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AEDNews - Construction Equipment Industry News McGrath RentCorp Announces Third Quarter Results McGrath RentCorp a diversified business to business rental company, last week announced revenues for the quarter ended Sept. 30, 2009, of $75.5 million, a decrease of 13 percent, compared to $86.3 million in the third quarter of 2008. The company reported net income of $9.5 million, or $0.40 per diluted share for the third quarter of 2009, compared to net income of $11.6 million, or $0.48 per diluted share, in the third quarter of 2008. Dennis Kakures, president and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations: “The continuing challenges of adverse macroeconomic conditions, an unsettled fiscal landscape in California and highly competitive market environments resulted in a 20 percent reduction in operating income to $17.3 million for the quarter from a year ago. However, we are beginning to see some signs of improvement with various portions of our rental equipment businesses. Despite these positive signs, we anticipate continued overall downward earnings pressure over the next few quarters. Mobile Modular’s rental revenues decreased by 14 percent to $22.5 million and operating income declined by 11 percent to $12.1 million compared to the third quarter of 2008. The lower percentage decrease in operating income compared to rental revenues reflected reduced material and labor costs in our inventory centers and downsized sales and administrative staffing levels, offset by lower gross profit on equipment sales. The significant inventory center cost reductions allowed gross margin on rents to increase to 62 percent from 60 percent a year ago. While we believe we are doing a good job managing costs in our modular business, rental revenues softened during the quarter and fleet utilization dropped to 69.5 percent at quarter end compared to 80.8 percent a year ago. Our modular rental business continued to be challenged primarily by California’s financial difficulties and their impact on school modernization and other infrastructure project funding, and reduced business activity levels in residential and non-residential construction. TRS-RenTelco’s rental revenues declined by 23 percent to $18.5 million and income from operations decreased by 50 percent to $3.4 million compared to the third quarter of 2008. The higher percentage decrease in operating income compared to rental revenues is primarily related to lower rental revenues and gross profit on equipment sales for the same year over year period. Sequentially, from the second quarter 2009, rental revenues and income from operations were up favorably from $17.8 million and $1.4 million, respectively. The larger increase in income from operations versus rental revenues from the second quarter of 2009 is chiefly related to increased rental revenues from existing underutilized equipment, which resulted in the majority of the rental revenue dropping to the income from operations line, a decrease in depreciation expense, operations staffing reductions and other cost cutting measures. During the quarter, we saw increasing rental revenue levels each month, which reflected increased business activity levels. We also continued to make progress during the quarter in selling lower utilized equipment which supported the reduction in depreciation expense. Improvements in business conditions and operating results over recent months have been encouraging, but we expect a normal seasonal slowdown in the business as year end approaches. Adler Tanks’ rental revenues and income from operations were $5.0 million and $1.5 million, respectively, during the third quarter. Sequentially, from the second quarter of 2009, rental revenues and income from operations were up favorably from $3.7 million and $0.6 million. Adler experienced higher business activity levels, as measured by units shipped, in all of its regional markets during the third quarter. Average utilization for the quarter increased to approximately 61percent, as compared to 53 percent for the second quarter of 2009. Although the marketplace continues to be very competitive, Adler benefited during the quarter from various larger quantity tank orders. We also expanded into the Florida market late in the third quarter. This is in keeping with our goal to roll out Adler operations to all of our existing modular inventory center locations in 2009 to support future growth. We believe the long-term prospects for Adler Tank Rentals becoming an increasing contributor to McGrath RentCorp’s earnings is very favorable. Our goals for the balance of 2009 are to continue building our new rental initiatives while managing costs tightly, and paying down debt. Our debt level at the end of the third quarter was $262 million, a reduction of approximately 14 percent from $305 million at the end of 2008.” All comparisons presented below are to the quarter ended Sept. 30, 2008 unless otherwise indicated. MOBILE MODULAR For the third quarter of 2009, the company’s Mobile Modular division reported an 11 percent decrease in income from operations to $12.1 million. Rental revenues