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CST: 21/11/2019 17:17:43   

McGrath RentCorp Announces Results for Third Quarter 2019

23 Days ago

LIVERMORE, Calif., Oct. 29, 2019 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended September 30, 2019 of $173.6 million, an increase of 21%, compared to the third quarter of 2018.  The Company reported net income of $32.5 million, or $1.32 per diluted share, for the third quarter of 2019, compared to net income of $24.8 million, or $1.01 per diluted share, for the third quarter of 2018. 

THIRD QUARTER 2019 COMPANY HIGHLIGHTS:

  • Income from operations increased 30% year-over-year to $46.7 million.
  • Rental revenues increased 11% year-over-year to $90.9 million.
  • Adjusted EBITDA1 increased 24% year-over-year to $70.8 million.   
  • Dividend rate increased 10% year-over-year to $0.375 per share for the third quarter of 2019.  On an annualized basis, this dividend represents a 2.1% yield on the October 28, 2019 close price of $69.99 per share.

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

“The third quarter underscored the benefit of our diverse portfolio as companywide total revenues increased 21%.  Mobile Modular, TRS-RenTelco, and Enviroplex delivered significant operating profit growth compared to a year ago, contributing to the Company’s overall 30% operating profit increase.  Our operating profit growth was driven by strong gross profit increases in both rental operations and sales.

Mobile Modular rental revenues for the quarter increased 13% from a year ago, driven by improvement in average rental rates, a larger fleet and improved utilization with equipment on rent increasing 7%.  Commercial and education rentals grew compared to a year ago, and reflected healthy overall business conditions.  Portable Storage rental revenues grew by 11%. 

TRS-RenTelco rental revenues for the quarter increased 21%, primarily driven by higher average rental equipment and improved utilization.  Demand for both general purpose and communications test equipment was healthy, as we serviced testing demand for both R&D needs as well as communications network upgrades.

Adler Tank Rentals rental revenues for the quarter decreased 8% from a year ago, driven primarily by lower utilization, partly offset by higher rental rates.  Weaker activity levels across multiple market segments contributed to a slower quarter compared to a year ago.

Sales revenues increased 41%, driven by seasonally strong demand for education projects at Enviroplex.

Our portfolio enabled us to deliver strong top line and operating profit growth despite softness in one of our businesses.  We remain positive about our overall momentum entering the fourth quarter.  Despite some economic uncertainty, many fundamentals remain healthy and our activity levels are good. We look forward to finishing 2019 on solid footing.”

____________

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

MOBILE MODULAR

For the third quarter of 2019, the Company’s Mobile Modular division reported income from operations of $22.2 million, an increase of $3.0 million, or 16%.  Rental revenues increased 13% to $46.7 million, depreciation expense increased 5% to $5.6 million and other direct costs increased 20% to $12.8 million, which resulted in an increase in gross profit on rental revenues of 12% to $28.4 million.   Rental related services revenues increased 39% to $22.6 million, with associated gross profit increasing 55% to $5.8 million.  Sales revenues decreased 3% to $16.7 million while gross margin on sales increased to 28% from 24%, resulting in a 13% increase in gross profit on sales revenues to $4.7 million.  Selling and administrative expenses increased 19% to $17.0 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.

TRS-RENTELCO

For the third quarter of 2019, the Company’s TRS-RenTelco division reported income from operations of $10.1 million, an increase of $2.4 million, or 32%.  Rental revenues increased 21% to $26.9 million, depreciation expense increased 19% to $10.8 million and other direct costs increased 9% to $4.1 million, which resulted in a 28% increase in gross profit on rental revenues to $12.0 million.  Sales revenues increased 25% to $5.7 million.  Gross margin on sales decreased to 60% from 63%, resulting in an 18% increase in gross profit on sales revenues to $3.4 million.  Selling and administrative expenses increased 16% to $6.0 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.

