EX-99 3 a4445317_ex991.txt MCGRATH EXHIBIT 99.1 Exhibit 99.1 McGrath RentCorp Announces Second Quarter Results; Q2 2003 EPS of $0.39 LIVERMORE, Calif.--(BUSINESS WIRE)--July 31, 2003--McGrath RentCorp (Nasdaq:MGRC), a leading rental provider of modular buildings for classroom and office space, and test equipment for communications, fiber optic and general purpose needs, today announced revenues for the quarter ended June 30, 2003 of $31.6 million, compared to $36.5 million in second quarter 2002. The Company reported net income of $4.7 million, or $0.39 per share, compared to a net loss of $1.2 million, or $0.10 loss per share, in second quarter 2002. Second quarter 2002 results included a noncash impairment charge of $12.2 million by the Company's RenTelco segment which primarily affected the carrying value of its communications rental equipment, reducing net income by $7.3 million or $0.58 per share, and expenses related to the terminated merger with Tyco International, reducing net income by $0.1 million or $0.01 per share. For comparability, excluding impairment and expenses related to the terminated merger, second quarter net income would have decreased 24% from $6.2 million in 2002 to $4.7 million in 2003 with earnings per share decreasing 20% from $0.49 per share in 2002 to $0.39 per share in 2003. The Company's Mobile Modular division rentals decreased 9%. Sales revenues from Mobile Modular decreased 2%. These decreases contributed to a 9% overall decline in total revenues and a 25% decline of pre-tax income to $7.2 million, representing 91% of the Company's pre-tax income for the quarter. "Mobile Modular's quarter over quarter decline in rental revenues was primarily due to a reduction in the average rental rate of utilized equipment, and to a lesser degree lower overall utilization," stated Dennis Kakures, President and CEO. "The decline is directly attributable to weakness in the commercial construction rental sector and classroom returns from various completed school construction projects. However, Mobile Modular's classroom rental orders for the first half of 2003 have been especially strong. In fact, the majority of returned classroom buildings during the first half of the year are already scheduled to be back on rent for the start of the 2003-2004 school year. In addition, we have continued to invest in new rental equipment to meet the increased demand for modular classrooms, which we believe stems largely from the passage of the November 2002 California state and local school bond measures. As this equipment comes online over the next few months, and the recurring rental revenue stream begins, it will add nicely to our rental business levels in future periods." Quarter-end sales backlog at Enviroplex, the Company's classroom manufacturer, was 42% higher than a year ago at $9.5 million; however, during the quarter sales decreased 16% from the same quarter in the prior year to $3.3 million. The Company's RenTelco division increased quarterly rental revenues 11% on a sequential basis to $3.0 million from $2.7 million in first quarter 2003 and contributed nominal pre-tax earnings this quarter primarily as a result of selling underutilized equipment. This modest increase in rental revenues may not be reflective of improving fundamentals, given the continued difficult conditions throughout the telecommunications industry. Total revenues for the six months ended June 30, 2003, were $59.0 million compared to $68.2 million in the same six-month period in 2002. Net income for the six months ended June 30, 2003, was $9.6 million or $0.78 per share, compared to net loss of $3.6 million, or $0.29 loss per share, in the prior-year period. The six-month 2002 results include noncash RenTelco impairment charges of $24.1 million, which reduced net income by $14.5 million or $1.15 per share and expenses related to the terminated Tyco merger which reduced net income by $0.4 million, or $0.03 per share. On July 22, 2003, the Company announced that its 2003 full-year earnings are expected to be in a range of $1.75 to $1.85 per diluted share, a reduction from its earlier full-year guidance range of $2.12 to $2.17 per diluted share. This revision was primarily due to lower than expected modular sales order activity. SECOND QUARTER 2003 HIGHLIGHTS (AS COMPARED TO SECOND QUARTER 2002) -- Rental revenues decreased 12% to $18.2 million. Within rental revenues, Mobile Modular decreased 9% to $15.2 million primarily due to lower rental rates and, to a lesser extent, utilization; and RenTelco decreased 25% to $3.0 million as a result of the severe and prolonged broad-based weakness in the telecommunications industry. -- Sales revenues decreased 15% to $9.5 million resulting from decreased equipment sales by RenTelco, Enviroplex, and Mobile Modular. Overall gross profit on sales decreased from $5.1 million in 2002 to $4.2 million in 2003. Sales can fluctuate from quarter to quarter and year to year depending on customer requirements and funding. -- Depreciation of rental equipment decreased 16% to $3.1 million. Within depreciation expense, Mobile Modular's depreciation expense increased 6% to $1.8 million and RenTelco's depreciation expense decreased 35% to $1.3 million, resulting primarily from the write-down of electronics equipment occurring in the first and second quarters 2002. -- Operating cash flow decreased 42% to $5.2 million, directly attributable to lower revenues during the quarter. Debt increased $2.7 million to $58.2 million, increasing the Company's total liabilities to equity ratio to from 1.25 to 1 at December 31, 2002 to 1.34 to 1 as of June 30, 2003. At June 30, 2003, the Company, under existing bank lines of credit, has capacity to borrow up to an additional $90.8 million. -- Dividend rate increased to $0.20 per share for the second quarter 2003. On an annualized basis, this dividend represented a 2.9% yield on the July 30, 2003 close price of $27.13. It is suggested that the press release be read in conjunction with the financial statements and notes thereto included in the Company's latest Form 10-K and Forms 10-Q. You can visit the Company's web site at www.mgrc.com to access information on McGrath RentCorp, including the latest filings on Form 10-K and Form 10-Q. About McGrath RentCorp Founded in 1979, the Company, under the trade name Mobile Modular Management Corporation, rents and sells modular buildings to fulfill customer's temporary and permanent space needs in California and Texas. Mobile Modular believes it is the largest provider of relocatable classrooms for rental to school districts for grades K-12 in California. McGrath RentCorp's majority owned subsidiary, Enviroplex, Inc., manufactures and sells classrooms directly to school districts in California. The Company's RenTelco division rents and sells electronic test equipment and is recognized as the leader in communications and fiber-optic test equipment rentals throughout the U.S. CONFERENCE CALL NOTE: As previously announced in its press release of July 1, 2003, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 31, 2003 to discuss the second quarter 2003 results. To participate in the teleconference, dial 1-800-240-2430 (international callers dial 1-303-262-2075). In addition, a live Web cast and replay of the call may be found in the investor relations section of the Company's website at www.mgrc.com. Telephone replay of the call will be available for 48 hours following the call by dialing 1-800-405-2236 (in the U.S.) or 1-303-590-3000 (outside the U.S.). The pass code for the call replay is 542168#. NON-GAAP FINANCIAL MEASURES: This press release includes financial measures for earnings per share and net income that have not been calculated in accordance with generally accepted accounting principles (GAAP). These differ from GAAP in that they exclude impairment and merger expenses from the second quarter of 2002 a noncash impairment charge of $12.2 million, which was taken by the Company's RenTelco segment and primarily affected the carrying value of its communications rental equipment, and expenses related to the terminated merger