decreased 14 percent to $22.5 million, which resulted in a decrease in gross profit on rental revenues of 11 percent to $14.0 million. Sales revenues decreased 18 percent to $10.5 million with gross profit on sales revenues decreasing 12 percent to $2.6 million due to lower new and used equipment sales revenues, partly offset by higher gross margins on used equipment sales in the third quarter 2009. Selling and administrative expenses decreased 13 percent to $6.7 million. TRS-RENTELCO For the third quarter of 2009, the company’s TRS-RenTelco division reported a 50 percent decrease in income from operations to $3.4 million. Rental revenues decreased 23 percent to $18.5 million, which resulted in a decrease in gross profit on rental revenues of 38 percent to $6.0 million. Sales revenues decreased 32 percent to $4.4 million with gross profit on sales decreasing 47 percent to $1.6 million due to lower new and used equipment sales revenues having lower gross margins in 2009 compared to 2008. Selling and administrative expenses decreased 25 percent to $4.7 million. ADLER TANKS For the third quarter of 2009, the company’s Adler Tanks division, which was acquired on Dec.11, 2008, reported income from operations of $1.5 million. Rental revenues were $5.0 million, with gross profit on rental revenues of $3.4 million. Rental related services revenues were $1.7 million, with gross profit on rental related services revenues of $0.4 million. Selling and administrative expenses were $2.3 million. OTHER THIRD QUARTER HIGHLIGHTS • Debt decreased $7.1 million during the quarter to $261.5 million, with the company’s funded debt (notes payable) to equity ratio decreasing from 1.22 to 1 at Dec. 31, 2008 to 1.00 to 1 as of Sept. 30, 2009. As of Sept. 30, 2009, the company had capacity to borrow an additional $117.5 million under its lines of credit. • Dividend rate increased 10 percent to $0.22 per share for the third quarter 2009 compared to the third quarter 2008. On an annualized basis, this dividend represents a 4.4 percent yield on the Nov. 4, 2009 close price of $19.85. • Adjusted EBITDA decreased 11 percent to $33.7 million for the third quarter of 2009. At Sept. 30, 2009, the company’s ratio of funded debt to the last twelve months actual Adjusted EBITDA was 2.00 to 1 compared to 2.15 to 1 at Dec. 31, 2008. Adjusted EBITDA is defMcGrath RentCorp a diversified business to business rental company, last week announced revenues for the quarter ended Sept. 30, 2009, of $75.5 million, a decrease of 13 percent, compared to $86.3 million in the third quarter of 2008. The company reported net income of $9.5 million, or $0.40 per diluted share for the third quarter of 2009, compared to net income of $11.6 million, or $0.48 per diluted share, in the third quarter of 2008. Dennis Kakures, president and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations: “The continuing challenges of adverse macroeconomic conditions, an unsettled fiscal landscape in California and highly competitive market environments resulted in a 20 percent reduction in operating income to $17.3 million for the quarter from a year ago. However, we are beginning to see some signs of improvement with various portions of our rental equipment businesses. Despite these positive signs, we anticipate continued overall downward earnings pressure over the next few quarters. Mobile Modular’s rental revenues decreased by 14 percent to $22.5 million and operating income declined by 11 percent to $12.1 million compared to the third quarter of 2008. The lower percentage decrease in operating income compared to rental revenues reflected reduced material and labor costs in our inventory centers and downsized sales and administrative staffing levels, offset by lower gross profit on equipment sales. The significant inventory center cost reductions allowed gross margin on rents to increase to 62 percent from 60 percent a year ago. While we believe we are doing a good job managing costs in our modular business, rental revenues softened during the quarter and fleet utilization dropped to 69.5 percent at quarter end compared to 80.8 percent a year ago. Our modular rental business continued to be challenged primarily by California’s financial difficulties and their impact on school modernization and other infrastructure project funding, and reduced business activity levels in residential and non-residential construction. TRS-RenTelco’s rental revenues declined by 23 percent to $18.5 million and income from operations decreased by 50 percent to $3.4 million compared to the third quarter of 2008. The higher percentage decrease in operating income compared to rental revenues is primarily related to lower rental revenues and gross profit on equipment sales for the same year over year period. Sequentially, from the second quarter 2009, rental revenues and income from operations were up favorably from $17.8 million and $1.4 million, respectively. The larger increase in income from operations versus rental revenues from the second quarter of 2009 is chiefly related to increased rental revenues from existing underutilized equipment, which resulted in the majority of the