Loading, Please Wait...

CST: 21/09/2019 12:32:25   

McGrath RentCorp Announces Results for First Quarter 2019

143 Days ago

LIVERMORE, Calif., April 30, 2019 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended March 31, 2019 of $122.0 million, an increase of 16%, compared to the first quarter of 2018.  The Company reported net income of $18.4 million, or $0.75 per diluted share, for the first quarter of 2019, compared to net income of $14.5 million, or $0.59 per diluted share, for the first quarter of 2018. 

FIRST QUARTER 2019 COMPANY HIGHLIGHTS:

  • Income from operations increased 24% year-over-year to $27.3 million.
  • Rental revenues increased 11% year-over-year to $82.7 million.
  • Adjusted EBITDA1 increased 16% year-over-year to $49.9 million.   
  • Dividend rate increased 10% year-over-year to $0.375 per share for the first quarter of 2019.  On an annualized basis, this dividend represents a 2.4% yield on the April 29, 2019 close price of $62.23 per share.

Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:

“I am pleased with our strong start to the year and first quarter results.  Business performance was favorable with all of our rental divisions growing both top and bottom lines.  Companywide rental revenues increased 11% and operating profit increased 24%, driven by growth in rental gross profit of $3.8 million and sales gross profit of $1.9 million.  Demand was broad based across all divisions, as the markets we serve continued to show positive momentum.

Mobile Modular rental revenues for the quarter increased 14% from a year ago, driven by higher rental rates, a larger fleet and improved utilization.  Customer activity for classrooms as well as commercial office space was healthy.  Portable Storage rental revenues grew by 15% on broad based demand.  Sales revenues increased year-over-year, from both higher new and used equipment sales.

TRS-RenTelco rental revenues for the quarter increased 10%, primarily driven by higher average rental equipment and improved utilization.  Demand for both communications and general purpose test equipment has been healthy and our rental fleet investments over the past year are delivering results.   

Adler Tank Rentals rental revenues for the quarter increased 7% from a year ago, driven primarily by higher rental rates.  Upstream oil and natural gas activity as well as other market verticals were healthy.  Compared to a year ago, utilization was flat for the quarter and average rental equipment was up slightly. 

We still have plenty of work to do to deliver on this year’s financial and operating goals, however, customer and field feedback on project activity has been positive.  We are encouraged by our early successes and will be working hard to keep our positive momentum throughout 2019.”

  1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.  A reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.


DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended March 31, 2019 to the quarter ended March 31, 2018 unless otherwise indicated.

MOBILE MODULAR

For the first quarter of 2019, the Company’s Mobile Modular division reported income from operations of $15.5 million, an increase of $3.2 million, or 26%.  Rental revenues increased 14% to $42.3 million, depreciation expense increased 3% to $5.4 million and other direct costs increased 22% to $12.6 million, which resulted in an increase in gross profit on rental revenues of 13% to $24.2 million.   Rental related services revenues increased 21% to $14.5 million, with associated gross profit increasing 22% to $3.5 million.  Sales revenues increased 74% to $8.0 million while gross margin on sales decreased to 34% from 36%, primarily due to lower margins on new equipment sales, resulting in a 66% increase in gross profit on sales revenues to $2.8 million.  Selling and administrative expenses increased 10% to $15.4 million, primarily due to higher salaries and benefit costs and higher allocated corporate expenses.

TRS-RENTELCO

For the first quarter of 2019, the Company’s TRS-RenTelco division reported income from operations of $7.7 million, an increase of $0.5 million, or 6%.  Rental revenues increased 10% to $23.6 million, depreciation expense increased 11% to $9.5 million and other direct costs increased 17% to $4.1 million, which resulted in a 6% increase in gross profit on rental revenues to $10.0 million.  Sales revenues increased 11% to $5.8 million.  Gross margin on sales was comparable at 52%, resulting in an 11% increase in gross profit on sales revenues to $3.0 million.  Selling and administrative expenses increased 6% to $6.0 million, primarily due to higher allocated corporate expenses.

ADLER TANKS

For the first quarter of 2019, the Company’s Adler Tanks division reported income from operations of $4.3 million, an increase of $1.1 million, or 36%.  Rental revenues increased 7% to $16.8 million, depreciation expense increased 2% to $4.0 million and other direct costs increased 23% to $3.0 million, which resulted in an increase in gross profit on rental revenues of 5% to $9.8 million.  Rental related services revenues increased 23% to $6.3 million, with gross profit on rental related services increasing 52% to $1.5 million.  Selling and administrative expenses decreased 2% to $7.1 million.