ADLER TANKS

For the third quarter of 2019, the Company’s Adler Tanks division reported income from operations of $5.1 million, a decrease of $0.4 million, or 7%.  Rental revenues decreased 8% to $17.2 million, depreciation expense increased 3% to $4.1 million and other direct costs decreased 15% to $2.8 million, which resulted in a decrease in gross profit on rental revenues of 10% to $10.3 million.  Rental related services revenues increased 7% to $7.4 million, with gross profit on rental related services increasing 28% to $1.9 million.  Selling and administrative expenses decreased 6% to $7.2 million, primarily due to decreased 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 15% to 19% above 2018 results, as compared to our prior expectation of a 9% to 14% 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 October 1, 2019, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 29, 2019 to discuss the third 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 8298548.  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 remaining positive about the Company’s overall momentum entering the fourth quarter, economic fundamentals remaining healthy with good activity levels, finishing 2019 on solid footing, as well as the updated 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   September   30,     Nine Months Ended September 30,  
(in thousands, except per share amounts)   2019     2018     2019     2018  
Revenues                                
Rental   $ 90,857     $ 82,155     $ 261,658     $ 233,683  
Rental related services     30,816       23,880       76,738       60,797  
Rental operations     121,673       106,035       338,396       294,480  
Sales     50,855       36,085       81,387       67,722  
Other     1,034       1,027       3,226       3,013  
    Total revenues     173,562       143,147       423,009       365,215  
Costs and Expenses                                
Direct costs of rental operations:                                
Depreciation of rental equipment     20,535       18,407       59,222       54,287  
Rental related services     23,007       18,618       57,507       47,404  
Other     19,654       17,674       61,128       52,696  
     Total direct costs of rental operations     63,196       54,699       177,857       154,387  
Costs of sales     32,084       24,398       49,984       42,680  
     Total costs of revenues     95,280       79,097       227,841       197,067  
         Gross profit     78,282       64,050       195,168       168,148  
Selling and administrative expenses     31,534       28,226       92,044       85,833  
Income from operations     46,748       35,824       103,124       82,315  
Other income (expense):                                
Interest expense     (3,161 )     (3,142 )     (9,407 )     (9,133 )
Foreign currency exchange loss     (132 )     (129 )     (46 )     (505 )
Income before provision for income taxes     43,455       32,553       93,671       72,677  
Provision for income taxes     10,987       7,774       23,266       17,520  
Net income   $ 32,468     $ 24,779     $ 70,405     $ 55,157  
Earnings per share:                                
Basic   $ 1.34     $ 1.03     $ 2.90     $ 2.29  
Diluted   $ 1.32     $ 1.01     $ 2.86     $ 2.25  
Shares used in per share calculation:                                
Basic     24,268       24,172       24,237       24,128  
Diluted     24,632       24,563       24,592       24,550  
Cash dividends declared per share   $ 0.375     $ 0.340     $ 1.125     $ 1.020  
                                 
                                 



MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

    September 30,     December 31,  
(in thousands)   2019     2018  
Assets                
Cash   $ 2,290     $ 1,508  
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2019 and 2018     138,114       121,016  
Rental equipment, at cost:                
Relocatable modular buildings     865,254       817,375  
Electronic test equipment     321,677       285,052  
Liquid and solid containment tanks and boxes     315,838       313,573  
      1,502,769       1,416,000  
Less accumulated depreciation     (544,159 )     (514,985 )
Rental equipment, net     958,610       901,015  
Property, plant and equipment, net     127,977       126,899  
Prepaid expenses and other assets     43,553       31,816  
Intangible assets, net     7,554       7,254  
Goodwill     28,125       27,808  
Total assets   $ 1,306,223     $ 1,217,316  
Liabilities and Shareholders' Equity                
Liabilities:                
Notes payable   $ 301,469     $ 298,564  
Accounts payable and accrued liabilities     111,320       90,844  
Deferred income     60,775       49,709  
Deferred income taxes, net     215,944       206,664  
Total liabilities     689,508       645,781  
Shareholders’ equity:                
Common stock, no par value - Authorized 40,000 shares                
Issued and outstanding - 24,285 shares as of September 30, 2019 and 24,182 shares as of December 31, 2018     106,033       103,801  
Retained earnings     510,702       467,783  
Accumulated other comprehensive loss     (20 )     (49 )
Total shareholders’ equity     616,715       571,535  
Total liabilities and shareholders’ equity   $ 1,306,223     $ 1,217,316  
                 
                 



MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

    Nine Months Ended September 30,  
(in thousands)   2019     2018  
Cash Flows from Operating Activities:                
Net income   $ 70,405     $ 55,157  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     65,960       60,896  
Impairment of rental assets           39  
Provision for doubtful accounts     655       297  
Share-based compensation     4,096       2,810  
Gain on sale of used rental equipment     (15,168 )     (15,044 )
Foreign currency exchange loss     46       505  
Amortization of debt issuance costs     8       18  
Change in:                
Accounts receivable     (16,929 )     (9,514 )
Prepaid expenses and other assets     (11,734 )     (10,195 )
Accounts payable and accrued liabilities     19,304       148  
Deferred income     10,946       8,741  
Deferred income taxes     9,280       2,982  
    Net cash provided by operating activities     136,869       96,840  
Cash Flows from Investing Activities:                
Purchases of rental equipment     (127,243 )     (84,658 )
Purchases of property, plant and equipment     (6,845 )     (12,521 )
Cash paid for acquisition of business assets     (7,401 )     (7,543 )
Proceeds from sales of used rental equipment     30,844       30,067  
     Net cash used in investing activities     (110,645 )     (74,655 )
Cash Flows from Financing Activities:                
Net borrowings under bank lines of credit     2,897       25,575  
Principal payments on Series A senior notes           (20,000 )
Taxes paid related to net share settlement of stock awards     (1,864 )     (3,004 )
Payment of dividends     (26,432 )     (22,719 )
     Net cash used in financing activities     (25,399 )     (20,148 )
Effect of foreign currency exchange rate changes on cash     (43 )     (139 )
     Net increase in cash     782       1,898  
Cash balance, beginning of period     1,508       2,501  
Cash balance, end of period   $ 2,290     $ 4,399  
Supplemental Disclosure of Cash Flow Information:                
Interest paid, during the period   $ 9,359     $ 9,193  
Net income taxes paid, during the period   $ 10,030     $ 16,055  
Dividends accrued during the period, not yet paid   $ 9,241     $ 8,349  
Rental equipment acquisitions, not yet paid   $ 9,450     $ 9,643  
                 
                 


                                         
MCGRATH RENTCORP   
BUSINESS SEGMENT DATA (unaudited)   
Three months ended September 30, 2019   
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler Tanks     Enviroplex     Consolidated  
Revenues                                        
Rental   $ 46,738     $ 26,938     $ 17,181     $     $ 90,857  
Rental related services     22,574       863       7,379             30,816  
  Rental operations     69,312       27,801       24,560             121,673  
Sales     16,676       5,678       140       28,361       50,855  
Other     314       611       109             1,034  
  Total revenues     86,302       34,090       24,809       28,361       173,562  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     5,572       10,849       4,114             20,535  
  Rental related services     16,799       695       5,513             23,007  
  Other     12,804       4,088       2,762             19,654  
  Total direct costs of rental operations     35,175       15,632       12,389             63,196  
Costs of  sales     11,963       2,277       126       17,718       32,084  
  Total costs of revenues     47,138       17,909       12,515       17,718       95,280  
                                         
Gross Profit                                        
Rental     28,362       12,001       10,305             50,668  
Rental related services     5,775       168       1,866             7,809  
  Rental operations     34,137       12,169       12,171             58,477  
Sales     4,713       3,401       14       10,643       18,771  
Other     314       611       109             1,034  
  Total gross profit     39,164       16,181       12,294       10,643       78,282  
Selling and administrative expenses     16,966       6,038       7,160       1,370       31,534  
Income from operations   $ 22,198     $ 10,143     $ 5,134     $ 9,273       46,748  
Interest expense                                     (3,161 )
Foreign currency exchange loss                                     (132 )
Provision for income taxes                                     (10,987 )
  Net income                                   $ 32,468  
                                         
