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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 24, 2005
-------------------------
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)
-------------------------
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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1
Item 2.02 Results of Operations and Financial Condition.
On February 24, 2005, McGrath RentCorp (the "Company") announced via
press release the Company's results for its fourth quarter ended December 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 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 February 24, 2005.
2
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: February 24, 2005 By: /s/ Thomas J. Sauer
----------------------------------------
Thomas J. Sauer
Vice President and
Chief Financial Officer
3
Exhibit 99.1
McGrath RentCorp Announces Results for Fourth Quarter and Year-end; EPS
Increases 31% for the Year; Company Announces 2-for-1 Stock Split and 27%
Dividend Increase
LIVERMORE, Calif.--(BUSINESS WIRE)--Feb. 24, 2005--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 December 31, 2004, of $59.3 million, compared to $37.1 million
in the fourth quarter of 2003. The Company reported net income of $8.8
million, or $0.70 per diluted share, compared to $7.0 million, or
$0.57 per diluted share, in the fourth of quarter 2003. During the
quarter, rental revenues increased 84%, largely attributable to the
Company's TRS-RenTelco division. 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 fourth quarter and for the twelve months of 2004
include the results of TRS since that date.
Total revenues for the twelve months ended December 31, 2004, were
$202.5 million, compared to $131.0 million in the same twelve-month
period in 2003. Net income for the twelve months ended December 31,
2004, increased to $30.0 million, or $2.42 per diluted share, a 31%
increase, compared to net income of $22.7 million, or $1.85 per
diluted share, in the prior year period.
The Company also announced that the board of directors approved a
2-for-1 stock split and a proportional increase in the number of
common shares outstanding from 12,284,749 to 24,569,498. Each
shareholder of record as of March 11, 2005 will receive one additional
share for each outstanding share held on the record date. Trading will
begin on a split-adjusted basis on March 25, 2005. The board of
directors also declared a post-split cash dividend of $0.14 per common
share for the quarter ended March 31, 2005, an increase of 27%. On an
annualized basis, this dividend represents a 2.7% yield based on the
February 23, 2005, closing price. The cash dividend will be payable on
April 29, 2005, to all shareholders of record on April 15, 2005. The
2004 results disclosed in this release are not adjusted to reflect the
2-for-1 stock split unless described as such.
In the fourth quarter of 2004, Mobile Modular had record rental
revenues of $19.1 million that contributed to an 11% increase in total
modular revenues to $30.7 million. Mobile Modular's fourth quarter
pre-tax income decreased 2% to $9.8 million from $10.0 million a year
earlier predominantly due to increases in maintenance expenses
associated with the preparation of unutilized equipment targeted for
potential rental opportunities in 2005, as well as higher allocated
overhead and interest expenses. Fourth quarter rental revenues at
TRS-RenTelco increased to $18.5 million from $3.6 million in the
fourth quarter of 2003, primarily from the TRS contribution, which
resulted in divisional pre-tax income of $3.9 million, compared to
pre-tax income of $1.1 million in the fourth quarter of 2003. Also, as
a result of the acquired TRS operations, the fourth quarter effective
tax rate was reduced from 39.9% to 35.0% due to recording a cumulative
true-up adjustment for the state income tax accrual rate, increasing
net income by $0.7 million or $0.05 per diluted share.
"These results demonstrate the ongoing strength of Mobile
Modular's California classroom rental business, and in particular,
strong classroom booking levels experienced in early 2004 for
modernization and reconstruction projects," stated Dennis Kakures,
President & CEO. "The $19.1 million in rental revenues was our highest
quarter ever for our modular rental division. This growth reflects our
success as the leader in providing interim facilities to school
districts throughout California. In addition, we continue to be
pleased with the order activity we are generating in the Florida
market, which we entered less than a year ago. Based upon our results
to date, we are enthusiastic about the prospects for developing a
meaningful educational rental business in Florida.
"Our test equipment rental business turned in a solid quarter as
we continued to work on key integration projects. With the initial
steps of integrating TRS-RenTelco in place, we are turning our full
attention to optimizing our day-to-day execution. We are excited about
the potential our industry leadership position, operating
efficiencies, and talented work force affords TRS-RenTelco in
positioning it for earnings growth in the years ahead.
"The 27% increase in the first quarter 2005 dividend is a one-time
step up in the dividend pay out related to the TRS acquisition and
reflects the increased amount of free cash flow that TRS is providing.
Looking forward, we expect any future dividend increases beyond 2005
to generally reflect increases in our underlying growth rates. In our
view, we create value for shareholders employing free cash flow and
available debt capacity on strategic growth opportunities that we
believe may result in increased earnings, and distributing excess cash
flow in the form of dividends."
Fourth Quarter 2004 Highlights as Compared to Fourth Quarter 2003
-- Rental revenues increased 84% to $37.7 million. Within rental
revenues, Mobile Modular increased 13% to $19.1 million,
driven by California educational rentals; and RenTelco
increased $15.0 million to $18.5 million, primarily due to
TRS's contribution since June 2, 2004.
