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McGrath RentCorp$59.28($.12)(.20%)

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 McGrath RentCorp Announces Results for Third Quarter 2017
   Tuesday, October 31, 2017 4:01:42 PM ET

McGrath RentCorp (MGRC ) (the "Company"), a diversified business to business rental company, today announced total revenues for the quarter ended September 30, 2017 of $135.4 million, an increase of 11%, compared to the third quarter of 2016. The Company reported net income of $16.8 million, or $0.69 per diluted share for the third quarter of 2017, compared to net income of $12.9 million, or $0.54 per diluted share, in the third quarter of 2016.

THIRD QUARTER 2017 Company HIGHLIGHTS:

-- Income from operations increased 25% year-over-year to $30.3 million.

-- Rental revenues increased 9% year-over-year to $73.8 million.

-- Adjusted EBITDA increased 12% to $50.7 million for the third quarter of 2017.

-- Dividend rate increased 2% year-over-year to $0.26 per share for the third quarter of 2017. On an annualized basis, this dividend represents a 2.3% yield on the October 30, 2017 close price of $44.46 per share.

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

"We were pleased with our third quarter performance. Mobile Modular, Adler Tank Rentals and TRS-RenTelco each delivered significant operating profit growth compared to a year ago, contributing to the Company’s 25% operating profit increase. Company operating profit growth was driven by a $6.8 million increase in gross profit from rental operations and a $1.1 million increase in sales gross profit also contributed to the strong results. Hurricanes Harvey and Irma had no material impact on our third quarter results.

Mobile Modular rental revenues for the quarter increased 9% from a year ago as rental rates and equipment on rent both increased, while average utilization declined slightly. Rental revenue growth continued to be healthy across commercial and education markets, as well as in our Portable Storage business.

TRS-RenTelco rental revenues for the quarter increased 3% as a result of higher general-purpose test equipment business activity. General-purpose test equipment rental revenues increased by 9%, but were partly offset by a 1% decrease for communications test equipment. While average equipment utilization increased, average rental rates declined for the quarter, primarily due to the business activity mix shift to general-purpose from communications test equipment.

Adler Tank Rentals rental revenues for the quarter increased 17% from a year ago. Rental revenue growth occurred across a broad mix of vertical markets, including upstream oil and natural gas, which increased from 9% to 10% of total Adler rental revenues. Average equipment on rent increased 16% to $176 million from $152 million a year ago, and average utilization increased to 57% from 49%. Despite ongoing competitive price pressure, average rental rates improved slightly as a result of product mix shifts.

Our third quarter results reflect some improvement in market conditions at Adler Tank Rentals and TRS-RenTelco. In addition we benefited from the various return on invested capital performance improvement initiatives across the business. We are also maintaining discipline on new rental equipment capital spending while selectively selling non-core equipment.

Based on our third quarter and year to date results, and our current outlook for the remainder of the year, we are raising our financial outlook and expect 2017 total Company operating profit to increase 15% to 18% above 2016, compared to our prior expectation of a 9% to 12% increase."

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization 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, 2017 to the quarter ended September 30, 2016 unless otherwise indicated.

MOBILE MODULAR

For the third quarter of 2017, the Company’s Mobile Modular division reported income from operations of $15.8 million, an increase of $3.1 million, or 25%. Rental revenues increased 9% to $36.2 million, depreciation expense was flat at $5.3 million and other direct costs increased 5% to $9.4 million, which resulted in an increase in gross profit on rental revenues of 14% to $21.6 million. Rental related services revenues increased 8% to $14.7 million, with associated gross profit increasing 27% to $3.7 million. Sales revenues increased 5% to $17.5 million and gross margin on sales increased to 27% compared to 25% in 2016, resulting in increased gross profit on sales revenues of $0.7 million, or 16%. Selling and administrative expenses increased 9% to $14.5 million, primarily due to increased salaries and employee benefit costs and higher allocated corporate expenses.

TRS-RENTELCO

For the third quarter of 2017, the Company’s TRS-RenTelco division reported income from operations of $7.1 million, an increase of $0.7 million, or 12%. Rental revenues increased 3% to $21.0 million, depreciation expense decreased 3% to $8.3 million and other direct costs decreased 5% to $3.4 million, which resulted in an increase in gross profit on rental revenues of 13% to $9.4 million. Sales revenues increased 3% to $4.9 million. Gross margin on sales decreased to 51% from 57% in 2016 primarily due to lower margins on used equipment sales, resulting in a 9% decrease in gross profit on sales revenues to $2.5 million. Selling and administrative expenses increased 7% to $5.5 million, primarily due to increased salaries and employee benefit costs.

