-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ce7yPHCges4QY2xWGgBqp1ntd34Um2sR1SXhFus4v7PU/za0OgTLK1nYkmvzIRNW a4Uua7upBmt7ZnPAb5dgjQ== 0000912057-97-016161.txt : 19970509 0000912057-97-016161.hdr.sgml : 19970509 ACCESSION NUMBER: 0000912057-97-016161 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCGRATH RENTCORP CENTRAL INDEX KEY: 0000752714 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 942579843 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13292 FILM NUMBER: 97597994 BUSINESS ADDRESS: STREET 1: 2500 GRANT AVE CITY: SAN LORENZO STATE: CA ZIP: 94580 BUSINESS PHONE: 5102762626 MAIL ADDRESS: STREET 2: 2500 GRANT AVENUE CITY: SAN LORENZO STATE: CA ZIP: 94580 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1997 Commission File No. 0-13292 McGRATH RENTCORP (Exact name of registrant as specified in its Charter) California 94-2579843 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2500 Grant Avenue San Lorenzo, California 94580 (Address of principal executive offices) Registrant's telephone number: (510) 276-2626 ------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------- At May 1, 1997, 15,008,518 shares of Registrant's Common Stock were outstanding. ------------------------- McGrath RentCorp First Quarter 1997 Form 10-Q Page 1 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended March 31, ------------------------ 1997 1996 ----------- ----------- REVENUES: Rental operations- Rental $14,327,001 $11,557,798 Rental related services 2,913,012 1,658,386 ----------- ----------- 17,240,013 13,216,184 Sales and related services 9,601,497 4,489,167 ----------- ----------- Total revenues 26,841,510 17,705,351 ----------- ----------- COSTS & EXPENSES: Direct costs of rental operations- Depreciation 3,423,441 3,005,653 Rental related services 2,037,493 1,026,590 Equipment supplies, repair, direct labor and other 2,528,406 1,961,356 ----------- ----------- 7,989,340 5,993,599 Cost of sales and related services 6,261,196 3,100,825 ----------- ----------- 14,250,536 9,094,424 ----------- ----------- Gross margin 12,590,974 8,610,927 Selling and administrative expenses 3,543,144 2,877,247 ----------- ----------- Income from operations 9,047,830 5,733,680 Interest expense 872,885 635,274 ----------- ----------- Income before provision for income taxes 8,174,945 5,098,406 Provision for income taxes 3,255,457 2,024,829 ----------- ----------- Net income $4,919,488 $3,073,577 ----------- ----------- ----------- ----------- Net income per share $ 0.33 $ 0.20 ----------- ----------- ----------- ----------- The accompanying notes are an integral part of these financial statements. McGrath RentCorp First Quarter 1997 Form 10-Q Page 2 CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1997 1996 ------------- ------------- ASSETS Cash $ 1,376,797 $ 686,333 Accounts receivable, less allowance for doubtful accounts of $611,000 in 1997 and $605,000 in 1996 17,695,950 19,919,954 Rental equipment, at cost: Relocatable modular offices 163,130,441 158,376,950 Electronic test instruments 45,039,756 43,335,413 ------------- ------------- 208,170,197 201,712,363 Less - Accumulated depreciation (66,349,206) (64,419,888) ------------- ------------- 141,820,991 137,292,475 Land, at cost 20,167,647 20,167,647 Land improvements, furniture and equipment, at cost, less accumulated depreciation of $3,540,708 in 1997 and $2,824,369 in 1996 21,120,233 19,572,015 Prepaid expenses and other assets 4,039,235 2,396,935 ------------- ------------- $206,220,853 $200,035,359 ------------- ------------- ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable $ 52,000,000 $ 53,850,000 Accounts payable and accrued liabilities 16,807,950 15,280,543 Deferred income 5,013,473 5,226,803 Deferred income taxes 39,394,287 36,869,734 ------------- ------------- Total liabilities 113,215,710 111,227,080 ------------- ------------- Shareholders' equity: Common stock, no par value - Authorized - 40,000,000 shares Outstanding - 14,976,518 shares in 1997 and 15,386,630 in 1996 7,639,225 7,161,168 Retained earnings 85,365,918 81,647,111 ------------- ------------- Total shareholders' equity 93,005,143 88,808,279 ------------- ------------- $206,220,853 $200,035,359 ------------- ------------- ------------- -------------
The accompanying notes are an integral part of these financial statements. McGrath RentCorp First Quarter 1997 Form 10-Q Page 3 CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in cash (Unaudited)
