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CST: 21/09/2019 12:08:24   

McGrath RentCorp Announces Results for Fourth Quarter 2018

206 Days ago

LIVERMORE, Calif., Feb. 26, 2019 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2018 of $133.1 million, an increase of 9%, compared to the fourth quarter of 2017.  The Company reported net income of $24.2 million, or $0.99 per diluted share for the fourth quarter of 2018, compared to net income of $117.7 million, or $4.82 per diluted share, in the fourth quarter of 2017.  The fourth quarter of 2017 included a net income benefit of $102.5 million, or $4.20 per diluted share, associated with the enactment of the Tax Cut and Jobs Act.

Total revenues for the year ended December 31, 2018 increased to $498.3 million from $462.0 million in 2017, with income from operations increasing 24% to $117.5 million. Net income for the year ended December 31, 2018 decreased to $79.4 million, or $3.24 per diluted share, from $153.9 million, or $6.34 per diluted share, in 2017. As discussed above, 2017 included a net income benefit of $102.5 million, or $4.20 per diluted share, associated with the enactment of the Tax Cut and Jobs Act.

FOURTH QUARTER 2018 COMPANY HIGHLIGHTS:

  • Income from operations increased 31% year-over-year to $35.2 million.
  • Rental revenues increased 10% year-over-year to $85.1 million.
  • Adjusted EBITDA1 increased 16% year-over-year to $57.6 million.   
  • Dividend rate increased 31% year-over-year to $0.34 per share for the fourth quarter of 2018.  On an annualized basis, this dividend represents a 2.6% yield on the February 25, 2019 close price of $53.23 per share.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.375 per share for the quarter ending March 31, 2019, an increase of $0.035, or 10%, over the prior year period.  On an annualized basis, the 2019 dividend represents a 2.8% yield, based on the February 25, 2019 closing stock price.  The cash dividend will be payable on April 30, 2019 to all shareholders of record on April 15, 2019.  This marks the 28th consecutive year the Company has increased its annual dividend.

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

“We finished our fourth quarter on a very good note with the business delivering impressive rental revenue and profit growth.  The Company’s 31% operating profit increase was driven by an overall increase in rental revenues of 10% and a 22% increase in rental gross profit.

Mobile Modular rental revenues for the quarter increased 13% from a year ago, primarily driven by an 8% improvement in average rental rates.  Rental revenue growth continued to be healthy across commercial and education markets, as well as in our Portable Storage business.  Average equipment on rent increased 5% and average utilization for the fleet was 79%.

TRS-RenTelco rental revenues for the quarter increased 8%, primarily driven by demand for general purpose equipment as well as communications equipment.  Test equipment rental revenues for general-purpose and communications increased by 9% and 4%, respectively. 

Adler Tank Rentals rental revenues for the quarter increased 3% from a year ago.  Rental revenue growth occurred across four of our six vertical markets, including upstream oil and natural gas. Average equipment on rent increased 2%, and average utilization increased to 61%. Rates also improved for the quarter by 1%.

For the full year, our operating profit grew by 24% compared to a year ago.  Mobile Modular, TRS-RenTelco and Adler Tank Rentals delivered operating profit growth of 30%, 14% and 32%, respectively, compared to a year ago.  Our strategy to focus on performance improvement initiatives coupled with solid execution from our teams helped deliver these strong results for the year.  We are pleased to announce today a dividend increase of 10%, our 28th consecutive annual dividend increase, and reflecting our overall favorable performance.

We ended the year well positioned to continue serving our broad customer base and I believe that our businesses will continue to perform well in 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 December 31, 2018 to the quarter ended December 31, 2017 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2018, the Company’s Mobile Modular division reported income from operations of $19.4 million, an increase of $6.8 million, or 54%.  Rental revenues increased 13% to $42.7 million, depreciation expense increased 1% to $5.4 million and other direct costs decreased 22% to $9.4 million, which resulted in an increase in gross profit on rental revenues of 37% to $28.0 million.  The decreased other direct costs was partly attributable to a $1.6 million impairment of rental assets, deemed beyond economic repair in the Southern California region in 2017.  Rental related services revenues increased 17% to $14.2 million, with associated gross profit increasing 9% to $3.5 million.  Sales revenues increased 18% to $8.8 million.  Gross margin on sales decreased to 28% from 30% primarily due to lower margins on used equipment sales, resulting in an 8% increase in gross profit on sales revenues to $2.4 million.  Selling and administrative expenses increased 10% to $14.8 million, primarily due to higher salaries and benefit costs and higher allocated corporate expenses.

