McGrath RentCorp Announces Results for Third Quarter 2017
LIVERMORE, Calif., Oct. 31, 2017 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ:MGRC) (the “Company”), a diversified business to business rental company, today announced total revenues for the quarter ended September 30, 2017 of $135.4 million, an increase of 11%, compared to the third quarter of 2016. The Company reported net income of $16.8 million, or $0.69 per diluted share for the third quarter of 2017, compared to net income of $12.9 million, or $0.54 per diluted share, in the third quarter of 2016.
THIRD QUARTER 2017 Company HIGHLIGHTS:
Income from operations increased 25% year-over-year to $30.3 million.
Rental revenues increased 9% year-over-year to $73.8 million.
Adjusted EBITDA1 increased 12% to $50.7 million for the third quarter of 2017.
Dividend rate increased 2% year-over-year to $0.26 per share for the third quarter of 2017. On an annualized basis, this dividend represents a 2.3% yield on the October 30, 2017 close price of $44.46 per share.
Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“We were pleased with our third quarter performance. Mobile Modular, Adler Tank Rentals and TRS-RenTelco each delivered significant operating profit growth compared to a year ago, contributing to the Company’s 25% operating profit increase. Company operating profit growth was driven by a $6.8 million increase in gross profit from rental operations and a $1.1 million increase in sales gross profit also contributed to the strong results. Hurricanes Harvey and Irma had no material impact on our third quarter results.
Mobile Modular rental revenues for the quarter increased 9% from a year ago as rental rates and equipment on rent both increased, while average utilization declined slightly. Rental revenue growth continued to be healthy across commercial and education markets, as well as in our Portable Storage business.
TRS-RenTelco rental revenues for the quarter increased 3% as a result of higher general-purpose test equipment business activity. General-purpose test equipment rental revenues increased by 9%, but were partly offset by a 1% decrease for communications test equipment. While average equipment utilization increased, average rental rates declined for the quarter, primarily due to the business activity mix shift to general-purpose from communications test equipment.
Adler Tank Rentals rental revenues for the quarter increased 17% from a year ago. Rental revenue growth occurred across a broad mix of vertical markets, including upstream oil and natural gas, which increased from 9% to 10% of total Adler rental revenues. Average equipment on rent increased 16% to $176 million from $152 million a year ago, and average utilization increased to 57% from 49%. Despite ongoing competitive price pressure, average rental rates improved slightly as a result of product mix shifts.
Our third quarter results reflect some improvement in market conditions at Adler Tank Rentals and TRS-RenTelco. In addition we benefited from the various return on invested capital performance improvement initiatives across the business. We are also maintaining discipline on new rental equipment capital spending while selectively selling non-core equipment.
Based on our third quarter and year to date results, and our current outlook for the remainder of the year, we are raising our financial outlook and expect 2017 total Company operating profit to increase 15% to 18% above 2016, compared to our prior expectation of a 9% to 12% increase.”
1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation. A reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended September 30, 2017 to the quarter ended September 30, 2016 unless otherwise indicated.
MOBILE MODULAR
For the third quarter of 2017, the Company’s Mobile Modular division reported income from operations of $15.8 million, an increase of $3.1 million, or 25%. Rental revenues increased 9% to $36.2 million, depreciation expense was flat at $5.3 million and other direct costs increased 5% to $9.4 million, which resulted in an increase in gross profit on rental revenues of 14% to $21.6 million. Rental related services revenues increased 8% to $14.7 million, with associated gross profit increasing 27% to $3.7 million. Sales revenues increased 5% to $17.5 million and gross margin on sales increased to 27% compared to 25% in 2016, resulting in increased gross profit on sales revenues of $0.7 million, or 16%. Selling and administrative expenses increased 9% to $14.5 million, primarily due to increased salaries and employee benefit costs and higher allocated corporate expenses.
TRS-RENTELCO
For the third quarter of 2017, the Company’s TRS-RenTelco division reported income from operations of $7.1 million, an increase of $0.7 million, or 12%. Rental revenues increased 3% to $21.0 million, depreciation expense decreased 3% to $8.3 million and other direct costs decreased 5% to $3.4 million, which resulted in an increase in gross profit on rental revenues of 13% to $9.4 million. Sales revenues increased 3% to $4.9 million. Gross margin on sales decreased to 51% from 57% in 2016 primarily due to lower margins on used equipment sales, resulting in a 9% decrease in gross profit on sales revenues to $2.5 million. Selling and administrative expenses increased 7% to $5.5 million, primarily due to increased salaries and employee benefit costs.