ADLER TANKS

For the third quarter of 2017, the Company’s Adler Tanks division reported income from operations of $4.2 million, an increase of $1.6 million, or 60%. Rental revenues increased 17% to $16.5 million, depreciation expense decreased 1% to $3.9 million and other direct costs increased 19% to $2.6 million, which together resulted in an increase in gross profit on rental revenues of $1.9 million. Rental related services revenues increased 10% to $6.3 million, with gross profit on rental related services increasing 19% to $1.5 million. Selling and administrative expenses increased 10% to $7.3 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 2017 total Company operating profit to increase 15% to 18% above 2016, compared to our prior expectation of a 9% to 12% increase.

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company with four rental divisions. Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs in California, Texas, Florida, and the Mid-Atlantic from Washington D.C. to Georgia. TRS-RenTelco rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas. Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations serving key markets throughout the United States. Mobile Modular Portable Storage provides portable storage solutions in the California, Texas, Florida, Northern Illinois, New Jersey, North Carolina and Georgia markets. For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate - www.mgrc.com

Modular Buildings - www.mobilemodular.com

Electronic Test Equipment - www.trsrentelco.com

Tanks and Boxes - www.adlertankrentals.com

Portable Storage - www.mobilemodularcontainers.com

School Facilities Manufacturing - www.enviroplex.com

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

CONFERENCE CALL NOTE:

As previously announced in its press release of October 2, 2017, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 31, 2017 to discuss the third quarter 2017 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 www.mgrc.com. A 7-day replay will be available following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the call replay is 92731571. 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 http://www.mgrc.com/investors#events-archives .