FINANCIAL OUTLOOK:

The Company reconfirms its expectation that total Company operating profit for the full year 2019 will increase between 5% and 10% over 2018 results. 

  

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions.  The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions.  For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.com

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings.  You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.

 

CONFERENCE CALL NOTE:

As previously announced in its press release of April 1, 2019, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on April 30, 2019 to discuss the first quarter 2019 results.  To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/.  A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.).  The pass code for the conference call replay is 4269848.  In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements.  These forward-looking statements also can be identified by the use of forward-looking terminology such as “believes,” “expects,” “will,” or “anticipates” or the negative of these terms or other comparable terminology.  In particular, Mr. Hanna’s comments on the initial positive momentum for 2019, customer and field feedback regarding positive project activity, as well as the reconfirmation of the full year 2019 outlook in the “Financial Outlook” section are forward-looking. 

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the extent of the recovery underway in our modular building division; the state of the wireless communications network upgrade environment; the utilization levels and rental rates of our Adler Tanks liquid and sold containment tank and box rental assets; continued execution of our performance improvement initiatives; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.

Forward-looking statements are made only as of the date hereof.  Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

    Three   Months   Ended   March 31,  
(in thousands, except per share amounts)   2019     2018  
Revenues                
Rental   $ 82,696     $ 74,261  
Rental related services     21,455       17,831  
Rental operations     104,151       92,092  
Sales     16,825       12,091  
Other     1,032       902  
Total revenues     122,008       105,085  
Costs and Expenses                
Direct costs of rental operations:                
Depreciation of rental equipment     18,961       17,777  
Rental related services     16,363       13,768  
Other     19,733       16,269  
Total direct costs of rental operations     55,057       47,814  
Costs of sales     9,946       7,101  
Total costs of revenues     65,003       54,915  
Gross profit     57,005       50,170  
Selling and administrative expenses     29,695       28,128  
Income from operations     27,310       22,042  
Other income (expense):                
Interest expense     (3,108 )     (2,992 )
Foreign currency exchange gain (loss)     49       (32 )
Income before provision for income taxes     24,251       19,018  
Provision for income taxes     5,802       4,552  
Net income   $ 18,449     $ 14,466  
Earnings per share:                
Basic   $ 0.76     $ 0.60  
Diluted   $ 0.75     $ 0.59  
Shares used in per share calculation:                
Basic     24,195       24,067  
Diluted     24,540       24,478  
Cash dividends declared per share   $ 0.375     $ 0.340  
                 


MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

    March 31,     December 31,  
(in thousands)   2019     2018  
Assets                
Cash   $ 1,442     $ 1,508  
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2019
  and 2018
    119,403       121,016  
Rental equipment, at cost:                
Relocatable modular buildings     834,883       817,375  
Electronic test equipment     286,469       285,052  
Liquid and solid containment tanks and boxes     314,899       313,573  
      1,436,251       1,416,000  
Less accumulated depreciation     (523,373 )     (514,985 )
Rental equipment, net     912,878       901,015  
Property, plant and equipment, net     127,736       126,899  
Prepaid expenses and other assets     43,336       31,816  
Intangible assets, net     7,030       7,254  
Goodwill     27,808       27,808  
Total assets   $ 1,239,633     $ 1,217,316  
Liabilities and Shareholders' Equity                
Liabilities:                
Notes payable   $ 289,464     $ 298,564  
Accounts payable and accrued liabilities     102,968       90,844  
Deferred income     58,187       49,709  
Deferred income taxes, net     208,371       206,664  
Total liabilities     658,990       645,781  
Shareholders’ equity:                
Common stock, no par value - Authorized 40,000 shares                
Issued and outstanding - 24,222 shares as of March 31, 2019 and 24,182 shares as of December 31, 2018     103,638       103,801  
Retained earnings     477,081       467,783  
Accumulated other comprehensive loss     (76 )     (49 )
Total shareholders’ equity     580,643       571,535  
Total liabilities and shareholders’ equity   $ 1,239,633     $ 1,217,316  
                 


MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

    Three Months Ended March 31,  
(in thousands)   2019     2018  
Cash Flows from Operating Activities:                
Net income   $ 18,449     $ 14,466  
Adjustments to reconcile net income to net cash provided by
  operating activities:
               
Depreciation and amortization     21,100       19,928  
Impairment of rental assets           39  
Provision for doubtful accounts     156       35  
Share-based compensation     1,392       864  
Gain on sale of used rental equipment     (4,615 )     (3,848 )
Foreign currency exchange (gain) loss     (49 )     32  
Amortization of debt issuance costs     3       13  
Change in:                
Accounts receivable     1,457       7,745  
Prepaid expenses and other assets     (11,520 )     (3,303 )
Accounts payable and accrued liabilities     9,948       (4,284 )
Deferred income     8,478       (717 )
Deferred income taxes     1,707       182  
Net cash provided by operating activities     46,506       31,152  
Cash Flows from Investing Activities:                
Purchases of rental equipment     (34,132 )     (24,168 )
Purchases of property, plant and equipment     (2,753 )     (2,667 )
Proceeds from sales of used rental equipment     9,233       7,707  
Net cash used in investing activities     (27,652 )     (19,128 )
Cash Flows from Financing Activities:                
Net repayments under bank lines of credit     (9,103 )     (2,831 )
Taxes paid related to net share settlement of stock awards     (1,555 )     (971 )
Payment of dividends     (8,248 )     (6,300 )
Net cash used in financing activities     (18,906 )     (10,102 )
Effect of foreign currency exchange rate changes on cash     (14 )     25  
Net increase (decrease) in cash     (66 )     1,947  
Cash balance, beginning of period     1,508       2,501  
Cash balance, end of period   $ 1,442     $ 4,448  
Supplemental Disclosure of Cash Flow Information:                
Interest paid, during the period   $ 2,828     $ 2,537  
Net income taxes paid, during the period   $ 710     $ 1,572  
Dividends accrued during the period, not yet paid   $ 9,088     $ 8,237  
Rental equipment acquisitions, not yet paid   $ 11,004     $ 6,930  
                 


MCGRATH RENTCORP                                        
BUSINESS SEGMENT DATA (unaudited)                                        
Three months ended March 31, 2019                                        
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler Tanks     Enviroplex     Consolidated  
Revenues                                        
Rental   $ 42,261     $ 23,623     $ 16,812     $     $ 82,696  
Rental related services     14,471       708       6,276             21,455  
Rental operations     56,732       24,331       23,088             104,151  
Sales     8,000       5,750       270       2,805       16,825  
Other     360       595       77             1,032  
Total revenues     65,092       30,676       23,435       2,805       122,008  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     5,408       9,520       4,033             18,961  
Rental related services     10,927       627       4,809             16,363  
Other     12,635       4,100       2,998             19,733  
Total direct costs of rental operations     28,970       14,247       11,840             55,057  
Costs of  sales     5,243       2,762       172       1,769       9,946  
Total costs of revenues     34,213       17,009       12,012       1,769       65,003  
                                         
Gross Profit                                        
Rental     24,218       10,003       9,781             44,002  
Rental related services     3,544       81       1,467             5,092  
Rental operations     27,762       10,084       11,248             49,094  
Sales     2,757       2,988       98       1,036       6,879  
Other     360       595       77             1,032  
Total gross profit     30,879       13,667       11,423       1,036       57,005  
Selling and administrative expenses     15,370       5,970       7,080       1,275       29,695  
Income (loss) from operations   $ 15,509     $ 7,697     $ 4,343     $ (239 )   $ 27,310  
Interest expense                                     (3,108 )
Foreign currency exchange gain                                     49  
Provision for income taxes                                     (5,802 )
Net income                                   $ 18,449  
                                         
Other Information                                        
Average rental equipment 1   $ 778,323     $ 284,350     $ 312,591                  
Average monthly total yield 2     1.81 %     2.77 %     1.79 %                
Average utilization 3     78.8 %     64.3 %     57.3 %                
Average monthly rental rate 4     2.30 %     4.31 %     3.13 %                
  1. Average rental equipment represents the cost of rental equipment excluding accessory equipment.  For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
  2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
  3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
  4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.


