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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 3, 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
(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))
1
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Item 2.02 Results of Operations and Financial Condition.
On November 3, 2005, McGrath RentCorp (the "Company") announced via press
release the Company's results for its third quarter ended September 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
November 3, 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: November 3, 2005 By: /s/ Thomas J. Sauer
--------------------------------------
Thomas J. Sauer
Vice President and Chief Financial
Officer
3
Exhibit 99.1
McGrath RentCorp Announces Third Quarter Results; Q3 2005 EPS Increases 26% to
$0.48; Company Increases 2005 EPS Guidance Range to $1.57 to $1.62
LIVERMORE, Calif.--(BUSINESS WIRE)--Nov. 3, 2005--McGrath RentCorp
(NASDAQ:MGRC) today announced revenues for the quarter ended September
30, 2005, of $77.8 million, compared to $72.5 million in third quarter
2004. The Company reported net income of $12.1 million, or $0.48 per
share, compared to $9.4 million, or $0.38 per share in the third
quarter 2004.
For the third quarter of 2005, Mobile Modular's total revenues
increased 23% from $39.6 million to $48.7 million with both rental and
sales revenues improving on the continued strength in the educational
market. Sales revenues for the quarter included three large sale
projects totaling $11.7 million, of which $5.8 million were related to
damages caused by the recent hurricanes. The large sale projects
recognized in the quarter are of a similar nature as the single sale
project of $9.3 million recognized in third quarter 2004. The Company
views these types of large sale projects as unique opportunities and
generally would not expect sale projects of a similar size to occur on
a regular basis. Mobile Modular's significant increase in revenues led
to a 29% increase in its pre-tax income to $13.6 million. As of
September 30, 2005, Mobile Modular's backlog of sale projects related
to the recent hurricanes totaled $8.5 million and will be recognized
during the fourth quarter 2005. Looking forward, Mobile Modular
anticipates additional hurricane related rental and sale
opportunities, although the extent and duration remains uncertain. For
TRS-RenTelco, third quarter 2005 rental revenues decreased 2% to $18.4
million from $18.7 million, though, gross profit on rents increased to
$7.9 million from $7.2 million a year ago due to lower depreciation
expense, contributing to the quarter's pre-tax income increase to $5.1
million from $4.5 million.
"Our third quarter 2005 earnings reflect our first full
quarter-over-quarter comparison of TRS-RenTelco's results since the
merger in June 2004," stated Dennis Kakures, President and CEO. "The
EPS increase of 26% for the quarter demonstrates the impact of new
classroom rental and sale activity in 2005 and greater profitability
in our test equipment business.
"We continue to measure the strength of our modular business by
growth in both top-line rental revenues and gross profit on rents. We
believe these metrics provide the best gauge of the potential
horsepower of our modular economic engine going forward.
Quarter-over-quarter growth for rental revenues was 13% to $20.9
million and related gross profit grew 22% to $13.3 million, both of
which were records. We continue to benefit from the recurring rental
stream from educational facility rentals in the geographic markets we
serve. In California, we experienced higher than normal classroom
returns during the quarter as public school modernization projects
were completed and equipment was returned. We expect redeployment of
the great majority of these classrooms to occur over the next twelve
months. In Florida, business activity levels have continued very
favorably, as we support the needs of school districts in both
enrollment growth and the implementation of class size reduction.
Also, as a result of the recent hurricanes, we have and will continue
to respond to modular rental and sale opportunities in the Texas and
Southeastern markets.
"For our test equipment business, pre-tax income and gross profit
on rents reached their highest levels to date for the combined
TRS-RenTelco business. Although top-line rental revenues were down
slightly from a year ago, we continue to more effectively manage our
rental inventory by selling underutilized equipment, ending the
quarter with utilization of 70.9%, which lowered depreciation as a
percentage of rents and improved rental margin to 42.9%. We also
continue to invest in the latest technology test equipment to support
new rental opportunities and believe we have put in place the cost
structure and operating disciplines that will support our future
earnings growth."
THIRD QUARTER 2005 HIGHLIGHTS (AS COMPARED TO THIRD QUARTER 2004)
-- Rental revenues increased 6% to $39.2 million. Within rental
revenues, Mobile Modular increased 13% from $18.4 million to
$20.9 million; TRS-RenTelco decreased 2% from $18.7 million to
$18.4 million, yet improved sequentially from the second
quarter 2005 level of $17.2 million.
