McGrath RentCorp Announces Results for Fourth Quarter 2011

LIVERMORE, Calif.-( Business Wire )-

McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business to business rental company, today announced revenues for the quarter ended December 31, 2011 of $85.2 million, an increase of 7%, compared to $79.9 million in the fourth quarter of 2010. The Company reported net income of $13.2 million, or $0.53 per diluted share for the fourth quarter of 2011, compared to net income of $12.7 million, or $0.52 per diluted share, in the fourth quarter of 2010.

Total revenues for the year ended December 31, 2011 were $342.7 million, compared to $291.4 million in 2010. Rental revenues increased 17% to $234.9 million in 2011 compared to $200.6 million in 2010. Net income for the year ended December 31, 2011 increased 36% to $49.6 million, compared to net income of $36.5 million in the prior year. Diluted earnings per share increased 33% to $2.00 in 2011 from $1.50 in 2010.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.235 per share for the quarter ending March 31, 2012, an increase of 2% over the prior year period. On an annualized basis, the 2012 dividend represents a 2.9% yield, based on the February 28, 2012 closing stock price. The cash dividend will be payable on April 30, 2012 to all shareholders of record on April 16, 2012.

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

“Our Company-wide 14% increase in rental revenues for the quarter from a year ago reflects very favorable business activity and rental revenue increases in both our tank and electronics rental businesses.

Our tank and box division rental revenues increased 46% to $17.2 million for the quarter, from $11.7 million a year ago. The strong increase in rental revenues was directly related to higher business activity levels and continued expansion of Adler’s rental equipment inventory. Income from operations was up 63% from a year ago to $9.6 million, as the business further leveraged existing employee and facility infrastructure, and also benefited from its base of longer term rentals.

Our electronics division rental revenues for the quarter increased by $2.9 million, or 13%, to $25.3 million from a year ago. Income from operations increased by $1.3 million, or 18%, to $8.6 million. In addition to higher rental revenues, our electronics business also benefited from lower depreciation and laboratory costs as a percentage of rental revenues, as well as slightly higher gross profit on equipment sales from a year ago.

Modular division rental revenues for the fourth quarter decreased by $0.5 million, or 2%, to $20.3 million from a year ago. Rental revenues grew by 15% quarter over quarter in our markets outside of California; however, they declined by 12% within the state. California continues to be plagued by fiscal and budgetary challenges. Quarter over quarter income from operations decreased by 30% from a year ago to $6.1 million; however, modular rental operations gross profit declined only 7%, more closely in line with the reduction in rental revenue. The higher percentage reduction in income from operations was due primarily to higher SG&A expenses associated with the continued expansion of our portable storage rental business and divisional employee costs, as well as lower gross profit on equipment sales.

Our portable storage and environmental test equipment businesses both continued to make good progress in their market penetration, booking levels, and rental revenue growth during the quarter. We continue to work hard to grow both of these initiatives.

During 2011, we had a net addition of over $101 million in original cost of rental assets. These rental products are primarily for the growth of Adler Tank Rentals, and for our test equipment and portable storage businesses. I am very pleased to share that McGrath RentCorp achieved a key milestone in January, 2012, in reaching $1.0 billion in original cost of rental equipment under management. Overall, McGrath RentCorp’s 33% increase in EPS for 2011 over 2010 validates the strategy and prudency of a platform of diverse rental products and geographies.”

All comparisons presented below are for the quarter ended December 31, 2011 to the quarter ended December 31, 2010 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2011, the Company’s Mobile Modular division reported a 30% decrease in income from operations to $6.1 million. Rental revenues decreased 2% to $20.3 million and other direct costs increased 2% to $4.7 million, which resulted in a decrease in gross profit on rental revenues of 5% to $12.1 million. Sales revenues decreased 34% to $3.6 million, with gross profit on sales revenues decreasing 42% to $0.9 million due to lower used equipment sales revenues in the fourth quarter of 2011. Selling and administrative expenses increased 15% to $8.1 million, primarily as a result of increased investment in our portable storage growth initiative.

