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CST: 14/11/2019 23:21:54   

McGrath RentCorp Announces Results for Second Quarter 2019

107 Days ago

LIVERMORE, Calif., July 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 June 30, 2019 of $127.4 million, an increase of 9%, compared to the second quarter of 2018.  The Company reported net income of $19.5 million, or $0.79 per diluted share, for the second quarter of 2019, compared to net income of $15.9 million, or $0.65 per diluted share, for the second quarter of 2018. 

SECOND QUARTER 2019 COMPANY HIGHLIGHTS:

  • Income from operations increased 19% year-over-year to $29.1 million.

  • Rental revenues increased 14% year-over-year to $88.1 million.

  • Adjusted EBITDA1 increased 15% year-over-year to $52.4 million.   

  • Dividend rate increased 10% year-over-year to $0.375 per share for the second quarter of 2019.  On an annualized basis, this dividend represents a 2.3% yield on the July 29, 2019 close price of $64.80 per share.

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

“For the second quarter, each of our divisions continued to perform well as companywide rental revenues increased 14% and operating profit increased 19%.  Our $4.6 million operating profit growth was driven by a $6.2 million rental gross profit increase, that fully offset a $2.6 million sales gross profit decrease. We are pleased with the positive momentum in our business as we take advantage of favorable economic conditions and continue to implement our strategy of performance improvement. 

Mobile Modular rental revenues for the quarter increased 17% from a year ago, driven by improvement in average rental rates, a larger fleet and improved utilization.  Activity in each of our operating geographies was healthy in both commercial and education markets.  Portable Storage rental revenues grew by 16%.  Sales revenues decreased year over year, due primarily to project timing.

TRS-RenTelco rental revenues for the quarter increased 15%, primarily driven by higher average rental equipment and improved utilization.  Demand for both communications and general purpose test equipment has been healthy, including some increased initial activity related to 5G.

Adler Tank Rentals rental revenues for the quarter increased 6% from a year ago driven primarily by higher rental rates, partly offset by lower utilization.  Five of six industry vertical markets increased year-over-year on broad-based demand. 

The first half of the year is complete and we are pleased with the execution of our strategy.   At this time, our order backlogs and activity levels remain healthy. We enter the second half of 2019 on a positive note and upwardly revised financial outlook.  Our focus on performance improvement and prudent capital allocation continues.”

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 June 30, 2019 to the quarter ended June 30, 2018 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2019, the Company’s Mobile Modular division reported income from operations of $16.3 million, an increase of $4.5 million, or 38%.  Rental revenues increased 17% to $44.7 million, depreciation expense increased 4% to $5.5 million and other direct costs increased 15% to $14.3 million, which resulted in an increase in gross profit on rental revenues of 22% to $25.0 million.   Rental related services revenues increased 28% to $15.9 million, with associated gross profit increasing 47% to $4.2 million.  Sales revenues decreased 25% to $6.7 million while gross margin on sales increased to 37% from 35%, resulting in a 21% decrease in gross profit on sales revenues to $2.5 million.  Selling and administrative expenses increased 5% to $15.7 million, primarily due to higher allocated corporate expenses.

TRS-RENTELCO

For the second quarter of 2019, the Company’s TRS-RenTelco division reported income from operations of $8.7 million, an increase of $0.3 million, or 3%.  Rental revenues increased 15% to $25.5 million, depreciation expense increased 15% to $10.2 million and other direct costs increased 13% to $4.0 million, which resulted in a 16% increase in gross profit on rental revenues to $11.3 million.  Sales revenues decreased 22% to $5.3 million.  Gross margin on sales decreased to 51% from 58%, resulting in a 32% decrease in gross profit on sales revenues to $2.7 million.  Selling and administrative expenses increased 3% to $6.1 million, primarily due to increased salaries and employee benefit costs.

ADLER TANKS

For the second quarter of 2019, the Company’s Adler Tanks division reported income from operations of $4.8 million, an increase of $0.8 million, or 20%.  Rental revenues increased 6% to $17.9 million, depreciation expense increased 3% to $4.1 million and other direct costs increased 26% to $3.4 million, which resulted in an increase in gross profit on rental revenues of 1% to $10.3 million.  Rental related services revenues increased 29% to $7.7 million, with gross profit on rental related services increasing 71% to $2.0 million.  Selling and administrative expenses increased 5% to $7.8 million, primarily due to increased salaries and employee benefit costs.

