View:
================================================================================
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): August 4, 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))
================================================================================
Item 2.02 Results of Operations and Financial Condition.
On August 4, 2005, McGrath RentCorp (the "Company") announced via press
release the Company's results for its second quarter ended June 30, 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
----------- -----------
99.1 Press Release of McGrath RentCorp, dated August 4, 2005.
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: August 4, 2005 By: /s/ Thomas J. Sauer
--------------------------------------
Thomas J. Sauer
Vice President and Chief Financial
Officer
Exhibit 99.1
McGrath RentCorp Announces Second Quarter Results;
Q2 2005 EPS Increases 52% to $0.38
LIVERMORE, Calif.--(BUSINESS WIRE)--Aug. 4, 2005--McGrath RentCorp
(Nasdaq:MGRC) today announced revenues for the quarter ended June 30,
2005, of $63.9 million, compared to $40.8 million in second quarter
2004. The Company reported net income of $9.5 million, or $0.38 per
share, compared to $6.1 million, or $0.25 per share in the second
quarter 2004. During the second quarter of 2005, rental revenues
increased 44% to $36.8 million, with the Company's TRS-RenTelco
division increasing $8.7 million to $17.2 million and the Mobile
Modular division increasing $2.5 million to $19.6 million. 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 2004 and
2005 discussed in this press release include the results of TRS as
part of the Company's TRS-RenTelco division since that date.
For the second quarter of 2005, Mobile Modular's rental revenues
increased 15% over the second quarter 2004 on continued strength in
the educational market, contributing pre-tax income of $10.5 million,
a 15% increase over the prior year's second quarter. For TRS-RenTelco,
second quarter 2005 rental revenues increased to $17.2 million from
$8.5 million, gross profit on sales increased to $2.2 million from
$0.7 million a year ago, and pre-tax earnings in the second quarter
2005 were $4.7 million compared to $1.2 million in the second quarter
2004, when TRS was included in results only from June 2, 2004, through
the end of that month. Looking forward, TRS-RenTelco's quarter over
quarter comparability will become more meaningful as both the then
current and prior year's quarters' results will include the TRS assets
and operations for a full three-month period.
"Our 52% increase in second quarter EPS for 2005 over the same
period last year primarily reflects the June 2004 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 second quarter pre-tax income ever for our
modular division, with gross profit on rents increasing approximately
12% over second quarter 2004 to $12.2 million. We continue to benefit
from our focus on educational rentals in the geographic markets we
serve. In California, we have benefited from the need to modernize
schools and the bond measure funding available to do so. Of the $2.3
billion in the March 2004 school bond measure for modernization
projects, approximately half remains ($1.2 billion) which either has
not been apportioned or released to school districts to date. At this
time, it appears unlikely that there will be another statewide
facilities bond measure in 2006 to further support the modernization
and reconstruction of public schools and we anticipate the remaining
bond funds will support the apportionment of monies necessary for new
projects being applied for through 2006. Additionally, we are in the
process of assessing future modernization and reconstruction rental
opportunities by seeking a better understanding of the monies
apportioned or released to date from past state and local bond
measures and the status of related projects.
"As for our Florida operations, the market continues to provide us
with very favorable rental classroom growth opportunities. I am very
pleased to date with our plan execution in establishing ourselves in
the Florida market and in growing our business levels. We anticipate
Florida to become an increasingly significant contributor to earnings
in the years ahead.
"For our test equipment business, sequential pre-tax income
increased by 144% over first quarter 2005 to $4.7 million and
represents our most profitable quarter to date for the newly combined
TRS-RenTelco business. Although top-line rental revenues were only
modestly higher, lower depreciation expense, primarily due to a
determination to extend the useful lives on two models of test
equipment, combined with the selling of underutilized equipment and
lower test equipment repair and calibration costs resulted in gross
margin on rents percentage improvement from 28% to 37%. Finally, our
focus on selling underutilized equipment resulted in higher profit on
sales."
SECOND QUARTER 2005 HIGHLIGHTS (AS COMPARED TO SECOND QUARTER
2004)
-- Rental revenues increased 44% to $36.8 million. Within rental
revenues, Mobile Modular increased 15% to $19.6 million, and
TRS-RenTelco increased 104% to $17.2 million, due to the
timing of the TRS acquisition in June 2004.
-- Sales revenues increased 119% to $20.1 million, resulting
primarily from increased sales volume by TRS-RenTelco and
Mobile Modular. Higher sales volume combined with a higher
gross margin percentage, 26.3% in 2005 compared to 23.0% in
2004, resulted in a gross profit increase of $3.2 million.