TRS-RENTELCO

For the fourth quarter of 2011, the Company’s TRS-RenTelco division reported an 18% increase in income from operations to $8.6 million. Rental revenues increased 13% to $25.3 million, which together with flat depreciation expense of $9.5 million and other direct costs increasing from $3.3 million to $3.4 million, resulted in an increase in gross profit on rental revenues of 28% to $12.5 million. Sales revenues increased 2% to $7.1 million, with gross profit on sales increasing 4% to $2.8 million, primarily due to higher gross margins on used equipment sales revenues in the fourth quarter of 2011. Selling and administrative expenses increased 24% to $7.0 million, primarily due to increased salary and benefits costs.

ADLER TANKS

For the fourth quarter of 2011, the Company’s Adler Tanks division reported a 63% increase in income from operations to $9.6 million. Rental revenues increased 46% to $17.2 million, which resulted in an increase in gross profit on rental revenues of 56% to $13.4 million. Rental related services revenues increased 46% to $3.8 million, with gross profit on rental related services revenues doubling to $1.2 million. Selling and administrative expenses increased 46% to $5.0 million, primarily due to increased personnel and benefits costs and bad debt expenses.

OTHER FOURTH QUARTER HIGHLIGHTS

  • Debt increased $6.9 million during the quarter to $296.5 million, with the Company’s funded debt (notes payable) to equity ratio decreasing from 0.90 to 1 at September 30, 2011 to 0.89 to 1 at December 31, 2011. As of December 31, 2011, the Company had capacity to borrow an additional $158.5 million under its lines of credit.
  • Dividend rate increased 2% to $0.23 per share for the fourth quarter 2011 compared to the fourth quarter 2010. On an annualized basis, this dividend represents a 2.8% yield on the February 28, 2012 close price of $32.37.
  • Adjusted EBITDA increased 8% to $42.5 million for the fourth quarter of 2011. At December 31, 2011, the Company’s ratio of funded debt to the last twelve months actual Adjusted EBITDA was 1.84 to 1 compared to 2.01 to 1 at December 31, 2010. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and other non-cash stock-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.

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

FINANCIAL GUIDANCE

The Company expects 2012 full-year earnings per share to be in a range of $2.02 to $2.12 per diluted share.

In 2012, the Company expects approximately 8% to 10% growth in rental operations revenues over 2011 and sales revenues comparable to 2011. The Company expects strongest revenue growth in Adler Tanks. However, a significant level of uncertainty remains in the California modular rental market. Rental equipment depreciation expense is expected to increase to $65 to $66 million, driven by rental fleet growth. Selling and administrative costs are expected to increase to approximately $84 to $86 million to support business growth, and continued investment in Adler Tanks and our portable storage initiative. Full year interest expense is forecasted to be approximately $9 million. The Company expects the 2012 effective tax rate to be 39.2% and the diluted share count to increase to approximately 25.3 to 25.7 million shares. These forward-looking statements reflect McGrath RentCorp’s expectations as of February 29, 2012. Actual 2012 full-year earnings per share results may be materially different and affected by many factors, including those factors outlined in the “forward-looking statements” paragraph at the end of this press release.

ABOUT MCGRATH RENTCORP

Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company. Under the trade name Mobile Modular Management Corporation (Mobile Modular), it rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs in California, Texas, Florida, North Carolina, Georgia, Maryland, Virginia and Washington, D.C. The Company’s TRS-RenTelco division rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas. In 2008, the Company purchased the assets of Adler Tank Rentals, a New Jersey based supplier of rental containment solutions for hazardous and nonhazardous liquids and solids with operations today in the Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West. Also, in 2008, under the trade name TRS-Environmental, the Company entered the environmental test equipment rental business serving the Americas. In 2008, the Company also entered the portable storage container rental business in Northern California under the trade name Mobile Modular Portable Storage, and in 2009 expanded this business into Southern California, Texas and Florida. For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.com

