EX-99.1 2 a4758354ex991.txt PRESS RELEASE Exhibit 99.1 McGrath RentCorp Announces Third Quarter Results; Rental Revenues Increase 89% to $37.1 Million; Q3 2004 EPS Increases 52% to $0.76 LIVERMORE, Calif.--(BUSINESS WIRE)--Nov. 4, 2004--McGrath RentCorp (Nasdaq:MGRC), a leading rental provider of modular buildings for classroom and office space, and test equipment for general purpose and communications needs, today announced revenues for the quarter ended September 30, 2004, of $72.5 million, compared to $34.9 million in the third quarter of 2003. The Company reported net income of $9.4 million, or $0.76 per share, compared to $6.1 million, or $0.50 per share in the third of quarter 2003. Most of the increase in revenues and income are attributable to the acquired Technology Rentals & Services ("TRS") assets and operations, which significantly contributed to an 89% increase in rental revenues. McGrath purchased substantially all the general purpose and communications test equipment assets of Dallas-based TRS, a division of CIT Group Inc. (NYSE:CIT) on June 2, 2004. Results for the third quarter and for the first nine months of 2004 include TRS' results since that date. In the third quarter of 2004 for Mobile Modular, record rental revenues of $18.4 million and a $9.3 million sale to a California school district contributed to total modular revenues increasing 51% to $39.6 million, as compared to third quarter 2003. The Company views the sales volume of this single $9.3 million sale project as unique and does not expect sales projects of this magnitude to occur on a regular basis. The significant rise in Mobile Modular's revenues led to a 25% increase in its pre-tax income to $10.5 million. Enviroplex sales during the quarter increased to $6.2 million from $3.0 million during the same period in 2003, with quarter-end backlog of $4.6 million, compared to $7.1 million in the year-ago quarter. At TRS-RenTelco, the Company's electronic test equipment rental division, rental revenues increased to $18.7 million from $3.4 million in the third quarter of 2003, primarily due to TRS' contribution, resulting in the division's pre-tax income of $4.5 million, compared to pre-tax income of $1.2 million in 2003. "These results reflect the strength of our California classroom rental business, and in particular, strong classroom booking levels experienced earlier this year for modernization and reconstruction projects, in driving modular rental revenues to a record $18.4 million for the quarter," stated Dennis Kakures, President & CEO. "This growth reflects our success as the leader in providing interim facilities to school districts throughout California. In addition, we recognized our first rental revenues in Florida, where order activity continues to outpace our pre-launch expectations. Although the impact of these initial rental revenues is minimal, we are very enthusiastic about the opportunity to create a meaningful educational rental business in Florida." Commenting on the Company's test equipment business, Kakures added, "This quarter's results demonstrate the significance of the TRS acquisition, with the electronics side of our business accounting for just over 50% of rental revenues, compared to 18% a year ago. In just our first full quarter of combined operations, we generated rental billings of $18.7 million and pre-tax income of $4.5 million. Keep in mind that our third quarter results only reflect a portion of the overhead cost structure adjustments associated with our integration efforts. We will complete the implementation of our remaining changes by the end of November. Overall, we are very pleased with our integration efforts and results over the past five months. We completed our consolidation of U.S. operations into a single facility at the DFW Airport, evaluated all operating groups and key programs, and are moving to implement plans on how we can most effectively and cost efficiently market to our target customer segments. Finally, the TRS-RenTelco leadership team, comprised of managers from both businesses, is now solidly in place and we couldn't be more pleased with the quality and capability of these individuals to grow the business." Total revenues for the nine months ended September 30, 2004, were $143.2 million, compared to $93.9 million in the same nine-month period in 2003. Net income for the nine months ended September 30, 2004, was $21.2 million or $1.72 per share, compared to net income of $15.7 million, or $1.28 per share, in the prior-year period. THIRD QUARTER 2004 HIGHLIGHTS AS