July 31, 2018 - 4:01 PM EDT
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McGrath RentCorp Announces Results for Second Quarter 2018

LIVERMORE, Calif., July 31, 2018 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended June 30, 2018 of $117.0 million, an increase of 7%, compared to the second quarter of 2017.  The Company reported net income of $15.9 million, or $0.65 per diluted share for the second quarter of 2018, compared to net income of $11.5 million, or $0.48 per diluted share, in the second quarter of 2017. 

SECOND QUARTER 2018 COMPANY HIGHLIGHTS:

  • Income from operations increased 12% year-over-year to $24.4 million.
  • Rental revenues increased 10% year-over-year to $77.3 million.
  • Adjusted EBITDA1 increased 8% year-over-year to $45.4 million.   
  • Dividend rate increased 31% year-over-year to $0.34 per share for the second quarter of 2018.  On an annualized basis, this dividend represents a 2.3% yield on the July 30, 2018 close price of $58.19 per share.

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

“Our second quarter results reflect continued positive momentum in all of our divisions as we finished the quarter with a 12% improvement in operating profit.  Rental gross profits improved by $3.7 million and sales gross profits improved $1.0 million.  We were pleased to see that second quarter demand for our rental solutions was strong, contributing to solid results for the first half of 2018, and setting the stage for the remainder of the year.

Mobile Modular rental revenues for the quarter increased 9% from a year ago, driven by 8% improvement in average rental rates and 1% improvement in average utilization.  Rental revenue growth continued to be healthy across commercial and education markets.  Despite a dip in sales this quarter, sales bookings are healthy and reflect continued strong demand.  Portable Storage rental revenues continue to grow nicely on broad based activity in all regions. 

TRS-RenTelco rental revenues for the quarter increased 12%, primarily driven by 11% higher average rental equipment and improved utilization.  We continued to see broad-based needs for both communications and general purpose test equipment and we expect this trend to continue for the remainder of the year.

Adler Tank Rentals rental revenues for the quarter increased 12% from a year ago.  Rental revenue growth occurred across a wide mix of vertical markets across the country, including upstream oil and natural gas, which increased from 9% to 10% of total rental revenues. Utilization continues to progress as average equipment on rent increased 9%.  Rental rates also rose by 2% as we focused on increasing rental rates coupled with better demand, particularly for 21K tanks.

With the benefit of an overall healthy demand environment, these results reflect our continued commitment to drive value from our invested capital base.  Each of our divisions has been executing this important work with conviction and we have made good progress.”   

________________________

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

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended June 30, 2018 to the quarter ended June 30, 2017 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2018, the Company’s Mobile Modular division reported income from operations of $11.8 million, an increase of $0.5 million, or 4%.  Rental revenues increased 9% to $38.2 million, depreciation expense decreased 1% to $5.3 million and other direct costs increased 22% to $12.5 million, which resulted in an increase in gross profit on rental revenues of 5% to $20.5 million.  Rental related services revenues increased 4% to $12.4 million, with associated gross profit decreasing 7% to $2.8 million.  Sales revenues decreased 6% to $9.0 million.  Gross margin on sales increased to 35% from 26% in 2017 primarily due to higher margins on used equipment sales, resulting in a 24% increase in gross profit on sales revenues to $3.1 million.  Selling and administrative expenses increased 8% to $14.9 million, primarily due to increased salaries and employee benefit costs.

TRS-RENTELCO

For the second quarter of 2018, the Company’s TRS-RenTelco division reported income from operations of $8.5 million, an increase of $1.3 million, or 19%.  Rental revenues increased 12% to $22.2 million, depreciation expense increased 11% to $8.9 million and other direct costs increased 9% to $3.6 million, which resulted in an increase in gross profit on rental revenues of 14% to $9.7 million.  Sales revenues increased 22% to $6.8 million.  Gross margin on sales decreased to 58% from 61% in 2017 primarily due to lower margins on used equipment sales, resulting in a 15% increase in gross profit on sales revenues to $4.0 million.  Selling and administrative expenses increased 11% to $5.9 million, primarily due to higher allocated corporate expenses.