Tanks and Boxes – www.AdlerTankRentals.com

Modular Buildings – www.MobileModularRents.com

Portable Storage – www.MobileModularRents-PortableStorage.com

Electronic Test Equipment – www.TRS-RenTelco.com

Environmental Test Equipment – www.TRS-Environmental.com

School Facilities Manufacturing – www.Enviroplex.com

CONFERENCE CALL NOTE

As previously announced in its press release of February 8, 2012, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 29, 2012 to discuss the fourth quarter 2011 results. To participate in the teleconference, dial 1-877-941-1427 (in the U.S.), or 1-480-629-9664 (outside the US), or visit the investor relations section of the Company’s website at www.mgrc.com. Telephone replay of the call will be available for 7 days following the call by dialing 1-800-406-7325 (in the U.S.), or 1-303-590-3030 (outside the U.S.). The pass code for the call replay is 4503262.

FORWARD-LOOKING STATEMENTS

Statements in this press release which are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, regarding McGrath RentCorp’s business strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, plans and objectives are forward looking statements. These forward-looking statements appear in a number of places and can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “hopes,” “goals” or “certain” or the negative of these terms or other variations or comparable terminology. In particular, the statements made in this press release about the following topics are forward looking statements: fiscal and budgetary challenges in California; continued expansion of our portable storage rental business and environmental test equipment business; continued expansion of Adler Tank's rental equipment inventory; increased investment in our portable storage growth initiative; and our statements under the heading “Financial Guidance.”

Management cautions that forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements including, without limitation, the following: the continuation of the current recession and financial, budget and credit crises, particularly in California, including the impact on funding for school facility projects and residential and commercial construction sectors, our customers’ need and ability to rent our products, and the Company’s ability to access additional capital in the current uncertain capital and credit market; changes in state funding for education and the timing and impact of federal stimulus monies; the effectiveness of management’s strategies and decisions, general economic, stock market and business conditions, including in the states and countries where we sell or rent our products; continuing demand for our products; hiring, retention and motivation of key personnel; failure by third parties to manufacture and deliver our products in a timely manner and to our specifications; the cost of and our ability to successfully implement information system upgrades; our ability to finance expansion and to locate and consummate acquisitions and to successfully integrate and operate Adler Tanks and other acquisitions; fluctuations in interest rates and the Company’s ability to manage credit risk; our ability to effectively manage our rental assets; the risk that we may be subject to litigation under environmental, health and safety and product liability laws and claims from employees, vendors and other third parties; fluctuations in the Company’s effective tax rate; changes in financial accounting standards; our failure to comply with internal control requirements; catastrophic loss to our facilities; effect on the Company’s Adler Tanks business from reductions to the price of oil or gas; new or modified statutory or regulatory requirements; success of the Company’s strategic growth initiatives; risks associated with doing business with government entities; seasonality of our businesses; intense industry competition including increasing price pressure; our ability to timely deliver, install and redeploy our rental products; significant increases in raw materials, labor, and other costs; and risks associated with operating internationally, including unfavorable exchange rates for the U.S. dollar against our Canadian dollar denominated revenues.

Our future business, financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties including the risks set forth above, those discussed in our Form 10-K for the year ended December 31, 2011 which is expected to be filed with the SEC on February 29, 2012, and those that may be identified from time to time in our reports and registration statements filed with the SEC. Forward-looking statements are made only as of the date of this press release and are based on management’s reasonable assumptions; however, these assumptions can be wrong or affected by known or unknown risks and uncertainties. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. Except as otherwise required by law, we do not undertake any duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results or to changes in our expectations.

