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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 5, 2004
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McGRATH RENTCORP
(Exact name of registrant as specified in its Charter)
California
(State or other jurisdiction of incorporation)
0-13292 94-2579843
(Commission File Number) (I.R.S. Employee Identification No.)
5700 Las Positas Road, Livermore, CA 94551-7800
(Address of principal executive offices)
(925) 606-9200
(Registrant's Telephone Number, Including Area Code)
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Item 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(c) Exhibits.
Exhibit No. Description
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99.1 Press Release of McGrath RentCorp, dated May 5,
2004.
On May 5, 2004, McGrath RentCorp (the "Company") announced via press
release the Company's results for its first quarter ended March 31, 2004. 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: May 5, 2004 By: /s/ Thomas J. Sauer
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Thomas J. Sauer
Vice President and Chief Financial
Officer
Exhibit 99.1
McGrath RentCorp Announces First Quarter Results; Q1 2004 EPS of
$0.47; Company Launches Modular Rental Business in Florida
LIVERMORE, Calif.--(BUSINESS WIRE)--May 5, 2004--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, 2004 of $29.9 million, compared to $27.5
million in first quarter 2003. The Company reported net income of $5.7
million, or $0.47 per share, compared to $4.9 million, or $0.40 per
share in first quarter 2003.
The Company's Mobile Modular division's rental operations revenues
increased 11% as a result of continued strength in the educational
market resulting in an 8% increase of pre-tax income to $8.4 million.
For Enviroplex, the Company's classroom manufacturer, sales increased
to $1.3 million with quarter-end backlog declining to $6.7 million
from $12.2 million a year ago due to several large projects booked in
the prior year quarterly period. For RenTelco, the Company's
communications test equipment rental division, rental revenues
increased 18% to $3.2 million from a year ago and contributed $1.1
million in pre-tax earnings, of which approximately $0.8 million
derived from selling underutilized equipment.
Separately, on May 3, 2004 the Company announced that it has
agreed to acquire substantially all the assets of Technology Rentals &
Services (TRS), a division of CIT Group Inc (NYSE:CIT). The
transaction is for approximately $116 million in cash and is expected
to close by May 31, 2004. The Company intends to finance the
transaction from a revolving line of credit facility with its banks
and a fixed-rate Senior Note.
"While we are moving forward with new growth initiatives for the
Company, each of our core rental business has again demonstrated solid
results," stated Dennis Kakures, President and CEO. "Our
quarter-over-quarter rental revenue increases of 7% for our modular
business and 18% for our improving test equipment business speaks
greatly to the strength of each business model. With the TRS
acquisition, our test equipment business will increase significantly
in size and rental revenues overnight. We are very focused on a smooth
integration of TRS and RenTelco and know how critical this effort is
to our success going forward. We are driven by the opportunity to
create the premier test equipment rental business in North America as
measured by rental revenues, breadth of inventory offered, technology
application expertise, and customer following.
"In support of our strategic planning focus of creating more
opportunities to grow our core rental businesses, in the first quarter
we launched modular operations in the state of Florida. In April, we
were successful in securing our first classroom rental order for 35
buildings. We believe there are many similar dynamics between the
Florida and California school markets. While our Florida initiative
leverages our educational rental expertise, it will take time to
develop into meaningful earnings. However, the enduring engine
provided by these new educational rentals will serve us well in the
years ahead. There is a great deal of excitement within the Company
surrounding the TRS acquisition, Florida initiative, and our prospects
for growth.
"We are also very pleased to announce that Tom Sauer will be
continuing on as Chief Financial Officer to serve our growing
business. We will look to fill the senior financial planning and
analysis role that Tom was targeted to fill from outside the Company."
FIRST QUARTER 2004 HIGHLIGHTS (AS COMPARED TO FIRST QUARTER 2003)
-- Rental revenues increased 9% to $20.0 million. Within rental
revenues, Mobile Modular increased 7% to $16.8 million, and
RenTelco increased 18% to $3.2 million.
-- Sales revenues decreased 4% to $5.1 million resulting from
decreased equipment sales by Mobile Modular. Overall gross
margin on sales increased to 38.0% in 2004 from 30.2% in 2003.
Sales revenues can fluctuate from quarter to quarter and year
to year depending on customer requirements and funding.
-- Depreciation of rental equipment increased 5% to $3.3 million
driven primarily by Mobile Modular's additions to its rental
fleet during the prior year.
-- Operating cash flow declined 41% to $7.8 million, primarily
due to the slower collection of certain accounts receivable of
MMMC and Enviroplex in 2004. Debt decreased $3.3 million
during the quarter to $43.9 million, with the Company's total
liabilities to equity ratio decreasing from 1.25 to 1 at
December 31, 2003 to 1.19 to 1 as of March 31, 2004. At March
31, 2004, the Company, under existing bank lines of credit,
had capacity to borrow up to an additional $97.1 million.
