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UNITED STATES
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): November 4, 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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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 Results of Operations and Financial Condition.
On November 4, 2004, McGrath RentCorp (the "Company") announced via press
release the Company's results for its third quarter ended September 30, 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 Items 2.02 and 9.01 of Form
8-K and are furnished to, but not filed with, the Securities and Exchange
Commission.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
----------- -----------
99.1 Press Release of McGrath RentCorp, dated
November 4, 2004.
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: November 4, 2004 By: /s/ Thomas J. Sauer
---------------------------------
Thomas J. Sauer
Vice President and Chief
Financial Officer
Exhibit 99.1
McGrath RentCorp Announces Third Quarter Results; Rental Revenues Increase 89%
to $37.1 Million; Q3 2004 EPS Increases 52% to $0.76
LIVERMORE, Calif.--(BUSINESS WIRE)--Nov. 4, 2004--McGrath RentCorp
(Nasdaq:MGRC), a leading rental provider of modular buildings for
classroom and office space, and test equipment for general purpose and
communications needs, today announced revenues for the quarter ended
September 30, 2004, of $72.5 million, compared to $34.9 million in the
third quarter of 2003. The Company reported net income of $9.4
million, or $0.76 per share, compared to $6.1 million, or $0.50 per
share in the third of quarter 2003. Most of the increase in revenues
and income are attributable to the acquired Technology Rentals &
Services ("TRS") assets and operations, which significantly
contributed to an 89% increase in rental revenues. McGrath purchased
substantially all the general purpose and communications test
equipment assets of Dallas-based TRS, a division of CIT Group Inc.
(NYSE:CIT) on June 2, 2004. Results for the third quarter and for the
first nine months of 2004 include TRS' results since that date.
In the third quarter of 2004 for Mobile Modular, record rental
revenues of $18.4 million and a $9.3 million sale to a California
school district contributed to total modular revenues increasing 51%
to $39.6 million, as compared to third quarter 2003. The Company views
the sales volume of this single $9.3 million sale project as unique
and does not expect sales projects of this magnitude to occur on a
regular basis. The significant rise in Mobile Modular's revenues led
to a 25% increase in its pre-tax income to $10.5 million. Enviroplex
sales during the quarter increased to $6.2 million from $3.0 million
during the same period in 2003, with quarter-end backlog of $4.6
million, compared to $7.1 million in the year-ago quarter. At
TRS-RenTelco, the Company's electronic test equipment rental division,
rental revenues increased to $18.7 million from $3.4 million in the
third quarter of 2003, primarily due to TRS' contribution, resulting
in the division's pre-tax income of $4.5 million, compared to pre-tax
income of $1.2 million in 2003.
"These results reflect the strength of our California classroom
rental business, and in particular, strong classroom booking levels
experienced earlier this year for modernization and reconstruction
projects, in driving modular rental revenues to a record $18.4 million
for the quarter," stated Dennis Kakures, President & CEO. "This growth
reflects our success as the leader in providing interim facilities to
school districts throughout California. In addition, we recognized our
first rental revenues in Florida, where order activity continues to
outpace our pre-launch expectations. Although the impact of these
initial rental revenues is minimal, we are very enthusiastic about the
opportunity to create a meaningful educational rental business in
Florida."
Commenting on the Company's test equipment business, Kakures
added, "This quarter's results demonstrate the significance of the TRS
acquisition, with the electronics side of our business accounting for
just over 50% of rental revenues, compared to 18% a year ago. In just
our first full quarter of combined operations, we generated rental
billings of $18.7 million and pre-tax income of $4.5 million. Keep in
mind that our third quarter results only reflect a portion of the
overhead cost structure adjustments associated with our integration
efforts. We will complete the implementation of our remaining changes
by the end of November. Overall, we are very pleased with our
integration efforts and results over the past five months. We
completed our consolidation of U.S. operations into a single facility
at the DFW Airport, evaluated all operating groups and key programs,
and are moving to implement plans on how we can most effectively and
cost efficiently market to our target customer segments. Finally, the
TRS-RenTelco leadership team, comprised of managers from both
businesses, is now solidly in place and we couldn't be more pleased
with the quality and capability of these individuals to grow the
business."
Total revenues for the nine months ended September 30, 2004, were
$143.2 million, compared to $93.9 million in the same nine-month
period in 2003. Net income for the nine months ended September 30,
2004, was $21.2 million or $1.72 per share, compared to net income of
$15.7 million, or $1.28 per share, in the prior-year period.
THIRD QUARTER 2004 HIGHLIGHTS AS COMPARED TO THIRD QUARTER 2003
-- Rental revenues increased 89% to $37.1 million. Within rental
revenues, Mobile Modular increased 14% to $18.4 million,
driven by California educational rentals, and RenTelco
increased $15.3 million to $18.7 million primarily due to
TRS's contribution since June 2, 2004.