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

               

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

(in thousands, except per share amounts)   2011     2010   2011     2010
   
REVENUES
Rental $ 62,798 $ 54,957 $ 234,906 $ 200,615
Rental Related Services   10,870   8,984   39,486   34,702
Rental Operations 73,668 63,941 274,392 235,317
Sales 11,176 15,520 66,382 54,055
Other   362   482   1,896   2,028
Total Revenues   85,206   79,943   342,670   291,400
 
COSTS AND EXPENSES
Direct Costs of Rental Operations
Depreciation of Rental Equipment 15,393 14,734 60,187 56,399
Rental Related Services 8,491 6,821 30,692 26,542
Other   9,380   9,161   39,859   40,007
Total Direct Costs of Rental Operations 33,264 30,716 130,738 122,948
Costs of Sales   7,749   10,772   45,141   37,637
Total Costs of Revenues   41,013   41,488   175,879   160,585
Gross Profit 44,193 38,455 166,791 130,815
Selling and Administrative Expenses   20,843   16,650   78,127   65,579
Income from Operations 23,350 21,805 88,664 65,236
Interest Expense   2,119   1,539   7,606   6,186
Income Before Provision for Income Taxes 21,231 20,266 81,058 59,050
Provision for Income Taxes   8,004   7,523   31,456   22,571
Net Income $ 13,227 $ 12,743 $ 49,602 $ 36,479
 
Earnings Per Share:
Basic $ 0.54 $ 0.53 $ 2.04 $ 1.52
Diluted $ 0.53 $ 0.52 $ 2.00 $ 1.50
Shares Used in Per Share Calculation:
Basic 24,431 24,085 24,349 23,944
Diluted 24,892 24,500 24,760 24,289
 
Cash Dividends Declared Per Share $ 0.230 $ 0.225 $ 0.920 $ 0.900

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

December 31,   December 31,
(in thousands)   2011     2010  
 
ASSETS
Cash $ 1,229 $ 990
Accounts Receivable, net of allowance for doubtful
accounts of $1,500 in 2011 and $1,700 in 2010 92,671 76,488
Income Taxes Receivable 6,131
 
Rental Equipment, at cost:
Relocatable Modular Buildings 539,147 514,548
Electronic Test Equipment 258,586 250,125
Liquid and Solid Containment Tanks and Boxes   201,456     133,095  
999,189 897,768
Less Accumulated Depreciation   (326,043 )   (306,188 )
Rental Equipment, net   673,146     591,580  
 
Property, Plant and Equipment, net 94,702 83,861
Prepaid Expenses and Other Assets 17,170 13,944
Intangible Assets, net 12,311 12,868
Goodwill   27,700     27,700  
Total Assets $ 918,929   $ 813,562  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes Payable $ 296,500 $ 265,640
Accounts Payable and Accrued Liabilities 58,854 49,612
Deferred Income 25,067 23,790
Deferred Income Taxes, net   205,366     179,543  
Total Liabilities   585,787     518,585  
 
Shareholders’ Equity:
Common Stock, no par value -
Authorized -- 40,000 shares
Issued and Outstanding -- 24,576 shares in 2011 and
24,235 shares in 2010 74,878 63,623
Retained Earnings   258,264     231,354  
Total Shareholders’ Equity   333,142     294,977  
Total Liabilities and Shareholders’ Equity $ 918,929   $ 813,562  

MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Year Ended December 31,
(in thousands)   2011       2010  
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 49,602 $ 36,479
Adjustments to Reconcile Net Income to Net Cash Provided

by Operating Activities:

