×

McGrath RentCorp Announces Results for Fourth Quarter 2016

Income from Operations increases 6%
EPS decreases 17% to $0.40 due to income tax expense increase
Company announces 2% dividend increase; 25th consecutive year increase

LIVERMORE, Calif., Feb. 28, 2017 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ:MGRC) (the “Company”), a diversified business to business rental company, today announced total revenues for the quarter ended December 31, 2016 of $105.3 million, which was unchanged from the fourth quarter of 2015. The Company reported net income of $9.7 million, or $0.40 per diluted share for the fourth quarter of 2016, compared to net income of $11.5 million, or $0.48 per diluted share, in the fourth quarter of 2015.

Total revenues for the year ended December 31, 2016 were $424.1 million, compared to $404.5 million in 2015. Rental revenues decreased 1% to $271.4 million in 2016, compared to $273.7 million in 2015, with income from operations increasing 3% to $79.3 million. Net income for the year ended December 31, 2016 decreased 5% to $38.3 million, compared to 2015. Diluted earnings per share increased 1% to $1.60 in 2016 from $1.59 in 2015.

The Company’s effective tax rate for the fourth quarter 2016 was 50.8% compared to 37.8% in the fourth quarter 2015. This increase was driven by the full year 2016 effective tax rate rising to 42.9% as compared to 39.0 % for 2015, which increased the provision for income taxes in 2016 by $2.6 million and reduced earnings by $0.11 per diluted share in the fourth quarter results. The increased effective tax rate in 2016 was primarily a result of a change in business mix by state and the decision to exit TRS-RenTelco’s branch operations in India. Higher business levels in states with higher tax rates, in particular growth in California, and the resulting re-pricing of deferred tax liabilities accounted for approximately $1.6 million. In addition, the decision to exit branch operations in India accounted for approximately $0.7 million. The Company estimates an effective tax rate of 40.0% for calendar year 2017.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.26 per share for the quarter ending March 31, 2017, an increase of 2% over the prior year period. On an annualized basis, the 2017 dividend represents a 2.7% yield, based on the February 27, 2017 closing stock price. The cash dividend will be payable on April 28, 2017 to all shareholders of record on April 14, 2017. This marks the 25th consecutive year the Company has increased its annual dividend.

Fourth quarter operating profit increased 6% compared to a year ago as higher operating profit at Mobile Modular and Enviroplex was partly offset by lower operating profit at Adler Tank Rentals and TRS-RenTelco.

Modular division-wide rental revenues for the quarter increased $2.8 million, or 9%, to $34.5 million from a year ago. Gross profit from rental revenues increased by 24% as rental revenue margins increased from 54% to 62%, partly due to lower equipment preparation expenses. Modular division income from operations grew 27% to $13.2 million from a year ago as a result of 18% growth in total gross profit, primarily from higher gross profit from rental revenues, partly offset by higher SG&A expenses. Modular division average rental equipment utilization for the quarter was flat compared to a year ago at 77.5%.

Mobile Modular Portable Storage continued to make good progress during the fourth quarter and grew rental revenues 13% compared to the same period a year ago. Progress continued towards making each of the portable storage operating geographies increasingly successful.

Rental revenues for TRS-RenTelco declined $1.9 million for the quarter, or 8%, to $20.7 million from a year ago. The year over year reduction in rental revenues was driven primarily by lower communications test equipment business activity and a continuing highly competitive environment. Communications test equipment rental revenues declined by 19% while general-purpose increased 5% for the quarter compared to the same period a year ago. Average equipment utilization was 62.3% compared to 61.2% in the same period in 2015. Average rental rates declined for the quarter to 4.46% from 4.67% for the fourth quarter of 2015, primarily due to the business activity mix shift from communications to general-purpose test equipment as well as a highly competitive communications test equipment marketplace. Income from operations declined 5% to $6.3 million as lower rental and sales revenues were partly offset by lower rental equipment depreciation, lower SG&A expenses and higher gross margins on equipment sales as compared to a year ago.