TRS-RENTELCO

For the fourth quarter of 2018, the Company’s TRS-RenTelco division reported income from operations of $8.6 million, an increase of $0.4 million, or 5%.  Rental revenues increased 8% to $24.0 million, depreciation expense increased 11% to $9.5 million and other direct costs increased 9% to $3.9 million, which resulted in a 5% increase in gross profit on rental revenues to $10.7 million.  Sales revenues increased 19% to $6.5 million.  Gross margin on sales decreased to 47% from 58% primarily due to lower margins on new and used equipment sales, resulting in a 4% decrease in gross profit on sales revenues to $3.1 million.  Selling and administrative expenses increased 6% to $6.0 million, primarily due to higher allocated corporate expenses.

ADLER TANKS

For the fourth quarter of 2018, the Company’s Adler Tanks division reported income from operations of $5.2 million, an increase of $1.1 million, or 27%.  Rental revenues increased 3% to $18.4 million, depreciation expense increased 2% to $4.0 million and other direct costs decreased 12% to $2.8 million, which resulted in an increase in gross profit on rental revenues of 8% to $11.6 million.  Rental related services revenues increased 5% to $6.9 million, with gross profit on rental related services increasing 61% to $1.4 million.  Selling and administrative expenses increased 1% to $7.8 million.

FINANCIAL OUTLOOK:

For the full-year 2019, the Company expects:

  • Rental revenues to increase between 6% and 9% over 2018. 
  • Sales revenues to be comparable to 2018. 
  • Rental equipment depreciation expense to be between $75 and $78 million. 
  • “Other” direct costs of rental operations, primarily for rental equipment maintenance and repair, to be between $72 and $75 million. 
  • Selling and administrative costs to be between $123 and $126 million. 
  • Operating profit to increase between 5% and 10% over 2018. 
  • Full year interest expense to be between $12.1 and $12.5 million. 
  • Effective tax rate to be approximately 27%.
  • Diluted share count to be between 24.6 and 24.7 million shares. 

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company with four rental divisions.  Mobile Modular rents and sells modular buildings to fulfill customers' temporary and permanent classroom and office space needs in California, Texas, Louisiana, Florida, and the Mid-Atlantic from Washington D.C. to Georgia.  TRS-RenTelco rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas.  Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations serving key markets throughout the United States.  Mobile Modular Portable Storage provides portable storage solutions in the California, Texas, Florida, Northern Illinois, New Jersey, North Carolina and Georgia markets.  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 February 1, 2019, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 26, 2019 to discuss the fourth quarter 2018 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 7-day replay will be available 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 call replay is 3293253.  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 belief that the Company’s business will continue to perform well in 2019, as well as 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  
December 31,
    Twelve   Months   Ended  
December 31,
 
(in thousands, except per share amounts)   2018     2017     2018     2017  
Revenues                                
Rental   $ 85,091     $ 77,705     $ 318,774     $ 289,417  
Rental related services     22,110       19,481       82,907       78,068  
Rental operations     107,201       97,186       401,681       367,485  
Sales     24,896       24,334       92,618       91,500  
Other     1,018       707       4,031       3,049  
Total revenues     133,115       122,227       498,330       462,034  
Costs and Expenses                                
Direct costs of rental operations:                                
Depreciation of rental equipment     18,852       17,795       73,139       69,908  
Rental related services     16,894       15,273       64,298       60,029  
Other     15,982       18,678       68,678       65,472  
Total direct costs of rental operations     51,728       51,746       206,115       195,409  
Costs of sales     16,284       15,792       58,964       60,280  
Total costs of revenues     68,012       67,538       265,079       255,689  
Gross profit     65,103       54,689       233,251       206,345  
Selling and administrative expenses     29,937       27,903       115,770       111,605  
Income from operations     35,166       26,786       117,481       94,740  
Other income (expense):                                
Interest expense     (3,164 )     (2,898 )     (12,297 )     (11,622 )
Foreign currency exchange gain (loss)     16       61       (489 )     334  
Income before provision (benefit) for income taxes     32,018       23,949       104,695       83,452  
Provision (benefit) for income taxes     7,769       (93,775 )     25,289       (70,468 )
Net income   $ 24,249     $ 117,724     $ 79,406     $ 153,920  
Earnings per share:                                
Basic   $ 1.00     $ 4.90     $ 3.29     $ 6.41  
Diluted   $ 0.99     $ 4.82     $ 3.24     $ 6.34  
Shares used in per share calculation:                                
Basic     24,179       24,044       24,141       23,999  
Diluted     24,514       24,410       24,540       24,269  
Cash dividends declared per share   $ 0.34     $ 0.26     $ 1.36     $ 1.04  
                                 