ADLER TANKS
For the third quarter of 2017, the Company’s Adler Tanks division reported income from operations of $4.2 million, an increase of $1.6 million, or 60%. Rental revenues increased 17% to $16.5 million, depreciation expense decreased 1% to $3.9 million and other direct costs increased 19% to $2.6 million, which together resulted in an increase in gross profit on rental revenues of $1.9 million. Rental related services revenues increased 10% to $6.3 million, with gross profit on rental related services increasing 19% to $1.5 million. Selling and administrative expenses increased 10% to $7.3 million, primarily due to increased salaries and employee benefit costs.
FINANCIAL OUTLOOK:
Based upon the Company’s year to date results and current outlook for the remainder of the year, the Company is raising its financial outlook and expects 2017 total Company operating profit to increase 15% to 18% above 2016, compared to our prior expectation of a 9% to 12% increase.
ABOUT MCGRATH RENTCORP:
Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company with four rental divisions. Mobile Modular rents and sells modular buildings to fulfill customers' temporary and permanent classroom and office space needs in California, Texas, Florida, and the Mid-Atlantic from Washington D.C. to Georgia. TRS-RenTelco rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas. Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations serving key markets throughout the United States. Mobile Modular Portable Storage provides portable storage solutions in the California, Texas, Florida, Northern Illinois, New Jersey, North Carolina and Georgia markets. For more information on McGrath RentCorp and its operating units, please visit our websites:
You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.
CONFERENCE CALL NOTE:
As previously announced in its press release of October 2, 2017, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 31, 2017 to discuss the third quarter 2017 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at www.mgrc.com. A 7-day replay will be available following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the call replay is 92731571. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at http://www.mgrc.com/investors#events-archives.
FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “believes,” “expects,” “will,” or “anticipates” or the negative of these terms or other comparable terminology. In particular, the full year 2017 operating profit outlook in the CEO comments and “Financial Outlook” sections are forward-looking.
These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the extent of the recovery underway in our modular building division; the state of the wireless communications network upgrade environment; the utilization levels and rental rates of our Adler Tanks liquid and sold containment tank and box rental assets; the potential for continuing softness in communications test equipment rental demand in our electronics division; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.
Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
ThreeMonthsEndedSeptember30,
NineMonthsEndedSeptember 30,
(in thousands, except per share amounts)
2017
2016
2017
2016
Revenues
Rental
$
73,781
$
67,757
$
211,712
$
201,036
Rental related services
21,856
20,122
58,587
57,028
Rental operations
95,637
87,879
270,299
258,064
Sales
38,684
33,486
67,166
58,916
Other
1,067
628
2,342
1,817
Total revenues
135,388
121,993
339,807
318,797
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
17,492
17,819
52,113
54,590
Rental related services
16,611
16,026
44,756
44,428
Other
15,396
14,689
46,794
45,991
Total direct costs of rental operations
49,499
48,534
143,663
145,009
Costs of sales
27,114
23,026
44,488
38,944
Total costs of revenues
76,613
71,560
188,151
183,953
Gross profit
58,775
50,433
151,656
134,844
Selling and administrative expenses
28,489
26,201
83,702