Sales revenues and related gross margins can fluctuate from
quarter to quarter depending on customer requirements,
equipment availability and funding.
-- Depreciation of rental equipment increased 83% to $10.8
million with Mobile Modular increasing 9% to $2.2 million and
TRS-RenTelco increasing 222% to $8.5 million due to the
acquisition of TRS rental assets. On a sequential basis,
TRS-RenTelco's depreciation expense decreased $0.9 million
from the first quarter 2005 resulting from the determination
to extend the useful lives on two models of test equipment
($0.6 million), the sale of underutilized equipment ($0.4
million), and rental equipment becoming fully depreciated
($0.1 million), offset by new equipment purchases ($0.2
million).
-- Debt increased $9.3 million during the quarter to $166.0
million, with the Company's total liabilities to equity ratio
increasing from 1.82 to 1 at March 31, 2005 to 1.83 to 1 as of
June 30, 2005. On July 11, 2005, the Company amended its
existing lines of credit to increase the borrowing capacity
from $135.0 million to $195.0 million and extended the
expiration date one year to June 30, 2008, increasing its
capacity to borrow up to an additional $89.0 million.
-- Dividend rate increased 27% to $0.14 per share for the second
quarter 2005, as compared to $0.11 per share for the second
quarter of 2004. On an annualized basis, this dividend
represents a 2.2% yield on the August 3, 2005 close price of
$25.86.
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 August 4,
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 July 12, 2005, McGrath RentCorp will host a conference call at 5:00
p.m. Eastern Time (2:00 p.m. Pacific Time) on August 4, 2005 to
discuss the second quarter 2005 results. To participate in the
teleconference, dial 1-800-240-2430 (international callers dial
1-303-262-2137). 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 11034471.
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
anticipation that the remaining California bond funds will support the
apportionment of monies necessary for new projects being applied for
through 2006, our expectation of the Florida market continuing to
provide very favorable rental classroom growth opportunities, our
expectation for the growth of our business levels in the Florida
market generally and our Florida operations becoming an increasingly
significant contributor to earnings in the years ahead, 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 Six Months Ended
June 30, June 30,
-------- -------- -------- --------
2005 2004 2005 2004
-------- -------- -------- --------
REVENUES
- --------
Rental $36,801 $25,560 $72,760 $45,583
Rental Related Services 6,235 5,822 11,510 10,366
-------- -------- -------- --------
Rental Operations 43,036 31,382 84,270 55,949
Sales 20,135 9,198 31,107 14,281
Other 694 209 1,426 438
-------- -------- -------- --------
Total Revenues 63,865 40,789 116,803 70,668
------- --------- ------- -------
COSTS AND EXPENSES
- ----------------------------------
Direct Costs of Rental
Operations
Depreciation of Rental
Equipment 10,762 5,875 22,327 9,136
Rental Related Services 4,161 3,590 7,732 6,265
Other 7,479 5,105 14,724 9,749
-------- -------- -------- --------
Total Direct Costs of
Rental Operations 22,402 14,570 44,783 25,150
Costs of Sales 14,844 7,082 22,408 10,233
-------- -------- -------- --------
Total Costs 37,246 21,652 67,191 35,383
-------- -------- -------- --------
Gross Profit 26,619 19,137 49,612 35,285
Selling and Administrative 9,420 7,596 18,981 13,653
-------- -------- -------- --------
Income from Operations 17,199 11,541 30,631 21,632
Interest 1,912 1,408 3,631 1,948
-------- -------- -------- --------
Income Before Provision for
Income Taxes 15,287 10,133 27,000 19,684
Provision for Income Taxes 5,809 4,043 10,260 7,854
-------- -------- -------- --------
Income Before Minority
Interest 9,478 6,090 16,740 11,830
Minority Interest in Income