 


MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

    December 31,     December 31,  
(in thousands)   2018     2017  
Assets                
Cash   $ 1,508     $ 2,501  
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2018 and $1,920 in 2017     121,016       105,872  
Rental equipment, at cost:                
Relocatable modular buildings     817,375       775,400  
Electronic test equipment     285,052       262,325  
Liquid and solid containment tanks and boxes     313,573       309,808  
      1,416,000       1,347,533  
Less accumulated depreciation     (514,985 )     (485,213 )
Rental equipment, net     901,015       862,320  
Property, plant and equipment, net     126,899       119,170  
Prepaid expenses and other assets     31,816       22,459  
Intangible assets, net     7,254       7,724  
Goodwill     27,808       27,808  
Total assets   $ 1,217,316     $ 1,147,854  
Liabilities and Shareholders' Equity                
Liabilities:                
Notes payable   $ 298,564     $ 303,414  
Accounts payable and accrued liabilities     90,844       86,408  
Deferred income     49,709       39,219  
Deferred income taxes, net     206,664       194,629  
Total liabilities     645,781       623,670  
Shareholders’ equity:                
Common stock, no par value - Authorized 40,000 shares                
Issued and outstanding - 24,182 shares as of December 31, 2018 and 24,052 shares as of December 31, 2017     103,801       102,947  
Retained earnings     467,783       421,405  
Accumulated other comprehensive income (loss)     (49 )     (168 )
Total shareholders’ equity     571,535       524,184  
Total liabilities and shareholders’ equity   $ 1,217,316     $ 1,147,854  
                 
 


MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

    Year Ended December 31,  
(in thousands)   2018     2017  
Cash Flows from Operating Activities:                
Net income   $ 79,406     $ 153,920  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     81,975       78,416  
Impairment of rental assets     39       1,639  
Provision for doubtful accounts     581       1,480  
Share-based compensation     4,111       3,198  
Gain on sale of used rental equipment     (19,559 )     (17,733 )
Foreign currency exchange (gain) loss     489       (334 )
Amortization of debt issuance costs     20       50  
Change in:                
Accounts receivable     (15,725 )     (10,475 )
Prepaid expenses and other assets     (9,351 )     3,124  
Accounts payable and accrued liabilities     (1,612 )     4,015  
Deferred income     10,258       1,720  
Deferred income taxes     12,035       (96,631 )
Net cash provided by operating activities     142,667       122,389  
Cash Flows from Investing Activities:                
Purchases of rental equipment     (123,071 )     (94,579 )
Purchases of property, plant and equipment     (15,664 )     (14,617 )
Cash paid for acquisition of business assets     (7,543 )      
Proceeds from sales of used rental equipment     41,786       38,344  
Net cash used in investing activities     (104,492 )     (70,852 )
Cash Flows from Financing Activities:                
Net borrowings (repayments) under bank lines of credit     15,130       (2,902 )
Principal payments on Series A senior notes     (20,000 )     (20,000 )
Taxes paid related to net share settlement of stock awards     (3,257 )     (2,072 )
Payment of dividends     (30,939 )     (24,876 )
Net cash used in financing activities     (39,066 )     (49,850 )
Effect of foreign currency exchange rate changes on cash     (102 )     (38 )
Net increase (decrease) in cash     (993 )     1,649  
Cash balance, beginning of period     2,501       852  
Cash balance, end of period   $ 1,508     $ 2,501  
Supplemental Disclosure of Cash Flow Information:                
Interest paid, during the period   $ 12,598     $ 11,825  
Net income taxes paid, during the period   $ 18,157     $ 29,504  
Dividends accrued during the period, not yet paid   $ 8,388     $ 6,260  
Rental equipment acquisitions, not yet paid   $ 9,695     $ 6,405  
                 
 