Depreciation and Amortization 67,395 62,577
Provision for Doubtful Accounts 1,755 1,494
Non-Cash Stock-Based Compensation 5,221 4,227
Gain on Sale of Used Rental Equipment (12,444 ) (11,728 )
Change In:
Accounts Receivable (17,938 ) (7,385 )
Income Taxes Receivable 6,131 120
Prepaid Expenses and Other Assets (3,226 ) 296
Accounts Payable and Accrued Liabilities 5,715 3,399
Deferred Income 1,277 (954 )
Deferred Income Taxes   25,823     12,073  
Net Cash Provided by Operating Activities   129,311     100,598  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments related to Acquisition of Adler Tanks (39 )
Purchase of Rental Equipment (154,963 ) (122,749 )
Purchase of Property, Plant and Equipment (17,204 ) (12,144 )
Proceeds from Sale of Used Rental Equipment   28,453     28,694  
Net Cash Used in Investing Activities   (143,714 )   (106,238 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Payments) Under Bank Lines of Credit (57,140 ) 30,306
Borrowings Under Private Placement 100,000
Principal Payments on Senior Notes (12,000 ) (12,000 )
Proceeds from the Exercise of Stock Options 5,054 7,506
Excess Tax Benefit from Equity Awards 980 1,021
Payment of Dividends   (22,252 )   (21,390 )
Net Cash Provided by Financing Activities   14,642     5,443  
 
Net Increase (Decrease) in Cash 239 (197 )
Cash Balance, beginning of period   990     1,187  
Cash Balance, end of period $ 1,229   $ 990  
 
Interest Paid, during the period $ 6,877   $ 6,306  
Net Income Taxes Paid (Refunds Received), during the period $ (1,480 ) $ 9,342  
Dividends Accrued $ 5,952   $ 5,513  
Rental Equipment Acquisitions, not yet paid $ 8,186   $ 5,388  

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Three Months Ended December 31, 2011

       

 

(dollar amounts in thousands)

Mobile

Modular

 

TRS-

RenTelco

 

Adler

Tanks

 

Enviroplex

 

Consolidated

Revenues
Rental $ 20,280 $ 25,324 $ 17,194 $ $ 62,798
Rental Related Services   6,177       860       3,833             10,870
Rental Operations 26,457 26,184 21,027 73,668
Sales 3,631 7,131 41 373 11,176
Other   111       208       43             362
Total Revenues   30,199       33,523       21,111       373       85,206
 
Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 3,474 9,478 2,441 15,393
Rental Related Services 5,047 834 2,610 8,491
Other   4,677       3,370       1,333             9,380
Total Direct Costs of Rental Operations 13,198 13,682 6,384 33,264
Costs of Sales   2,778       4,333       161       477       7,749
Total Costs of Revenues   15,976       18,015       6,545       477       41,013
 
Gross Profit (Loss)
Rental 12,129 12,476 13,420 38,025
Rental Related Services   1,130       26       1,223             2,379
Rental Operations 13,259 12,502 14,643 40,404
Sales 853 2,798 (120 ) (104 ) 3,427
Other   111       208       43             362
Total Gross Profit 14,223 15,508 14,566 (104 ) 44,193
Selling and Administrative Expenses   8,104       6,955       4,994       790       20,843
Income (Loss) from Operations $ 6,119     $ 8,553     $ 9,572     $ (894 ) 23,350
Interest Expense 2,119
Provision for Income taxes   8,004
Net Income $ 13,227
 
Other Information
Average Rental Equipment 1 $ 512,757 $ 264,840 $ 184,365
Average Monthly Total Yield 2 1.32 % 3.19 % 3.11 %
Average Utilization 3 67.1 % 67.7 % 86.8 %
Average Monthly Rental Rate 4 1.96 % 4.71 % 3.58 %
  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 cost of Average Rental Equipment on rent by the

    total cost of Average Rental Equipment.
  4. Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by

    the cost of rental equipment on rent, for the period.

