statements, which constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a
number of places. Such statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may,"
"estimates," "will," "should," "plans" or "anticipates" or the
negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. These include our
statements regarding guidance on per share earnings for 2003, the
expectation that strong order activity will facilitate a rebound in
the operating trends modular business, the expectation of increased
earnings contributions from RenTelco, the impact of the passage of the
state and local bond measures for public schools in California for
2002 on order activity from California schools, the expectation of
recurring rental revenues and cash flows for our modular business, and
the annualized dividend yield. 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. These
factors include the effectiveness of management's strategies and
decisions, general economic and business conditions, the condition of
the telecommunications industry, new or modified statutory or
regulatory requirements, continuing demand for modular products,
timely delivery and installation of modular products, delays of future
sales projects into 2004 and changing prices and market conditions.
There may be other factors not listed above that could cause actual
results to vary materially from the forward-looking statements
described in this press release.
MCGRATH RENTCORP
Consolidated earnings, balance sheet and segment data follow:
(in thousands, except per share amounts)
- --------------------------------------------------------------------
Three Months Ended
March 31
-------------------
2003 2002
- ----------------------------------------------------------------------
REVENUES
Rental $18,441 $21,292
Rental Related Services 3,547 3,971
--------- ---------
Rental Operations 21,988 25,263
Sales 5,277 6,145
Other 196 356
--------- ---------
Total Revenues 27,461 31,764
--------- ---------
COSTS AND EXPENSES
Direct Costs of Rental Operations
Depreciation of Rental Equipment 3,115 5,368
Rental Related Services 2,161 2,231
Impairment of Rental Equipment -- 11,887
Other 4,413 4,928
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Total Direct Costs of Rental Operations 9,689 24,414
Costs of Sales 3,684 4,271
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Total Costs 13,373 28,685
------- ----------
Gross Margin 14,088 3,079
Selling and Administrative 5,340 5,979
------- ----------
Income (Loss) from Operations 8,748 (2,900)
Interest 690 1,147
------- ----------
Income (Loss) Before Provision for Income Taxes 8,058 (4,047)
Provision (Benefit) for Income Taxes 3,215 (1,611)
------- ----------
Income (Loss) Before Minority Interest 4,843 (2,436)
Minority Interest in Income (Loss) of Subsidiary (46) (70)
------- ----------
Net Income (Loss) $4,889 $(2,366)
======= ==========
Earnings (Loss) Per Share:
Basic $0.40 $(0.19)
Diluted $0.40 $(0.19)
Cash Dividends Per Share $0.20 $0.16
Shares Used in Per Share Calculation:
Basic 12,261 12,427
Diluted 12,350 12,674
Shares outstanding period end 12,033 12,464
March 31, December 31,
BALANCE SHEET DATA 2003 2002
- ------------------------------------------------------------ ---------
Rental Equipment, net $220,159 $221,899
Total Assets 304,773 313,134
Notes Payable 58,698 55,523
Shareholders' Equity 131,383 139,019
SEGMENT DATA
(in thousands) Modulars Electronics Enviroplex Corporate(1) Consoli-
dated
-------- ----------- ---------- ------------ --------
Three Months Ended March 31,
- ---------------------------
2003
Rental Revenues $15,703 $2,738 $-- $-- $18,441
Rental Related
Services
Revenues 3,427 120 -- -- 3,547
Sales and Other
Revenues 2,582 2,063 828 -- 5,473
Total Revenues 21,712 4,921 828 -- 27,461
Depreciation of
Rental
Equipment 1,740 1,375 -- -- 3,115
Impairment of
Rental
Equipment -- -- -- -- --
Interest Expense
(Income)
Allocation 652 96 (58) -- 690
Income (Loss)
before
Provision for
Income Taxes 7,840 600 (382) -- 8,058
Rental Equipment
Acquisitions 2,897 757 -- -- 3,654
Accounts
Receivable, net
(period end) 21,535 3,475 2,010 -- 27,020
Rental
Equipment, at
cost (period
end) 287,147 37,801 -- -- 324,948
Rental
Equipment, net
book value
(period end) 200,766 19,393 -- -- 220,159
Utilization
(period end)
(2) 82.9% 44.2%
Average
Utilization (2) 83.8% 42.8%
2002
Rental Revenues $16,327 $4,965 $-- $-- $21,292
Rental Related
Services
Revenues 3,817 154 -- -- 3,971
Sales and Other
Revenues 3,442 2,699 360 -- 6,501
Total Revenues 23,586 7,818 360 -- 31,764
Depreciation of
Rental
Equipment 1,755 3,613 -- -- 5,368
Impairment of
Rental
Equipment -- 11,887 -- -- 11,887
Interest Expense
(Income)
Allocation 912 293 (58) -- 1,147
Income (Loss)
before
Provision for
Income Taxes 8,850 (11,913) (565) (419) (4,047)
Rental Equipment
Acquisitions 6,523 504 -- -- 7,027
Accounts
Receivable, net
(period end) 22,834 7,186 1,949 -- 31,969
Rental
Equipment, at
cost (period
end) 284,733 64,754 -- -- 349,487
Rental
Equipment, net
book value
(period end) 200,876 40,994 -- -- 241,870
Utilization
(period end)
(2) 85.8% 37.2%
Average
Utilization (2) 85.9% 34.7%
- ----------------------------------------------------------------------
(1) Corporate includes the impact of nonrecurring merger related items
in 2002 of $419,000, which are not allocated to a specific segment.
(2) Utilization is calculated each month by dividing the cost of
rental equipment on rent by the total cost of rental equipment
excluding new equipment inventory and accessory equipment. The average
utilization for the period is calculated using the average costs of
rental equipment.
CONTACT: McGrath RentCorp
Thomas J. Sauer, 925/606-9200