Rental revenues at Adler Tank Rentals declined $1.2 million for the quarter, or 8%, to $15.1 million from a year ago but were up from $14.2 million in the third quarter of 2016. Average utilization was 51.3% for the quarter compared to 54.0% a year ago, and 49.4% for the third quarter of 2016. Fourth quarter average equipment on rent declined to $157 million from $166 million a year ago, but was up from $152 million in the third quarter of 2016. Upstream oil and natural gas rental revenue declined from 11% of total Adler rental revenues in the fourth quarter of 2015 to 8% for the same period in 2016. Weak demand in the upstream oil and natural gas market put downward pressure on 21K multi-purpose tank utilization and rental rates in upstream, midstream and downstream energy sectors, as well as in other market verticals. Income from operations for the quarter decreased $2.1 million, or 48%, to $2.2 million from a year ago, primarily due to lower gross profit on rental revenues.

Despite very challenging end market conditions throughout the year for Adler Tank Rentals, and to a lesser extent TRS-RenTelco, positive results at Mobile Modular and Enviroplex enabled the Company to grow full year 2016 income from operations to $79 million from $77 million in 2015. Strong cash flows enabled the Company to reduce debt by $55 million, while paying dividends of $24 million and selectively deploying new capital to increase the size of the modular division rental equipment fleet by $32 million.

All comparisons presented below are for the quarter ended December 31, 2016 to the quarter ended December 31, 2015 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2016, the Company’s Mobile Modular division reported a $2.8 million increase in income from operations, or 27%, to $13.2 million. Rental revenues increased 9% to $34.5 million, depreciation expense increased 7% to $5.4 million and other direct costs decreased 17% to $7.8 million, which resulted in an increase in gross profit on rental revenues of 24% to $21.3 million. Rental related services revenues increased 4% to $12.2 million, with gross profit on rental related services revenues increasing 11% to $3.8 million. Sales revenues decreased 36% to $4.3 million, with gross profit on sales revenues decreasing 29% to $1.3 million, primarily due to lower new equipment sales in the fourth quarter of 2016. Selling and administrative expenses increased 10% to $13.3 million, primarily due to higher allocated corporate expenses.

TRS-RENTELCO

For the fourth quarter of 2016, the Company’s TRS-RenTelco division reported a $0.4 million decrease in income from operations, or 5%, to $6.3 million. Rental revenues decreased 8% to $20.7 million, depreciation expense decreased 14% to $8.3 million and other direct costs increased 9% to $3.8 million, which resulted in a decrease in gross profit on rental revenues of 9% to $8.6 million. Sales revenues decreased 24% to $4.5 million. Gross profit on sales revenues increased 5% to $2.7 million, with gross margin percentage increasing to 60% from 43%, primarily due to higher margins on new and used equipment sales in the fourth quarter of 2016. Selling and administrative expenses decreased 7% to $5.5 million, primarily due to lower bad debt expense.

ADLER TANKS

For the fourth quarter of 2016, the Company’s Adler Tanks division reported a $2.1 million decrease in income from operations, or 48%, to $2.2 million. Rental revenues decreased 8% to $15.1 million, depreciation expense decreased 3% to $3.9 million and other direct costs increased 26% to $3.1 million, which resulted in a decrease in gross profit on rental revenues of 18% to $8.0 million. Rental related services revenues decreased 6% to $6.0 million, with gross profit on rental related services decreasing 12% to $1.1 million. Selling and administrative expenses increased 1% to $6.8 million.

OTHER HIGHLIGHTS

  • Debt decreased $19.0 million during the quarter to $326.4 million, with the Company’s funded debt (notes payable) to equity ratio decreasing from 0.88 to 1 at September 30, 2016 to 0.82 to 1 at December 31, 2016. As of December 31, 2016, the Company had capacity to borrow an additional $245.6 million under its lines of credit.
  • Share Repurchases of the Company’s common stock during the fourth quarter 2015 were 551,685 shares for an aggregate repurchase price of $15.2 million, or an average repurchase price of $27.50 per share. There were no repurchases of the Company’s common stock made during the fourth quarter of 2016.
  • Dividend rate increased 2% to $0.255 per share for the fourth quarter of 2016 compared to the fourth quarter of 2015. On an annualized basis, this dividend represents a 2.7% yield on the February 27, 2017 close price of $37.95 per share.
  • Adjusted EBITDA was flat at $42.9 million for the fourth quarter of 2016 compared to the fourth quarter of 2015. At December 31, 2016, the Company’s ratio of funded debt to the last twelve months actual Adjusted EBITDA was 2.00 to 1, compared to 2.11 to 1 at September 30, 2016. 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.

