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McGrath RentCorp Announces Results for Fourth Quarter 2020

·14-min read

Company Announces 4% Dividend Increase and 30th Consecutive Year Increase

McGrath RentCorp (NASDAQ: MGRC) (the "Company"), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2020 of $149.0 million, an increase of 1%, compared to the fourth quarter of 2019. The Company reported net income of $31.2 million, or $1.27 per diluted share, for the fourth quarter of 2020, compared to net income of $26.4 million, or $1.07 per diluted share, for the fourth quarter of 2019.

Total revenues for the year ended December 31, 2020 increased to $572.6 million from $570.2 million in 2019, with income from operations decreasing $0.6 million to $140.8 million. Net income for the year ended December 31, 2020 increased to $102.0 million, or $4.16 per diluted share, from $96.8 million, or $3.93 per diluted share, in 2019.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.435 per share for the quarter ending March 31, 2021, an increase of $0.015, or 4%, over the prior year period. The cash dividend will be payable on April 30, 2021 to all shareholders of record on April 15, 2021. This marks the 30th consecutive year the Company has increased its annual dividend.

FOURTH QUARTER 2020 COMPANY HIGHLIGHTS:

  • Income from operations increased 7% year-over-year to $41.0 million.

  • Total revenues increased 1% year-over-year to $149.0 million.

  • Rental revenues decreased 4% year-over-year to $88.5 million.

  • Adjusted EBITDA1 increased 3% year-over-year to $65.3 million.

  • Dividend rate increased 12% year-over-year to $0.42 per share for the fourth quarter of 2020. On an annualized basis, this dividend represents a 2.1% yield on the February 22, 2021 close price of $80.48 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 fourth quarter results. Strong sales revenues, primarily at Enviroplex, more than offset some softness in rental demand, primarily at Adler, compared to a year ago. The growth in total revenues, coupled with good management of costs, enabled us to grow operating income by 7%.

Our full year results demonstrated the resilience in our business and the dedication of our teams. Despite the many disruptions arising from the pandemic, we grew total revenues and delivered operating income comparable to the prior year. Growth in sales revenues, primarily at Mobile Modular, more than offset slightly lower rental revenue. I am grateful to our employees who persevered and adapted to the new work conditions arising from the pandemic, and who continued to provide excellent service to our customers.

We are entering 2021 with a solid business, an experienced leadership team, and a strong balance sheet. Our track record of execution combined with an improving economy should drive healthy free cash flow generation while we invest in additional fleet to meet customer needs. We are well positioned to continue growing the business as demand conditions improve during the year."

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2020 to the quarter ended December 31, 2019 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2020, the Company’s Mobile Modular division reported income from operations of $22.5 million, a decrease of $1.4 million, or 6%. Rental revenues decreased 2% to $47.5 million, depreciation expense increased 3% to $5.8 million and other direct costs decreased 4% to $11.0 million, which resulted in a decrease in gross profit on rental revenues of 2% to $30.8 million. The rental revenue decline was due to decreased demand from commercial and education customers. Rental related services revenues decreased 1% to $16.2 million, with associated gross profit increasing 10% to $4.5 million. Sales revenues decreased 23% to $12.0 million, primarily due to lower used equipment sales with gross margin on sales decreasing to 27% from 30%, resulting in a 30% decrease in gross profit on sales revenues to $3.3 million. Selling and administrative expenses decreased 7% to $16.5 million, primarily due to lower allocated corporate expenses.

TRS-RENTELCO

For the fourth quarter of 2020, the Company’s TRS-RenTelco division reported income from operations of $10.8 million, an increase of $1.3 million, or 14%. Rental revenues increased 1% to $27.9 million, depreciation expense decreased 1% to $11.3 million and other direct costs increased 7% to $4.4 million, which resulted in a 1% increase in gross profit on rental revenues to $12.2 million. The rental revenue growth was due to increased demand from general purpose test equipment customers. Sales revenues increased 62% to $8.7 million. Gross margin on sales was 47% in 2020 compared to 62% in 2019, resulting in a 23% increase in gross profit on sales revenues to $4.1 million. Selling and administrative expenses decreased 7% to $6.1 million, primarily due to lower salaries and benefit costs and lower travel, meals and meeting expenses.