with Tyco International. McGrath RentCorp provides these measurements because they provide a consistent basis for comparison between quarters without the effect of one-time events. The losses per share and net losses contained in the attached unaudited financial statement are presented and have been calculated in accordance with GAAP. This press release contains statements, which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These include our statements regarding guidance on per share earnings for 2003, the expectation of increased demand for modular classrooms, the expectation of increased recurring rental revenue streams from increased deployment of modular rental equipment, and the annualized dividend yield. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. Actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include the effectiveness of management's strategies and decisions, general economic and business conditions, the condition of the telecommunications industry, new or modified statutory or regulatory requirements, continuing demand for modular products, timely delivery and installation of modular products, delays of future sales projects into 2004 and changing prices and market conditions. There may be other factors not listed above that could cause actual results to vary materially from the forward-looking statements described in this press release. MCGRATH RENTCORP Consolidated earnings, balance sheet and segment data follow: (in thousands, except per share amounts) ---------------------------------------------------------------------- Three Months Ended Six Months Ended June 30 June 30 ------------------------------------------ 2003 2002 2003 2002 -------------------------------------- --------- ---------- --------- REVENUES ---------------------------- Rental $ 18,219 $ 20,658 $ 36,660 $ 41,950 Rental Related Services 3,657 4,319 7,204 8,290 ---------- --------- ---------- --------- Rental Operations 21,876 24,977 43,864 50,240 Sales 9,500 11,164 14,777 17,309 Other 208 335 404 691 ---------- --------- ---------- --------- Total Revenues 31,584 36,476 59,045 68,240 ---------- --------- ---------- --------- COSTS AND EXPENSES ---------------------------- Direct Costs of Rental Operations Depreciation of Rental Equipment 3,127 3,737 6,242 9,105 Rental Related Services 2,212 2,320 4,373 4,551 Impairment of Rental Equipment -- 12,196 -- 24,083 Other 4,808 5,013 9,221 9,941 ---------- --------- ---------- --------- Total Direct Costs of Rental Operations 10,147 23,266 19,836 47,680 Costs of Sales 6,862 7,939 10,546 12,210 ---------- --------- ---------- --------- Total Costs 17,009 31,205 30,382 59,890 ---------- --------- ---------- --------- Gross Margin 14,575 5,271 28,663 8,350 Selling and Administrative 5,910 6,040 11,250 12,019 ---------- --------- ---------- --------- Income (Loss) from Operations 8,665 (769) 17,413 (3,669) Interest 748 1,077 1,438 2,224 ---------- --------- ---------- --------- Income (Loss) Before Provision for Income Taxes 7,917 (1,846) 15,975 (5,893) Provision (Benefit) for Income Taxes 3,159 (734) 6,374 (2,345) ---------- --------- ---------- --------- Income (Loss) Before Minority Interest 4,758 (1,112) 9,601 (3,548) Minority Interest in Income (Loss) of Subsidiary 40 93 (6) 23 ---------- --------- ---------- --------- Net Income (Loss) $ 4,718 $ (1,205) $ 9,607 $ (3,571) ========== ========= ========== ========= Earnings (Loss) Per Share: Basic $ 0.39 $ (0.10) $ 0.79 $ (0.29) Diluted $ 0.39 $ (0.10) $ 0.78 $ (0.29) Shares Used in Per Share Calculation: Basic 12,039 12,475 12,150 12,451 Diluted 12,169 12,475 12,261 12,451 June 30, Dec. 31, BALANCE SHEET DATA 2003 2002 --------------------------- ---------- --------- Rental Equipment, net $224,667 $221,899 Total Assets 312,859 313,134 Notes Payable 58,173 55,523 Shareholders' Equity 133,967 139,019 SEGMENT DATA Modulars Elec- Enviro- Corporate Consoli- (UNAUDITED) tronics plex (1) dated ---------------------- -------- -------- -------- ---------- --------- Three Months Ended June 30, ---------------------- 