-----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, HXoYEJ+C5NkW1PrzOwLpVyomZTH1Ncu60xt5xraqr3sBP6yPJetDmZIBfGTpbbd6 RUBUlg1x8yWiVPABaLUN9g== 0000912057-96-025606.txt : 19961113 0000912057-96-025606.hdr.sgml : 19961113 ACCESSION NUMBER: 0000912057-96-025606 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 96658906 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 September 30, 1996 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 November 7, 1996, 7,398,959 shares of Registrant's Common Stock were outstanding. ------------------------- McGrath RentCorp Third Quarter 1996 Form 10-Q Page 1 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Nine months ended September 30, September 30, ----------------------- ----------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- REVENUES: Rental operations- Rental $12,321,796 $11,928,853 $35,573,650 $34,524,914 Rental related services 3,920,071 3,032,306 7,672,245 6,832,034 ----------- ----------- ----------- ----------- 16,241,867 14,961,159 43,245,895 41,356,948 Sales and related services 9,255,338 4,106,228 19,598,040 11,480,755 ----------- ----------- ----------- ----------- Total revenues 25,497,205 19,067,387 62,843,935 52,837,703 ----------- ----------- ----------- ----------- COSTS & EXPENSES: Direct costs of rental operations- Depreciation 3,108,151 2,930,235 9,188,972 8,532,567 Rental related services 2,048,185 1,925,257 4,227,682 4,325,845 Other 1,752,510 1,256,333 3,855,515 3,593,837 ----------- ----------- ----------- ----------- 6,908,846 6,111,825 17,272,169 16,452,249 Cost of sales and related services 6,064,184 2,793,706 13,257,615 7,698,983 ----------- ----------- ----------- ----------- 12,973,030 8,905,531 30,529,784 24,151,232 ----------- ----------- ----------- ----------- Gross margin 12,524,175 10,161,856 32,314,151 28,686,471 Selling and administrative expenses 4,648,965 3,534,800 11,952,094 9,967,180 ----------- ----------- ----------- ----------- Income from operations 7,875,210 6,627,056 20,362,057 18,719,291 Interest expense 744,275 759,920 2,061,701 2,122,581 ----------- ----------- ----------- ----------- Income before provision for income taxes 7,130,935 5,867,136 18,300,356 16,596,710 Provision for income taxes 2,667,070 2,361,414 7,110,824 6,649,630 ----------- ----------- ----------- ----------- Net income $ 4,463,865 $ 3,505,722 $11,189,532 $ 9,947,080 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income per share $ 0.59 $ 0.44 $ 1.45 $ 1.22 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements. McGrath RentCorp Third Quarter 1996 Form 10-Q Page 2 CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 1996 1995 ------------ ------------ ASSETS Cash $ 1,067,236 $ 221,075 Accounts receivable, less allowance for doubtful accounts of $605,000 in 1996 and 1995 18,581,472 13,201,196 Rental equipment, at cost: Relocatable modular offices 148,253,732 146,867,850 Electronic test instruments 40,458,394 34,932,807 Accessory equipment 3,931,249 3,755,754 ------------ ------------ 192,643,375 185,556,411 Less - Accumulated depreciation (62,531,036) (57,948,456) ------------ ------------ 130,112,339 127,607,955 Land 20,167,647 19,489,300 Land improvements, furniture and equipment, at cost, less accumulated depreciation of $3,160,174 in 1996 and $2,708,404 in 1995 16,391,873 12,713,095 Prepaid expenses and other assets 2,326,195 1,897,700 ------------ ------------ $188,646,762 $ 175,130,321 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable $ 45,725,000 $ 37,080,000 Accounts payable and accrued liabilities 15,733,551 11,701,417 Deferred income 5,625,178 5,967,063 Deferred income taxes 36,315,667 34,488,695 ------------ ------------ Total liabilities 103,399,396 89,237,175 ------------ ------------ Shareholders' equity: Common stock, no par value - Authorized - 2O,OOO,OOO shares Outstanding - 7,398,959 shares in 1996 and 7,760,247 in 1995 5,585,817 8,913,311 Retained earnings 79,661,549 76,979,835 ------------ ------------ Total shareholders' equity 85,247,366 85,893,146 ------------ ------------ $188,646,762 $ 175,130,321 ------------- ----------- The accompanying notes are an integral part of these financial statements. McGrath RentCorp Third Quarter 1996 Form 10-Q Page 3 CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in cash (Unaudited)