-- Dividend rate increased to $0.22 per share for the first
quarter 2004. On an annualized basis, this dividend represents
a 2.8% yield on the May 4, 2004 close price of $31.66.
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.
FINANCIAL GUIDANCE
The Company currently expects its 2004 full-year earnings per
share to be in a range of $2.00 to $2.10 per diluted share. This
guidance excludes any potential accretive impact in 2004 of the TRS
acquisition noted above. Such a forward-looking statement reflects
McGrath RentCorp's expectations as of May 5, 2004. Results may be
materially affected by many factors, as outlined in the
"forward-looking statements" paragraph at the end of this press
release.
CORPORATE GOVERNANCE
Management and the Company's board of directors have recently
updated its corporate governance practices, which can be accessed in
the investor relations section of the Company's web site at
www.mgrc.com.
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, Texas
and Florida. Mobile Modular believes it is the largest provider of
relocatable classrooms for rental to school districts for grades K -
12 in California. 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 21, 2004, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on May 5, 2004 to
discuss the first quarter 2004 results. To participate in the
teleconference, dial 1-800-240-6709 (international callers dial
1-303-262-2211). In addition, a live webcast 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 1-800-405-2236
(in the U.S.) or 1-303-590-3300 (outside the U.S.). The pass code for
the call replay is 577670#.
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 the
expectation that the TRS transaction will close by May 31, 2004, our
expectation regarding new growth initiatives for the Company, our
expectation for a smooth integration of the TRS acquisition with our
RenTelco business, our expectation of creating the premier test
equipment rental business in North America, the belief that there are
many similar dynamics in the California and Florida school markets,
that the Florida new educational rentals will create an enduring
economic engine that will serve us well in the future, our general
expectations for growth for the Company, our annualized dividend
yield, and our guidance on per share earnings range for 2004. 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, changing prices and market
conditions, that we may not successfully consummate the TRS
acquisition, the acquired TRS assets may not be integrated
successfully and that the TRS transaction may have a negative impact
on our future business or operations, that there may be unanticipated
costs of integrating the acquired assets, that our Florida initiatives
may not be successful or provide meaningful revenue or earnings, and
that we may have difficulties in managing a larger, more
geographically dispersed organization. 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)
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Three Months Ended
March 31
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2004 2003
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REVENUES
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Rental $ 20,023 $ 18,441
Rental Related Services 4,544 3,547
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Rental Operations 24,567 21,988
Sales 5,083 5,277
Other 229 196
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Total Revenues 29,879 27,461
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COSTS AND EXPENSES
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Direct Costs of Rental Operations
Depreciation of Rental Equipment 3,261 3,115
Rental Related Services 2,675 2,161
Other 4,644 4,413
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Total Direct Costs of Rental
Operations 10,580 9,689
Costs of Sales 3,151 3,684
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Total Costs 13,731 13,373
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Gross Margin 16,148 14,088
Selling and Administrative 6,057 5,340
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Income from Operations 10,091 8,748
Interest 540 690
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Income Before Provision for Income Taxes 9,551 8,058
Provision for Income Taxes 3,811 3,215
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Income Before Minority Interest 5,740 4,843
Minority Interest in Income (Loss) of
Subsidiary 2 (46)
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Net Income $ 5,738 $ 4,889
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Earnings Per Share:
Basic $ 0.47 $ 0.40
Diluted $ 0.47 $ 0.40
Shares Used in Per Share Calculation:
Basic 12,126 12,261
Diluted 12,303 12,350
March 31, December 31,
BALANCE SHEET DATA 2004 2003
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Rental Equipment, net $232,894 $232,046
Total Assets 322,641 323,858
Notes Payable 43,932 47,266
Shareholders' Equity 147,391 143,978
SEGMENT DATA
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(in thousands) Modulars Electronics Enviroplex Consolidated
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Three Months Ended
March 31,
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2004
Rental Revenues $ 16,797 $ 3,226 $ -- $ 20,023
Rental Related Services
Revenues 4,420 124 -- 4,544
Sales and Other Revenues 1,904 2,114 1,294 5,312
Total Revenues 23,121 5,464 1,294 29,879
Depreciation of Rental
Equipment 2,006 1,255 -- 3,261
Interest Expense
(Income) Allocation 519 63 (42) 540
Income before Provision
for Income Taxes 8,431 1,105 15 9,551
Rental Equipment
Acquisitions 4,350 1,292 -- 5,642
Accounts Receivable, net
(period end) 22,433 3,887 2,985 29,305
Rental Equipment, at
cost (period end) 308,075 33,484 -- 341,559
Rental Equipment, net
book value (period end) 217,386 15,508 -- 232,894
Utilization (period end)
(1) 84.2% 47.3%
Average Utilization (1) 84.3% 46.3%
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
Interest Expense
(Income) Allocation 652 96 (58) 690
Income 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)
(1) 82.9% 44.2%
Average Utilization (1) 83.8% 42.8%
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(1) 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