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Three Months Ended December 31, 2010

       

 

(dollar amounts in thousands)

Mobile

Modular

 

TRS-

RenTelco

 

Adler

Tanks

 

Enviroplex

 

Consolidated

Revenues
Rental $ 20,759 $ 22,457 $ 11,741 $ $ 54,957
Rental Related Services   5,741       618       2,625           8,984
Rental Operations 26,500 23,075 14,366 63,941
Sales 5,543 6,997 150 2,830 15,520
Other   87       378       17           480
Total Revenues   32,130       30,450       14,533       2,830     79,943
 
Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 3,443 9,490 1,801 14,734
Rental Related Services 4,256 547 2,018 6,821
Other   4,584       3,250       1,327           9,161
Total Direct Costs of Rental Operations 12,283 13,287 5,146 30,716
Costs of Sales   4,071       4,319       106       2,276     10,772
Total Costs of Revenues   16,354       17,606       5,252       2,276     41,488
 
Gross Profit (Loss)
Rental 12,732 9,717 8,613 31,062
Rental Related Services   1,485       71       607           2,163
Rental Operations 14,217 9,788 9,220 33,225
Sales 1,472 2,678 44 554 4,748
Other   87       378       17           482
Total Gross Profit 15,776 12,844 9,281 554 38,455
Selling and Administrative Expenses   7,070       5,623       3,411       546     16,650
Income from Operations $ 8,706     $ 7,221     $ 5,870     $ 8 21,805
Interest Expense 1,539
Provision for Income taxes   7,523
Net Income $ 12,743
 
Other Information
Average Rental Equipment 1 $ 496,397 $ 250,651 $ 122,964
Average Monthly Total Yield 2 1.39 % 2.99 % 3.18 %
Average Utilization 3 67.4 % 66.2 % 81.8 %
Average Monthly Rental Rate 4 2.07 % 4.51 % 3.89 %
  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 cost of Average Rental Equipment on rent by the

    total cost of Average Rental Equipment.
  4. Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by

    the cost of rental equipment on rent, for the period.

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Twelve Months Ended December 31, 2011

       

 

(dollar amounts in thousands)

Mobile

Modular

 

TRS-

RenTelco

 

Adler

Tanks

 

Enviroplex

 

Consolidated

Revenues
Rental $ 79,969 $ 95,694 $ 59,243 $ $ 234,906
Rental Related Services   24,063       3,133       12,290           39,486
Rental Operations 104,032 98,827 71,533 274,392
Sales 20,152 25,164 278 20,788 66,382
Other   425       1,324       147           1,896
Total Revenues   124,609       125,315       71,958       20,788     342,670
 
Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 13,780 38,039 8,368 60,187
Rental Related Services 18,835 2,848 9,009 30,692
Other   21,940       13,272       4,647           39,859
Total Direct Costs of Rental Operations 54,555 54,159 22,024 130,738
Costs of Sales   14,861       14,087       315       15,878     45,141
Total Costs of Revenues   69,416       68,246       22,339       15,878     175,879
 
Gross Profit (Loss)
Rental 44,249 44,383 46,228 134,860
Rental Related Services   5,228       285       3,281           8,794
Rental Operations 49,477 44,668 49,509 143,654
Sales 5,291 11,077 (37 ) 4,910 21,241
Other   425       1,324       147           1,896
Total Gross Profit 55,193 57,069 49,619 4,910 166,791
Selling and Administrative Expenses   32,131       25,921       16,698       3,377     78,127
Income from Operations $ 23,062     $ 31,148     $ 32,921     $ 1,533   88,664
Interest Expense 7,606
Provision for Income taxes   31,456
Net Income $ 49,602
 
Other Information
Average Rental Equipment 1 $ 504,276 $ 258,995 $ 157,917
Average Monthly Total Yield 2 1.32 % 3.08 % 3.13 %
Average Utilization 3 67.1 % 66.0 % 86.2 %
Average Monthly Rental Rate 4 1.97 % 4.66 % 3.63 %
  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 cost of Average Rental Equipment on rent by the

    total cost of Average Rental Equipment.
  4. Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by the

    cost of rental equipment on rent, for the period.