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, the full year 2017 operating profit outlook in the CEO comments and "Financial Outlook" sections 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; the potential for continuing softness in communications test equipment rental demand in our electronics division; 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) 2017             2016                2017             2016
Revenues
Rental                                   $     73,781     $     67,757        $     211,712    $     201,036
Rental related services                        21,856           20,122              58,587           57,028
Rental operations                              95,637           87,879              270,299          258,064
Sales                                          38,684           33,486              67,166           58,916
Other                                          1,067            628                 2,342            1,817
Total revenues                                 135,388          121,993             339,807          318,797
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment               17,492           17,819              52,113           54,590
Rental related services                        16,611           16,026              44,756           44,428
Other                                          15,396           14,689              46,794           45,991
Total direct costs of rental operations        49,499           48,534              143,663          145,009
Costs of sales                                 27,114           23,026              44,488           38,944
Total costs of revenues                        76,613           71,560              188,151          183,953
Gross profit                                   58,775           50,433              151,656          134,844
Selling and administrative expenses            28,489           26,201              83,702           78,281
Income from operations                         30,286           24,232              67,954           56,563
Other income (expense):
Interest expense                               (2,986  )        (2,940    )         (8,724  )        (9,486  )
Foreign currency exchange gain (loss)          36               (15       )         273              59
Income before provision for income taxes       27,336           21,277              59,503           47,136
Provision for income taxes                     10,574           8,405               23,307           18,619
Net income                               $     16,762     $     12,872        $     36,196     $     28,517
Earnings per share:
Basic                                    $     0.70       $     0.54          $     1.51       $     1.19
Diluted                                  $     0.69       $     0.54          $     1.50       $     1.19
Shares used in per share calculation:
Basic                                          24,015           23,911              23,984           23,891
Diluted                                        24,228           24,041              24,201           23,957
Cash dividends declared per share        $     0.260      $     0.255         $     0.780      $     0.765
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                                                                                                            September 30,          December 31,
(in thousands)                                                                                              2017                   2016
Assets
Cash                                                                                                        $      1,369           $      852
Accounts receivable, net of allowance for doubtful accounts of $1,987 in 2017                                      107,413                96,877
and $2,087 in 2016
Rental equipment, at cost:
Relocatable modular buildings                                                                                      781,791                769,190
Electronic test equipment                                                                                          258,877                246,325
Liquid and solid containment tanks and boxes                                                                       309,825                308,542
                                                                                                                   1,350,493              1,324,057
Less accumulated depreciation                                                                                      (484,769  )            (467,686  )
Rental equipment, net                                                                                              865,724                856,371
Property, plant and equipment, net                                                                                 119,315                112,190
Prepaid expenses and other assets                                                                                  26,844                 25,583
Intangible assets, net                                                                                             7,942                  8,595
Goodwill                                                                                                           27,808                 27,808
Total assets                                                                                                $      1,156,415       $      1,128,276
Liabilities and Shareholders’ Equity
Liabilities:
Notes payable                                                                                               $      323,117         $      326,266
Accounts payable and accrued liabilities                                                                           81,765                 78,205
Deferred income                                                                                                    42,188                 37,499
Deferred income taxes, net                                                                                         296,563                292,019
Total liabilities                                                                                                  743,633                733,989
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,032 shares as of September 30, 2017 and 23,948  shares as of December 31, 2016         102,703                101,821
Retained earnings                                                                                                  310,210                292,521
Accumulated other comprehensive loss                                                                               (131      )            (55       )
Total shareholders’ equity                                                                                         412,782                394,287
Total liabilities and shareholders’ equity                                                                  $      1,156,415       $      1,128,276
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                                                             Nine Months Ended September 30,
(in thousands)                                               2017             2016
Cash Flows from Operating Activities :
Net income                                                   $     36,196     $     28,517
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization                                      58,425           61,528
Provision for doubtful accounts                                    1,155            1,366
Share-based compensation                                           2,245            2,327
Gain on sale of used rental equipment                              (13,006 )        (10,798 )
Foreign currency exchange gain                                     (273    )        (59     )
Amortization of debt issuance costs                                38               39
Change in:
Accounts receivable                                                (11,691 )        (10,107 )
Income taxes receivable                                            --               11,000
Prepaid expenses and other assets                                  (1,261  )        1,374
Accounts payable and accrued liabilities                           80               3,089
Deferred income                                                    4,689            5,191
Deferred income taxes                                              4,544            11,810
Net cash provided by operating activities                          81,141           105,277
Cash Flows from Investing Activities:
Purchases of rental equipment                                      (73,193 )        (64,349 )
Purchases of property, plant and equipment                         (12,784 )        (10,028 )
Proceeds from sales of used rental equipment                       28,478           24,037
Net cash used in investing activities                              (57,499 )        (50,340 )
Cash Flows from Financing Activities:
Net borrowings (repayments) under bank lines of credit             16,813           (16,034 )
Principal payments on Series A senior notes                        (20,000 )        (20,000 )
Proceeds from the exercise of stock options                        --               37
Taxes paid related to net share settlement of stock awards         (1,363  )        (589    )
Payment of dividends                                               (18,628 )        (18,349 )
Net cash used in financing activities                              (23,178 )        (54,935 )
Effect of foreign currency exchange rate changes on cash           53               (13     )
Net increase (decrease) in cash                                    517              (11     )
Cash balance, beginning of period                                  852              1,103
Cash balance, end of period                                  $     1,369      $     1,092
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period                             $     8,563      $     9,042
Net income taxes paid, during the period                     $     23,510     $     7,751
Dividends accrued during the period, not yet paid            $     5,979      $     6,144
Rental equipment acquisitions, not yet paid                  $     6,622      $     3,688
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2017
(dollar amounts in thousands)            Mobile         TRS-            Adler Tanks      Enviroplex     Consolidated
                                         Modular        RenTelco
Revenues
Rental                                   $   36,239     $    21,018     $     16,524     $     --       $      73,781
Rental related services                      14,729          783              6,344            --              21,856
Rental operations                            50,968          21,801           22,868           --              95,637
Sales                                        17,533          4,909            461              15,781          38,684
Other                                        386             594              87               --              1,067
Total revenues                               68,887          27,304           23,416           15,781          135,388
Costs and Expenses
Direct costs of rental operations:
Depreciation                                 5,285           8,264            3,943            --              17,492
Rental related services                      11,075          683              4,853            --              16,611
Other                                        9,396           3,352            2,648            --              15,396
Total direct costs of rental operations      25,756          12,299           11,444           --              49,499
Costs of  sales                              12,770          2,432            397              11,515          27,114
Total costs of revenues                      38,526          14,731           11,841           11,515          76,613
Gross Profit
Rental                                       21,558          9,402            9,933            --              40,893
Rental related services                      3,654           100              1,491            --              5,245
Rental operations                            25,212          9,502            11,424           --              46,138
Sales                                        4,763           2,477            64               4,266           11,570
Other                                        386             594              87               --              1,067
Total gross profit                           30,361          12,573           11,575           4,266           58,775
Selling and administrative expenses          14,540          5,456            7,327            1,166           28,489
Income  from operations                  $   15,821     $    7,117      $     4,248      $     3,100           30,286
Interest expense                                                                                               (2,986  )
Foreign currency exchange gain                                                                                 36
Provision for income taxes                                                                                     (10,574 )
Net income                                                                                              $      16,762
Other Information
Average rental equipment                 $   748,779    $    254,369    $     307,790
Average monthly total yield                  1.61    %       2.75    %        1.79    %
Average utilization                          76.3    %       63.4    %        57.1    %
Average monthly rental rate                  2.11    %       4.35    %        3.14    %

-- 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.

-- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.

-- 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.

-- 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, 2016
(dollar amounts in thousands)            Mobile         TRS-            Adler Tanks      Enviroplex     Consolidated
                                         Modular        RenTelco
Revenues
Rental                                   $   33,210     $    20,365     $     14,182     $     --       $      67,757
Rental related services                      13,697          655              5,770            --              20,122
Rental operations                            46,907          21,020           19,952           --              87,879
Sales                                        16,700          4,788            358              11,640          33,486
Other                                        82              509              37               --              628
Total revenues                               63,689          26,317           20,347           11,640          121,993
Costs and Expenses
Direct costs of rental operations:
Depreciation                                 5,295           8,553            3,971            --              17,819
Rental related services                      10,811          700              4,515            --              16,026
Other                                        8,949           3,524            2,216            --              14,689
Total direct costs of rental operations      25,055          12,777           10,702           --              48,534
Costs of  sales                              12,592          2,065            360              8,009           23,026
Total costs of revenues                      37,647          14,842           11,062           8,009           71,560
Gross Profit (Loss)
Rental                                       18,966          8,288            7,995            --              35,249
Rental related services                      2,886           (45     )        1,255            --              4,096
Rental operations                            21,852          8,243            9,250            --              39,345
Sales                                        4,108           2,723            (2      )        3,631           10,460
Other                                        82              509              37               --              628
Total gross profit                           26,042          11,475           9,285            3,631           50,433
Selling and administrative expenses          13,364          5,101            6,631            1,105           26,201
Income from operations                   $   12,678     $    6,374      $     2,654      $     2,526           24,232
Interest expense                                                                                               (2,940  )
Foreign currency exchange loss                                                                                 (15     )
Provision for income taxes                                                                                     (8,405  )
Net income                                                                                              $      12,872
Other Information
Average rental equipment                 $   729,943    $    251,786    $     307,621
Average monthly total yield                  1.52    %       2.70    %        1.54    %
Average utilization                          76.7    %       61.2    %        49.4    %
Average monthly rental rate                  1.98    %       4.41    %        3.11    %

-- 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.

-- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.

-- 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.

-- 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, 2017
(dollar amounts in thousands)            Mobile         TRS-            Adler Tanks      Enviroplex     Consolidated
                                         Modular        RenTelco
Revenues
Rental                                   $   104,923    $    60,569     $     46,220     $     --       $      211,712
Rental related services                      38,283          2,095            18,209           --              58,587
Rental operations                            143,206         62,664           64,429           --              270,299
Sales                                        30,001          14,897           1,576            20,692          67,166
Other                                        621             1,596            125              --              2,342
Total revenues                               173,828         79,157           66,130           20,692          339,807
Costs and Expenses
Direct costs of rental operations:
Depreciation                                 15,951          24,335           11,827           --              52,113
Rental related services                      28,802          1,937            14,017           --              44,756
Other                                        29,290          9,957            7,547            --              46,794
Total direct costs of rental operations      74,043          36,229           33,391           --              143,663
Costs of  sales                              21,846          6,508            1,332            14,802          44,488
Total costs of revenues                      95,889          42,737           34,723           14,802          188,151
Gross Profit
Rental                                       59,683          26,277           26,846           --              112,806
Rental related services                      9,481           158              4,191            --              13,830
Rental operations                            69,164          26,435           31,037           --              126,636
Sales                                        8,154           8,389            245              5,890           22,678
Other                                        621             1,596            125              --              2,342
Total gross profit                           77,939          36,420           31,407           5,890           151,656
Selling and administrative expenses          42,157          16,475           21,855           3,215           83,702
Income from operations                   $   35,782     $    19,945     $     9,552      $     2,675           67,954
Interest expense                                                                                               (8,724  )
Foreign currency exchange gain                                                                                 273
Provision for income taxes                                                                                     (23,307 )
Net income                                                                                              $      36,196
Other Information
Average rental equipment                 $   746,632    $    249,740    $     307,322
Average monthly total yield                  1.56    %       2.69    %        1.67    %
Average utilization                          76.6    %       62.8    %        54.7    %
Average monthly rental rate                  2.04    %       4.29    %        3.06    %

-- 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.

-- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.

-- 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.

-- 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, 2016
(dollar amounts in thousands)            Mobile         TRS-            Adler Tanks      Enviroplex     Consolidated
                                         Modular        RenTelco
Revenues
Rental                                   $   96,002     $    61,562     $     43,472     $     --       $      201,036
Rental related services                      37,034          2,156            17,838           --              57,028
Rental operations                            133,036         63,718           61,310           --              258,064
Sales                                        25,132          17,050           947              15,787          58,916
Other                                        284             1,441            92               --              1,817
Total revenues                               158,452         82,209           62,349           15,787          318,797
Costs and Expenses
Direct costs of rental operations:
Depreciation                                 15,642          26,939           12,009           --              54,590
Rental related services                      28,370          1,965            14,093           --              44,428
Other                                        28,501          10,500           6,990            --              45,991
Total direct costs of rental operations      72,513          39,404           33,092           --              145,009
Costs of  sales                              18,610          8,772            895              10,667          38,944
Total costs of revenues                      91,123          48,176           33,987           10,667          183,953
Gross Profit
Rental                                       51,860          24,122           24,473           --              100,455
Rental related services                      8,664           191              3,745            --              12,600
Rental operations                            60,524          24,313           28,218           --              113,055
Sales                                        6,521           8,279            52               5,120           19,972
Other                                        284             1,441            92               --              1,817
Total gross profit                           67,329          34,033           28,362           5,120           134,844
Selling and administrative expenses          38,162          16,444           20,786           2,889           78,281
Income from operations                   $   29,167     $    17,589     $     7,576      $     2,231           56,563
Interest expense                                                                                               (9,486  )
Foreign currency exchange gain                                                                                 59
Provision for income taxes                                                                                     (18,619 )
Net income                                                                                              $      28,517
Other Information
Average rental equipment                 $   719,206    $    255,896    $     307,669
Average monthly total yield                  1.48    %       2.67    %        1.57    %
Average utilization                          76.3    %       60.1    %        49.9    %
Average monthly rental rate                  1.94    %       4.44    %        3.15    %

-- 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.

-- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.

-- 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.

-- 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, 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            Nine Months Ended            Twelve Months Ended
                               September 30,                 September 30,                September 30,
                               2017            2016          2017           2016          2017             2016
Net income                     $   16,762      $   12,872    $  36,196      $  28,517     $   45,930       $   40,035
Provision for income taxes         10,574          8,405        23,307         18,619         33,368           25,624
Interest                           2,986           2,940        8,724          9,486          11,445           12,396
Depreciation and amortization      19,673          20,111       58,425         61,528         78,076           82,505
EBITDA                             49,995          44,328       126,652        118,150        168,819          160,560
Share-based compensation           707             741          2,245          2,327          3,009            2,863
Adjusted EBITDA                $   50,702      $   45,069    $  128,897     $  120,477    $   171,828      $   163,423
Adjusted EBITDA margin             37     %        37     %     38      %      38      %      39      %        39      %

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)              Three Months Ended             Nine Months Ended            Twelve Months Ended
                                           September 30,                  September 30,                September 30,
                                           2017             2016          2017           2016          2017             2016
Adjusted EBITDA                            $   50,702       $   45,069    $  128,897     $  120,477    $   171,828      $   163,423
Interest paid                                  (2,746  )        (2,396 )     (8,563  )      (9,042  )      (11,957 )        (11,859 )
Net income taxes paid                          (5,369  )        (2,072 )     (23,510 )      (7,751  )      (31,314 )        (8,009  )
Gain on sale of used rental equipment          (5,092  )        (4,516 )     (13,006 )      (10,798 )      (15,947 )        (13,634 )
Foreign currency exchange loss (gain)          (36     )        15           (273    )      (59     )      (93     )        (25     )
Amortization of debt financing cost            13               13           38             39             51               51
Change in certain assets and liabilities:
Accounts receivable, net                       (10,874 )        (8,144 )     (10,536 )      (8,741  )      (3,655  )        3,302
Income taxes receivable                    --               --            --                11,000     --               --
Prepaid expenses and other assets              7,578            4,237        (1,261  )      1,374          (686    )        1,379
Accounts payable and other liabilities         (2,089  )        (2,444 )     4,666          3,587          8,298            14,293
Deferred income                                (345    )        3,130        4,689          5,191          34               1,306
Net cash provided by operating activities  $   31,742       $   32,892    $  81,141      $  105,277    $   116,559      $   150,227

-- Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, and share-based compensation.

-- 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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