FINANCIAL OUTLOOK:

Based upon the Company’s year-to-date results and current outlook for the remainder of the year, the Company is raising its financial outlook and expects its 2019 total operating profit to increase 9% to 14% above 2018 results, as compared to our prior expectation of a 5% to 10% increase.

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 July 1, 2019, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 30, 2019 to discuss the second 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 7257099.  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 positive momentum in the business as the Company takes advantage of favorable economic conditions, increased initial activity related to 5G at TRS-RenTelco, order backlogs and activity levels remain healthy, the focus on continuing performance improvement and prudent capital allocation, 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 and capital allocation 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   June 30,     Six   Months   Ended   June 30,  
(in thousands, except per share amounts) 2019     2018     2019     2018  
Revenues                              
Rental $ 88,105     $ 77,267     $ 170,801     $ 151,528  
Rental related services   24,467       19,086       45,922       36,917  
Rental operations   112,572       96,353       216,723       188,445  
Sales   13,707       19,546       30,532       31,637  
Other   1,160       1,084       2,192       1,986  
Total revenues   127,439       116,983       249,447       222,068  
Costs and Expenses                              
Direct costs of rental operations:                              
Depreciation of rental equipment   19,726       18,103       38,687       35,880  
Rental related services   18,137       15,018       34,500       28,786  
Other   21,741       18,753       41,474       35,022  
Total direct costs of rental operations   59,604       51,874       114,661       99,688  
Costs of sales   7,954       11,181       17,900       18,282  
Total costs of revenues   67,558       63,055       132,561       117,970  
Gross profit   59,881       53,928       116,886       104,098  
Selling and administrative expenses   30,815       29,479       60,510       57,607  
Income from operations   29,066       24,449       56,376       46,491  
Other income (expense):                              
Interest expense   (3,138 )     (2,999 )     (6,246 )     (5,991 )
Foreign currency exchange gain (loss)   37       (344 )     86       (376 )
Income before provision for income taxes   25,965       21,106       50,216       40,124  
Provision for income taxes   6,477       5,194       12,279       9,746  
Net income $ 19,488     $ 15,912     $ 37,937     $ 30,378  
Earnings per share:                              
Basic $ 0.80     $ 0.66     $ 1.57     $ 1.26  
Diluted $ 0.79     $ 0.65     $ 1.54     $ 1.24  
Shares used in per share calculation:                              
Basic   24,246       24,145       24,221       24,106  
Diluted   24,579       24,584       24,561       24,549  
Cash dividends declared per share $ 0.375     $ 0.340     $ 0.750     $ 0.680  
                               


MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

  June 30,     December 31,  
(in thousands) 2019     2018  
Assets              
Cash $ 1,496     $ 1,508  
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2019 and 2018   121,018       121,016  
Rental equipment, at cost:              
Relocatable modular buildings   854,076       817,375  
Electronic test equipment   307,639       285,052  
Liquid and solid containment tanks and boxes   315,571       313,573  
    1,477,286       1,416,000  
Less accumulated depreciation   (534,134 )     (514,985 )
Rental equipment, net   943,152       901,015  
Property, plant and equipment, net   126,906       126,899  
Prepaid expenses and other assets   53,062       31,816  
Intangible assets, net   6,807       7,254  
Goodwill   27,808       27,808  
Total assets $ 1,280,249     $ 1,217,316  
Liabilities and Shareholders' Equity              
Liabilities:              
Notes payable $ 301,878     $ 298,564  
Accounts payable and accrued liabilities   109,443       90,844  
Deferred income   66,618       49,709  
Deferred income taxes, net   210,001       206,664  
Total liabilities   687,940       645,781  
Shareholders’ equity:              
Common stock, no par value - Authorized 40,000 shares              
Issued and outstanding - 24,253 shares as of June 30, 2019 and 24,182 shares as of December 31, 2018   104,984       103,801  
Retained earnings   487,407       467,783  
Accumulated other comprehensive loss   (82 )     (49 )
Total shareholders’ equity   592,309       571,535  
Total liabilities and shareholders’ equity $ 1,280,249     $ 1,217,316  
               


MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

  Six Months Ended June 30,  
(in thousands) 2019     2018  
Cash Flows from Operating Activities:              
Net income $ 37,937     $ 30,378  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization   43,087       40,288  
Impairment of rental assets         39  
Provision for doubtful accounts   371       181  
Share-based compensation   2,746       1,828  
Gain on sale of used rental equipment   (9,168 )     (9,875 )
Foreign currency exchange (gain) loss   (86 )     376  
Amortization of debt issuance costs   5       15  
Change in:              
Accounts receivable   (373 )     596  
Prepaid expenses and other assets   (21,246 )     (14,938 )
Accounts payable and accrued liabilities   18,468       (365 )
Deferred income   16,909       4,854  
Deferred income taxes   3,337       388  
Net cash provided by operating activities   91,987       53,765  
Cash Flows from Investing Activities:              
Purchases of rental equipment   (90,701 )     (58,662 )
Purchases of property, plant and equipment   (3,961 )     (6,417 )
Proceeds from sales of used rental equipment   18,280       19,212  
Net cash used in investing activities   (76,382 )     (45,867 )
Cash Flows from Financing Activities:              
Net borrowings under bank lines of credit   3,309       31,431  
Principal payments on Series A senior notes         (20,000 )
Taxes paid related to net share settlement of stock awards   (1,563 )     (2,792 )
Payment of dividends   (17,337 )     (14,501 )
Net cash used in financing activities   (15,591 )     (5,862 )
Effect of foreign currency exchange rate changes on cash   (26 )     (53 )
Net increase (decrease) in cash   (12 )     1,983  
Cash balance, beginning of period   1,508       2,501  
Cash balance, end of period $ 1,496     $ 4,484  
Supplemental Disclosure of Cash Flow Information:              
Interest paid, during the period $ 6,210     $ 6,123  
Net income taxes paid, during the period $ 6,173     $ 11,675  
Dividends accrued during the period, not yet paid $ 9,163     $ 8,267  
Rental equipment acquisitions, not yet paid $ 8,930     $ 7,201  
               


                                       
MCGRATH RENTCORP                                      
BUSINESS SEGMENT DATA (unaudited)                                      
Three months ended June 30, 2019                                      
(dollar amounts in thousands) Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
Revenues                                      
Rental $ 44,737     $ 25,489     $ 17,879     $     $ 88,105  
Rental related services   15,901       854       7,712             24,467  
Rental operations   60,638       26,343       25,591             112,572  
Sales   6,725       5,317       593       1,072       13,707  
Other   359       650       151             1,160  
Total revenues   67,722       32,310       26,335       1,072       127,439  
                                       
Costs and Expenses                                      
Direct costs of rental operations:                                      
Depreciation   5,469       10,164       4,093             19,726  
Rental related services   11,728       686       5,723             18,137  
Other   14,282       4,018       3,441             21,741  
Total direct costs of rental operations   31,479       14,868       13,257             59,604  
Costs of  sales   4,257       2,617       415       665       7,954  
Total costs of revenues   35,736       17,485       13,672       665       67,558  
                                       
Gross Profit                                      
Rental   24,986       11,307       10,345             46,638  
Rental related services   4,173       168       1,989             6,330  
Rental operations   29,159       11,475       12,334             52,968  
Sales   2,468       2,700       178       407       5,753  
Other   359       650       151             1,160  
Total gross profit   31,986       14,825       12,663       407       59,881  
Selling and administrative expenses   15,677       6,093       7,814       1,231       30,815  
Income from operations $ 16,309     $ 8,732     $ 4,849     $ (824 )     29,066  
Interest expense                                   (3,138 )
Foreign currency exchange gain                                   37  
Provision for income taxes                                   (6,477 )
Net income                                 $ 19,488  
                                       
