EX-99.1 3 a4576345ex99.txt PRESS RELEASE Exhibit 99.1 McGrath RentCorp Announces Fourth Quarter and Year-End Results; Q4 2003 EPS of $0.57 and FYE 2003 EPS of $1.85 LIVERMORE, Calif.--(BUSINESS WIRE)--Feb. 19, 2004-- Quarter over Quarter Rental Revenues Increase for Both Modulars and Electronics 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 December 31, 2003 of $37.1 million, compared to $34.9 million in the fourth quarter of 2002. The Company reported net income of $7.0 million or $0.57 per share, compared to $7.7 million or $0.61 per share in the fourth quarter of 2002. Fourth quarter 2002 results included a nonrecurring gain on land sales of $0.9 million, which increased net income by $0.5 million or $0.04 per share. For comparability, excluding the gain on land sales, fourth quarter net income would have decreased 3% from $7.2 million, or $0.57 per share, in 2002 to $7.0 million, or $0.57 per share, in 2003, with fewer outstanding shares in 2003. For the quarter, rental revenues for the Company's Mobile Modular division increased 2% from the same period in 2002 to $16.9 million as a result of high shipping levels of classroom product in the third quarter. The rental revenue increase for Mobile Modular was offset by higher operating expenses coupled with lower margin contribution of rental related services and sales. This resulted in a pre-tax income decline for Mobile Modular of 11% to $10.0 million. For Enviroplex, the Company's classroom manufacturing subsidiary, sales revenues for the quarter increased to $3.9 million from $1.2 million in the same period in 2002, as projects in process at the end of the third quarter were completed, resulting in pre-tax income of $0.8 million compared to a pre-tax loss of $0.2 million in the year ago period. Enviroplex's backlog at December 31, 2003 was $4.2 million compared to $3.3 million at the end of 2002. At RenTelco, the Company's communications test equipment rental division, rental revenues increased 4% sequentially to $3.6 million from $3.4 million in the third quarter of 2003, and were 8% higher than in the fourth quarter of 2002. RenTelco contributed $1.1 million in pre-tax earnings, about half of which were derived from selling underutilized equipment. "Both of our rental businesses ended the year with strong quarters," stated Dennis Kakures, President and CEO. "Our Modular business experienced its highest-ever rental revenue quarter while rental revenues for our communications test equipment business increased for a third sequential quarter and grew 8% over fourth quarter 2002 results. More importantly, gross margin on rents for RenTelco has increased for three consecutive quarters, and grew 24% over fourth quarter 2002. "In addition, we continued to bolster our healthy balance sheet by generating strong cash flow during the year, further reducing our debt by $8.3 million and lowering our already low debt-to-equity ratio. We accomplished this while continuing to increase the dividend in 2003, repurchasing $10.3 million of the Company's common stock and increasing our rental equipment assets by $13.7 million for the year. "We look forward into 2004 with enthusiasm and anticipation that feels different from our recent past. "We believe that the increased momentum in order activity for RenTelco, especially in product areas that have been relatively dormant over the past few years, is very encouraging. As the communications industry continues to recover, we anticipate increasing business levels. Our communications test equipment leadership position, rightsizing of our inventory levels and infrastructure cost reductions over the past couple of years, has well positioned us to take full advantage of improving market conditions. Looking forward, this business has the potential for favorable income growth. "We expect our modular rental business to continue its strong performance in 2004. Mobile Modular, in good and bad economic times, has endured and produced consistently favorable results. Our educational rental business is the core of this economic engine. We are focused on growing our leadership position in providing low cost, interim facility solutions to the educational community. "Over the past 12 to 18 months, the Company's management has made a significant investment of time and money in developing a strategic planning structure and protocols to cultivate and assess growth opportunities going forward. We believe that these capabilities will enhance our ability to develop the Company's future income growth." Total revenues for the twelve months ended December 31, 2003, were $131.0 million, compared to $145.1 million in the same twelve-month period in 2002. Net income for the twelve months ended December 31, 2003, was $22.7 million or $1.85 per share, compared to $12.6 million or $1.00 per share in the prior-year period. The twelve-month 2002 results include