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.

FINANCIAL OUTLOOK

Comparing 2017 with 2016, the Company currently expects operating profits to be higher at Mobile Modular and roughly flat at TRS-RenTelco and Adler Tanks.

For the full-year 2017, the Company expects:

  • Rental revenues to increase between 1% and 3% over 2016.
  • Sales revenues to be comparable to 2016.
  • Rental equipment depreciation expense to be between $67 and $69 million.
  • “Other” direct costs of rental operations, primarily for rental equipment maintenance and repair, to be between $62 and $64 million.
  • Selling and administrative costs to be between $110 and $112 million.
  • Operating profit to increase between 3% and 5% over 2016.
  • Full year interest expense to be approximately $12 million.
  • Effective tax rate to be 40%, excluding any potential impact from ASU 2016-09.
  • Diluted share count to be between 24.1 and 24.3 million shares.

These forward-looking statements reflect McGrath RentCorp’s expectations as of February 28, 2017. Actual 2017 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. The Company’s Mobile Modular division 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. 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. The Company’s Adler Tank Rentals subsidiary rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations today serving key markets throughout the United States. In 2008, the Company entered the portable storage container rental business under the trade name Mobile Modular Portable Storage. Today, the business is located in the key markets of California, Texas, Florida, Northern Illinois, New Jersey and most recently entered the North Carolina region. 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.mobilemodular.com
Portable Storage – www.mobilemodularcontainers.com
Electronic Test Equipment – www.trsrentelco.com
School Facilities Manufacturing – www.enviroplex.com

CONFERENCE CALL NOTE

As previously announced in its press release of January 26, 2017, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 28, 2017 to discuss the fourth quarter 2016 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 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 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the call replay is 61399095. 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://mgrc.com/Investor/EventsAndArchive

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, statements about the full year 2017 outlook in the section of the press release entitled “Financial Outlook” are forward-looking statements.

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 extent of and timetable for the recovery underway in our modular building division; the continued recovery of the California market; the impact of the bond initiative passed in California on the modular building division; the state of the wireless communications network upgrade environment; the utilization levels 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; our customers’ need and ability to rent our products; failure by third parties to manufacture and deliver our products in a timely manner and to our specifications; our ability to successfully integrate and operate acquisitions, as well as manage expansions; 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; effect on our businesses from reductions to the price of oil or gas or the volatility of the oil industry generally; new or modified statutory or regulatory requirements; success of our 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.

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 Part II—Item 1A “Risk Factors” and elsewhere in our Form 10-K for the year ended December 31, 2016, 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,
(dollar amounts in thousands, except per share amounts) 2016 2015 2016 2015
Revenues
Rental $70,352 $70,694 $271,388 $273,696
Rental related services 18,831 18,858 75,859 73,314
Rental operations 89,183 89,552 347,247 347,010
Sales 15,494 15,204 74,410 55,385
Other 606 526 2,423 2,149
Total revenues 105,283 105,282 424,080 404,544
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment 17,607 18,706 72,197 75,213
Rental related services 13,970 14,117 56,374 54,719
Other 14,785 15,467 62,800 60,936
Total direct costs of rental operations 46,362 48,290 191,371 190,868
Costs of sales 9,598 10,236 48,542 36,769
Total costs of revenues 55,960 58,526 239,913 227,637
Gross profit 49,323 46,756 184,167 176,907
Selling and administrative expenses 26,627 25,289 104,908 99,950
Income from operations 22,696 21,467 79,259 76,957
Other expenses:
Interest expense (2,721) (2,910) (12,207) (10,092)
Foreign currency exchange loss (180) (34) (121) (488)
Income before provision for income taxes 19,795 18,523 66,931 66,377
Provision for income taxes 10,061 7,005 28,680 25,907
Net income $9,734 $11,518 $38,251 $40,470
Earnings per share:
Basic $0.41 $0.48 $1.60 $1.60
Diluted $0.40 $0.48 $1.60 $1.59
Shares used in per share calculation:
Basic 23,927 23,932 23,900 25,369
Diluted 24,123 24,015 23,976 25,457
Cash dividend declared per share $0.255 $0.250 $1.02 $1.00


MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, December 31,
(in thousands) 2016 2015
Assets
Cash $852 $1,103
Accounts receivable, net of allowance for doubtful accounts of $2,087 in 2016 and 2015 96,877 95,017
Income taxes receivable 11,000
Rental equipment, at cost:
Relocatable modular buildings 769,190 736,875
Electronic test equipment 246,325 262,945
Liquid and solid containment tanks and boxes 308,542 310,263
1,324,057 1,310,083
Less accumulated depreciation (467,686) (440,482)
Rental equipment, net 856,371 869,601
Property, plant and equipment, net 112,190 109,753
Prepaid expenses and other assets 25,583 28,802
Intangible assets, net 8,595 9,465
Goodwill 27,808 27,808
Total assets $1,128,276 $1,152,549
Liabilities and Shareholders Equity
Liabilities:
Notes payable $326,266 $381,281
Accounts payable and accrued liabilities 78,205 71,942
Deferred income 37,499 36,288
Deferred income taxes, net 292,019 283,351
Total liabilities 733,989 772,862
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 23,948 shares as of December 31, 2016 and 23,851 shares as of December 31, 2015 101,821 101,046
Retained earnings 292,521 278,708
Accumulated other comprehensive loss (55) (67)
Total shareholders’ equity 394,287 379,687
Total liabilities and shareholders’ equity $1,128,276 $1,152,549


MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Year Ended December 31,
(in thousands) 2016 2015
Cash Flows from Operating Activities:
Net income $38,251 $40,470
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 81,179 84,280
Provision for doubtful accounts 1,892 2,149
Share-based compensation 3,091 3,399
Gain on sale of used rental equipment (13,739) (11,902)
Foreign currency exchange loss 121 488
Amortization of debt issuance cost 51 52
Change in:
Accounts receivable (3,752 3,628
Income taxes receivable 11,000 (11,000)
Prepaid expenses and other assets 3,219 12,910
Accounts payable and accrued liabilities 11,492 (1,520)
Deferred income 1,211 7,149
Deferred income taxes 7,745 14,449
Net cash provided by operating activities 141,761 144,552
Cash Flows from Investing Activities:
Purchases of rental equipment (79,038) (131,037)
Purchases of property, plant and equipment (10,548) (9,321)
Proceeds from sale of used rental equipment 29,406 26,214
Net cash used in investing activities (60,180) (114,144)
Cash Flows from Financing Activities:
Net borrowings (repayments) under bank lines of credit (35,066) 18,963
Principal payments on Series A senior notes (20,000) (20,000)
Borrowings under Series C senior notes 60,000
Proceeds from the exercise of stock options 37 2,149
Excess tax shortfall from exercise of stock awards (1,066) (292)
Taxes paid related to net share settlement of stock awards (1,287) (1,560)
Repurchase of common stock (63,953)
Payment of dividends (24,448) (25,779)
Net cash used in financing activities (81,830) (30,472)
Effect of foreign currency exchange rate changes on cash (2)
Net decrease in cash (251) (64)
Cash balance, beginning of period 1,103 1,167
Cash balance, end of period $852 $1,103
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period $12,436 $10,041
Net income taxes paid, during the period $15,555 $2,498
Dividends accrued during the period, not yet paid $6,147 $6,019
Rental equipment acquisitions, not yet paid $2,876 $7,280


MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2016
(dollar amounts in thousands) Mobile
Modular
TRS-
RenTelco
Adler
Tanks
Enviroplex Consolidated
Revenues
Rental $34,494 $20,745 $15,113 $ $70,352
Rental related services 12,172 690 5,969 18,831
Rental operations 46,666 21,435 21,082 89,183
Sales 4,261 4,532 367 6,334 15,494
Other 133 441 32 606
Total revenues 51,060 26,408 21,481 6,334 105,283
Costs and Expenses
Direct costs of rental operations:
Depreciation 5,359 8,317 3,931 17,607
Rental related services 8,376 675 4,919 13,970
Other 7,828 3,820 3,137 14,785
Total direct costs of rental operations 21,563 12,812 11,987 46,362
Costs of sales 3,010 1,832 447 4,309 9,598
Total costs of revenues 24,573 14,644 12,434 4,309 55,960
Gross Profit (Loss)
Rental 21,307 8,608 8,045 37,960
Rental related services 3,796 15 1,050 4,861
Rental operations 25,103 8,623 9,095 42,821
Sales 1,251 2,700 (80) 2,025 5,896
Other 133 441 32 606
Total gross profit 26,487 11,764 9,047 2,025 49,323
Selling and administrative expenses 13,270 5,452 6,824 1,081 26,627
Income from operations $13,217 $6,312 $2,223 $944 22,696
Interest expense (2,721)
Foreign currency exchange loss (180)
Provision for income taxes (10,061)
Net income $9,734
Other Information
Average rental equipment 1 $739,728 $248,841 $306,681
Average monthly total yield 2 1.55% 2.78% 1.64%
Average utilization 3 77.5% 62.3% 51.3%
Average monthly rental rate 4 2.01% 4.46% 3.20%

  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 December 31, 2015
(dollar amounts in thousands) Mobile
Modular
TRS-
RenTelco
Adler
Tanks
Enviroplex Consolidated
Revenues
Rental $31,744 $22,596 $16,354 $ $70,694
Rental related services 11,712 784 6,362 18,858
Rental operations 43,456 23,380 22,716 89,552
Sales 6,618 5,964 376 2,246 15,204
Other 93 405 28 526
Total revenues 50,167 29,749 23,120 2,246 105,282
Costs and Expenses
Direct costs of rental operations:
Depreciation 5,028 9,639 4,039 18,706
Rental related services 8,283 668 5,166 14,117
Other 9,483 3,498 2,486 15,467
Total direct costs of rental operations 22,794 13,805 11,691 48,290
Costs of sales 4,865 3,401 415 1,555 10,236
Total costs of revenues 27,659 17,206 12,106 1,555 58,526
Gross Profit (Loss)
Rental 17,233 9,459 9,829 36,521
Rental related services 3,429 116 1,196 4,741
Rental operations 20,662 9,575 11,025 41,262
Sales 1,753 2,563 (39) 691 4,968
Other 93 405 28 526
Total gross profit 22,508 12,543 11,014 691 46,756
Selling and administrative expenses 12,060 5,871 6,739 619 25,289
Income from operations $10,448 $6,672 $4,275 $72 21,467
Interest expense (2,910)
Foreign currency exchange loss (34)
Provision for income taxes (7,005)
Net income $11,518
Other Information
Average rental equipment 1 $696,482 $263,567 $307,390
Average monthly total yield 2 1.52% 2.86% 1.77%
Average utilization 3 77.5% 61.2% 54.0%
Average monthly rental rate 4 1.96% 4.67% 3.28%

  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)
Twelve months ended December 31, 2016
(dollar amounts in thousands) Mobile
Modular
TRS-
RenTelco
Adler
Tanks
Enviroplex Consolidated
Revenues
Rental $130,496 $82,307 $58,585 $ $271,388
Rental related services 49,206 2,846 23,807 75,859
Rental operations 179,702 85,153 82,392 347,247
Sales 29,393 21,582 1,314 22,121 74,410
Other 417 1,882 124 2,423
Total revenues 209,512 108,617 83,830 22,121 424,080
Costs and Expenses
Direct costs of rental operations:
Depreciation 21,001 35,256 15,940 72,197
Rental related services 34,722 2,640 19,012 56,374
Other 38,353 14,320 10,127 62,800
Total direct costs of rental operations 94,076 52,216 45,079 191,371
Costs of sales 21,620 10,604 1,342 14,976 48,542
Total costs of revenues 115,696 62,820 46,421 14,976 239,913
Gross Profit (Loss)
Rental 71,143 32,730 32,518 136,391
Rental related services 14,484 206 4,795 19,485
Rental operations 85,627 32,936 37,313 155,876
Sales 7,772 10,979 (28) 7,145 25,868
Other 417 1,882 124 2,423
Total gross profit 93,816 45,797 37,409 7,145 184,167
Selling and administrative expenses 51,432 21,896 27,610 3,970 104,908
Income from operations $42,384 $23,901 $9,799 $3,175 79,259
Interest expense (12,207)
Foreign currency exchange loss (121)
Provision for income taxes (28,680)
Net income $38,251
Other Information
Average rental equipment 1 $724,333 $254,019 $307,416
Average monthly total yield 2 1.50% 2.70% 1.59%
Average utilization 3 76.6% 60.6% 50.1%
Average monthly rental rate 4 1.96% 4.45% 3.17%