Other Information                                      
Average rental equipment 1 $ 786,512     $ 297,379     $ 313,552                  
Average monthly total yield 2   1.90 %     2.86 %     1.90 %                
Average utilization 3   79.2 %     67.2 %     57.5 %                
Average monthly rental rate 4   2.39 %     4.25 %     3.31 %                
  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 June 30, 2018                                      
(dollar amounts in thousands) Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
Revenues                                      
Rental $ 38,204     $ 22,165     $ 16,898     $     $ 77,267  
Rental related services   12,388       707       5,991             19,086  
Rental operations   50,592       22,872       22,889             96,353  
Sales   8,961       6,844       30       3,711       19,546  
Other   318       636       130             1,084  
Total revenues   59,871       30,352       23,049       3,711       116,983  
                                       
Costs and Expenses                                      
Direct costs of rental operations:                                      
Depreciation   5,273       8,866       3,964             18,103  
Rental related services   9,555       638       4,825             15,018  
Other   12,467       3,563       2,723             18,753  
Total direct costs of rental operations   27,295       13,067       11,512             51,874  
Costs of  sales   5,847       2,891       21       2,422       11,181  
Total costs of revenues   33,142       15,958       11,533       2,422       63,055  
                                       
Gross Profit                                      
Rental   20,463       9,736       10,212             40,411  
Rental related services   2,833       69       1,166             4,068  
Rental operations   23,296       9,805       11,378             44,479  
Sales   3,115       3,953       8       1,289       8,365  
Other   318       636       130             1,084  
Total gross profit   26,729       14,394       11,516       1,289       53,928  
Selling and administrative expenses   14,918       5,942       7,460       1,159       29,479  
Income from operations $ 11,811     $ 8,452     $ 4,056     $ 130       24,449  
Interest expense                                   (2,999 )
Foreign currency exchange loss                                   (344 )
Provision for income taxes                                   (5,194 )
Net income                                 $ 15,912  
                                       
Other Information                                      
Average rental equipment 1 $ 748,689     $ 274,317     $ 309,853                  
Average monthly total yield 2   1.70 %     2.69 %     1.82 %                
Average utilization 3   77.1 %     63.2 %     59.1 %                
Average monthly rental rate 4   2.21 %     4.26 %     3.08 %                
  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)                                      
Six months ended June 30, 2019                                      
(dollar amounts in thousands) Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
Revenues                                      
Rental $ 86,998     $ 49,112     $ 34,691     $     $ 170,801  
Rental related services   30,372       1,562       13,988             45,922  
Rental operations   117,370       50,674       48,679             216,723  
Sales   14,725       11,067       863       3,877       30,532  
Other   719       1,245       228             2,192  
Total revenues   132,814       62,986       49,770       3,877       249,447  
                                       
Costs and Expenses                                      
Direct costs of rental operations:                                      
Depreciation   10,877       19,684       8,126             38,687  
Rental related services   22,655       1,313       10,532             34,500  
Other   26,917       8,118       6,439             41,474  
Total direct costs of rental operations   60,449       29,115       25,097             114,661  
Costs of  sales   9,500       5,379       587       2,434       17,900  
Total costs of revenues   69,949       34,494       25,684       2,434       132,561  
                                       
Gross Profit                                      
Rental   49,204       21,310       20,126             90,640  
Rental related services   7,717       249       3,456             11,422  
Rental operations   56,921       21,559       23,582             102,062  
Sales   5,225       5,688       276       1,443       12,632  
Other   719       1,245       228             2,192  
Total gross profit   62,865       28,492       24,086       1,443       116,886  
Selling and administrative expenses   31,047       12,063       14,894       2,506       60,510  
Income (loss) from operations $ 31,818     $ 16,429     $ 9,192     $ (1,063 )     56,376  
Interest expense                                   (6,246 )
Foreign currency exchange gain                                   86  
Provision for income taxes                                   (12,279 )
Net income                                 $ 37,937  
                                       
Other Information                                      
Average rental equipment 1 $ 782,562     $ 291,590     $ 313,032                  
Average monthly total yield 2   1.85 %     2.81 %     1.85 %                
Average utilization 3   79.1 %     65.7 %     57.1 %                
Average monthly rental rate 4   2.34 %     4.27 %     3.23 %                
  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)                                      
Six months ended June 30, 2018                                      
(dollar amounts in thousands) Mobile
Modular
    TRS-
RenTelco
    Adler
Tanks
    Enviroplex     Consolidated  
Revenues                                      
Rental $ 75,231     $ 43,694     $ 32,603     $     $ 151,528  
Rental related services   24,322       1,514       11,081             36,917  
Rental operations   99,553       45,208       43,684             188,445  
Sales   13,554       12,019       335       5,729       31,637  
Other   615       1,163       208             1,986  
Total revenues   113,722       58,390       44,227       5,729       222,068  
                                       