rental revenue dropping to the income from operations line, a decrease in depreciation expense, operations staffing reductions and other cost cutting measures. During the quarter, we saw increasing rental revenue levels each month, which reflected increased business activity levels. We also continued to make progress during the quarter in selling lower utilized equipment which supported the reduction in depreciation expense. Improvements in business conditions and operating results over recent months have been encouraging, but we expect a normal seasonal slowdown in the business as year end approaches. Adler Tanks’ rental revenues and income from operations were $5.0 million and $1.5 million, respectively, during the third quarter. Sequentially, from the second quarter of 2009, rental revenues and income from operations were up favorably from $3.7 million and $0.6 million. Adler experienced higher business activity levels, as measured by units shipped, in all of its regional markets during the third quarter. Average utilization for the quarter increased to approximately 61percent, as compared to 53 percent for the second quarter of 2009. Although the marketplace continues to be very competitive, Adler benefited during the quarter from various larger quantity tank orders. We also expanded into the Florida market late in the third quarter. This is in keeping with our goal to roll out Adler operations to all of our existing modular inventory center locations in 2009 to support future growth. We believe the long-term prospects for Adler Tank Rentals becoming an increasing contributor to McGrath RentCorp’s earnings is very favorable. Our goals for the balance of 2009 are to continue building our new rental initiatives while managing costs tightly, and paying down debt. Our debt level at the end of the third quarter was $262 million, a reduction of approximately 14 percent from $305 million at the end of 2008.” All comparisons presented below are to the quarter ended Sept. 30, 2008 unless otherwise indicated. MOBILE MODULAR For the third quarter of 2009, the company’s Mobile Modular division reported an 11 percent decrease in income from operations to $12.1 million. Rental revenues decreased 14 percent to $22.5 million, which resulted in a decrease in gross profit on rental revenues of 11percent to $14.0 million. Sales revenues decreased 18 percent to $10.5 million with gross profit on sales revenues decreasing 12 percent to $2.6 million due to lower new and used equipment sales revenues, partly offset by higher gross margins on used equipment sales in the third quarter 2009. Selling and administrative expenses decreased 13 percent to $6.7 million. TRS-RENTELCO For the third quarter of 2009, the company’s TRS-RenTelco division reported a 50 percent decrease in income from operations to $3.4 million. Rental revenues decreased 23 percent to $18.5 million, which resulted in a decrease in gross profit on rental revenues of 38 percent to $6.0 million. Sales revenues decreased 32 percent to $4.4 million with gross profit on sales decreasing 47 percent to $1.6 million due to lower new and used equipment sales revenues having lower gross margins in 2009 compared to 2008. Selling and administrative expenses decreased 25 percent to $4.7 million. ADLER TANKS For the third quarter of 2009, the company’s Adler Tanks division, which was acquired on Dec.11, 2008, reported income from operations of $1.5 million. Rental revenues were $5.0 million, with gross profit on rental revenues of $3.4 million. Rental related services revenues were $1.7 million, with gross profit on rental related services revenues of $0.4 million. Selling and administrative expenses were $2.3 million. OTHER THIRD QUARTER HIGHLIGHTS • Debt decreased $7.1 million during the quarter to $261.5 million, with the company’s funded debt (notes payable) to equity ratio decreasing from 1.22 to 1 at Dec. 31, 2008 to 1.00 to 1 as of Sept. 30, 2009. As of Sept. 30, 2009, the company had capacity to borrow an additional $117.5 million under its lines of credit. • Dividend rate increased 10 percent to $0.22 per share for the third quarter 2009 compared to the third quarter 2008. On an annualized basis, this dividend represents a 4.4 percent yield on the Nov. 4, 2009 close price of $19.85. • Adjusted EBITDA decreased 11 percent to $33.7 million for the third quarter of 2009. At Sept. 30, 2009, the company’s ratio of funded debt to the last twelve months actual Adjusted EBITDA was 2.00 to 1 compared to 2.15 to 1 at Dec. 31, 2008. Adjusted EBITDA is defined as net income before minority interest in income of subsidiary, 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.comto access information on McGrath RentCorp, including the latest Form 10-K and 10-Q and other SEC filings. ined as net income before minority interest in income of subsidiary, 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 information on McGrath RentCorp, including the latest Form 10-K and 10-Q and other SEC filings. Article Date: 11-09-2009 Source: McGrath RentCorp Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved. | ||||||
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