ADLER TANKS

For the fourth quarter of 2020, the Company’s Adler Tanks division reported income from operations of $2.2 million, a decrease of $1.2 million, or 35%. Rental revenues decreased 18% to $13.1 million, depreciation expense decreased 1% to $4.1 million and other direct costs decreased 16% to $2.3 million, which resulted in a 27% decrease in gross profit on rental revenues to $6.7 million. The rental revenue decrease was primarily due to continued COVID-19 related market disruptions and a decrease in the price of oil and gas, which contributed to weaker activities in multiple geographic and market segments. Rental related services revenues decreased 24% to $5.3 million, with gross profit on rental related services decreasing 9% to $1.3 million. Selling and administrative expenses decreased 21% to $5.8 million, primarily due to lower allocated corporate expenses, decreased salaries and employee benefit costs and lower marketing and administrative costs.

FINANCIAL OUTLOOK:

For the full year 2021, the Company currently expects:

  • Total revenue: $560 million - $595 million

  • Adjusted EBITDA1,2: $230 million - $245 million

  • Gross rental equipment capital expenditures: $90 million to $110 million

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 actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.

2.

Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions. The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions. 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 January 26, 2021, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 23, 2021 to discuss the fourth quarter 2020 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 replay 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 conference call replay is 3349708. 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 "anticipates," "believes," "continues," "could," "estimates," "expects," "intends," "may," "plan," "predict," "project," or "will," or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about entering 2021 with a solid business, an experienced leadership team, and a strong balance sheet, the Company’s track record of execution combined with an improving economy driving healthy free cash flow generation while investing in additional fleet to meet customer needs and being well positioned to continue growing the business as demand conditions improve during 2021 as well as the statements regarding the full year 2021 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 duration of the COVID-19 pandemic and its economic impact, the extent and length of the shelter-in and other restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and solid 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 December 31,

Twelve Months Ended December 31,

(in thousands, except per share amounts)

2020

2019

2020

2019

Revenues

Rental

$

88,517

$

92,231

$

351,790

$

353,889

Rental related services

22,367

24,300

92,393

101,038

Rental operations

110,884

116,531

444,183

454,927

Sales

37,238

28,842

124,604

110,229

Other

858

1,848

3,767

5,074

Total revenues

148,980

147,221

572,554

570,230

Costs and Expenses

Direct costs of rental operations:

Depreciation of rental equipment

21,226

21,169

85,866

80,391

Rental related services

16,345

18,734

68,105

76,241

Other

17,647

18,237

73,818

79,365

Total direct costs of rental operations

55,218

58,140

227,789

235,997

Costs of sales

23,108

18,084

81,019

68,068

Total costs of revenues

78,326

76,224

308,808

304,065

Gross profit

70,653

70,997

263,746

266,165

Selling and administrative expenses

29,628

32,749

122,993

124,793

Income from operations

41,025

38,248

140,753

141,372

Other income (expense):

Interest expense

(1,983

)

(2,924

)

(8,787

)

(12,331

)

Foreign currency exchange gain

267

130

78

84

Income before provision for income taxes

39,309

35,454

132,044

129,125

Provision for income taxes

8,133

9,053

30,060

32,319

Net income

$

31,176

$

26,401

$

101,984

$

96,806

Earnings per share:

Basic

$

1.29

$

1.09

$

4.22

$

3.99

Diluted

$

1.27

$

1.07

$

4.16

$

3.93

Shares used in per share calculation:

Basic

24,119

24,290

24,157

24,250

Diluted

24,453

24,697

24,531

24,623

Cash dividends declared per share

$

0.420

$

0.375

$

1.68

$

1.50

MCGRATH RENTCORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

December 31,

(in thousands)

2020

2019

Assets

Cash

$

1,238

$

2,342

Accounts receivable, net of allowance for doubtful accounts of $2,100 in 2020

and $1,883 in 2019

123,316

128,099

Rental equipment, at cost:

Relocatable modular buildings

882,115

868,807

Electronic test equipment

333,020

335,343

Liquid and solid containment tanks and boxes

315,706

316,261

1,530,841

1,520,411

Less accumulated depreciation

(592,725

)

(552,911

)

Rental equipment, net

938,116

967,500

Property, plant and equipment, net

136,210

131,047

Prepaid expenses and other assets

41,549

45,356

Intangible assets, net

7,118

7,334

Goodwill

28,197

28,197

Total assets

$

1,275,744

$

1,309,875

Liabilities and Shareholders' Equity

Liabilities:

Notes payable

$

222,754

$

293,431

Accounts payable and accrued liabilities

108,334

109,174

Deferred income

45,975

54,964

Deferred income taxes, net

216,077

218,270

Total liabilities

593,140

675,839

Shareholders’ equity:

Common stock, no par value - Authorized 40,000 shares

Issued and outstanding - 24,128 shares as of December 31, 2020 and 24,296 shares as of December 31, 2019

106,289

106,360

Retained earnings

576,419

527,746

Accumulated other comprehensive loss

(104

)

(70

)

Total shareholders’ equity

682,604

634,036

Total liabilities and shareholders’ equity

$

1,275,744

$

1,309,875

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Twelve Months Ended December 31,

(in thousands)

2020

2019

Cash Flows from Operating Activities:

Net income

$

101,984

$

96,806

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

94,643

89,476

Provision for doubtful accounts

1,343

1,013

Share-based compensation

5,549

5,892

Gain on sale of used rental equipment

(19,329

)

(21,309

)

Foreign currency exchange gain

(78

)

(84

)

Amortization of debt issuance costs

11

11

Change in:

Accounts receivable

3,440

(7,323

)

Prepaid expenses and other assets

3,807

(13,530

)

Accounts payable and accrued liabilities

316

20,298

Deferred income

(8,989

)

5,138

Deferred income taxes

(2,193

)

11,606

Net cash provided by operating activities

180,504

187,994

Cash Flows from Investing Activities:

Purchases of rental equipment

(86,329

)

(167,703

)

Purchases of property, plant and equipment

(13,724

)

(12,080

)

Cash paid for acquisition of business assets

(7,808

)

Proceeds from sales of used rental equipment

47,052

44,447

Net cash used in investing activities

(53,001

)

(143,144

)

Cash Flows from Financing Activities:

Net (repayment) borrowing under bank lines of credit

(70,689

)

(5,144

)

Repurchase of common stock

(13,617

)

Taxes paid related to net share settlement of stock awards

(4,376

)

(3,333

)

Payment of dividends

(39,769

)

(35,539

)

Net cash used in financing activities

(128,451

)

(44,016

)

Effect of foreign currency exchange rate changes on cash

(156

)

-

Net (decrease) increase in cash

(1,104

)

834

Cash balance, beginning of period

2,342

1,508

Cash balance, end of period

$

1,238

$

2,342

Supplemental Disclosure of Cash Flow Information:

Interest paid, during the period

$

9,050

$

12,475

Net income taxes paid, during the period

$

34,903

$

17,528

Dividends accrued during the period, not yet paid

$

10,083

$

9,489

Rental equipment acquisitions, not yet paid

$

4,373

$

6,496

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Three months ended December 31, 2020

(dollar amounts in thousands)

Mobile Modular

TRS-RenTelco

Adler Tanks

Enviroplex

Consolidated

Revenues

...

Rental

$

47,548

$

27,916

$

13,054

$

$

88,518

Rental related services

16,236

784

5,347

22,367

Rental operations

63,784

28,700

18,401

110,885

Sales

12,016

8,675

426

16,121

37,238

Other

351

438

68

857

Total revenues

76,151

37,813

18,895

16,121

148,980

Costs and Expenses

Direct costs of rental operations:

Depreciation

5,790

11,343

4,093

21,226

Rental related services

11,688

583

4,074

16,345

Other

10,989

4,371

2,287

17,647

Total direct costs of rental operations

28,467

16,297

10,454

55,218

Costs of sales

8,737

4,573

478

9,320

23,108

Total costs of revenues

37,204

20,870

10,932

9,320

78,326

Gross Profit

Rental

30,769

12,202

6,674

49,645

Rental related services

4,548

201

1,273

6,022

Rental operations

35,317

12,403

7,947

55,667

Sales

3,279

4,102

(52

)