Costs and Expenses                                      
Direct costs of rental operations:                                      
Depreciation   10,521       17,443       7,916             35,880  
Rental related services   18,574       1,259       8,953             28,786  
Other   22,798       7,067       5,157             35,022  
Total direct costs of rental operations   51,893       25,769       22,026             99,688  
Costs of  sales   8,779       5,379       289       3,835       18,282  
Total costs of revenues   60,672       31,148       22,315       3,835       117,970  
                                       
Gross Profit                                      
Rental   41,911       19,184       19,531             80,626  
Rental related services   5,748       255       2,128             8,131  
Rental operations   47,659       19,439       21,659             88,757  
Sales   4,776       6,640       45       1,894       13,355  
Other   615       1,163       208             1,986  
Total gross profit   53,050       27,242       21,912       1,894       104,098  
Selling and administrative expenses   28,930       11,560       14,658       2,459       57,607  
Income (loss) from operations $ 24,120     $ 15,682     $ 7,254     $ (565 )     46,491  
Interest expense                                   (5,991 )
Foreign currency exchange gain                                   (376 )
Provision for income taxes                                   (9,746 )
Net income                                 $ 30,378  
                                       
Other Information                                      
Average rental equipment 1 $ 747,614     $ 269,455     $ 308,171                  
Average monthly total yield 2   1.68 %     2.70 %     1.76 %                
Average utilization 3   77.3 %     62.8 %     56.8 %                
Average monthly rental rate 4   2.17 %     4.30 %     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
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
June 30,
  2019   2018   2019   2018   2019   2018
Net income $ 19,488     $ 15,912     $ 37,937     $ 30,378     $ 86,965     $ 164,864  
Provision (benefit) for income taxes   6,477       5,194       12,279       9,746       27,822       (73,455 )
Interest expense   3,138       2,999       6,246       5,991       12,552       11,875  
Depreciation and amortization   21,987       20,360       43,087       40,288       84,774       79,952  
EBITDA   51,090       44,465       99,549       86,403       212,113       183,236  
Impairment of rental assets                     39             1,678  
Share-based compensation   1,354       964       2,746       1,828       5,029       3,488  
Adjusted EBITDA 1 $ 52,444     $ 45,429     $ 102,295     $ 88,270     $ 217,142     $ 188,402  
Adjusted EBITDA margin 2   41 %     39 %     41 %     40 %     41 %     39 %
                                               


Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands) Three Months Ended
June 30,
  Six Months Ended
June 30,
  Twelve Months Ended
June 30,
  2019   2018   2019   2018   2019   2018
Adjusted EBITDA 1 $ 52,444     $ 45,429     $ 102,295     $ 88,270     $ 217,142     $ 188,402  
Interest paid   (3,382 )     (3,586 )     (6,210 )     (6,123 )     (12,685 )     (12,131 )
Income taxes paid, net of refunds received   (5,463 )     (10,103 )     (6,173 )     (11,675 )     (12,655 )     (23,038 )
Gain on sale of used rental equipment   (4,553 )     (6,027 )     (9,168 )     (9,875 )     (18,852 )     (19,694 )
Foreign currency exchange (gain) loss   (37 )     344       (86 )     376       27       279  
Amortization of debt issuance cost   2       2       5       15       10       40  
Change in certain assets and liabilities:                                              
Accounts receivable, net   (1,615 )     (7,003 )     (2 )     777       (15,923 )     (8,556 )
Prepaid expenses and other assets   (9,726 )     (11,635 )     (21,246 )     (14,938 )     (15,659 )     (2,975 )
Accounts payable and other liabilities   9,380       9,621       15,663       2,084       17,171       2,905  
Deferred income   8,431       5,571       16,909       4,854       22,313       1,540  
Net cash provided by operating activities $ 45,481     $ 22,613     $ 91,987     $ 53,765     $ 180,889     $ 126,772  
                                               
  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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