2003 ---- Rental Revenues $ 15,207 $ 3,012 $ -- $ -- $ 18,219 Rental Related Services Revenues 3,526 131 -- -- 3,657 Sales and Other Revenues 4,754 1,657 3,297 -- 9,708 Total Revenues 23,487 4,800 3,297 -- 31,584 Depreciation of Rental Equipment 1,782 1,345 -- -- 3,127 Impairment of Rental Equipment -- -- -- -- -- Interest Expense (Income) Allocation 693 96 (41) -- 748 Income (Loss) before Provision for Income Taxes 7,162 421 334 -- 7,917 Rental Equipment Acquisitions 7,880 1,426 -- -- 9,306 Accounts Receivable, net (period end) 21,316 3,164 5,065 -- 29,545 Rental Equipment, at cost (period end) 293,731 37,026 -- -- 330,757 Rental Equipment, net book value (period end) 206,093 18,574 -- -- 224,667 Utilization (period end)(2) 83.6% 45.1% Average Utilization(2) 82.8% 45.4% 2002 ---- Rental Revenues $ 16,620 $ 4,038 $ -- $ -- $ 20,658 Rental Related Services Revenues 4,188 131 -- -- 4,319 Sales and Other Revenues 4,888 2,668 3,943 -- 11,499 Total Revenues 25,696 6,837 3,943 -- 36,476 Depreciation of Rental Equipment 1,681 2,056 -- -- 3,737 Impairment of Rental Equipment -- 12,196 -- -- 12,196 Interest Expense (Income) Allocation 927 200 (50) -- 1,077 Income (Loss) before Provision for Income Taxes 9,556 (11,981) 752 (173) (1,846) Rental Equipment Acquisitions 4,723 822 -- -- 5,545 Accounts Receivable, net (period end) 23,873 4,960 4,304 -- 33,137 Rental Equipment, at cost (period end) 287,032 44,504 -- -- 331,536 Rental Equipment, net book value (period end) 202,490 25,709 -- -- 228,199 Utilization (period end)(2) 85.9% 41.9% Average Utilization(2) 85.8% 37.4% ---------------------------------------------------------------------- SEGMENT DATA Modulars Elec- Enviro- Corporate Consoli- (UNAUDITED) tronics plex (1) dated ---------------------- -------- -------- -------- ---------- --------- Six Months Ended June 30, ---------------------- 2003 ---- Rental Revenues $ 30,910 $ 5,750 $ -- $ -- $ 36,660 Rental Related Services Revenues 6,953 251 -- -- 7,204 Sales and Other Revenues 7,336 3,720 4,125 -- 15,181 Total Revenues 45,199 9,721 4,125 -- 59,045 Depreciation of Rental Equipment 3,522 2,720 -- -- 6,242 Impairment of Rental Equipment -- -- -- -- -- Interest Expense (Income) Allocation 1,345 192 (99) -- 1,438 Income (Loss) before Provision for Income Taxes 15,002 1,021 (48) -- 15,975 Rental Equipment Acquisitions 10,777 2,183 -- -- 12,960 Accounts Receivable, net (period end) 21,316 3,164 5,065 -- 29,545 Rental Equipment, at cost (period end) 293,731 37,026 -- -- 330,757 Rental Equipment, net book value (period end) 206,093 18,574 -- -- 224,667 Utilization (period end)(2) 83.6% 45.1% Average Utilization(2) 83.3% 44.1% 2002 ---- Rental Revenues $ 32,947 $ 9,003 $ -- $ -- $ 41,950 Rental Related Services Revenues 8,005 285 -- -- 8,290 Sales and Other Revenues 8,330 5,367 4,303 -- 18,000 Total Revenues 49,282 14,655 4,303 -- 68,240 Depreciation of Rental Equipment 3,436 5,669 -- -- 9,105 Impairment of Rental Equipment -- 24,083 -- -- 24,083 Interest Expense (Income) Allocation 1,839 493 (108) -- 2,224 Income (Loss) before Provision for Income Taxes 18,406 (23,894) 187 (592) (5,893) Rental Equipment Acquisitions 11,246 1,326 -- -- 12,572 Accounts Receivable, net (period end) 23,873 4,960 4,304 -- 33,137 Rental Equipment, at cost (period end) 287,032 44,504 -- -- 331,536 Rental Equipment, net book value (period end) 202,490 25,709 -- -- 228,199 Utilization (period end)(2) 85.9% 41.9% Average Utilization(2) 85.9% 35.6% ---------------------------------------------------------------------- (1) Corporate includes the impact of nonrecurring items related to the terminated merger with Tyco International of $173,000 and $592,000 for the three and six months ended June 30, 2002, which are not allocated to a specific segment. (2) Utilization is calculated each month by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding new equipment inventory and accessory equipment. The average utilization for the period is calculated using the average costs of rental equipment. CONTACT: McGrath RentCorp Thomas J. Sauer, 925-606-9200