noncash RenTelco impairment charges, net of the lower depreciation expense from the equipment write-downs, of $20.6 million, which reduced net income by $12.4 million or $0.98 per share; a nonrecurring gain on land sales, which increased net income by $0.5 million or $0.04 per share; and net nonrecurring income related to the terminated Tyco merger, which increased net income by $0.4 million, or $0.03 per share. FOURTH QUARTER 2003 HIGHLIGHTS (AS COMPARED TO FOURTH QUARTER 2002) -- Rental revenues increased 3% to $20.4 million. Within rental revenues, Mobile Modular increased 2% to $16.9 million, resulting from high shipping levels of classroom product during the prior quarter. RenTelco rental revenues increased 8% to $3.6 million. -- Sales revenues increased 22% to $11.2 million resulting from $2.7 million higher equipment sales by Enviroplex offset by lower sales at Mobile Modular and RenTelco. Overall gross profit on sales for the quarter increased from $2.7 million in 2002 to $3.2 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 5% to $3.3 million for the quarter resulting primarily from RenTelco's sale of underutilized communications test equipment throughout the year. -- Operating cash flow increased 36% to $15.7 million, primarily due to collection of accounts receivable and lower income tax payments during the quarter. Debt decreased $8.7 million during the quarter to $47.3 million, with the Company's total liabilities to equity ratio decreasing from 1.43 to 1 at September 30, 2003 to 1.25 to 1 as of December 31, 2003. At December 31, 2003, the Company, under existing bank lines of credit, has capacity to borrow up to an additional $93.7 million. -- Dividend rate increased to $0.20 per share for the fourth quarter 2003. On an annualized basis, this dividend represented a 2.6% yield on the February 18, 2004 close price of $30.41. FINANCIAL GUIDANCE The Company currently expects its 2004 full-year earnings per share to be in a range of $2.00 to $2.10 per diluted share. Such a forward-looking statement reflects McGrath RentCorp's expectations as of February 19, 2004. Results may be materially affected by many factors, as outlined in the "forward-looking statements" paragraph at the end of this press release. 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 Forms 10-Q. CORPORATE GOVERNANCE Management and the Company's board of directors have recently updated its corporate governance practices, which can be accessed in the Investor Relations section of the Company's web site at www.mgrc.com. 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 February 4, 2004, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 19, 2004 to discuss the fourth quarter 2003 results. To participate in the teleconference, dial 1-800-218-4007 (international callers dial 1-303-262-2130). 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 567142#. 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 from the 2002 three-month results the net nonrecurring gain on land sales of $0.5 million. McGrath RentCorp provides these measurements to provide a consistent basis for comparison between quarters without the effect of one-time events. The net income and earnings per share 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 our general expectations regarding our business in 2004, our expectation regarding RenTelco's increased business activity and potential for favorable income growth, our expectation of continued strong performance by Mobile Modular's rental business in 2004, our expectations regarding the impact of the Company's strategic planning on the Company's future income growth, and guidance on per share earnings for 2004. 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 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 Twelve Months Ended December 31 December 31 ------------------- ------------------- 2003 2002 2003 2002 ---------------------------------------- --------- ---------- -------- REVENUES ------------------------------- Rental $20,426 $19,839 $76,678 $81,991 Rental Related Services 5,192 4,724 16,746 17,497 --------- --------- ---------- -------- Rental Operations 25,618 24,563 93,424 99,488 Sales 11,249 9,196 36,745 42,257 Other 204 1,137 802 3,341 --------- --------- ---------- -------- Total Revenues 37,071 34,896 130,971 145,086 --------- --------- ---------- -------- COSTS AND EXPENSES ------------------------------- Direct Costs of Rental Operations Depreciation of Rental Equipment 3,277 3,465 12,745 15,792 Rental Related Services 3,482 2,584 10,356 9,497 Impairment of Rental Equipment -- -- -- 24,083 Other 4,079 3,763 18,623 17,839 --------- --------- ---------- -------- Total Direct Costs of Rental Operations 10,838 9,812 41,724 67,211 Costs of Sales 8,083 6,506 25,913 30,541 --------- --------- ---------- -------- Total Costs 18,921 16,318 67,637 97,752 --------- --------- ---------- -------- Gross