Other Information                                        
Average rental equipment 1   $ 802,718     $ 314,428     $ 314,314                  
Average monthly total yield 2     1.94 %     2.86 %     1.82 %                
Average utilization 3     79.4 %     66.9 %     54.5 %                
Average monthly rental rate 4     2.45 %     4.27 %     3.34 %                
  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 September 30, 2018   
(dollar amounts in thousands)   Mobile
Modular
    TRS-
RenTelco
    Adler Tanks     Enviroplex     Consolidated  
Revenues                                        
Rental   $ 41,205     $ 22,225     $ 18,725     $     $ 82,155  
Rental related services     16,188       773       6,919             23,880  
  Rental operations     57,393       22,998       25,644             106,035  
Sales     17,140       4,549       294       14,102       36,085  
Other     358       590       79             1,027  
  Total revenues     74,891       28,137       26,017       14,102       143,147  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     5,320       9,093       3,994             18,407  
  Rental related services     12,457       697       5,464             18,618  
  Other     10,662       3,767       3,245             17,674  
  Total direct costs of rental operations     28,439       13,557       12,703             54,699  
Costs of  sales     12,987       1,667       195       9,549       24,398  
  Total costs of revenues     41,426       15,224       12,898       9,549       79,097  
                                         
Gross Profit                                        
Rental     25,223       9,365       11,486             46,074  
Rental related services     3,731       76       1,455             5,262  
  Rental operations     28,954       9,441       12,941             51,336  
Sales     4,153       2,882       99       4,553       11,687  
Other     358       590       79             1,027  
  Total gross profit     33,465       12,913       13,119       4,553       64,050  
Selling and administrative expenses     14,261       5,220       7,587       1,158       28,226  
Income from operations   $ 19,204     $ 7,693     $ 5,532     $ 3,395       35,824  
Interest expense                                     (3,142 )
Foreign currency exchange loss                                     (129 )
Provision for income taxes                                     (7,774 )
  Net income                                   $ 24,779  
                                         
Other Information                                        
Average rental equipment 1   $ 759,542     $ 280,377     $ 311,086                  
Average monthly total yield 2     1.81 %     2.64 %     2.01 %                
Average utilization 3     78.6 %     61.9 %     62.5 %                
Average monthly rental rate 4     2.30 %     4.27 %     3.21 %                
  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)                                        
Nine months ended September 30, 2019                                        
(dollar amounts in thousands)   Mobile Modular     TRS-RenTelco     Adler Tanks     Enviroplex     Consolidated  
Revenues                                        
Rental   $ 133,736     $ 76,050     $ 51,872     $     $ 261,658  
Rental related services     52,946       2,425       21,367             76,738  
  Rental operations     186,682       78,475       73,239             338,396  
Sales     31,401       16,745       1,003       32,238       81,387  
Other     1,033       1,856       337             3,226  
  Total revenues     219,116       97,076       74,579       32,238       423,009  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     16,449       30,533       12,240             59,222  
  Rental related services     39,454       2,008       16,045             57,507  
  Other     39,721       12,206       9,201             61,128  
  Total direct costs of rental operations     95,624       44,747       37,486             177,857  
Costs of  sales     21,463       7,656       713       20,152       49,984  
  Total costs of revenues     117,087       52,403       38,199       20,152       227,841  
                                         
Gross Profit                                        
Rental     77,566       33,311       30,431             141,308  
Rental related services     13,492       417       5,322             19,231  
  Rental operations     91,058       33,728       35,753             160,539  
Sales     9,938       9,089       290       12,086       31,403  
Other     1,033       1,856       337             3,226  
  Total gross profit     102,029       44,673       36,380       12,086       195,168  
Selling and administrative expenses     48,013       18,101       22,054       3,876       92,044  
Income from operations   $ 54,016     $ 26,572     $ 14,326     $ 8,210       103,124  
Interest expense                                     (9,407 )
Foreign currency exchange loss                                     (46 )
Provision for income taxes                                     (23,266 )
  Net income                                   $ 70,405  
                                         
