FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995
Commission File No. 0-13292
McGRATH RENTCORP
(Exact name of registrant as specified in its Charter)
California 94-2579843
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2500 Grant Avenue
San Lorenzo, California 94580
(Address of principal executive offices)
Registrant's telephone number: (510) 276-2626
_________________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ______
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At May 10, 1995, 8,142,717 shares of Registrant's Common Stock were
outstanding.
_________________________
McGrath RentCorp
First Quarter 1995 Form 10-Q
Page 1
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended
March 31,
-----------------------
1995 1994
----------- -----------
REVENUES:
Rental operations-
Rental $11,074,099 $10,824,509
Rental related services 2,030,738 2,456,906
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13,104,837 13,281,415
Sales and related services 3,544,632 3,069,795
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Total revenues 16,649,469 16,351,210
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COSTS & EXPENSES:
Direct costs of rental operations-
Depreciation 2,754,380 2,663,563
Rental related services 1,175,651 1,615,769
Other 1,152,418 1,260,447
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5,082,449 5,539,779
Cost of sales and related services 2,328,899 2,029,248
----------- -----------
7,411,348 7,569,027
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Gross margin 9,238,121 8,782,183
Selling and administrative expenses 3,302,686 3,200,896
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Income from operations 5,935,435 5,581,287
Interest expense 675,454 458,145
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Income before provision
for income taxes 5,259,981 5,123,142
Provision for income taxes 2,083,012 1,985,217
----------- -----------
Net income $ 3,176,969 $ 3,137,925
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Net income per share $ 0.38 $ 0.37
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The accompanying notes are an integral part of these financial statements.
McGrath RentCorp
First Quarter 1995 Form 10-Q
Page 2
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1995 1994
------------ ------------
ASSETS
Cash $ 582,474 $ 1,151,648
Accounts receivable, less allowance for
doubtful accounts of $1,205,000 in 1995
and $1,400,000 in 1994 11,622,405 12,662,213
Rental equipment, at cost:
Relocatable modular offices 144,711,993 144,674,027
Electronic test instruments 30,687,847 29,541,687
Accessory equipment 3,639,889 3,627,776
------------ ------------
179,039,729 177,843,490
Less - Accumulated depreciation (52,279,012) (50,599,702)
------------ ------------
126,760,717 127,243,788
Land, at cost 19,484,550 19,484,550
Land improvements, furniture and equipment,
at cost, less accumulated depreciation of
$2,342,616 in 1995 and $2,348,664 in 1994 9,663,681 7,276,411
Prepaid expenses and other assets 2,395,906 2,103,913
------------ ------------
$170,509,733 $169,922,523
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $ 34,050,000 $ 35,950,000
Accounts payable and accrued liabilities 10,986,859 9,603,107
Deferred income 6,156,421 7,247,647
Deferred income taxes 34,865,452 33,282,281
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Total liabilities 86,058,732 86,083,035
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Shareholders' equity:
Common stock, no par value -
Authorized - 2O,OOO,OOO shares
Outstanding - 8,140,057 shares in 1995
and 8,158,687 in 1994 15,312,461 15,999,633
Retained earnings 69,138,540 67,839,855
------------ ------------
Total shareholders' equity 84,451,001 83,839,488
------------ ------------
$170,509,733 $169,922,523
============ ============
The accompanying notes are an integral part of these financial statements.