6,801

14,130

Other

351

438

68

857

Total gross profit

38,947

16,943

7,963

6,801

70,654

Selling and administrative expenses

16,456

6,108

5,766

1,298

29,628

Income from operations

$

22,491

$

10,835

$

2,197

$

5,503

$

41,026

Interest expense

(1,983

)

Foreign currency exchange gain

267

Provision for income taxes

(8,134

)

Net income

$

31,176

Other Information

Average rental equipment 1

$

834,599

$

333,505

$

314,647

Average monthly total yield 2

1.90

%

2.74

%

1.38

%

Average utilization 3

76.2

%

68.4

%

42.6

%

Average monthly rental rate 4

2.49

%

4.08

%

3.25

%

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, 2019

(dollar amounts in thousands)

Mobile Modular

TRS-RenTelco

Adler Tanks

Enviroplex

Consolidated

Revenues

Rental

$

48,580

$

27,654

$

15,997

$

$

92,231

Rental related services

16,449

835

7,016

24,300

Rental operations

65,029

28,489

23,013

116,531

Sales

15,642

5,361

263

7,576

28,842

Other

1,223

557

68

1,848

Total revenues

81,894

34,407

23,344

7,576

147,221

Costs and Expenses

Direct costs of rental operations:

Depreciation

5,622

11,415

4,132

21,169

Rental related services

12,333

783

5,618

18,734

Other

11,415

4,097

2,725

18,237

Total direct costs of rental operations

29,370

16,295

12,475

58,140

Costs of sales

10,935

2,037

235

4,877

18,084

Total costs of revenues

40,305

18,332

12,710

4,877

76,224

Gross Profit

Rental

31,543

12,142

9,140

52,825

Rental related services

4,116

52

1,398

5,566

Rental operations

35,659

12,194

10,538

58,391

Sales

4,707

3,324

28

2,699

10,758

Other

1,223

557

68

1,848

Total gross profit

41,589

16,075

10,634

2,699

70,997

Selling and administrative expenses

17,686

6,544

7,267

1,252

32,749

Income from operations

$

23,903

$

9,531

$

3,367

$

1,447

38,248

Interest expense

(2,924

)

Foreign currency exchange gain

130

Provision for income taxes

(9,053

)

Net income

$

26,401

Other Information

Average rental equipment 1

$

813,535

$

328,038

$

314,906

Average monthly total yield 2

1.99

%

2.81

%

1.69

%

Average utilization 3

79.3

%

66.8

%

50.0

%

Average monthly rental rate 4

2.51

%

4.20

%

3.39

%

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, 2020

(dollar amounts in thousands)

Mobile Modular

TRS-RenTelco

Adler Tanks

Enviroplex

Consolidated

Revenues

Rental

$

188,719

$

109,083

$

53,988

$

$

351,790

Rental related services

67,527

3,080

21,786

92,393

Rental operations

256,246

112,163

75,774

444,183

Sales

63,863

26,618

1,386

32,737

124,604

Other

1,415

2,030

322

3,767

Total revenues

321,524

140,811

77,482

32,737

572,554

Costs and Expenses

Direct costs of rental operations:

Depreciation

22,967

46,472

16,427

85,866

Rental related services

48,910

2,419

16,776

68,105

Other

47,762

17,133

8,923

73,818

Total direct costs of rental operations

119,639

66,024

42,126

227,789

Costs of sales

46,011

13,923

1,277

19,808

81,019

Total costs of revenues

165,650

79,947

43,403

19,808

308,808

Gross Profit

Rental

117,990

45,478

28,638

192,106

Rental related services

18,617

661

5,010

24,288

Rental operations

136,607

46,139

33,648

216,394

Sales

17,852

12,695

109

12,929

43,585

Other

1,415

2,030

322

3,767

Total gross profit

155,874

60,864

34,079

12,929

263,746

Selling and administrative expenses

68,470

24,306

24,764

5,453

122,993

Income from operations

$

87,404

$

36,558

$

9,315

$

7,476

$

140,753

Interest expense

(8,787

)