Three months ended March 31, ------------------------------- 1997 1996 ----------- ----------- Cash flows from operating activities: Net income $ 4,919,488 $ 3,073,577 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,657,614 3,178,949 Gain on sale of rental equipment (1,513,842) (1,115,396) Change in: Accounts receivable 2,224,004 1,087,360 Prepaids and other assets (1,642,300) 142,136 Accounts payable and accrued liabilities 1,364,540 875,338 Deferred income (213,330) (1,212,778) Deferred income taxes 2,524,553 1,814,025 ----------- ----------- Net cash provided by operating activities 11,320,727 7,843,211 ----------- ----------- Cash flows from investing activities: Purchase of rental equipment (9,980,850) (5,501,792) Purchase of land improvements, furniture and equipment (1,782,391) (1,374,781) Proceeds from sale of rental equipment 3,542,735 3,005,926 ----------- ----------- Net cash used in investing activities (8,220,506) (3,870,647) ----------- ----------- Cash flows from financing activities: Net borrowings (payments) under line of credit (1,850,000) (1,225,000) Proceeds from the exercise of stock options 478,057 252,125 Repurchase of common stock --- (2,215,127) Payment of dividends (1,037,814) (935,353) ----------- ----------- Net cash used in financing activities (2,409,757) (4,123,355) ----------- ----------- Net increase (decrease) in cash 690,464 (150,791) Cash balance, beginning of period 686,333 221,075 ----------- ----------- Cash balance, end of period $ 1,376,797 $ 70,284 ----------- ----------- ----------- ----------- Interest paid during period $ 892,867 $ 641,163 ----------- ----------- ----------- ----------- Income taxes paid during period $ 731,200 $ 210,804 ----------- ----------- ----------- ----------- Dividends declared but not yet paid $ 1,200,681 $ 1,069,567 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements. McGrath RentCorp First Quarter 1997 Form 10-Q Page 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 ------------------------------------------ 1. The consolidated financial information for the three months ended March 31, 1997 has not been audited, but in the opinion of management, all adjustments (consisting of only normal recurring accruals, consolidation and eliminating entries) necessary for the fair presentation of the consolidated results of operations, financial position, and cash flows of McGrath RentCorp (the "Company") have been made. The consolidated results of the three months ended March 31, 1997 should not be considered as necessarily indicative of the consolidated results for the entire year. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest Form 10-K. 2. On March 27, 1997, the Company's Board of Directors declared a 2-for-1 stock split to be effective April 15, 1997. All share and per share calculations retroactively reflect the stock split. The number of outstanding shares and equivalent shares used in the earnings per common share calculations were as follows: Quarter ended March 31, Primary Fully Diluted - ----------------------- ---------- ------------- 1997 15,123,004 15,143,156 1996 15,756,370 15,762,590 3. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share", which modifies the way in which earnings per share (EPS) is calculated and disclosed effective for periods ending after December 15, 1997. Primary EPS will be replaced by basic EPS which is computed by dividing reported net income by the weighted average number of shares of common stock outstanding during the period. Fully diluted EPS will be replaced with diluted EPS which is computed by dividing reported net income by the weighted average number of shares of common stock and dilutive common equivalent shares outstanding during the period. Common stock equivalents result from dilutive stock options computed using the treasury stock method with the average share price for the reported period. When implemented, the effect of this accounting change on previously reported EPS data is not significant. McGrath RentCorp First Quarter 1997 Form 10-Q Page 5 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Three Months Ended March 31, 1997 and 1996 McGrath RentCorp (the "Company") is engaged in the business of renting and selling relocatable modular offices and classrooms under its trade name "Mobile Modular," and electronic test and measurement instruments under the names "McGrath RentCorp" and "Rentelco". Although the Company's primary emphasis is on rentals, both modulars and electronics are sold to direct-use customers. The Company also manufactures portable classrooms through its majority owned (73.2%) subsidiary, Enviroplex, Inc., for direct sale to school districts. Rental revenues for the first quarter of 1997 increased $2,769,203 (24%) over 1996 with modulars contributing $2,128,809 of the increase and electronics contributing $640,394. Average utilization during the first quarter increased for modulars from 70.0% to 79.3% and declined for electronics from 56.7% to 53.9%, as compared to the same period in 1996. The increase in utilization for modulars resulted from the large volume of shipments to school districts during the last half of 1996 and first quarter 1997 due to the implementation of class size reduction in California. Class size reduction has significantly contributed to the increase in rental revenues. Rental related services revenues for the first quarter of 1997 increased $1,254,626 (76%) over the same period in 1996. Most of the increase resulted from one commercial project with