Nine months ended September 30, ----------------------------- 1996 1995 ------------ ------------ Cash flows from operating activities: Net income $ 11,189,532 $ 9,947,080 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 9,787,419 9,274,334 Gain on sale of rental equipment (3,606,691) (2,325,868) Change in: Accounts receivable (5,380,276) (2,507,781) Prepaids and other assets (428,495) (429,354) Accounts payable and accrued liabilities 3,931,629 2,113,140 Deferred income (341,885) (139,452) Deferred income taxes 1,826,972 1,415,789 ----------------------------- Net cash provided by operating activities 16,978,205 17,347,888 ----------------------------- Cash flows from investing activities: Purchase of rental equipment (17,598,298) (13,587,246) Purchase of land (678,347) (4,750) Purchase of land improvements, furniture and equipment (4,277,225) (4,761,776) Proceeds from sale of rental equipment 9,511,633 6,316,019 ----------------------------- Net cash used in investing activities (13,042,237) (12,037,753) ----------------------------- Cash flows from financing activities: Net borrowings 8,645,000 3,975,000 Payment of dividends (3,048,133) (2,836,584) Repurchase of common stock (8,778,775) (7,374,279) Net proceeds from the exercise of stock options 92,101 41,416 ----------------------------- Net cash provided (used) by financing activities (3,089,807) (6,194,447) ----------------------------- Net increase (decrease) in cash 846,161 (884,312) Cash balance, beginning of period 221,075 1,151,648 ----------------------------- Cash balance, end of period $ 1,067,236 $ 267,336 ============================= Interest paid during period $ 2,028,226 $ 2,110,541 ============================= Income taxes paid during period $ 5,256,506 $ 4,750,000 ============================= Dividends declared but not yet paid $ 1,035,854 $ 931,230 =============================
The accompanying notes are an integral part of these financial statements. McGrath RentCorp Third Quarter 1996 Form 10-Q Page 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1996 ____________________________________________ 1. The consolidated financial information for the nine months ended September 30, 1996 has not been audited, but in the opinion of management, all adjustments (consisting only of 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 nine months ended September 30, 1996 should not be considered as necessarily indicative of the 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. The number of outstanding shares and equivalent shares used in the earnings per common share calculations were as follows: Primary Fully Diluted --------- ------------- Three months ended: September 30, 1996 7,586,204 7,597,150 September 30, 1995 7,958,848 7,960,787 Nine months ended: September 30, 1996 7,701,993 7,734,126 September 30, 1995 8,158,890 8,166,221 3. In May 1996, the Company's unsecured line of credit agreement (the "Agreement") with its banks was amended to extend the expiration date of the Agreement to June 30, 1997. In addition to extending the expiration date, the amendment requires the Company to maintain shareholders' equity of not less than $70,000,000 plus 50% of all net income generated subsequent to December 31, 1995 plus 90% of any new stock issuance proceeds (restricted equity as of September 30, 1996 is $75,595,000). McGrath RentCorp Third Quarter 1996 Form 10-Q Page 5 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 The Company has experienced a significant increase in orders during the three months ended September 30, 1996 primarily related to a law enacted on July 15, 1996 in California which provided operational funding for a reduction of classroom size for kindergarten through third grade to 20 pupils and additional legislation which made available $200 million of state funds for facilities to accomplish that goal. The law requires that the new classrooms be in place by February 1997 to be eligible for the state funding. Rental revenues for the three and nine months ended September 30, 1996 increased slightly over the same periods in 1995. For the nine month period, the $1,794,715 increase in rental revenues from electronics was offset by a $745,979 decline in rental revenues from relocatable modular offices. The rental revenue decline for modulars is primarily due to an increase in rental customers electing to purchase modulars they had on rent and to the return of modular equipment related to several large expired leases during the first part of 1996. Average utilization for the first nine months declined for modular equipment, from 74.6% to 70.5%, and remained the same for electronic equipment (55.2%), as compared to the same period in 1995. However, as a result of the significant volume of shipments to school districts during August and September 1996, modular utilization has increased to 74.9% as of September 30, 1996 from 71.0% as of December 31, 1995. Rental revenues for the three months ended September 30, 1996 reflect only a partial quarter of rental revenues associated with the modular equipment shipped in August and September 1996. Rental related services for the three and nine months ended September 30, 1996 increased $887,765 (29%) and $840,211 (12%), respectively, over the same periods in 1995. The nine month increase was primarily due to additional site requirements and the significant increase in the movement of modular equipment to school districts. Sales and related services for the three and nine months ended September 30, 1996 increased $5,149,110 (125%) and $8,117,285 (71%), respectively, over the same periods in 1995. Of the nine month increase in sales and related services, $4,964,022 relates to the Company's modular equipment, $2,164,259 