-- Sales revenues increased 163% to $28.2 million primarily due
to a $9.3 million sale project by Mobile Modular to a
California school district, and to a lesser extent higher
sales volumes at Enviroplex and TRS-RenTelco. In the third
quarter 2004, higher sales volume was somewhat offset by a
lower overall sale margin (20.3% compared to 32.1% in 2003)
associated with a higher mix of new equipment sold during the
third quarter of 2004, resulting in a gross profit increase of
$2.3 million. Sales revenues and margins can fluctuate from
quarter to quarter depending on customer requirements and
funding.
-- Depreciation of rental equipment increased 259% to $11.6
million, primarily due to the purchase of TRS rental assets
valued at $107.6 million on June 2, 2004.
-- Operating cash flow increased 48% to $20.4 million, primarily
due to higher revenues and net income.
-- Debt decreased $5.5 million during the quarter to $163.0
million with the Company's total liabilities to equity ratio
decreasing from 2.08 to 1 as of June 30, 2004, to 2.05 to 1 as
of September 30, 2004. At September 30, 2004, the Company,
under existing bank lines of credit, had capacity to borrow up
to an additional $32.0 million.
-- Dividend rate increased to $0.22 per share for the third
quarter 2004. On an annualized basis, this dividend represents
a 2.2% yield on the November 3, 2004, close price of $39.79.
We suggest that this 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 expects its 2004 full-year earnings per share guidance
to be in a range of $2.30 to $2.40 per diluted share. Such a
forward-looking statement reflects McGrath RentCorp's expectations as
of November 4, 2004. Actual 2004 full-year earnings per share results
may be materially affected by many factors, as outlined in the
"forward-looking statements" paragraph at the end of this press
release.
About McGrath RentCorp
Founded in 1979, the Company, under the trade name Mobile Modular
Management Corporation, rents and sells modular buildings to fulfill
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 TRS-RenTelco division rents and sells electronic
test equipment and is one of the leading providers of general purpose
and communications test equipment in North America.
CONFERENCE CALL NOTE: As previously announced in its press release
of October 7, 2004, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on November 4, 2004 to
discuss the third quarter 2004 results. To participate in the
teleconference, dial 1-800-218-0204 (international callers dial
1-303-275-2170). 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 1-303-590-3000 (outside the U.S.). The pass code for
the call replay is 11010858.
This press release contains statements, which constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to a number
of risks and uncertainties. These statements appear in a number of
places. Such statements can be identified by the use of
forward-looking terminology such as "believes", "expects", "may",
"estimates", "will", "should", "plans" or "anticipates" or the
negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. These include, our beliefs
that school district modernization and reconstruction projects will
continue to drive the growth of our educational rentals in California,
our expectation regarding the opportunity for a meaningful educational
rental business in Florida, our expectations regarding the timing of
the implementation of the integration efforts relating to the TRS
acquisition, including the related expense reductions and cost
savings, our annualized dividend yield, and our guidance on per share
range for 2004 full-year earnings. 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. 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 Nine Months Ended
September 30, September 30,
------------------- -----------------
2004 2003 2004 2003
--------- --------- --------- ---------
REVENUES
Rental $37,113 $19,592 $82,696 $56,252
Rental Related Services 6,901 4,350 17,267 11,554
--------- --------- --------- ---------
Rental Operations 44,014 23,942 99,963 67,806
Sales 28,208 10,719 42,489 25,496
Other 318 194 756 598
--------- --------- --------- ---------
Total Revenues 72,540 34,855 143,208 93,900
--------- --------- -------- ---------
COSTS AND EXPENSES
Direct Costs of Rental
Operations
Depreciation of Rental
Equipment 11,589 3,226 20,725 9,468
Rental Related Services 3,981 2,501 10,246 6,874
Other 7,465 5,323 17,214 14,544
--------- --------- -------- ---------
Total Direct Costs of
Rental Operations 23,035 11,050 48,185 30,866
Costs of Sales 22,496 7,284 32,729 17,830
--------- --------- -------- ---------
Total Costs 45,531 18,334 80,914 48,716