Other Information                                        
Average rental equipment 1   $ 789,664     $ 299,210     $ 313,475                  
Average monthly total yield 2     1.88 %     2.82 %     1.84 %                
Average utilization 3     79.1 %     66.0 %     56.2 %                
Average monthly rental rate 4     2.38 %     4.28 %     3.27 %                
  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)   
Nine months ended September 30, 2018   
(dollar amounts in thousands)   Mobile Modular     TRS-RenTelco     Adler Tanks     Enviroplex     Consolidated  
Revenues                                        
Rental   $ 116,436     $ 65,919     $ 51,328     $     $ 233,683  
Rental related services     40,510       2,287       18,000             60,797  
  Rental operations     156,946       68,206       69,328             294,480  
Sales     30,694       16,568       629       19,831       67,722  
Other     973       1,753       287             3,013  
  Total revenues     188,613       86,527       70,244       19,831       365,215  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
  Depreciation     15,841       26,536       11,910             54,287  
  Rental related services     31,031       1,956       14,417             47,404  
  Other     33,460       10,834       8,402             52,696  
  Total direct costs of rental operations     80,332       39,326       34,729             154,387  
Costs of  sales     21,766       7,046       484       13,384       42,680  
  Total costs of revenues     102,098       46,372       35,213       13,384       197,067  
                                         
Gross Profit                                        
Rental     67,134       28,549       31,017             126,700  
Rental related services     9,479       331       3,583             13,393  
  Rental operations     76,613       28,880       34,600             140,093  
Sales     8,929       9,522       144       6,447       25,042  
Other     973       1,753       287             3,013  
  Total gross profit     86,515       40,155       35,031       6,447       168,148  
Selling and administrative expenses     43,191       16,780       22,245       3,617       85,833  
Income from operations   $ 43,324     $ 23,375     $ 12,786     $ 2,830       82,315  
Interest expense                                     (9,133 )
Foreign currency exchange loss                                     (505 )
Provision for income taxes                                     (17,520 )
  Net income                                   $ 55,157  
                                         
Other Information                                        
Average rental equipment 1   $ 752,076     $ 273,142     $ 309,943                  
Average monthly total yield 2     1.72 %     2.68 %     1.84 %                
Average utilization 3     77.8 %     62.4 %     59.8 %                
Average monthly rental rate 4     2.21 %     4.29 %     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.


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
September 30,
    Nine Months Ended
September 30,
    Twelve Months Ended
September 30,
 
    2019     2018     2019     2018     2019     2018  
Net income   $ 32,468     $ 24,779     $ 70,405     $ 55,157     $ 94,654     $ 172,881  
Provision (benefit) for income taxes     10,987       7,774       23,266       17,520       31,035       (76,255 )
Interest expense     3,161       3,142       9,407       9,133       12,571       12,031  
Depreciation and amortization     22,873       20,608       65,960       60,896       87,039       80,887  
EBITDA     69,489       56,303       169,038       142,706       225,299       189,544  
  Impairment of rental assets                       39             1,678  
Share-based compensation     1,350       982       4,096       2,810       5,397       3,763  
Adjusted EBITDA 1   $ 70,839     $ 57,285     $ 173,134     $ 145,555     $ 230,696     $ 194,985  
Adjusted EBITDA margin 2     41 %     40 %     41 %     40 %     41 %     40 %
                                                 


Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)   Three Months Ended
September 30,
    Nine Months Ended
September 30,
    Twelve Months Ended
September 30,
 
    2019     2018     2019     2018     2019     2018  
Adjusted EBITDA 1   $ 70,839     $ 57,285     $ 173,134     $ 145,555     $ 230,696     $ 194,985  
Interest paid     (3,149 )     (3,070 )     (9,359 )     (9,193 )     (12,764 )     (12,455 )
Income taxes paid, net of refunds received     (3,857 )     (4,380 )     (10,030 )     (16,055 )     (12,132 )     (22,049 )
Gain on sale of used rental equipment     (6,000 )     (5,169 )     (15,168 )     (15,044 )     (19,683 )     (19,771 )
Foreign currency exchange loss     132       129       46       505       30       444  
Amortization of debt issuance cost     3       3       8       18       10       30  
Change in certain assets and liabilities:                                                
Accounts receivable, net     (16,272 )     (9,994 )     (16,274 )     (9,217 )     (22,201 )     (7,676 )
Prepaid expenses and other assets     9,512       4,743       (11,734 )     (10,195 )     (10,890 )     (5,810 )
Accounts payable and other liabilities     (363 )     (359 )     15,300       1,725       17,167       4,618  
Deferred income     (5,963 )     3,887       10,946       8,741       12,463       5,772  
Net cash provided by operating activities   $ 44,882     $ 43,075     $ 136,869     $ 96,840     $ 182,696     $ 138,088  
                                                 
  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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