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McGrath RentCorp$66.60($.10)(.15%)

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 McGrath RentCorp Announces Results for First Quarter 2019
   Tuesday, April 30, 2019 4:01:00 PM ET

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

FIRST QUARTER 2019 COMPANY HIGHLIGHTS:

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

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

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

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

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

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

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

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



DIVISION HIGHLIGHTS:

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

MOBILE MODULAR

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

TRS-RENTELCO

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

ADLER TANKS

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

FINANCIAL OUTLOOK:

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

  

ABOUT MCGRATH RENTCORP:

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

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

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

 

CONFERENCE CALL NOTE:

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

FORWARD-LOOKING STATEMENTS:

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

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

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

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

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


MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

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


MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

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


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


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


Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

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

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

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

Reconciliation of Net Income to Adjusted EBITDA

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


Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

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

FOR INFORMATION CONTACT:    

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

mgrc-40year-logo-400x400.jpg

Source: McGrath RentCorp


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