-- Sales revenues increased 30% to $14.7 million, primarily due
to increased sales volume of TRS-RenTelco, offset by lower
sales volumes at Mobile Modular and Enviroplex, resulting in a
gross profit increase of $1.1 million. Sales revenues and
margins can fluctuate from quarter to quarter depending on
customer requirements and funding.
-- Depreciation of rental equipment increased 257% to $11.7
million, primarily due to the purchase of TRS rental assets.
-- Operating cash flow increased 67% to $31.0 million, primarily
due to the revenue and net income contribution of the acquired
TRS operations.
-- Debt decreased $11.1 million during the quarter to $151.9
million with the Company's total liabilities to equity ratio
decreasing from 2.05 to 1 as of September 30, 2004, to 1.85 to
1 as of December 31, 2004. At December 31, 2004, the Company,
under existing bank lines of credit, had capacity to borrow up
to an additional $43.1 million.
-- Dividends increased to $0.22 per share for the fourth quarter
2004 as compared to $0.20 per share for the fourth quarter
2003.
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
Giving effect to the announced 2-for-1 stock split, the Company
expects its 2005 full-year earnings per share guidance to be in a
range of $1.45 to $1.55 per diluted share. This guidance range
excludes the impact of the third quarter of 2005 adoption of Statement
of Financial Standards No. 123R, "Share Based Payment", which requires
the expensing of stock options at fair value effective for quarters
beginning after June 15, 2005. Assuming the effective date for these
rules is not extended, the Company anticipates application on a
retrospective basis and expects the impact to reduce 2005 diluted
earnings per share by approximately $0.05 per share. Such a
forward-looking statement reflects McGrath RentCorp's expectations as
of February 24, 2005. Actual 2005 full-year earnings per share 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, 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 January 27, 2005, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 24, 2005
to discuss the fourth quarter 2005 results. To participate in the
teleconference, dial 1-800-218-0204 (international callers dial
1-303-262-2130). 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 11019909.
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
expectation regarding the opportunity for a meaningful educational
rental business in Florida, our expectation regarding our ability to
grow the TRS-RenTelco business in 2005 and its earnings in the years
ahead, our expectation regarding the step-up in our dividend level due
to the increased amount of free cash flow that TRS is providing and
our expectations regarding our dividend levels in 2005 and beyond
2005, our future dividend increases generally, our belief that
strategic growth opportunities may result in increased earnings, our
annualized dividend yield, and our 2005 full-year earnings per share
guidance. 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 Twelve Months Ended
December 31, December 31,
------------------- -------------------
2004 2003 2004 2003
- ---------------------------- -------- -------- -------- -------
REVENUES
- --------
Rental $ 37,662 $ 20,426 $120,358 $76,678
Rental Related Services 6,640 5,192 23,907 16,746
-------- -------- -------- -------
Rental Operations 44,302 25,618 144,265 93,424
Sales 14,673 11,249 57,162 36,745
Other 337 204 1,093 802
-------- -------- -------- -------
Total Revenues 59,312 37,071 202,520 130,971
-------- -------- -------- -------
COSTS AND EXPENSES
- ------------------
Direct Costs of Rental
Operations
Depreciation of Rental
Equipment 11,701 3,277 32,426 12,745
Rental Related Services 4,926 3,482 15,172 10,356
Other 6,793 4,079 24,007 18,623
-------- -------- -------- -------
Total Direct Costs
of Rental
Operations 23,420 10,838 71,605 41,724
Costs of Sales 10,405 8,083 43,134 25,913
-------- -------- -------- -------
Total Costs 33,825 18,921 114,739 67,637
-------- -------- -------- -------
Gross Margin 25,487 18,150 87,781 63,334
Selling and Administrative 10,411 5,753 33,705 22,626
-------- -------- -------- -------
Income from Operations 15,076 12,397 54,076 40,708
Interest 1,664 583 5,188 2,668
-------- -------- -------- -------
Income Before Provision
for Income Taxes and
Minority Interest in
Income of Subsidiary 13,412 11,814 48,888 38,040
Provision for Income Taxes 4,688 4,714 18,843 15,178