78,281
Income from operations
30,286
24,232
67,954
56,563
Other income (expense):
Interest expense
(2,986
)
(2,940
)
(8,724
)
(9,486
)
Foreign currency exchange gain (loss)
36
(15
)
273
59
Income before provision for income taxes
27,336
21,277
59,503
47,136
Provision for income taxes
10,574
8,405
23,307
18,619
Net income
$
16,762
$
12,872
$
36,196
$
28,517
Earnings per share:
Basic
$
0.70
$
0.54
$
1.51
$
1.19
Diluted
$
0.69
$
0.54
$
1.50
$
1.19
Shares used in per share calculation:
Basic
24,015
23,911
23,984
23,891
Diluted
24,228
24,041
24,201
23,957
Cash dividends declared per share
$
0.260
$
0.255
$
0.780
$
0.765
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30,
December 31,
(in thousands)
2017
2016
Assets
Cash
$
1,369
$
852
Accounts receivable, net of allowance for doubtful accounts of $1,987 in 2017 and $2,087 in 2016
107,413
96,877
Rental equipment, at cost:
Relocatable modular buildings
781,791
769,190
Electronic test equipment
258,877
246,325
Liquid and solid containment tanks and boxes
309,825
308,542
1,350,493
1,324,057
Less accumulated depreciation
(484,769
)
(467,686
)
Rental equipment, net
865,724
856,371
Property, plant and equipment, net
119,315
112,190
Prepaid expenses and other assets
26,844
25,583
Intangible assets, net
7,942
8,595
Goodwill
27,808
27,808
Total assets
$
1,156,415
$
1,128,276
Liabilities and Shareholders' Equity
Liabilities:
Notes payable
$
323,117
$
326,266
Accounts payable and accrued liabilities
81,765
78,205
Deferred income
42,188
37,499
Deferred income taxes, net
296,563
292,019
Total liabilities
743,633
733,989
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,032 shares as of September 30, 2017 and 23,948 shares as of December 31, 2016
102,703
101,821
Retained earnings
310,210
292,521
Accumulated other comprehensive loss
(131
)
(55
)
Total shareholders’ equity
412,782
394,287
Total liabilities and shareholders’ equity
$
1,156,415
$
1,128,276
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
(in thousands)
2017
2016
Cash Flows from Operating Activities :
Net income
$
36,196
$
28,517
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
58,425
61,528
Provision for doubtful accounts
1,155
1,366
Share-based compensation
2,245
2,327
Gain on sale of used rental equipment
(13,006
)
(10,798
)
Foreign currency exchange gain
(273
)
(59
)
Amortization of debt issuance costs
38
39
Change in:
Accounts receivable
(11,691
)
(10,107
)
Income taxes receivable
—
11,000
Prepaid expenses and other assets
(1,261
)
1,374
Accounts payable and accrued liabilities
80
3,089
Deferred income
4,689
5,191
Deferred income taxes
4,544
11,810
Net cash provided by operating activities
81,141
105,277
Cash Flows from Investing Activities:
Purchases of rental equipment
(73,193
)
(64,349
)
Purchases of property, plant and equipment
(12,784
)
(10,028
)
Proceeds from sales of used rental equipment
28,478
24,037
Net cash used in investing activities
(57,499
)
(50,340
)
Cash Flows from Financing Activities:
Net borrowings (repayments) under bank lines of credit
16,813
(16,034
)
Principal payments on Series A senior notes
(20,000
)
(20,000
)
Proceeds from the exercise of stock options
—
37
Taxes paid related to net share settlement of stock awards
(1,363
)
(589
)
Payment of dividends
(18,628
)
(18,349
)
Net cash used in financing activities
(23,178
)
(54,935
)
Effect of foreign currency exchange rate changes on cash
53
(13
)
Net increase (decrease) in cash
517
(11
)
Cash balance, beginning of period
852
1,103
Cash balance, end of period
$
1,369
$
1,092
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
$
8,563
$
9,042
Net income taxes paid, during the period
$
23,510
$
7,751
Dividends accrued during the period, not yet paid
$
5,979
$
6,144
Rental equipment acquisitions, not yet paid
$
6,622
$
3,688
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2017
(dollar amounts in thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
36,239
$
21,018
$
16,524
$