  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)
Twelve months ended December 31, 2015
(dollar amounts in thousands) Mobile
Modular
TRS-
RenTelco
Adler
Tanks
Enviroplex Consolidated
Revenues
Rental $115,986 $89,208 $68,502 $ $273,696
Rental related services 45,616 3,055 24,643 73,314
Rental operations 161,602 92,263 93,145 347,010
Sales 22,248 21,137 1,388 10,612 55,385
Other 434 1,617 98 2,149
Total revenues 184,284 115,017 94,631 10,612 404,544
Costs and Expenses
Direct costs of rental operations:
Depreciation 19,246 39,974 15,993 75,213
Rental related services 32,576 2,722 19,421 54,719
Other 37,233 13,619 10,084 60,936
Total direct costs of rental operations 89,055 56,315 45,498 190,868
Costs of sales 16,458 10,866 1,736 7,709 36,769
Total costs of revenues 105,513 67,181 47,234 7,709 227,637
Gross Profit (Loss)
Rental 59,507 35,615 42,425 137,547
Rental related services 13,040 333 5,222 18,595
Rental operations 72,547 35,948 47,647 156,142
Sales 5,790 10,271 (348) 2,903 18,616
Other 434 1,617 98 2,149
Total gross profit 78,771 47,836 47,397 2,903 176,907
Selling and administrative expenses 46,496 22,930 27,494 3,030 99,950
Income (loss) from operations $32,275 $24,906 $19,903 $(127) 76,957
Interest expense (10,092)
Foreign currency exchange loss (488)
Provision for income taxes (25,907)
Net income $40,470
Other Information
Average rental equipment 1 $667,953 $265,832 $304,001
Average monthly total yield 2 1.45% 2.80% 1.88%
Average utilization 3 75.8% 60.5% 58.3%
Average monthly rental rate 4 1.91% 4.62% 3.22%

  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, 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
December 31,
Twelve Months Ended
December 31,
2016 2015 2016 2015
Net income$ 9,734 $ 11,518 $ 38,251 $ 40,470
Provision for income taxes 10,061 7,005 28,680 25,907
Interest 2,721 2,910 12,207 10,092
Depreciation and amortization 19,651 20,977 81,179 84,280
EBITDA 42,167 42,410 160,317 160,749
Share-based compensation 764 536 3,091 3,399
Adjusted EBITDA 1$ 42,931 $ 42,946 $ 163,408 $ 164,148
Adjusted EBITDA margin 2 41% 41% 39% 41%


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,
2016 2015 2016 2015
Adjusted EBITDA 1$ 42,931 $ 42,946 $ 163,408 $ 164,148
Interest paid (3,394) (2,817) (12,436) (10,041)
Net income taxes paid (7,804) (258) (15,555) (2,498)
Gain on sale of rental equipment (2,941) (2,836) (13,739) (11,902)
Foreign currency exchange loss 180 34 121 488
Amortization of debt issuance cost 13 13 51 52
Change in certain assets and liabilities:
Accounts receivable, net 6,881 12,043 (1,860) 5,777
Income taxes receivable (11,000) 11,000 (11,000)
Prepaid expenses and other assets 1,845 5 3,219 12,910
Accounts payable and other liabilities 1,761 9,664 6,341 (10,531)
Deferred income (3,980) (3,885) 1,211 7,149
Net cash provided by operating activities$ 35,492 $ 43,909 $ 141,761 $ 144,552

  1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, 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 Chief Financial Officer 925 606 9200

Source:McGrath RentCorp