-------- -------- -------- -------
Income Before Minority
Interest in Income of
Subsidiary 8,724 7,100 30,045 22,862
Minority Interest in
Income of Subsidiary (34) 81 48 170
-------- -------- -------- -------
Net Income $ 8,758 $ 7,019 $ 29,997 $22,692
======== ======== ======== =======
Earnings Per Share:
Basic $ 0.72 $ 0.58 $ 2.46 $ 1.87
Diluted $ 0.70 $ 0.57 $ 2.42 $ 1.85
Shares Used in Per Share
Calculation:
Basic 12,232 12,119 12,172 12,125
Diluted 12,510 12,274 12,402 12,259
December December
31, 31,
BALANCE SHEET DATA 2004 2003
- ------------------ -------- --------
Rental Equipment, net $357,788 $232,046
Total Assets 474,280 323,858
Notes Payable 151,888 47,266
Shareholders' Equity 166,888 143,978
- ----------------------------------------------------------------------
SEGMENT DATA Modulars Electronics Enviroplex Consolidated
------------- -------- ----------- ---------- ------------
Three Months Ended
December 31,
-------------------
2004
Rental Revenues $ 19,146 $ 18,516 $ -- $ 37,662
Rental Related Services
Revenues 5,903 737 -- 6,640
Sales and Other Revenues 5,680 7,925 1,405 15,010
Total Revenues 30,729 27,178 1,405 59,312
Depreciation of Rental
Equipment 2,173 9,528 -- 11,701
Gross Margin 15,527 9,643 317 25,487
Interest Expense
(Income) Allocation 1,145 578 (59) 1,664
Income Before Provision
for Income Taxes and
Minority
Interest in Income
of Subsidiary 9,761 3,887 (236) 13,412
Rental Equipment
Acquisitions 11,341 7,898 -- 19,239
Accounts Receivable, net
(period end) 28,237 22,558 3,051 53,846
Rental Equipment, at
cost (period end) 339,537 149,437 -- 488,974
Rental Equipment, net
(period end) 245,924 111,864 -- 357,788
Utilization
(period end)(1) 86.1% 61.6%
Average Utilization (1) 86.3% 63.9%
2003
Rental Revenues $ 16,875 $ 3,551 $ -- $ 20,426
Rental Related Services
Revenues 5,051 141 -- 5,192
Sales and Other Revenues 5,720 1,838 3,895 11,453
Total Revenues 27,646 5,530 3,895 37,071
Depreciation of Rental
Equipment 1,972 1,305 -- 3,277
Gross Margin 14,702 2,318 1,130 18,150
Interest Expense
(Income) Allocation 557 71 (45) 583
Income Before Provision
for Income Taxes and
Minority
Interest in Income
of Subsidiary 9,960 1,057 797 11,814
Rental Equipment
Acquisitions 4,623 737 -- 5,360
Accounts Receivable, net
(period end) 26,616 3,664 1,919 32,199
Rental Equipment, at
cost (period end) 304,905 34,448 -- 339,353
Rental Equipment, net
(period end) 215,589 16,457 -- 232,046
Utilization
(period end)(1) 84.6% 45.2%
Average Utilization (1) 85.1% 46.6%
- ----------------------------------------------------------------------
SEGMENT DATA Modulars Electronics Enviroplex Consolidated
------------- -------- ----------- ---------- ------------
Twelve Months Ended
December 31,
-------------------
2004
Rental Revenues $ 71,460 $ 48,898 $ -- $120,358
Rental Related Services
Revenues 22,142 1,765 -- 23,907
Sales and Other Revenues 28,061 20,940 9,254 58,255
Total Revenues 121,663 71,603 9,254 202,520
Depreciation of Rental
Equipment 8,374 24,052 -- 32,426
Gross Margin 59,812 25,986 1,983 87,781
Interest Expense
(Income) Allocation 3,947 1,412 (171) 5,188
Income Before Provision
for Income Taxes and
Minority
Interest in Income
of Subsidiary 37,850 10,718 320 48,888
Rental Equipment
Acquisitions 44,679 132,379 -- 177,058
Accounts Receivable, net
(period end) 28,237 22,558 3,051 53,846
Rental Equipment, at
cost (period end) 339,537 149,437 -- 488,974
Rental Equipment, net
(period end) 245,924 111,864 -- 357,788
Utilization
(period end)(1) 86.1% 61.6%
Average Utilization (1) 85.6% 61.7%
2003
Rental Revenues $ 63,948 $ 12,730 $ -- $ 76,678
Rental Related Services
Revenues 16,203 543 -- 16,746
Sales and Other Revenues 18,973 7,567 11,007 37,547
Total Revenues 99,124 20,840 11,007 130,971
Depreciation of Rental
Equipment 7,377 5,368 -- 12,745
Gross Margin 52,007 8,071 3,255 63,333
Interest Expense
(Income) Allocation 2,505 343 (180) 2,668
Income Before Provision
for Income Taxes and
Minority
Interest in Income
of Subsidiary 33,357 3,290 1,393 38,040
Rental Equipment
Acquisitions 27,637 4,790 -- 32,427
Accounts Receivable, net
(period end) 26,616 3,664 1,919 32,199
Rental Equipment, at
cost (period end) 304,905 34,448 -- 339,353
Rental Equipment, net
(period end) 215,589 16,457 -- 232,046
Utilization
(period end)(1) 84.6% 45.2%
Average Utilization (1) 84.2% 45.3%
- ----------------------------------------------------------------------
(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