—
$
73,781
Rental related services
14,729
783
6,344
—
21,856
Rental operations
50,968
21,801
22,868
—
95,637
Sales
17,533
4,909
461
15,781
38,684
Other
386
594
87
—
1,067
Total revenues
68,887
27,304
23,416
15,781
135,388
Costs and Expenses
Direct costs of rental operations:
Depreciation
5,285
8,264
3,943
—
17,492
Rental related services
11,075
683
4,853
—
16,611
Other
9,396
3,352
2,648
—
15,396
Total direct costs of rental operations
25,756
12,299
11,444
—
49,499
Costs of sales
12,770
2,432
397
11,515
27,114
Total costs of revenues
38,526
14,731
11,841
11,515
76,613
Gross Profit
Rental
21,558
9,402
9,933
—
40,893
Rental related services
3,654
100
1,491
—
5,245
Rental operations
25,212
9,502
11,424
—
46,138
Sales
4,763
2,477
64
4,266
11,570
Other
386
594
87
—
1,067
Total gross profit
30,361
12,573
11,575
4,266
58,775
Selling and administrative expenses
14,540
5,456
7,327
1,166
28,489
Income from operations
$
15,821
$
7,117
$
4,248
$
3,100
30,286
Interest expense
(2,986
)
Foreign currency exchange gain
36
Provision for income taxes
(10,574
)
Net income
$
16,762
Other Information
Average rental equipment 1
$
748,779
$
254,369
$
307,790
Average monthly total yield 2
1.61
%
2.75
%
1.79
%
Average utilization 3
76.3
%
63.4
%
57.1
%
Average monthly rental rate 4
2.11
%
4.35
%
3.14
%
Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2016
(dollar amounts in thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
33,210
$
20,365
$
14,182
$
—
$
67,757
Rental related services
13,697
655
5,770
—
20,122
Rental operations
46,907
21,020
19,952
—
87,879
Sales
16,700
4,788
358
11,640
33,486
Other
82
509
37
—
628
Total revenues
63,689
26,317
20,347
11,640
121,993
Costs and Expenses
Direct costs of rental operations:
Depreciation
5,295
8,553
3,971
—
17,819
Rental related services
10,811
700
4,515
—
16,026
Other
8,949
3,524
2,216
—
14,689
Total direct costs of rental operations
25,055
12,777
10,702
—
48,534
Costs of sales
12,592
2,065
360
8,009
23,026
Total costs of revenues
37,647
14,842
11,062
8,009
71,560
Gross Profit (Loss)
Rental
18,966
8,288
7,995
—
35,249
Rental related services
2,886
(45
)
1,255
—
4,096
Rental operations
21,852
8,243
9,250
—
39,345
Sales
4,108
2,723
(2
)
3,631
10,460
Other
82
509
37
—
628
Total gross profit
26,042
11,475
9,285
3,631
50,433
Selling and administrative expenses
13,364
5,101
6,631
1,105
26,201
Income from operations
$
12,678
$
6,374
$
2,654
$
2,526
24,232
Interest expense
(2,940
)
Foreign currency exchange loss
(15
)
Provision for income taxes
(8,405
)
Net income
$
12,872
Other Information
Average rental equipment 1
$
729,943
$
251,786
$
307,621
Average monthly total yield 2
1.52
%
2.70
%
1.54
%
Average utilization 3
76.7
%
61.2
%
49.4
%
Average monthly rental rate 4
1.98
%
4.41
%
3.11
%
Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2017
(dollar amounts in thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
104,923
$
60,569
$
46,220
$
—
$
211,712
Rental related services
38,283
2,095
18,209
—
58,587
Rental operations
143,206
62,664
64,429
—
270,299
Sales
30,001
14,897
1,576
20,692
67,166
Other
621
1,596
125
—
2,342
Total revenues
173,828
79,157
66,130
20,692
339,807
Costs and Expenses
Direct costs of rental operations:
Depreciation
15,951
24,335
11,827
—
52,113
Rental related services
28,802
1,937
14,017
—
44,756
Other
29,290
9,957
7,547
—
46,794
Total direct costs of rental operations
74,043
36,229
33,391
—
143,663
Costs of sales
21,846
6,508
1,332
14,802
44,488
Total costs of revenues
95,889
42,737
34,723
14,802
188,151
Gross Profit
Rental
59,683
26,277
26,846
—
112,806
Rental related services
9,481
158
4,191
—
13,830
Rental operations
69,164
26,435
31,037
—
126,636
Sales
8,154
8,389
245
5,890
22,678
Other
621
1,596
125
—
2,342
Total gross profit
77,939
36,420
31,407
5,890
151,656
Selling and administrative expenses
42,157
16,475
21,855
3,215
83,702
Income from operations
$
35,782
$
19,945
$
9,552
$
2,675
67,954
Interest expense
(8,724