relates to the Company's majority owned subsidiary, Enviroplex, Inc., which manufactures and sells portable classrooms directly to school districts and $989,004 relates to electronic test and measurement equipment. The significant increase in modular equipment sales and related services is due to a high number (17) of large sales in 1996 of both new and used relocatable modular equipment amounting to $4,050,881. Of the sales of modular equipment through September 30, 1996, 33% are new and 67% are used. As of September 30, 1996, the largest single sale was for $1,517,337 by Enviroplex, Inc. to a school district consisting of McGrath RentCorp Third Quarter 1996 Form 10-Q Page 6 manufactured portable classrooms of various sizes. Sales and related services from quarter to quarter have fluctuated depending on customer requirements. Gross margin on sales and related services for the nine month period was 32% in 1996 compared with 33.0% in 1995. Depreciation on rental equipment for the three and nine months ended September 30, 1996 increased $177,916 (6%) and $656,405 (8%), respectively, over the same periods in 1995 due to the increases in electronics rental equipment. Other direct costs for the three and nine months ended September 30, 1996 have increased $496,177 (39%) and $261,678 (7%) respectively, compared to the same periods in 1995 due to material and repair costs directly related to the modular equipment movement during the third quarter of 1996. Selling and administrative expenses for the three and nine months ended September 30, 1996 increased $1,114,165 (32%) and $1,984,914 (20%), respectively, over the same periods in 1995. However, during the first quarter of 1995, the Company recognized an acceleration of $330,000 in additional leasehold improvement expense related to a rented facility in Southern California in which the lease was terminated. Excluding this 1995 nonrecurring expense, selling and administrative expenses increased $2,314,914 (23%) for the nine months ended September 30, 1996 compared to the same period in 1995. The nine month increase is primarily due to increases in staffing levels for sales and support, personnel costs, temporary contract labor to assist in the preparation of modular offices for potential lease and sale opportunities, and increases in the expenses of the Company's majority owned subsidiary, Enviroplex, Inc. The increase in expenses are net of the reduction in facilities rental expense due to the relocation of modular office operations in Southern California and Texas to owned facilities. Net income for the three and nine months ended September 30, 1996 increased $958,143 (27%) and $1,242,452 (12%), respectively, over the same periods in 1995. Earnings per share for the three and nine months ended September 30, 1996 increased 34%, from $0.44 to $0.59, and 19%, from $1.22 to $1.45, over the comparative 1995 period as a result of higher earnings and fewer outstanding shares. LIQUIDITY AND CAPITAL RESOURCES. The debt (notes payable) to equity ratio was 0.54 to 1 at September 30, 1996 compared to 0.43 to 1 at December 31, 1995. The debt (total liabilities) to equity ratio at the end of the current period was 1.21 to 1 as compared to 1.04 to 1 as of December 31, 1995. The Company continues to make purchases of shares of its common stock from time to time in the over-the-counter market (NASDAQ) and/or through privately negotiated, large block transactions under an authorization of McGrath RentCorp Third Quarter 1996 Form 10-Q Page 7 the Board of Directors. 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. From January 1, 1996 thru November 7, 1996, the Company repurchased a total of 420,550 shares of its common stock at an aggregate cost of $8,778,775 or an average price of $20.87 per share. As of November 7, 1996, 387,200 shares remain 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 1996. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION On August 30, 1996 the Company declared a quarterly dividend on its Common Stock; the dividend was $0.14 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 the Bank prohibits payment of dividends in excess of 50% of net income in any one year without the bank's 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 Third Quarter 1996 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: November 7, 1996 McGRATH RENTCORP By:/s/ Delight Saxton ____________________________ Delight Saxton, Chief Financial Officer and Vice President of Administration EX-27 2 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MCGRATH RENTCORP'S QUARTERLY REPORT (10Q) FOR QUARTER ENDING SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,067 0 19,186 (605) 0 0 232,362 (65,691) 188,647 0 0 0 0 5,585 79,662 188,647 62,843 62,843 30,529 30,529 11,952 0 2,062 18,300 7,110 0 0 0 0 11,190 1.45 0 16) Includes Rental Equipment, Land, Land Improvements, Furniture and Equipment 17) Accumulated Depreciation related to 16 above
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