ADLER TANKS

For the second quarter of 2018, the Company’s Adler Tanks division reported income from operations of $4.1 million, an increase of $1.0 million, or 34%.  Rental revenues increased 12% to $16.9 million, depreciation expense increased 1% to $4.0 million and other direct costs increased 8% to $2.7 million, which resulted in an increase in gross profit on rental revenues of 18% to $10.2 million.  Rental related services revenues decreased 3% to $6.0 million, with gross profit on rental related services decreasing 20% to $1.2 million.  Selling and administrative expenses increased 3% to $7.5 million primarily, due to higher allocated corporate expenses.

FINANCIAL OUTLOOK:

The Company reconfirms its expectation that total Company operating profit will increase 11% to 15% above 2017 results.

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 July 2, 2018, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 31, 2018 to discuss the second quarter 2018 results.  To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/.  A 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 2476588.  In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements.  These forward-looking statements also can be identified by the use of forward-looking terminology such as “believes,” “expects,” “will,” or “anticipates” or the negative of these terms or other comparable terminology.  In particular, Mr. Hanna’s comment that the second quarter demand for the Company’s rental solutions have established a good foundation for the remainder of 2018, mobile modular sales bookings are healthy and reflect continued strong demand and that the Company expects broad-based needs for communications and general purpose test equipment for the remainder of the year, as well as the full year 2018 outlook in the “Financial Outlook” section are forward-looking.

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

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

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

  Three Months Ended June 30,
 Six Months Ended June 30,
(in thousands, except per share amounts) 2018
 2017
 2018
 2017
Revenues                
Rental $77,267  $69,953  $151,528  $137,931 
Rental related services  19,086   18,796   36,917   36,731 
Rental operations  96,353   88,749   188,445   174,662 
Sales  19,546   20,187   31,637   28,482 
Other  1,084   646   1,986   1,275 
Total revenues  116,983   109,582   222,068   204,419 
Costs and Expenses                
Direct costs of rental operations:                
Depreciation of rental equipment  18,103   17,242   35,880   34,621 
Rental related services  15,018   14,312   28,786   28,145 
Other  18,753   16,039   35,022   31,398 
Total direct costs of rental operations  51,874   47,593   99,688   94,164 
Costs of sales  11,181   12,778   18,282   17,374 
Total costs of revenues  63,055   60,371   117,970   111,538 
Gross profit  53,928   49,211   104,098   92,881 
Selling and administrative expenses  29,479   27,365   57,607   55,213 
Income from operations  24,449   21,846   46,491   37,668 
Other income (expense):                
Interest expense  (2,999)  (2,949)  (5,991)  (5,738)
Foreign currency exchange gain (loss)  (344)  11   (376)  237 
Income before provision for income taxes  21,106   18,908   40,124   32,167 
Provision for income taxes  5,194   7,447   9,746   12,733 
Net income $15,912  $11,461  $30,378  $19,434 
Earnings per share:                
Basic $0.66  $0.48  $1.26  $0.81 
Diluted $0.65  $0.48  $1.24  $0.80 
Shares used in per share calculation:                
Basic  24,145   23,985   24,106   23,968 
Diluted  24,584   24,092   24,549   24,164 
Cash dividends declared per share $0.340  $0.260  $0.680  $0.520 
                 


MCGRATH RENTCORP

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

  June 30,
 December 31,
(in thousands) 2018
 2017
Assets        
Cash $4,484  $2,501 
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2018 and $1,920 in 2017  105,095   105,872 
Rental equipment, at cost:        
Relocatable modular buildings  789,158   775,400 
Electronic test equipment  278,253   262,325 
Liquid and solid containment tanks and boxes  312,168   309,808 
   1,379,579   1,347,533 
Less accumulated depreciation  (503,057)  (485,213)
Rental equipment, net  876,522   862,320 
Property, plant and equipment, net  121,614   119,170 
Prepaid expenses and other assets  37,397   22,459 
Intangible assets, net  7,289   7,724 
Goodwill  27,808   27,808 
Total assets $1,180,209  $1,147,854 
Liabilities and Shareholders' Equity        
Liabilities:        
Notes payable $314,860  $303,414 
Accounts payable and accrued liabilities  89,064   86,408 
Deferred income  44,073   39,219 
Deferred income taxes, net  195,017   194,629 
Total liabilities  643,014   623,670 
Shareholders’ equity:        
Common stock, no par value - Authorized 40,000 shares        
Issued and outstanding - 24,170 shares as of June 30, 2018 and 24,052 shares as of December 31, 2017  101,983   102,947 
Retained earnings  435,279   421,405 
Accumulated other comprehensive loss  (67)  (168)
Total shareholders’ equity  537,195   524,184 
Total liabilities and shareholders’ equity $1,180,209  $1,147,854 
         


MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

  Six Months Ended June 30,
(in thousands) 2018
 2017
Cash Flows from Operating Activities:        
Net income $30,378  $19,434 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  40,288   38,752 
Impairment of rental assets  39    
Provision for doubtful accounts  181   597 
Share-based compensation  1,828   1,538 
Gain on sale of used rental equipment  (9,875)  (7,914)
Foreign currency exchange (gain) loss  376   (237)
Amortization of debt issuance costs  15   25 
Change in:        
Accounts receivable  596   (259)
Prepaid expenses and other assets  (14,938)  (8,839)
Accounts payable and accrued liabilities  (365)  680 
Deferred income  4,854   5,034 
Deferred income taxes  388   587 
Net cash provided by operating activities  53,765   49,398 
Cash Flows from Investing Activities:        
Purchases of rental equipment  (58,662)  (46,118)
Purchases of property, plant and equipment  (6,417)  (9,623)
Proceeds from sales of used rental equipment  19,212   16,057 
Net cash used in investing activities  (45,867)  (39,684)
Cash Flows from Financing Activities:        
Net borrowings under bank lines of credit  31,431   23,996 
Principal payments on Series A senior notes  (20,000)  (20,000)
Taxes paid related to net share settlement of stock awards  (2,792)  (319)
Payment of dividends  (14,501)  (12,390)
Net cash used in financing activities  (5,862)  (8,713)
Effect of foreign currency exchange rate changes on cash  (53)  18 
Net increase in cash  1,983   1,019 
Cash balance, beginning of period  2,501   852 
Cash balance, end of period $4,484  $1,871 
Supplemental Disclosure of Cash Flow Information:        
Interest paid, during the period $6,123  $5,817 
Net income taxes paid, during the period $11,675  $18,141 
Dividends accrued during the period, not yet paid $8,267  $6,214 
Rental equipment acquisitions, not yet paid $7,201  $6,359 
         


MCGRATH RENTCORP                    
BUSINESS SEGMENT DATA (unaudited)                    
Three months ended June 30, 2018                    
(dollar amounts in thousands) Mobile 
Modular
 TRS-
RenTelco 
 Adler Tanks
 Enviroplex
 Consolidated
Revenues                    
Rental $38,204  $22,165  $16,898  $  $77,267 
Rental related services  12,388   707   5,991      19,086 
Rental operations  50,592   22,872   22,889      96,353 
Sales  8,961   6,844   30   3,711   19,546 
Other  318   636   130      1,084 
Total revenues  59,871   30,352   23,049   3,711   116,983 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  5,273   8,866   3,964      18,103 
Rental related services  9,555   638   4,825      15,018 
Other  12,467   3,563   2,723      18,753 
Total direct costs of rental operations  27,295   13,067   11,512      51,874 
Costs of sales  5,847   2,891   21   2,422   11,181 
Total costs of revenues  33,142   15,958   11,533   2,422   63,055 
                     
Gross Profit                    
Rental  20,463   9,736   10,212      40,411 
Rental related services  2,833   69   1,166      4,068 
Rental operations  23,296   9,805   11,378      44,479 
Sales  3,115   3,953   8   1,289   8,365 
Other  318   636   130      1,084 
Total gross profit  26,729   14,394   11,516   1,289   53,928 
Selling and administrative expenses  14,918   5,942   7,460   1,159   29,479 
Income from operations $11,811  $8,452  $4,056  $130   24,449 
Interest expense                  (2,999)
Foreign currency exchange loss                  (344)
Provision for income taxes                  (5,194)
Net income                 $15,912 
                     
Other Information                    
Average rental equipment 1 $748,689  $274,317  $309,853         
Average monthly total yield 2  1.70%  2.69%  1.82%        
Average utilization 3  77.1%  63.2%  59.1%        
Average monthly rental rate 4  2.21%  4.26%  3.08%        
                     