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Twelve Months Ended December 31, 2010

       

 

(dollar amounts in thousands)

Mobile

Modular

 

TRS-

RenTelco

 

Adler

Tanks

 

Enviroplex

 

Consolidated

Revenues
Rental $ 82,648 $ 82,540 $ 35,427 $ $ 200,615
Rental Related Services   22,947       2,240       9,515           34,702
Rental Operations 105,595 84,780 44,942 235,317
Sales 20,685 21,443 232 11,695 54,055
Other   432       1,539       57           2,028
Total Revenues   126,712       107,762       45,231       11,695     291,400
 
Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 13,734 37,017 5,648 56,399
Rental Related Services 17,156 2,001 7,385 26,542
Other   23,087       12,587       4,333           40,007
Total Direct Costs of Rental Operations 53,977 51,605 17,366 122,948
Costs of Sales   15,833       12,682       180       8,942     37,637
Total Costs of Revenues   69,810       64,287       17,546       8,942     160,585
 
Gross Profit
Rental 45,827 32,936 25,446 104,209
Rental Related Services   5,791       239       2,130           8,160
Rental Operations 51,618 33,175 27,576 112,369
Sales 4,852 8,761 52 2,753 16,418
Other   432       1,539       57           2,028
Total Gross Profit 56,902 43,475 27,685 2,753 130,815
Selling and Administrative Expenses   28,309       22,421       12,161       2,688     65,579
Income from Operations $ 28,593     $ 21,054     $ 15,524     $ 65   65,236
Interest Expense 6,186
Provision for Income taxes   22,571
Net Income $ 36,479
 
Other Information
Average Rental Equipment 1 $ 491,364 $ 244,425 $ 101,263
Average Monthly Total Yield 2 1.40 % 2.81 % 2.92 %
Average Utilization 3 67.7 % 66.0 % 76.0 %
Average Monthly Rental Rate 4 2.07 % 4.26 % 3.84 %
  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 cost of Average Rental Equipment on rent by the

    total cost of Average 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, and non-cash stock-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 evaluate the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including stock-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 stock-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 Securities and Exchange Commission, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Reconciliation of Net Income to Adjusted EBITDA

   
(dollar amounts in thousands) Three Months Ended

December 31,

Twelve Months Ended

December 31,

  2011       2010     2011       2010  
Net Income $ 13,227 $ 12,743 $ 49,602 $ 36,479
Provision for Income Taxes 8,004 7,523 31,456 22,571
Interest   2,119     1,539     7,606     6,186  
Income from Operations 23,350 21,805 88,664 65,236
Depreciation and Amortization 17,649 16,308 67,395 62,577
Non-Cash Stock-Based Compensation   1,512     1,072     5,221     4,227  
Adjusted EBITDA 1 $ 42,511   $ 39,185   $ 161,280   $ 132,040  
 
Adjusted EBITDA Margin 2 50 % 49 % 47 % 45 %

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

   
(dollar amounts in thousands) Three Months Ended

December 31,

Twelve Months Ended

December 31,

  2011       2010     2011       2010  
Adjusted EBITDA 1 $ 42,511 $ 39,185 $ 161,280 $ 132,040
Interest Paid (3,171 ) (1,776 ) (6,877 ) (6,306 )
Net Income Taxes (Paid) Refunds Received 4,915 (1,312 ) 1,480 (9,342 )
Gain on Sale of Rental Equipment (2,731 ) (3,583 ) (12,444 ) (11,728 )
Change in certain assets and liabilities:
Accounts Receivable, net (3,030 ) 12,423 (16,183 ) (5,891 )
Prepaid Expenses and Other Assets (3,117 ) 1,645 (3,226 ) 296
Accounts Payable and Other Liabilities (10,198 ) (3,780 ) 4,004 2,483
Deferred Income   (364 )   (8,351 )   1,277     (954 )
Net Cash Provided by Operating Activities $ 24,815   $ 34,451   $ 129,311   $ 100,598  
  1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes,

    depreciation, amortization, and non-cash stock-based compensation.
  2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

McGrath RentCorpKeith E. PrattChief Financial Officer925-606-9200

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