McGrath RentCorp
First Quarter 1995 Form 10-Q
Page 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash
(Unaudited)
Three months ended
March 31,
-----------------------
1995 1994
----------- -----------
Cash flows from operating activities:
Net income $ 3,176,969 $ 3,137,925
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,208,414 2,790,659
Gain on sale of rental equipment (906,519) (989,107)
Change in:
Accounts receivable 1,039,808 (474,198)
Prepaids and other assets (291,993) (32,800)
Accounts payable and accrued liabilities 405,812 1,004,524
Deferred income (1,091,226) (558,921)
Deferred income taxes 1,583,171 1,985,218
----------- -----------
Net cash provided by operating activities 7,124,436 6,863,300
----------- -----------
Cash flows from investing activities:
Purchase of rental equipment (3,691,143) (5,111,635)
Purchase of land improvements, furniture
and equipment (2,841,304) (8,997)
Proceeds from sale of rental equipment 2,326,353 2,816,390
----------- -----------
Net cash used in investing activities (4,206,094) (2,304,242)
----------- -----------
Cash flows from financing activities:
Net borrowings (payments) under line of credit (1,900,000) (3,400,000)
Proceeds from the exercise of stock options 26,865 7,451
Repurchase of common stock (714,037) ---
Payment of dividends (900,344) (831,264)
----------- -----------
Net cash used in financing activities (3,487,516) (4,223,813)
----------- -----------
Net increase (decrease) in cash (569,174) 335,245
Cash balance, beginning of period 1,151,648 432,009
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Cash balance, end of period $ 582,474 $ 767,254
========== ===========
Interest paid during period $ 700,880 $ 458,101
========== ===========
Income taxes paid during period $ --- $ 50,000
========== ===========
Dividends declared but not yet paid $ 977,940 $ 914,543
========== ===========
The accompanying notes are an integral part of these financial statements.
McGrath RentCorp
First Quarter 1995 Form 10-Q
Page 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
------------------------------------------
1. The consolidated financial information for the three months ended March 31,
1995 has not been audited, but in the opinion of management, all adjustments
(consisting of only normal recurring accruals, consolidation and eliminating
entries) necessary for the fair presentation of the consolidated results of
operations, financial position, and cash flows of McGrath RentCorp (the
"Company") have been made. The consolidated results of the three months ended
March 31, 1995 should not be considered as necessarily indicative of the
consolidated results for the entire year. It is suggested that these
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's latest Form 10-K.
2. The number of outstanding shares and equivalent shares used in the earnings
per common share calculations were as follows:
Quarter ended March 31, Primary Fully Diluted
----------------------- --------- -------------
1995 8,262,300 8,262,300
1994 8,446,845 8,452,102
3. On January 1, 1995, McGrath RentCorp converted a $300,000 note receivable
to 73.171% ownership of Enviroplex, Inc. Enviroplex, Inc. manufactures portable
classrooms built to the requirements of the Division of State Architect ("DSA")
and sells primarily to school districts. The accompanying consolidated financial
statements include the accounts of the Company and its majority owned
subsidiary. All intercompany accounts and transactions have been eliminated in
consolidation.
4. In April 1995, 6,786 shares of common stock were issued under the Long Term
Bonus Plan to certain key employees for achieving an average return on equity
during the three years ended December 31, 1994. The liability of $115,362 for
these shares was reflected in the 1994 Financial Statements and in April 1995
was reclassed to equity (common stock) upon issuance.
McGrath RentCorp
First Quarter 1995 Form 10-Q
Page 5
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Three Months Ended March 31, 1995 and 1994
Rental revenues for the first quarter of 1995 increased by $249,590, a 2%
increase over the same period in 1994. The $354,466 increase in rental revenues
from electronics was offset by a $104,876 decline in rental revenues from
relocatable modular offices. The rental revenue decline for modulars was due to
the return of a significant amount of equipment (220 unit complex) from a single
customer which generated rental billings of $322,464 per quarter. Average
utilization during the first quarter improved for electronic equipment from
53.6% to 54.6% while modular utilization declined from 78.5% to 75.5% compared
to the same period in 1994 due to the return of the above mentioned complex.
Rental related services for the three months ended March 31, 1995 decreased
$426,168, a 17% decrease from the same period in 1994. The decrease was due to
fewer site work requirements experienced in 1995. This was offset by a one time
adjustment of incentive fees recognized by the Company for equipment management.
For the comparative period in 1994, $739,000 of rental related service revenues
was for site work for three projects, one was directly related to the
Northridge, California earthquake.