MCGRATH RENTCORP 
BUSINESS SEGMENT DATA (unaudited) 
Three months ended December 31, 2018 
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 42,700     $ 24,018     $ 18,373     $     $ 85,091  
Rental related services     14,186       1,013       6,911             22,110  
  Rental operations     56,886       25,031       25,284             107,201  
Sales     8,773       6,493       415       9,215       24,896  
Other     302       606       110             1,018  
  Total revenues     65,961       32,130       25,809       9,215       133,115  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     5,359       9,475       4,018             18,852  
  Rental related services     10,670       742       5,482             16,894  
  Other     9,352       3,865       2,765             15,982  
  Total direct costs of rental operations     25,381       14,082       12,265             51,728  
Costs of  sales     6,345       3,430       520       5,989       16,284  
  Total costs of revenues     31,726       17,512       12,785       5,989       68,012  
                                         
Gross Profit (Loss)                                        
Rental     27,989       10,678       11,590             50,257  
Rental related services     3,516       271       1,429             5,216  
  Rental operations     31,505       10,949       13,019             55,473  
Sales     2,428       3,063       (105 )     3,226       8,612  
Other     302       606       110             1,018  
  Total gross profit     34,235       14,618       13,024       3,226       65,103  
Selling and administrative expenses     14,826       6,043       7,781       1,287       29,937  
Income from operations   $ 19,409     $ 8,575     $ 5,243     $ 1,939     $ 35,166  
Interest expense                                     (3,164 )
Foreign currency exchange gain                                     16  
Provision for income taxes                                     (7,769 )
  Net income                                   $ 24,249  
                                         
Other Information                                        
Average rental equipment 1   $ 770,355     $ 284,959     $ 311,815                  
Average monthly total yield 2     1.85 %     2.81 %     1.96 %                
Average utilization 3     79.2 %     63.1 %     61.0 %                
Average monthly rental rate 4     2.33 %     4.45 %     3.22 %                
 
  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 December 31, 2017 
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 37,661     $ 22,243     $ 17,801     $     $ 77,705  
Rental related services     12,165       763       6,553             19,481  
  Rental operations     49,826       23,006       24,354             97,186  
Sales     7,434       5,437       786       10,677       24,334  
Other     178       444       85             707  
  Total revenues     57,438       28,887       25,225       10,677       122,227  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     5,296       8,556       3,943             17,795  
  Rental related services     8,953       652       5,668             15,273  
  Other     12,000       3,546       3,132             18,678  
  Total direct costs of rental operations     26,249       12,754       12,743             51,746  
Costs of  sales     5,193       2,264       671       7,664       15,792  
  Total costs of revenues     31,442       15,018       13,414       7,664       67,538  
                                         
Gross Profit                                        
Rental     20,365       10,141       10,726             41,232  
Rental related services     3,212       111       885             4,208  
  Rental operations     23,577       10,252       11,611             45,440  
Sales     2,241       3,173       115       3,013       8,542  
Other     178       444       85             707  
  Total gross profit     25,996       13,869       11,811       3,013       54,689  
Selling and administrative expenses     13,426       5,696       7,687       1,094       27,903  
Income from operations   $ 12,570     $ 8,173     $ 4,124     $ 1,919       26,786  
Interest expense                                     (2,898 )
Foreign currency exchange gain                                     61  
Benefit for income taxes                                     93,775  
  Net income                                   $ 117,724  
                                         
Other Information                                        
Average rental equipment 1   $ 750,424     $ 260,324     $ 308,258                  
Average monthly total yield 2     1.67 %     2.85 %     1.92 %                
Average utilization 3     77.3 %     63.6 %     60.2 %                
Average monthly rental rate 4     2.16 %     4.48 %     3.20 %                
 
  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) 
Twelve months ended December 31, 2018 
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 159,136     $ 89,937     $ 69,701     $     $ 318,774  
Rental related services     54,696       3,300       24,911             82,907  
  Rental operations     213,832       93,237       94,612             401,681  
Sales     39,467       23,061       1,044       29,046       92,618  
Other     1,275       2,359       397             4,031  
  Total revenues     254,574       118,657       96,053       29,046       498,330  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     21,200       36,011       15,928             73,139  
  Rental related services     41,701       2,698       19,899             64,298  
  Other     42,812       14,699       11,167             68,678  
  Total direct costs of rental operations     105,713       53,408       46,994             206,115  
Costs of  sales     28,111       10,476       1,004       19,373       58,964  
  Total costs of revenues     133,824       63,884       47,998       19,373       265,079  
                                         