(Loss) of Subsidiary 12 (31) 97 (29)
-------- -------- -------- --------
Net Income $9,466 $6,121 $16,643 $11,859
======== ======== ======== ========
Earnings Per Share:
Basic $0.38 $0.25 $0.68 $0.49
Diluted $0.38 $0.25 $0.66 $0.48
Shares Used in Per Share
Calculation:
Basic 24,627 24,306 24,600 24,279
Diluted 25,224 24,742 25,177 24,669
June December
30, 31,
BALANCE SHEET DATA 2005 2004
-------- ---------
Rental Equipment, net $378,379 $357,788
Total Assets 504,191 474,280
Notes Payable 166,000 151,888
Shareholders' Equity 178,326 168,888
SEGMENT DATA (Unaudited)
(in thousands) Modulars Electronics Enviroplex Consolidated
-------- ----------- ---------- ------------
Three Months Ended June 30,
- ---------------------------
2005
Rental Revenues $19,586 $17,215 $ -- $36,801
Rental Related Services
Revenues 5,811 424 -- 6,235
Sales and Other Revenues 11,346 7,668 1,815 20,829
Total Revenues 36,743 25,307 1,815 63,865
Depreciation of Rental
Equipment 2,228 8,534 -- 10,762
Gross Profit 16,649 9,309 661 26,619
Interest Expense
(Income) Allocation 1,363 600 (51) 1,912
Income before Provision
for Income Taxes 10,493 4,717 77 15,287
Rental Equipment
Acquisitions 13,930 8,939 -- 22,869
Accounts Receivable, net
(period end) 37,451 19,514 4,927 61,892
Rental Equipment, at
cost (period end) 371,592 151,162 -- 522,754
Rental Equipment, net
book value (period end) 274,704 103,675 -- 378,379
Utilization (period
end)(1) 85.9% 66.5%
Average Utilization(1) 85.6% 64.3%
2004
Rental Revenues $17,101 $8,459 $ -- $25,560
Rental Related Services
Revenues 5,555 267 -- 5,822
Sales and Other Revenues 5,584 3,437 386 9,407
Total Revenues 28,240 12,163 386 40,789
Depreciation of Rental
Equipment 2,043 3,832 -- 5,875
Gross Profit 14,556 4,675 (94) 19,137
Interest Expense
(Income) Allocation 1,189 253 (34) 1,408
Income before Provision
for Income Taxes 9,130 1,217 (214) 10,133
Rental Equipment
Acquisitions 18,229 111,453 -- 129,682
Accounts Receivable, net
(period end) 28,065 18,548 3,381 49,994
Rental Equipment, at
cost (period end) 323,244 141,279 -- 464,523
Rental Equipment, net
book value (period end) 231,743 120,594 -- 352,337
Utilization (period
end)(1) 86.4% 66.1%
Average Utilization(1) 85.4% 59.5%
SEGMENT DATA (Unaudited)
(in thousands) Modulars Electronics Enviroplex Consolidated
-------- ----------- ---------- ------------
Six Months Ended June 30,
- -------------------------
2005
Rental Revenues $38,612 $34,148 $ -- $72,760
Rental Related Services
Revenues 10,779 731 -- 11,510
Sales and Other Revenues 14,081 14,345 4,107 32,533
Total Revenues 63,472 49,224 4,107 116,803
Depreciation of Rental
Equipment 4,392 17,935 -- 22,327
Gross Profit 31,758 16,234 1,620 49,612
Interest Expense
(Income) Allocation 2,575 1,172 (116) 3,631
Income before Provision
for Income Taxes 19,786 6,653 561 27,000
Rental Equipment
Acquisitions 35,682 16,867 -- 52,549
Accounts Receivable, net
(period end) 37,451 19,514 4,927 61,892
Rental Equipment, at
cost (period end) 371,592 151,162 -- 522,754
Rental Equipment, net
book value (period end) 274,704 103,675 -- 378,379
Utilization (period
end)(1) 85.9% 66.5%
Average Utilization(1) 85.7% 63.1%
2004
Rental Revenues $33,898 $11,685 $ -- $45,583
Rental Related Services
Revenues 9,975 391 -- 10,366
Sales and Other Revenues 7,488 5,551 1,680 14,719
Total Revenues 51,361 17,627 1,680 70,668
Depreciation of Rental
Equipment 4,049 5,087 -- 9,136
Gross Profit 27,826 7,041 418 35,285
Interest Expense
(Income) Allocation 1,708 316 (76) 1,948
Income before Provision
for Income Taxes 17,561 2,322 (199) 19,684
Rental Equipment
Acquisitions 22,579 112,745 -- 135,324
Accounts Receivable, net
(period end) 28,065 18,548 3,381 49,994
Rental Equipment, at
cost (period end) 323,244 141,279 -- 464,523
Rental Equipment, net
book value (period end) 231,743 120,594 -- 352,337
Utilization (period
end)(1) 86.4% 66.1%
Average Utilization(1) 85.0% 55.5%
(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