  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 June 30, 2017                    
(dollar amounts in thousands) Mobile 
Modular
 TRS-
RenTelco
 Adler Tanks
 Enviroplex
 Consolidated 
Revenues                    
Rental $35,030  $19,805  $15,118  $  $69,953 
Rental related services  11,966   654   6,176      18,796 
Rental operations  46,996   20,459   21,294      88,749 
Sales  9,504   5,605   926   4,152   20,187 
Other  138   475   33      646 
Total revenues  56,638   26,539   22,253   4,152   109,582 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  5,333   7,980   3,929      17,242 
Rental related services  8,930   657   4,725      14,312 
Other  10,247   3,272   2,520      16,039 
Total direct costs of rental operations  24,510   11,909   11,174      47,593 
Costs of sales  6,994   2,176   802   2,806   12,778 
Total costs of revenues  31,504   14,085   11,976   2,806   60,371 
                     
Gross Profit (Loss)                    
Rental  19,451   8,553   8,669      36,673 
Rental related services  3,036   (3)  1,450      4,483 
Rental operations  22,487   8,550   10,119      41,156 
Sales  2,509   3,429   125   1,346   7,409 
Other  138   475   33      646 
Total gross profit  25,134   12,454   10,277   1,346   49,211 
Selling and administrative expenses  13,817   5,330   7,261   957   27,365 
Income from operations $11,317  $7,124  $3,016  $389   21,846 
Interest expense                  (2,949)
Foreign currency exchange gain                  11 
Provision for income taxes                  (7,447)
Net income                 $11,461 
                     
Other Information                    
Average rental equipment 1 $746,358  $248,117  $307,263         
Average monthly total yield 2  1.56%  2.66%  1.64%        
Average utilization 3  76.5%  62.4%  54.4%        
Average monthly rental rate 4  2.05%  4.27%  3.01%        
                     
  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)                    
Six months ended June 30, 2018                    
(dollar amounts in thousands) Mobile 
Modular
 TRS-
RenTelco
 Adler Tanks
 Enviroplex
 Consolidated 
Revenues                    
Rental $75,231  $43,694  $32,603  $  $151,528 
Rental related services  24,322   1,514   11,081      36,917 
Rental operations  99,553   45,208   43,684      188,445 
Sales  13,554   12,019   335   5,729   31,637 
Other  615   1,163   208      1,986 
Total revenues  113,722   58,390   44,227   5,729   222,068 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  10,521   17,443   7,916      35,880 
Rental related services  18,574   1,259   8,953      28,786 
Other  22,798   7,067   5,157      35,022 
Total direct costs of rental operations  51,893   25,769   22,026      99,688 
Costs of sales  8,779   5,379   289   3,835   18,282 
Total costs of revenues  60,672   31,148   22,315   3,835   117,970 
                     
Gross Profit                    
Rental  41,911   19,184   19,531      80,626 
Rental related services  5,748   255   2,128      8,131 
Rental operations  47,659   19,439   21,659      88,757 
Sales  4,776   6,640   45   1,894   13,355 
Other  615   1,163   208      1,986 
Total gross profit  53,050   27,242   21,912   1,894   104,098 
Selling and administrative expenses  28,930   11,560   14,658   2,459   57,607 
Income (loss) from operations $24,120  $15,682  $7,254  $(565)  46,491 
Interest expense                  (5,991)
Foreign currency exchange loss                  (376)
Provision for income taxes                  (9,746)
Net income                 $30,378 
                     
Other Information                    
Average rental equipment 1 $747,614  $269,455  $309,411         
Average monthly total yield 2  1.68%  2.70%  1.76%        
Average utilization 3  77.3%  62.8%  58.5%        
Average monthly rental rate 4  2.17%  4.30%  3.00%        
                     