Gross Profit                                        
Rental     95,123       39,227       42,607             176,957  
Rental related services     12,995       602       5,012             18,609  
  Rental operations     108,118       39,829       47,619             195,566  
Sales     11,357       12,585       39       9,673       33,654  
Other     1,275       2,359       397             4,031  
  Total gross profit     120,750       54,773       48,055       9,673       233,251  
Selling and administrative expenses     58,017       22,823       30,026       4,904       115,770  
Income from operations   $ 62,733     $ 31,950     $ 18,029     $ 4,769     $ 117,481  
Interest expense                                     (12,297 )
Foreign currency exchange loss                                     (489 )
Provision for income taxes                                     (25,289 )
  Net income                                   $ 79,406  
                                         
Other Information                                        
Average rental equipment 1   $ 756,513     $ 275,891     $ 310,401                  
Average monthly total yield 2     1.75 %     2.72 %     1.87 %                
Average utilization 3     78.2 %     62.7 %     59.9 %                
Average monthly rental rate 4     2.24 %     4.33 %     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) 
Twelve months ended December 31, 2017 
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 142,584     $ 82,812     $ 64,021     $     $ 289,417  
Rental related services     50,448       2,858       24,762             78,068  
  Rental operations     193,032       85,670       88,783             367,485  
Sales     37,435       20,334       2,362       31,369       91,500  
Other     799       2,040       210             3,049  
  Total revenues     231,266       108,044       91,355       31,369       462,034  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     21,247       32,891       15,770             69,908  
  Rental related services     37,755       2,589       19,685             60,029  
  Other     41,290       13,503       10,679             65,472  
  Total direct costs of rental operations     100,292       48,983       46,134             195,409  
Costs of  sales     27,039       8,772       2,003       22,466       60,280  
  Total costs of revenues     127,331       57,755       48,137       22,466       255,689  
                                         
Gross Profit (Loss)                                        
Rental     80,048       36,418       37,572             154,038  
Rental related services     12,693       269       5,076             18,038  
  Rental operations     92,741       36,687       42,648             172,076  
Sales     10,395       11,562       360       8,903       31,220  
Other     799       2,040       210             3,049  
  Total gross profit     103,935       50,289       43,218       8,903       206,345  
Selling and administrative expenses     55,583       22,171       29,542       4,309       111,605  
Income from operations   $ 48,352     $ 28,118     $ 13,676     $ 4,594     $ 94,740  
Interest expense                                     (11,622 )
Foreign currency exchange gain                                     334  
Benefit for income taxes                                     70,468  
  Net income                                   $ 153,920  
                                         
Other Information                                        
Average rental equipment 1   $ 747,478     $ 252,332     $ 307,558                  
Average monthly total yield 2     1.59 %     2.74 %     1.73 %                
Average utilization 3     76.8 %     62.9 %     56.0 %                
Average monthly rental rate 4     2.07 %     4.35 %     3.10 %                
 
  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
December 31,
    Twelve Months Ended
December 31,
 
    2018     2017     2018     2017  
Net income   $ 24,249     $ 117,724     $ 79,406     $ 153,903  
Provision (benefit) for income taxes     7,769       (93,775 )     25,289       (70,451 )
Interest     3,164       2,898       12,297       11,622  
Depreciation and amortization     21,079       19,991       81,975       78,416  
EBITDA     56,261       46,838       198,967       173,490  
  Impairment of rental assets           1,639       39       1,639  
Share-based compensation     1,301       953       4,111       3,198  
Adjusted EBITDA 1   $ 57,562     $ 49,430     $ 203,117     $ 178,327  
Adjusted EBITDA margin 2     43 %     40 %     41 %     39 %
                                 
 


Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)   Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
    2018     2017     2018     2017  
Adjusted EBITDA 1   $ 57,562     $ 49,430     $ 203,117     $ 178,327  
Interest paid     (3,405 )     (3,262 )     (12,598 )     (11,825 )
Income taxes paid, net of refunds received     (2,102 )     (5,994 )     (18,157 )     (29,504 )
Gain on sale of used rental equipment     (4,515 )     (4,727 )     (19,559 )     (17,733 )
Foreign currency exchange loss (gain)     (16 )     (61 )     489       (334 )
Amortization of debt financing cost     2       12       20       50  
Change in certain assets and liabilities:                                
Accounts receivable, net     (5,927 )     1,541       (15,144 )     (8,995 )
Prepaid expenses and other assets     844       4,385       (9,351 )     3,124  
Accounts payable and other liabilities     1,867       2,893       3,592       7,559  
Deferred income     1,517       (2,969 )     10,258       1,720  
Net cash provided by operating activities   $ 45,827     $ 41,248     $ 142,667     $ 122,389  
                                 
 
  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   

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