-- Sales revenues increased 10% to $31.0 million, resulting
primarily from Mobile Modular's increased sales volume, which
included $5.8 million of sales revenues related to
requirements related to the recent hurricanes. Higher sales
volume combined with a higher gross margin percentage, 26.5%
in 2005 compared to 20.3% in 2004, resulted in a gross profit
increase of $2.5 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 decreased 7% to $10.8
million, with Mobile Modular increasing 13% to $2.4 million
and TRS-RenTelco decreasing 12% to $8.3 million from $9.4
million in 2004. The TRS-RenTelco decrease was due to the
determination in April 2005 to extend the useful lives on two
models of test equipment (quarterly impact of $0.6 million)
and the net impact of selling underutilized equipment and
rental equipment becoming fully depreciated, offset by new
equipment purchases.
-- Debt decreased $11.4 million during the quarter to $154.6
million, with the Company's total liabilities to equity ratio
decreasing from 1.83 to 1 at June 30, 2005 to 1.80 to 1 as of
September 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 extend the
expiration dates to June 30, 2008. As of September 30, 2005,
the Company, under its lines of credit, had capacity to borrow
an additional $100.4 million.
-- Dividend rate increased 27% to $0.14 per share for the third
quarter 2005, as compared to $0.11 per share for the third
quarter of 2004. On an annualized basis, this dividend
represents a 2.0% yield on the November 2, 2005 close price of
$28.18.
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 expects its 2005 full-year earnings per share to be in
a range of $1.57 to $1.62 per diluted share. Such a forward-looking
statement reflects McGrath RentCorp's expectations as of November 3,
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 October 12, 2005, McGrath RentCorp will host a conference call at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on November 3, 2005 to
discuss the third quarter 2005 results. To participate in the
teleconference, dial 1-800-218-8862 (international callers dial
1-303-262-2143). 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 11041135.
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 revenue being generated from our backlog of sale
projects related to the recent hurricanes, our expectation regarding
additional future hurricane related rental and sale opportunities, our
expectation regarding redeployment of the higher than normal
California classroom returns over the next twelve months, our
expectation that the cost structure and operating disciplines in our
TRS-RenTelco business will support future earnings growth for that
business, our expectation regarding the annual 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 Nine Months Ended
September 30, September 30,
-------------------------- ------------------
2005 2004 2005 2004
- ------------------------ ------------- ------------ --------- --------
REVENUES
- ------------------------
Rental $ 39,240 $ 37,113 $112,000 $82,696
Rental Related
Services 6,929 6,613 18,439 16,958
------------- ------------ --------- --------
Rental Operations 46,169 43,726 130,439 99,654
Sales 30,986 28,208 62,093 42,489
Other 607 606 2,033 1,065
------------- ------------ --------- --------
Total Revenues 77,762 72,540 194,565 143,208
------------- ------------ --------- --------
COSTS AND EXPENSES
- ------------------------
Direct Costs of Rental
Operations
Depreciation of
Rental Equipment 10,763 11,589 33,090 20,725
Rental Related
Services 4,474 3,981 12,206 10,246
Other 7,338 7,465 22,062 17,214
------------- ------------ --------- --------
Total Direct Costs
of Rental
Operations 22,575 23,035 67,358 48,185
Costs of Sales 22,767 22,496 45,175 32,729
------------- ------------ --------- --------
Total Costs 45,342 45,531 112,533 80,914
------------- ------------ --------- --------
Gross Profit 32,420 27,009 82,032 62,294
Selling and
Administrative 10,543 9,641 29,524 23,294
------------- ------------ --------- --------
Income from
Operations 21,877 17,368 52,508 39,000
Interest 2,095 1,576 5,726 3,524
------------- ------------ --------- --------
Income Before
Provision for