  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)                    
Six months ended June 30, 2017                    
(dollar amounts in thousands) Mobile 
Modular
 TRS-
RenTelco
 Adler Tanks
 Enviroplex
 Consolidated
Revenues                    
Rental $68,684  $39,551  $29,696  $  $137,931 
Rental related services  23,554   1,312   11,865      36,731 
Rental operations  92,238   40,863   41,561      174,662 
Sales  12,468   9,988   1,115   4,911   28,482 
Other  235   1,002   38      1,275 
Total revenues  104,941   51,853   42,714   4,147   203,655 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  10,666   16,071   7,884      34,621 
Rental related services  17,727   1,254   9,164      28,145 
Other  19,894   6,605   4,899      31,398 
Total direct costs of rental operations  48,287   23,930   21,947      94,164 
Costs of sales  9,076   4,076   935   3,287   17,374 
Total costs of revenues  57,363   28,006   22,882   3,287   111,538 
                     
Gross Profit                    
Rental  38,125   16,875   16,913      71,913 
Rental related services  5,827   58   2,700      8,585 
Rental operations  43,952   16,933   19,613      80,498 
Sales  3,391   5,912   181   1,624   11,108 
Other  235   1,002   38      1,275 
Total gross profit  47,578   23,847   19,832   1,624   92,881 
Selling and administrative expenses  27,617   11,019   14,528   2,049   55,213 
Income (loss) from operations $19,961  $12,828  $5,304  $(425)  37,668 
Interest expense                  (5,738)
Foreign currency exchange gain                  237 
Provision for income taxes                  (12,733)
Net income                 $19,434 
                     
Other Information                    
Average rental equipment 1 $745,508  $247,099  $307,048         
Average monthly total yield 2  1.54%  2.67%  1.61%        
Average utilization 3  76.7%  62.3%  53.4%        
Average monthly rental rate 4  2.00%  4.28%  3.02%        
                     
  1. Average rental equipment represents the cost of rental equipment excluding accessory equipment.  For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
  2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
  3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
  4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

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

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

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

Reconciliation of Net Income to Adjusted EBITDA

(dollar amounts in thousands)Three Months Ended 
June 30, 
 Six Months Ended 
June 30,
 Twelve Months Ended 
June 30,
 2018
 2017
 2018
 2017
 2018
 2017
Net income$15,912  $11,461  $30,378  $19,434  $164,864  $42,040 
Provision (benefit) for income taxes 5,194   7,447   9,746   12,733   (73,455)  31,199 
Interest 2,999   2,949   5,991   5,738   11,875   11,399 
Depreciation and amortization 20,360   19,348   40,288   38,752   79,952   78,514 
EBITDA 44,465   41,205   86,403   76,657   183,236   163,152 
Impairment of rental assets       39      1,678    
Share-based compensation 964   732   1,828   1,538   3,488   3,043 
Adjusted EBITDA 1$45,429  $41,937  $88,270  $78,195  $188,402  $166,195 
Adjusted EBITDA margin 2 39%  38%  40%  38%  39%  38%
                        

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)Three Months Ended 
June 30, 
 Six Months Ended 
June 30, 
 Twelve Months Ended 
June 30,
 2018
 2017
 2018
 2017
 2018  2017
Adjusted EBITDA 1$45,429  $41,937  $88,270  $78,195  $188,402  $166,195 
Interest paid (3,586)  (3,397)  (6,123)  (5,817)  (12,131)  (11,607)
Income taxes paid, net of refunds received (10,103)  (12,576)  (11,675)  (18,141)  (23,038)  (28,017)
Gain on sale of used rental equipment (6,027)  (4,971)  (9,875)  (7,914)  (19,694)  (15,371)
Foreign currency exchange loss (gain) 344   (11)  376   (237)  279   (42)
Amortization of debt financing cost 2   12   15   25   40   51 
Change in certain assets and liabilities:                       
Accounts receivable, net (7,003)  (3,987)  777   338   (8,556)  (925)
Prepaid expenses and other assets (11,635)  (7,303)  (14,938)  (8,839)  (2,975)  (4,027)
Accounts payable and other liabilities 9,621   11,218   2,084   6,754   2,905   7,943 
Deferred income 5,571   2,646   4,854   5,034   1,540   3,509 
Net cash provided by operating activities$22,613  $23,568  $53,765  $49,398  $126,772  $117,709 
                        
  1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
  2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

FOR INFORMATION CONTACT:  Keith E. Pratt
                                                      EVP & Chief Financial Officer
                                                      925-606-9200

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Source: GlobeNewswire (July 31, 2018 - 4:01 PM EDT)

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