Margin 18,150 18,578 63,334 47,334 Selling and Administrative 5,753 4,996 22,626 22,099 --------- --------- ---------- -------- Income from Operations 12,397 13,582 40,708 25,235 Interest 583 807 2,668 3,982 --------- --------- ---------- -------- Income Before Provision for Income Taxes 11,814 12,775 38,040 21,253 Provision for Income Taxes 4,714 5,085 15,178 8,459 --------- --------- ---------- -------- Income Before Minority Interest 7,100 7,690 22,862 12,794 Minority Interest in Income of Subsidiary 81 (21) 170 161 --------- --------- ---------- -------- Net Income $7,019 $7,711 $22,692 $12,633 ========= ========= ========== ======== Earnings Per Share: Basic $0.58 $0.62 $1.87 $1.01 Diluted $0.57 $0.61 $1.85 $1.00 Shares Used in Per Share Calculations: Basic 12,119 12,488 12,125 12,468 Diluted 12,274 12,572 12,259 12,619 December 31, December 31, BALANCE SHEET DATA 2003 2002 ---------------------------------------- --------- Rental Equipment, net $232,046 $221,899 Total Assets 323,858 313,134 Notes Payable 47,266 55,523 Shareholders' Equity 143,978 139,019 SEGMENT DATA Modulars Electro- Enviro- Corporate(1) Consol- nics plex idated ------------------------------- -------- ------- ------------ -------- Three Months Ended December 31, ----------------------- 2003 Rental Revenues $16,875 $3,551 $-- $-- $20,426 Rental Related Services Revenues 5,051 141 -- -- 5,192 Sales and Other Revenues 5,720 1,838 3,895 -- 11,453 Total Revenues 27,646 5,530 3,895 -- 37,071 Depreciation of Rental Equipment 1,972 1,305 -- -- 3,277 Interest Expense (Income) Allocation 557 71 (45) -- 583 Income before Provision for Income Taxes 9,960 1,057 797 -- 11,814 Rental Equipment Acquisitions 4,623 737 -- -- 5,360 Accounts Receivable, net (period end) 26,616 3,664 1,919 -- 32,199 Rental Equipment, at cost (period end) 304,905 34,448 -- -- 339,353 Rental Equipment, net book value (period end) 215,589 16,457 -- -- 232,046 Utilization (period end) (2) 84.6% 45.2% Average Utilization(2) 85.1% 46.6% 2002 Rental Revenues $16,550 $3,289 $-- $-- $19,839 Rental Related Services Revenues 4,594 130 -- -- 4,724 Sales and Other Revenues 5,804 2,451 1,173 905 10,333 Total Revenues 26,948 5,870 1,173 905 34,896 Depreciation of Rental Equipment 2,004 1,461 -- -- 3,465 Interest Expense (Income) Allocation 746 115 (54) -- 807 Income before Provision for Income Taxes 11,173 869 (172) 905 12,775 Rental Equipment Acquisitions 1,844 924 -- -- 2,768 Accounts Receivable, net (period end) 27,368 3,896 1,985 -- 33,249 Rental Equipment, at cost (period end) 285,901 39,786 -- -- 325,687 Rental Equipment, net book value (period end) 200,593 21,306 -- -- 221,899 Utilization (period end) (2) 85.2% 41.6% Average Utilization(2) 85.8% 43.8% ---------------------------------------------------------------------- SEGMENT DATA Modulars Electro- Enviro- Corporate(1) Consol- nics plex idated ------------------------------- -------- ------- ------------ -------- Twelve Months Ended December 31, ----------------------- 2003 Rental Revenues $63,948 $12,730 $-- $-- $76,678 Rental Related Services Revenues 16,203 543 -- -- 16,746 Sales and Other Revenues 18,973 7,567 11,007 -- 37,547 Total Revenues 99,124 20,840 11,007 -- 130,971 Depreciation of Rental Equipment 7,377 5,368 -- -- 12,745 Impairment of Rental Equipment -- -- -- -- -- Interest Expense (Income) Allocation 2,505 343 (180) -- 2,668 Income before Provision for Income Taxes 33,357 3,290 1,393 -- 38,040 Rental Equipment Acquisitions 27,637 4,790 -- -- 32,427 Accounts Receivable, net (period end) 26,616 3,664 1,919 -- 32,199 Rental Equipment, at cost (period end) 304,905 34,448 -- -- 339,353 Rental Equipment, net book value (period end) 215,589 16,457 -- -- 232,046 Utilization (period end) (2) 84.6% 45.2% Average Utilization(2) 84.2% 45.3% 2002 Rental Revenues $66,214 $15,777 $-- $-- $81,991 Rental Related Services Revenues 16,936 561 -- -- 17,497 Sales and Other Revenues 20,802 10,153 12,488 2,155 45,598 Total Revenues 103,952 26,491 12,488 2,155 145,086 Depreciation of Rental Equipment 7,169 8,623 -- -- 15,792 Impairment of Rental Equipment -- 24,083 -- -- 24,083 Interest Expense (Income) Allocation 3,451 749 (218) -- 3,982 Income before Provision for Income Taxes 40,412 (22,023) 1,302 1,562 21,253 Rental Equipment Acquisitions 15,895 3,023 -- -- 18,918 Accounts Receivable, net (period end) 27,368 3,896 1,985 -- 33,249 Rental Equipment, at cost (period end) 285,901 39,786 -- -- 325,687 Rental Equipment, net book value (period end) 200,593 21,306 -- -- 221,899 Utilization (period end) (2) 85.2% 41.6% Average Utilization(2) 85.9% 38.2% ---------------------------------------------------------------------- (1) Corporate includes nonrecurring items related to the terminated merger with Tyco International in 2002 and gain on land sales, which were 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 Chief Financial Officer