COMPARED TO THIRD QUARTER 2003 -- Rental revenues increased 89% to $37.1 million. Within rental revenues, Mobile Modular increased 14% to $18.4 million, driven by California educational rentals, and RenTelco increased $15.3 million to $18.7 million primarily due to TRS's contribution since June 2, 2004. -- Sales revenues increased 163% to $28.2 million primarily due to a $9.3 million sale project by Mobile Modular to a California school district, and to a lesser extent higher sales volumes at Enviroplex and TRS-RenTelco. In the third quarter 2004, higher sales volume was somewhat offset by a lower overall sale margin (20.3% compared to 32.1% in 2003) associated with a higher mix of new equipment sold during the third quarter of 2004, resulting in a gross profit increase of $2.3 million. Sales revenues and margins can fluctuate from quarter to quarter depending on customer requirements and funding. -- Depreciation of rental equipment increased 259% to $11.6 million, primarily due to the purchase of TRS rental assets valued at $107.6 million on June 2, 2004. -- Operating cash flow increased 48% to $20.4 million, primarily due to higher revenues and net income. -- Debt decreased $5.5 million during the quarter to $163.0 million with the Company's total liabilities to equity ratio decreasing from 2.08 to 1 as of June 30, 2004, to 2.05 to 1 as of September 30, 2004. At September 30, 2004, the Company, under existing bank lines of credit, had capacity to borrow up to an additional $32.0 million. -- Dividend rate increased to $0.22 per share for the third quarter 2004. On an annualized basis, this dividend represents a 2.2% yield on the November 3, 2004, close price of $39.79. We suggest that this 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. FINANCIAL GUIDANCE The Company expects its 2004 full-year earnings per share guidance to be in a range of $2.30 to $2.40 per diluted share. Such a forward-looking statement reflects McGrath RentCorp's expectations as of November 4, 2004. Actual 2004 full-year earnings per share results may be materially affected by many factors, as outlined in the "forward-looking statements" paragraph at the end of this press release. 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, Texas and Florida. 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 TRS-RenTelco division rents and sells electronic test equipment and is one of the leading providers of general purpose and communications test equipment in North America. CONFERENCE CALL NOTE: As previously announced in its press release of October 7, 2004, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on November 4, 2004 to discuss the third quarter 2004 results. To participate in the teleconference, dial 1-800-218-0204 (international callers dial 1-303-275-2170). In addition, a live webcast 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 11010858. This press release contains statements, which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to a number of risks and uncertainties. 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 beliefs that school district modernization and reconstruction projects will continue to drive the growth of our educational rentals in California, our expectation regarding the opportunity for a meaningful educational rental business in Florida, our expectations regarding the timing of the implementation of the integration efforts relating to the TRS acquisition, including the related expense reductions and cost savings, our annualized dividend yield, and our guidance on per share range for 2004 full-year earnings. 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, 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 Nine Months Ended September 30, September 30, ------------------- ----------------- 2004 2003 2004 2003 --------- --------- --------- --------- REVENUES Rental $37,113 $19,592 $82,696 $56,252 Rental Related Services 6,901 4,350 17,267 11,554 --------- --------- --------- --------- Rental Operations 44,014 23,942 99,963 67,806 Sales 28,208 10,719 42,489 25,496 Other 318 194 756 598 --------- --------- --------- --------- Total Revenues 72,540 34,855 143,208 93,900 --------- --------- -------- --------- COSTS AND EXPENSES Direct Costs of Rental Operations Depreciation of Rental Equipment 11,589 3,226 20,725 9,468 Rental Related Services 3,981 2,501 10,246 6,874 Other 7,465 5,323 17,214 14,544 --------- --------- -------- --------- Total Direct Costs of Rental Operations 23,035 11,050 48,185 30,866 Costs of Sales 22,496 7,284 32,729 17,830 --------- --------- -------- --------- Total