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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): May 5, 2005
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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
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(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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Item 2.02 Results of Operations and Financial Condition.
On May 5, 2005, McGrath RentCorp (the "Company") announced via press
release the Company's results for its first quarter ended March 31, 2005. 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
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99.1 Press Release of McGrath RentCorp, dated May 5, 2005.
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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, 2005 By: /s/ Thomas J. Sauer
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Thomas J. Sauer
Vice President and Chief Financial
Officer
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Exhibit 99.1
McGrath RentCorp Announces First
Quarter Results; Q1 2005 EPS Increases 26% to $0.29; Company
Reconfirms 2005 EPS Guidance Range of $1.45 to $1.55
LIVERMORE, Calif.--(BUSINESS WIRE)--May 5, 2005--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, 2005, of $52.9 million, compared to $29.9
million in first quarter 2004. The Company reported net income of $7.2
million, or $0.29 per share, compared to $5.7 million, or $0.23 per
share in first quarter 2004. During the first quarter of 2005, rental
revenues increased 80% to $36.0 million largely attributable to the
Company's TRS-RenTelco division. McGrath purchased substantially all
of the general purpose and communications test equipment assets of
Dallas-based TRS, a division of CIT Group Inc. (NYSE:CIT), on June 2,
2004. The Company's results for the first quarter 2005 include the
results of TRS as part of the Company's TRS-RenTelco division.
All share and per-share calculations in this press release reflect
the previously announced 2-for-1 stock split, which took effect on
March 25, 2005 and resulted in a proportional increase in the number
of common shares outstanding.
For the first quarter of 2005, the Company's Mobile Modular
division experienced increased rental revenues of 13% over the first
quarter of 2004 on continued strength in the educational market,
contributing to a 10% increase of pre-tax income to $9.3 million. For
TRS-RenTelco, rental revenues increased to $16.9 million from $3.2
million a year ago as a result of the TRS acquisition, contributing
$1.9 million in pre-tax earnings.
"Our 26% increase in first quarter EPS for 2005 over the same
period last year reflects the impact of the TRS acquisition as well as
the recurring rental stream from the increase in new classroom orders
going on rent in the later half of 2004," stated Dennis Kakures,
President & CEO.
"This was our highest first quarter pre-tax income ever for our
modular division, with gross margin on rents increasing approximately
15% over first quarter 2004. We continue to benefit from our focus on
educational rentals in the geographic markets we serve. During the
first quarter of 2005, our Florida modular initiative completed its
first year of operations and produced favorable margins and
profitability that were ahead of our expectations. Based on our
results to date, we continue to be enthusiastic about the prospects
for developing a meaningful educational rental business in Florida.
"Our test equipment business, TRS-RenTelco, experienced slower
business activity levels in the first quarter 2005, with rental
revenues declining approximately 9% sequentially from fourth quarter
2004. From all indications, it appears that the test equipment
industry as a whole had a challenging first quarter. However, we
experienced a favorable increase in new rental bookings for April as
we began seeing more projects coming online from our first quarter
quoting activity as well as from new opportunities. In 2005, we are
continuing our focus on lowering our depreciation expense as a
percentage of rental revenues by targeting underutilized equipment for
sale. We are also working hard at refining and executing on our
business development strategies with a high focus on the deployment of
the most effective marketing mediums to reach each of our target
customer bases. If we are successful in these efforts, we believe we
will see increasing profitability for TRS-RenTelco in 2005."
FIRST QUARTER 2005 HIGHLIGHTS (AS COMPARED TO FIRST QUARTER 2004)
-- Rental revenues increased 80% to $36.0 million. Within rental
revenues, Mobile Modular increased 13% to $19.0 million, and
TRS-RenTelco increased 425% to $16.9 million, primarily due to
TRS's contribution.
-- Sales revenues increased 116% to $11.0 million resulting
primarily from increased sales volume by TRS-RenTelco. Higher
sales volume combined with a lower gross margin percentage,
31.1% in 2005 compared to 38.0% in 2004, resulted in a gross
profit increase of $1.5 million. Sales revenues can fluctuate
from quarter to quarter depending on customer requirements,
equipment availability and funding.