Income Taxes 19,782 15,792 46,782 35,476
Provision for Income
Taxes 7,517 6,301 17,777 14,155
------------- ------------ --------- --------
Income Before
Minority Interest 12,265 9,491 29,005 21,321
Minority Interest in
Income of Subsidiary 194 111 291 82
------------- ------------ --------- --------
Net Income $ 12,071 $ 9,380 $ 28,714 $21,239
============= ============ ========= ========
Earnings Per Share:
Basic $ 0.49 $ 0.39 $ 1.17 $ 0.87
Diluted $ 0.48 $ 0.38 $ 1.14 $ 0.86
Shares Used in Per Share
Calculation:
Basic 24,678 24,354 24,626 24,304
Diluted 25,382 24,842 25,255 24,716
September 30, December 31,
BALANCE SHEET DATA 2005 2004
- ------------------------ ------------- ------------
Rental Equipment, net $ 391,170 $ 357,788
Total Assets 529,407 474,280
Notes Payable 154,623 151,888
Shareholders' Equity 188,933 166,888
SEGMENT DATA (Unaudited)
- ----------------------------------------------------------------------
(in thousands) Modulars Electronics Enviroplex Consolidated
--------- ----------- ---------- ------------
Three Months Ended
September 30,
- ------------------------
2005
Rental Revenues $ 20,886 $ 18,354 $ -- $ 39,240
Rental Related Services
Revenues 6,670 259 -- 6,929
Sales and Other Revenues 21,112 6,251 4,230 31,593
Total Revenues 48,668 24,864 4,230 77,762
Depreciation of Rental
Equipment 2,422 8,341 -- 10,763
Gross Profit 20,824 10,017 1,579 32,420
Interest Expense
(Income) Allocation 1,514 638 (57) 2,095
Income before Provision
for Income Taxes 13,615 5,068 1,099 19,782
Rental Equipment
Acquisitions 19,450 8,651 -- 28,101
Accounts Receivable, net
(period end) 48,673 18,209 7,328 74,210
Rental Equipment, at
cost (period end) 388,814 152,474 -- 541,288
Rental Equipment, net
book value (period end) 290,309 100,861 -- 391,170
Utilization (period
end)(1) 84.1% 70.9%
Average Utilization(1) 84.7% 68.3%
2004
Rental Revenues $ 18,416 $ 18,697 $ -- $ 37,113
Rental Related Services
Revenues 6,264 349 -- 6,613
Sales and Other Revenues 14,893 7,752 6,169 28,814
Total Revenues 39,573 26,798 6,169 72,540
Depreciation of Rental
Equipment 2,152 9,437 -- 11,589
Gross Profit 16,458 9,304 1,247 27,009
Interest Expense
(Income) Allocation 1,094 518 (36) 1,576
Income before Provision
for Income Taxes 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
book value (period end) 238,659 117,201 -- 355,860
Utilization (period
end)(1) 86.3% 65.2%
Average Utilization(1) 86.3% 65.0%
- ----------------------------------------------------------------------
SEGMENT DATA (Unaudited)
- ----------------------------------------------------------------------
(in thousands) Modulars Electronics Enviroplex Consolidated
--------- ----------- ---------- ------------
Nine Months Ended
September 30,
- ------------------------
2005
Rental Revenues $ 59,498 $ 52,502 $ -- $ 112,000
Rental Related Services
Revenues 17,449 990 -- 18,439
Sales and Other Revenues 35,193 20,596 8,337 64,126
Total Revenues 112,140 74,088 8,337 194,565
Depreciation of Rental
Equipment 6,814 26,276 -- 33,090
Gross Profit 52,582 26,251 3,199 82,032
Interest Expense
(Income) Allocation 4,089 1,810 (173) 5,726
Income before Provision
for Income Taxes 33,401 11,721 1,660 46,782
Rental Equipment
Acquisitions 55,132 25,518 -- 80,650
Accounts Receivable, net
(period end) 48,673 18,209 7,328 74,210
Rental Equipment, at
cost (period end) 388,814 152,474 -- 541,288
Rental Equipment, net
book value (period end) 290,309 100,861 -- 391,170
Utilization (period
end)(1) 84.1% 70.9%
Average Utilization(1) 85.3% 64.9%
2004
Rental Revenues $ 52,314 $ 30,382 $ -- $ 82,696
Rental Related Services
Revenues 16,239 719 -- 16,958
Sales and Other Revenues 22,381 13,324 7,849 43,554
Total Revenues 90,934 44,425 7,849 143,208
Depreciation of Rental
Equipment 6,201 14,524 -- 20,725
Gross Profit 44,284 16,345 1,665 62,294
Interest Expense
(Income) Allocation 2,802 834 (112) 3,524
Income before Provision
for Income Taxes 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
book value (period end) 238,659 117,201 -- 355,860
Utilization (period
end)(1) 86.3% 65.2%
Average Utilization(1) 85.4% 60.6%
- ----------------------------------------------------------------------
(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