Foreign currency exchange gain

78

Provision for income taxes

(30,060

)

Net income

$

101,984

Other Information

Average rental equipment 1

$

825,614

$

336,399

$

314,797

Average monthly total yield 2

1.88

%

2.70

%

1.43

%

Average utilization 3

77.2

%

66.2

%

44.6

%

Average monthly rental rate 4

2.47

%

4.08

%

3.21

%

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, 2019

(dollar amounts in thousands)

Mobile Modular

TRS-RenTelco

Adler Tanks

Enviroplex

Consolidated

Revenues

Rental

$

182,316

$

103,704

$

67,869

$

$

353,889

Rental related services

69,395

3,260

28,383

101,038

Rental operations

251,711

106,964

96,252

454,927

Sales

47,043

22,106

1,266

39,814

110,229

Other

2,256

2,413

405

5,074

Total revenues

301,010

131,483

97,923

39,814

570,230

Costs and Expenses

Direct costs of rental operations:

Depreciation

22,071

41,948

16,372

80,391

Rental related services

51,787

2,791

21,663

76,241

Other

51,136

16,303

11,926

79,365

Total direct costs of rental operations

124,994

61,042

49,961

235,997

Costs of sales

32,398

9,693

948

25,029

68,068

Total costs of revenues

157,392

70,735

50,909

25,029

304,065

Gross Profit

Rental

109,109

45,453

39,571

194,133

Rental related services

17,608

469

6,720

24,797

Rental operations

126,717

45,922

46,291

218,930

Sales

14,645

12,413

318

14,785

42,161

Other

2,256

2,413

405

5,074

Total gross profit

143,618

60,748

47,014

14,785

266,165

Selling and administrative expenses

65,699

24,645

29,321

5,128

124,793

Income from operations

$

77,919

$

36,103

$

17,693

$

9,657

$

141,372

Interest expense

(12,331

)

Foreign currency exchange loss

84

Provision for income taxes

(32,319

)

Net income

$

96,806

Other Information

Average rental equipment 1

$

795,250

$

306,426

$

313,810

Average monthly total yield 2

1.90

%

2.82

%

1.80

%

Average utilization 3

79.2

%

66.2

%

54.7

%

Average monthly rental rate 4

2.41

%

4.26

%

3.29

%

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,

2020

2019

2020

2019

Net income

$

31,175

$

26,401

$

101,984

$

96,806

Provision for income taxes

8,134

9,053

30,060

32,319

Interest expense

1,983

2,924

8,787

12,331

Depreciation and amortization

23,394

23,516

94,643

89,476

EBITDA

64,686

61,894

235,474

230,932

Share-based compensation

655

1,796

5,549

5,892

Adjusted EBITDA 1

$

65,341

$

63,690

$

241,023

$

236,824

Adjusted EBITDA margin 2

44

%

43

%

42

%

42

%

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,

2020

2019

2020

2019

Adjusted EBITDA 1

$

65,341

$

63,690

$

241,023

$

236,824

Interest paid

(2,221

)

(3,116

)

(9,050

)

(12,475

)

Income taxes paid, net of refunds received

(10,199

)

(7,498

)

(34,903

)

(17,528

)

Gain on sale of used rental equipment

(5,219

)

(6,141

)

(19,329

)

(21,309

)

Foreign currency exchange loss (gain)

(267

)

(130

)

(78

)

(84

)

Amortization of debt issuance costs

3

3

11

11

Change in certain assets and liabilities:

Accounts receivable, net

6,117

9,964

4,783

(6,310

)

Prepaid expenses and other assets

5,121

(1,796

)

3,807

(13,530

)

Accounts payable and other liabilities

2,871

1,957

3,229

17,257

Deferred income

(12,580

)

(5,808

)

(8,989

)

5,138

Net cash provided by operating activities

$

48,967

$

51,125

$

180,504

$

187,994

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210223005929/en/

Contacts

Keith E. Pratt
EVP & Chief Financial Officer
925-606-9200