)
Foreign currency exchange gain
273
Provision for income taxes
(23,307
)
Net income
$
36,196
Other Information
Average rental equipment 1
$
746,632
$
249,740
$
307,322
Average monthly total yield 2
1.56
%
2.69
%
1.67
%
Average utilization 3
76.6
%
62.8
%
54.7
%
Average monthly rental rate 4
2.04
%
4.29
%
3.06
%
Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2016
(dollar amounts in thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
96,002
$
61,562
$
43,472
$
—
$
201,036
Rental related services
37,034
2,156
17,838
—
57,028
Rental operations
133,036
63,718
61,310
—
258,064
Sales
25,132
17,050
947
15,787
58,916
Other
284
1,441
92
—
1,817
Total revenues
158,452
82,209
62,349
15,787
318,797
Costs and Expenses
Direct costs of rental operations:
Depreciation
15,642
26,939
12,009
—
54,590
Rental related services
28,370
1,965
14,093
—
44,428
Other
28,501
10,500
6,990
—
45,991
Total direct costs of rental operations
72,513
39,404
33,092
—
145,009
Costs of sales
18,610
8,772
895
10,667
38,944
Total costs of revenues
91,123
48,176
33,987
10,667
183,953
Gross Profit
Rental
51,860
24,122
24,473
—
100,455
Rental related services
8,664
191
3,745
—
12,600
Rental operations
60,524
24,313
28,218
—
113,055
Sales
6,521
8,279
52
5,120
19,972
Other
284
1,441
92
—
1,817
Total gross profit
67,329
34,033
28,362
5,120
134,844
Selling and administrative expenses
38,162
16,444
20,786
2,889
78,281
Income from operations
$
29,167
$
17,589
$
7,576
$
2,231
56,563
Interest expense
(9,486
)
Foreign currency exchange gain
59
Provision for income taxes
(18,619
)
Net income
$
28,517
Other Information
Average rental equipment 1
$
719,206
$
255,896
$
307,669
Average monthly total yield 2
1.48
%
2.67
%
1.57
%
Average utilization 3
76.3
%
60.1
%
49.9
%
Average monthly rental rate 4
1.94
%
4.44
%
3.15
%
Average rental equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, and share-based compensation. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.
Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Reconciliation of Net Income to Adjusted EBITDA
(dollar amounts in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Twelve Months Ended September 30,
2017
2016
2017
2016
2017
2016
Net income
$
16,762
$
12,872
$
36,196
$
28,517
$
45,930
$
40,035
Provision for income taxes
10,574
8,405
23,307
18,619
33,368
25,624
Interest
2,986
2,940
8,724
9,486
11,445
12,396
Depreciation and amortization
19,673
20,111
58,425
61,528
78,076
82,505
EBITDA
49,995
44,328
126,652
118,150
168,819
160,560
Share-based compensation
707
741
2,245
2,327
3,009
2,863
Adjusted EBITDA 1
$
50,702
$
45,069
$
128,897
$
120,477
$
171,828
$
163,423
Adjusted EBITDA margin 2
37
%
37
%
38
%
38
%
39
%
39
%
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
Twelve Months Ended September 30,
2017
2016
2017
2016
2017
2016
Adjusted EBITDA 1
$
50,702
$
45,069
$
128,897
$
120,477
$
171,828
$
163,423
Interest paid
(2,746
)
(2,396
)
(8,563
)
(9,042
)
(11,957
)
(11,859
)
Net income taxes paid
(5,369
)
(2,072
)
(23,510
)
(7,751
)
(31,314
)
(8,009
)
Gain on sale of used rental equipment
(5,092
)
(4,516
)
(13,006
)
(10,798
)
(15,947
)
(13,634
)
Foreign currency exchange loss (gain)
(36
)
15
(273
)
(59
)
(93
)
(25
)
Amortization of debt financing cost
13
13
38
39
51
51
Change in certain assets and liabilities:
Accounts receivable, net
(10,874
)
(8,144
)
(10,536
)
(8,741
)
(3,655
)
3,302
Income taxes receivable
—
—
—
11,000
—
—
Prepaid expenses and other assets
7,578
4,237
(1,261
)
1,374
(686
)
1,379
Accounts payable and other liabilities
(2,089
)
(2,444
)
4,666
3,587
8,298
14,293
Deferred income
(345
)
3,130
4,689
5,191
34
1,306
Net cash provided by operating activities
$
31,742
$
32,892
$
81,141
$
105,277
$
116,559
$
150,227
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, and share-based compensation.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
FOR INFORMATION CONTACT:
Keith E. Pratt
EVP & Chief Financial Officer
925-606-9200