Sales and related services for the three months ended March 31, 1995
increased $474,837, a 15% increase compared to the same period in 1994 due to
the sales volume of $924,306 contributed by the Company's majority owned
subsidiary, Enviroplex, Inc. Sales and related services from quarter to quarter
have fluctuated depending on customer requirements. Gross margins on sales and
related services remained consistent in 1995 compared to the same period in 1994
at 34%.
Selling and administrative expenses increased $101,790 (3%) for the three
months ended March 31, 1995 compared to the same period in 1994 primarily due to
the impact of Enviroplex, Inc. of $93,384 and the acceleration of a leasehold
improvement of $330,000 offset by a reduction in the bad debt reserve of
$200,000. The Company also realized reductions in insurance expense and modular
equipment freight expense.
Interest expense increased $217,309 (47%) for the first quarter 1995 over
the same period in 1994 as a result of a higher average interest rate even
though average borrowing levels were lower.
Income before provision for taxes increased $136,839 (3%) for the three
months ended March 31, 1995 over the same period in 1994 with after tax income
increasing $39,044 (1%) as a result of a higher effective tax rate in 1995 of
39.60% compared to 38.75% in 1994.
McGrath RentCorp
First Quarter 1995 Form 10-Q
Page 6
LIQUIDITY AND CAPITAL RESOURCES.
The debt (notes payable) to equity ratio was 0.40 to 1 at March 31, 1995
compared to 0.43 to 1 at December 31, 1994. The debt (total liabilities) to
equity ratio at the end of the current period was 1.02 to 1 as compared to 1.03
to 1 as of December 31 1994.
In August 1994, the Company's Board of Directors authorized the repurchase
of up to 850,000 shares of the Company's issued and outstanding common stock.
Under this authorization, the Company has repurchased 204,054 shares of common
stock for an aggregate purchase price of $3,246,629 or an average price of
$15.91 per share. No other shares will be repurchased under this authorization.
On March 30, 1995, the Board of Directors authorized the repurchase of up
to 650,000 shares of the Company's issued and outstanding Common Stock. The
Company intends to make purchases from time to time in the over-the-counter
market (NASDQ) and/or through privately negotiated, large block transactions.
The Board of Directors believes the Company's shares are currently undervalued
by the market and that the repurchase of its shares is a good investment for the
Company at this time. Shares repurchased by the Company will be cancelled and
returned to the status of authorized but unissued stock. As of May 12, 1995, the
Company has not repurchased any common stock under this authorization.
The Company's primary use of funds is to purchase rental equipment, and
funds will continue to be used for this purpose in the future. Additionally, the
Company plans to make further improvements to the land at their inventory
facilities located in Southern California, Northern California and Houston area.
The Company also pays quarterly dividends, which will constitute an additional
use of cash in 1995.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On March 30, 1995 the Company declared a quarterly dividend on its Common
Stock; the dividend was $0.12 per share. Subject to its continued profitability
and favorable cash flow, the Company intends to continue the payment of
quarterly dividends. The Company's loan agreement with the Bank prohibits
payment of dividends in excess of 50% of net income in any one year without the
bank's consent.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. No exhibits included.
(b) REPORTS ON FORM 8-K. No reports on form 8-K have been filed during the
quarter for which this report is filed.
McGrath RentCorp
First Quarter 1995 Form 10-Q
Page 7
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 thereunto duly authorized.
Date: May 10, 1995 McGRATH RENTCORP
By: /s/ Delight Saxton
----------------------
Delight Saxton
Vice-President of Administration,
Chief Financial Officer and
Secretary
5
1,000
3-MOS
DEC-31-1995
JAN-01-1995
MAR-31-1995
582
0
12,827
1,205
0
0
191,047
54,622
170,510
0
0
15,312
0
0
69,139
170,510
16,650
16,650
7,411
7,411
3,303
0
675
5,260
2,083
3,177
0
0
0
3,177
.38
0