--------- --------- -------- ---------
Gross Margin 27,009 16,521 62,294 45,184
Selling and Administrative 9,641 5,623 23,294 16,873
--------- --------- -------- ---------
Income from Operations 17,368 10,898 39,000 28,311
Interest 1,576 647 3,524 2,085
--------- --------- -------- ---------
Income Before Provision for
Income Taxes and Minority
Interest in Income of
Subsidiary 15,792 10,251 35,476 26,226
Provision for Income Taxes 6,301 4,090 14,155 10,464
--------- --------- --------- ---------
Income Before Minority
Interest in Income of
Subsidiary 9,491 6,161 21,321 15,762
Minority Interest in Income
of Subsidiary 111 95 82 89
--------- --------- --------- ---------
Net Income $9,380 $6,066 $21,239 $15,673
========= ========= ========= =========
Earnings Per Share:
Basic $0.77 $0.50 $1.75 $1.29
Diluted $0.76 $0.50 $1.72 $1.28
Shares Used in Per Share
Calculation:
Basic 12,177 12,080 12,152 12,127
Diluted 12,421 12,242 12,358 12,254
Sept. 30, Dec. 31,
BALANCE SHEET DATA 2004 2003
--------- ---------
Rental Equipment, net $355,860 $232,046
Total Assets 483,735 323,858
Notes Payable 162,999 47,266
Shareholders' Equity 158,727 143,978
SEGMENT DATA
(UNAUDITED) Modulars Electronics Enviroplex Consolidated
- ------------------ ------------ ------------ ------------ ------------
Three Months Ended
September 30,
- ------------------
2004
Rental Revenues $18,416 $18,697 $-- $37,113
Rental Related
Services Revenues 6,264 637 -- 6,901
Sales and Other
Revenues 14,893 7,464 6,169 28,526
Total Revenues 39,573 26,798 6,169 72,540
Depreciation of
Rental Equipment 2,152 9,437 -- 11,589
Interest Expense
(Income)
Allocation 1,094 518 (36) 1,576
Income Before
Provision for
Income Taxes and
Minority Interest
in Income of
Subsidiary 10,528 4,509 755 15,792
Rental Equipment
Acquisitions 10,641 11,854 -- 22,495
Accounts
Receivable, net
(period end) 38,910 20,816 3,013 62,739
Rental Equipment,
at cost (period
end) 330,818 146,938 -- 477,756
Rental Equipment,
net (period end) 238,659 117,201 -- 355,860
Utilization (period
end) (1) 86.3% 65.2%
Average Utilization
(1) 86.3% 65.0%
2003
Rental Revenues $16,163 $3,429 $-- $19,592
Rental Related
Services Revenues 4,199 151 -- 4,350
Sales and Other
Revenues 5,917 2,009 2,987 10,913
Total Revenues 26,279 5,589 2,987 34,855
Depreciation of
Rental Equipment 1,883 1,343 -- 3,226
Interest Expense
(Income)
Allocation 603 80 (36) 647
Income Before
Provision for
Income Taxes and
Minority Interest
in Income of
Subsidiary 8,395 1,212 644 10,251
Rental Equipment
Acquisitions 12,237 1,870 -- 14,107
Accounts
Receivable, net
(period end) 33,286 3,943 5,161 42,390
Rental Equipment,
at cost (period
end) 303,021 36,509 -- 339,530
Rental Equipment,
net (period end) 214,374 18,069 -- 232,443
Utilization (period
end) (1) 85.8% 48.6%
Average Utilization
(1) 85.1% 47.1%
- ----------------------------------------------------------------------
SEGMENT DATA
(UNAUDITED) Modulars Electronics Enviroplex Consolidated
- ------------------ ------------ ------------ ------------ ------------
Nine Months Ended
September 30,
- ------------------
2004
Rental Revenues $52,314 $30,382 $-- $82,696
Rental Related
Services Revenues 16,239 1,028 -- 17,267
Sales and Other
Revenues 22,381 13,015 7,849 43,245
Total Revenues 90,934 44,425 7,849 143,208
Depreciation of
Rental Equipment 6,201 14,524 -- 20,725
Interest Expense
(Income)
Allocation 2,802 834 (112) 3,524
Income Before
Provision for
Income Taxes and
Minority Interest
in Income of
Subsidiary 28,089 6,831 556 35,476
Rental Equipment
Acquisitions 33,220 124,599 -- 157,819
Accounts
Receivable, net
(period end) 38,910 20,816 3,013 62,739
Rental Equipment,
at cost (period
end) 330,818 146,938 -- 477,756
Rental Equipment,
net (period end) 238,659 117,201 -- 355,860
Utilization (period
end) (1) 86.3% 65.2%
Average Utilization
(1) 85.4% 60.6%
2003
Rental Revenues $47,073 $9,179 $-- $56,252
Rental Related
Services Revenues 11,152 402 -- 11,554
Sales and Other
Revenues 13,253 5,729 7,112 26,094
Total Revenues 71,478 15,310 7,112 93,900
Depreciation of
Rental Equipment 5,405 4,063 -- 9,468
Interest Expense
(Income)
Allocation 1,948 272 (135) 2,085
Income Before
Provision for
Income Taxes and
Minority Interest
in Income of
Subsidiary 23,397 2,233 596 26,226
Rental Equipment
Acquisitions 23,017 4,053 -- 27,070
Accounts
Receivable, net
(period end) 33,286 3,943 5,161 42,390
Rental Equipment,
at cost (period
end) 303,021 36,509 -- 339,530
Rental Equipment,
net (period end) 214,374 18,069 -- 232,443
Utilization (period
end) (1) 85.8% 48.6%
Average Utilization
(1) 84.0% 45.2%
- ----------------------------------------------------------------------
(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