Costs 45,531 18,334 80,914 48,716 --------- --------- -------- --------- Gross Margin 27,009 16,521 62,294 45,184 Selling and Administrative 9,641 5,623 23,294 16,873 --------- --------- -------- --------- Income from Operations 17,368 10,898 39,000 28,311 Interest 1,576 647 3,524 2,085 --------- --------- -------- --------- Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 15,792 10,251 35,476 26,226 Provision for Income Taxes 6,301 4,090 14,155 10,464 --------- --------- --------- --------- Income Before Minority Interest in Income of Subsidiary 9,491 6,161 21,321 15,762 Minority Interest in Income of Subsidiary 111 95 82 89 --------- --------- --------- --------- Net Income $9,380 $6,066 $21,239 $15,673 ========= ========= ========= ========= Earnings Per Share: Basic $0.77 $0.50 $1.75 $1.29 Diluted $0.76 $0.50 $1.72 $1.28 Shares Used in Per Share Calculation: Basic 12,177 12,080 12,152 12,127 Diluted 12,421 12,242 12,358 12,254 Sept. 30, Dec. 31, BALANCE SHEET DATA 2004 2003 --------- --------- Rental Equipment, net $355,860 $232,046 Total Assets 483,735 323,858 Notes Payable 162,999 47,266 Shareholders' Equity 158,727 143,978 SEGMENT DATA (UNAUDITED) Modulars Electronics Enviroplex Consolidated ------------------ ------------ ------------ ------------ ------------ Three Months Ended September 30, ------------------ 2004 Rental Revenues $18,416 $18,697 $-- $37,113 Rental Related Services Revenues 6,264 637 -- 6,901 Sales and Other Revenues 14,893 7,464 6,169 28,526 Total Revenues 39,573 26,798 6,169 72,540 Depreciation of Rental Equipment 2,152 9,437 -- 11,589 Interest Expense (Income) Allocation 1,094 518 (36) 1,576 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 10,528 4,509 755 15,792 Rental Equipment Acquisitions 10,641 11,854 -- 22,495 Accounts Receivable, net (period end) 38,910 20,816 3,013 62,739 Rental Equipment, at cost (period end) 330,818 146,938 -- 477,756 Rental Equipment, net (period end) 238,659 117,201 -- 355,860 Utilization (period end) (1) 86.3% 65.2% Average Utilization (1) 86.3% 65.0% 2003 Rental Revenues $16,163 $3,429 $-- $19,592 Rental Related Services Revenues 4,199 151 -- 4,350 Sales and Other Revenues 5,917 2,009 2,987 10,913 Total Revenues 26,279 5,589 2,987 34,855 Depreciation of Rental Equipment 1,883 1,343 -- 3,226 Interest Expense (Income) Allocation 603 80 (36) 647 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 8,395 1,212 644 10,251 Rental Equipment Acquisitions 12,237 1,870 -- 14,107 Accounts Receivable, net (period end) 33,286 3,943 5,161 42,390 Rental Equipment, at cost (period end) 303,021 36,509 -- 339,530 Rental Equipment, net (period end) 214,374 18,069 -- 232,443 Utilization (period end) (1) 85.8% 48.6% Average Utilization (1) 85.1% 47.1% ---------------------------------------------------------------------- SEGMENT DATA (UNAUDITED) Modulars Electronics Enviroplex Consolidated ------------------ ------------ ------------ ------------ ------------ Nine Months Ended September 30, ------------------ 2004 Rental Revenues $52,314 $30,382 $-- $82,696 Rental Related Services Revenues 16,239 1,028 -- 17,267 Sales and Other Revenues 22,381 13,015 7,849 43,245 Total Revenues 90,934 44,425 7,849 143,208 Depreciation of Rental Equipment 6,201 14,524 -- 20,725 Interest Expense (Income) Allocation 2,802 834 (112) 3,524 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 28,089 6,831 556 35,476 Rental Equipment Acquisitions 33,220 124,599 -- 157,819 Accounts Receivable, net (period end) 38,910 20,816 3,013 62,739 Rental Equipment, at cost (period end) 330,818 146,938 -- 477,756 Rental Equipment, net (period end) 238,659 117,201 -- 355,860 Utilization (period end) (1) 86.3% 65.2% Average Utilization (1) 85.4% 60.6% 2003 Rental Revenues $47,073 $9,179 $-- $56,252 Rental Related Services Revenues 11,152 402 -- 11,554 Sales and Other Revenues 13,253 5,729 7,112 26,094 Total Revenues 71,478 15,310 7,112 93,900 Depreciation of Rental Equipment 5,405 4,063 -- 9,468 Interest Expense (Income) Allocation 1,948 272 (135) 2,085 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 23,397 2,233 596 26,226 Rental Equipment Acquisitions 23,017 4,053 -- 27,070 Accounts Receivable, net (period end) 33,286 3,943 5,161 42,390 Rental Equipment, at cost (period end) 303,021 36,509 -- 339,530 Rental Equipment, net (period end) 214,374 18,069 -- 232,443 Utilization (period end) (1) 85.8% 48.6% Average Utilization (1) 84.0% 45.2% ---------------------------------------------------------------------- (1) 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