significant site work requirements performed at a lower gross margin. Gross margins declined between comparative quarters, from 38% in 1996 to 30% in 1997, as a result of this commercial project compounded with the earning of less incentive fees during the quarter for equipment management. Sales and related services revenues for the three months ended March 31, 1997 increased $5,112,330, a 114% increase, compared to the same period in 1996. Of the increase in sales and related services revenues, $2,225,968 relates to modulars, $2,621,819 relates to Enviroplex and $264,543 relates to electronics. Again in 1997, the significant increase in sales for modulars and Enviroplex is directly related to the higher demand by school districts because of the class size reduction program in California. Of the consolidated total sales and related services revenues for the Company, 61% were related to school districts. Gross margin on sales and related services improved during first quarter 1997 to 35% from 31% for the comparative period in 1996. Sales and related services have fluctuated from quarter to quarter and year to year depending on customer requirements. Depreciation on rental equipment for the three months ended March 31, 1997 increased $417,788 (14%) as a result of additions to the rental equipment for both modulars and electronics. Equipment supplies, repair, direct labor and other increased $567,050 (29%) over first quarter 1996 due to material, repair and labor costs directly related to the modular equipment movement in the first quarter 1997. McGrath RentCorp First Quarter 1997 Form 10-Q Page 6 Selling and administrative expenses increased $665,897 (23%) for the three months ended March 31, 1997 compared to the same period in 1996 due to increased staffing levels and personnel costs necessitated by the increasing levels of business. Additionally, expense increases of Enviroplex contributed to the overall increase. Income before provision for taxes increased $3,076,539 (60%) for the three months ended March 31, 1997 from the same period in 1996 with after tax income increasing $1,845,911 (60%). Earnings per share for the quarter increased from $0.20 per share to $0.33 per share, a 65% increase, as a result of higher net income and fewer outstanding shares. Liquidity and Capital Resources. The debt (notes payable) to equity ratio was 0.61 to 1 at March 31, 1997 compared to 0.56 to 1 at December 31, 1996. The debt (total liabilities) to equity ratio at the end of the current period was 1.25 to 1 compared to 1.22 to 1 as of December 31, 1995. The Company has made purchases of shares of its common stock from time to time in the over-the-counter market (NASDQ) and/or through privately negotiated, large block transactions under an authorization of the Board of Dircetors. The Board of Directors believes that the repurchase of its shares continues to be a good investment for the Company. Shares repurchased by the Company will be cancelled and returned to the status of authorized but unissued stock. The Company has not repurchased any of its common stock during 1997 and currently has 1,000,000 shares authorized for repurchase. The Company's primary use of funds is to purchase rental equipment, and funds will continue to be used for this purpose in the future. Additionally, the Company plans to make further improvements to the land at their inventory facility located in Northern California. The Company also pays quarterly dividends, which will constitute an additional use of cash in 1997. McGrath RentCorp First Quarter 1997 Form 10-Q Page 7 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION On March 27, 1997 the Company declared a quarterly dividend on its Common Stock; the dividend was $0.08 per share. Subject to its continued profitability and favorable cash flow, the Company intends to continue the payment of quarterly dividends. The Company's loan agreement with its banks prohibits payment of dividends in excess of 50% of net income in any one year without the banks' consent. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. No exhibits included. (b) REPORTS ON FORM 8-K. No reports on form 8-K have been filed during the quarter for which this report is filed. McGrath RentCorp First Quarter 1997 Form 10-Q Page 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 1, 1997 McGRATH RENTCORP By: /s/ Delight Saxton --------------------------- Delight Saxton Vice-President of Administration, Chief Financial Officer and Secretary EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MCGRATH RENTCORP'S QUARTERLY REPORT (10Q) FOR QUARTER ENDING MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1,377 0 18,306 (611) 0 0 252,999 (69,890) 206,221 0 0 0 0 7,639 85,366 206,221 26,842 26,842 14,251 14,251 3,543 0 873 8,175 3,255 0 0 0 0 4,919 .33 0 INCLUDES RENTAL EQUIPMENT, LAND, LAND IMPROVEMENTS, FURNITURE AND EQUIPMENT ACCUMULATED DEPRECIATION RELATED TO FOOTNOTE 16 ABOVE
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