-- Depreciation of rental equipment increased 255% to $11.6
million primarily due to the purchase of TRS rental assets.
-- Operating cash flow increased 140% to $18.8 million, primarily
due to the increase in operating income before depreciation,
primarily as a result of the acquired TRS operations.
-- Debt increased $4.8 million during the quarter to $156.7
million, with the Company's total liabilities to equity ratio
decreasing from 1.84 to 1 at December 31, 2004 to 1.82 to 1 as
of March 31, 2005. At March 31, 2005, the Company, under
existing bank lines of credit, had capacity to borrow up to an
additional $38.3 million.
-- Dividend rate increased 27% to $0.14 per share for the first
quarter 2005 as compared to $0.11 per share for the first
quarter of 2004. On an annualized basis, this dividend
represents a 2.5% yield on the May 4, 2005 close price of
$22.65.
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 reconfirms its 2005 full-year earnings per share to be
in a range of $1.45 to $1.55 per diluted share. Such a forward-looking
statement reflects McGrath RentCorp's expectations as of May 5, 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
customers' 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. 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 April 13, 2005, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on May 5, 2005 to
discuss the first quarter 2004 results. To participate in the
teleconference, dial 1-800-240-4186 (international callers dial
1-303-262-2175). 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 11028069.
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
expectations regarding the continued benefits from our focus on
educational rentals in the geographical markets we serve, our
prospects for developing a meaningful educational rental business in
Florida, our belief that our business development strategies and our
efforts to lower depreciation as a percentage of rents will increase
profitability for TRS-RenTelco in 2005, 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, selected 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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2005 2004
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REVENUES
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Rental $35,959 $20,023
Rental Related Services 5,275 4,544
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Rental Operations 41,234 24,567
Sales 10,972 5,083
Other 732 229
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Total Revenues 52,938 29,879
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COSTS AND EXPENSES
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Direct Costs of Rental Operations
Depreciation of Rental Equipment 11,565 3,261
Rental Related Services 3,571 2,675
Other 7,245 4,644
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Total Direct Costs of Rental
Operations 22,381 10,580
Costs of Sales 7,564 3,151
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Total Costs 29,945 13,731
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Gross Profit 22,993 16,148
Selling and Administrative 9,561 6,057
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Income from Operations 13,432 10,091
Interest 1,719 540
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Income Before Provision for Income
Taxes 11,713 9,551
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Provision for Income Taxes 4,451 3,811
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Income Before Minority Interest 7,262 5,740
Minority Interest in Income of
Subsidiary 85 2
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Net Income $7,177 $5,738
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Earnings Per Share:
Basic $0.29 $0.24
Diluted $0.29 $0.23
Shares Used in Per Share Calculation:
Basic 24,572 24,252
Diluted 25,147 24,606
March 31, December 31,
BALANCE SHEET DATA 2005 2004
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Rental Equipment, net $370,856 $357,788
Total Assets 484,515 474,280
Notes Payable 156,676 151,888
Shareholders' Equity 171,577 168,888
SEGMENT DATA (Unaudited)
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(in thousands) Modulars Electronics Enviroplex Consolidated
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Three Months Ended
March 31,
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2005
Rental Revenues $19,026 $16,933 $-- $35,959
Rental Related Services
Revenues 4,968 307 -- 5,275
Sales and Other Revenues 2,735 6,677 2,292 11,704
Total Revenues 26,729 23,917 2,292 52,938
Depreciation of Rental
Equipment 2,164 9,401 -- 11,565
Gross Profit 15,109 6,925 959 22,993
Interest Expense
(Income) Allocation 1,212 572 (65) 1,719
Income before Provision
for Income Taxes 9,293 1,936 484 11,713
Rental Equipment
Acquisitions 21,755 7,928 -- 29,683
Accounts Receivable, net
(period end) 24,260 21,383 5,469 51,111
Rental Equipment, at
cost (period end) 359,820 150,389 -- 510,209
Rental Equipment, net
book value (period end) 264,600 106,256 -- 370,856
Utilization (period
end)(1) 85.3% 61.6%
Average Utilization(1) 85.7% 61.6%
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
Gross Profit 13,270 2,366 512 16,148
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%
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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