MCGRATH RENTCORP                                        
BUSINESS SEGMENT DATA (unaudited)                                        
Three months ended March 31, 2018                                        
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler Tanks     Enviroplex     Consolidated  
Revenues                                        
Rental   $ 37,027     $ 21,529     $ 15,705     $     $ 74,261  
Rental related services     11,934       807       5,090             17,831  
Rental operations     48,961       22,336       20,795             92,092  
Sales     4,593       5,175       305       2,018       12,091  
Other     297       527       78             902  
Total revenues     53,851       28,038       21,178       2,018       105,085  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     5,248       8,577       3,952             17,777  
Rental related services     9,019       621       4,128             13,768  
Other     10,331       3,504       2,434             16,269  
Total direct costs of rental operations     24,598       12,702       10,514             47,814  
Costs of  sales     2,932       2,488       268       1,413       7,101  
Total costs of revenues     27,530       15,190       10,782       1,413       54,915  
                                         
Gross Profit                                        
Rental     21,448       9,448       9,319             40,215  
Rental related services     2,915       186       962             4,063  
Rental operations     24,363       9,634       10,281             44,278  
Sales     1,661       2,687       37       605       4,990  
Other     297       527       78             902  
Total gross profit     26,321       12,848       10,396       605       50,170  
Selling and administrative expenses     14,012       5,618       7,198       1,300       28,128  
Income (loss) from operations   $ 12,309     $ 7,230     $ 3,198     $ (695 )     22,042  
Interest expense                                     (2,992 )
Foreign currency exchange loss                                     (32 )
Provision for income taxes                                     (4,552 )
Net income                                   $ 14,466  
                                         
Other Information                                        
Average rental equipment 1   $ 746,186     $ 264,325     $ 308,920                  
Average monthly total yield 2     1.65 %     2.71 %     1.69 %                
Average utilization 3     77.3 %     62.7 %     57.6 %                
Average monthly rental rate 4     2.14 %     4.33 %     2.94 %                
  1. Average rental equipment represents the cost of rental equipment excluding accessory equipment.  For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
  2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
  3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
  4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.


Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.  The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company. 

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements.  Management believes the exclusion of non-cash charges, including share-based compensation, is useful in measuring the Company’s cash available for operations and performance of the Company.  Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.  

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges.  The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow.  In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance.  Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP. 

Reconciliation of Net Income to Adjusted EBITDA

(dollar amounts in thousands) Three Months Ended
March 31,
    Twelve Months Ended
March 31,
 
  2019     2018     2019     2018  
Net income $ 18,449     $ 14,466     $ 83,389     $ 160,413  
Provision (benefit) for income taxes   5,802       4,552       26,539       (71,202 )
Interest expense   3,108       2,992       12,413       11,825  
Depreciation and amortization   21,100       19,928       83,147       78,940  
EBITDA   48,459       41,938       205,488       179,976  
  Impairment of rental assets         39             1,678  
Share-based compensation   1,392       864       4,639       3,256  
Adjusted EBITDA 1 $ 49,851     $ 42,841     $ 210,127     $ 184,910  
Adjusted EBITDA margin 2   41 %     41 %     41 %     39 %
                               


Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands) Three Months Ended
March 31,
    Twelve Months Ended
March 31,
 
  2019     2018     2018     2018  
Adjusted EBITDA 1 $ 49,851     $ 42,841     $ 210,127     $ 184,910  
Interest paid   (2,828 )     (2,537 )     (12,889 )     (11,942 )
Income taxes paid, net of refunds received   (710 )     (1,572 )     (17,295 )     (25,511 )
Gain on sale of used rental equipment   (4,615 )     (3,848 )     (20,326 )     (18,638 )
Foreign currency exchange (gain) loss   (49 )     32       408       (76 )
Amortization of debt issuance cost   3       13       10       50  
Change in certain assets and liabilities:                              
Accounts receivable, net   1,613       7,780       (21,311 )     (5,540 )
Prepaid expenses and other assets   (11,520 )     (3,303 )     (17,568 )     1,357  
Accounts payable and other liabilities   6,283       (7,537 )     17,412       4,679  
Deferred income   8,478       (717 )     19,453       (1,385 )
Net cash provided by operating activities $ 46,506     $ 31,152     $ 158,021     $ 127,904  
                               
  1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
  2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

FOR INFORMATION CONTACT:    

Keith E. Pratt
EVP & Chief Financial Officer        
925-606-9200 

Is your business listed correctly on America’s largest city directory network of 1,000 portals?