EX-99.1 2 a4829976ex991.txt EXHIBIT 99.1 Exhibit 99.1 McGrath RentCorp Announces Results for Fourth Quarter and Year-end; EPS Increases 31% for the Year; Company Announces 2-for-1 Stock Split and 27% Dividend Increase LIVERMORE, Calif.--(BUSINESS WIRE)--Feb. 24, 2005--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 December 31, 2004, of $59.3 million, compared to $37.1 million in the fourth quarter of 2003. The Company reported net income of $8.8 million, or $0.70 per diluted share, compared to $7.0 million, or $0.57 per diluted share, in the fourth of quarter 2003. During the quarter, rental revenues increased 84%, largely attributable to the Company's TRS-RenTelco division. 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 fourth quarter and for the twelve months of 2004 include the results of TRS since that date. Total revenues for the twelve months ended December 31, 2004, were $202.5 million, compared to $131.0 million in the same twelve-month period in 2003. Net income for the twelve months ended December 31, 2004, increased to $30.0 million, or $2.42 per diluted share, a 31% increase, compared to net income of $22.7 million, or $1.85 per diluted share, in the prior year period. The Company also announced that the board of directors approved a 2-for-1 stock split and a proportional increase in the number of common shares outstanding from 12,284,749 to 24,569,498. Each shareholder of record as of March 11, 2005 will receive one additional share for each outstanding share held on the record date. Trading will begin on a split-adjusted basis on March 25, 2005. The board of directors also declared a post-split cash dividend of $0.14 per common share for the quarter ended March 31, 2005, an increase of 27%. On an annualized basis, this dividend represents a 2.7% yield based on the February 23, 2005, closing price. The cash dividend will be payable on April 29, 2005, to all shareholders of record on April 15, 2005. The 2004 results disclosed in this release are not adjusted to reflect the 2-for-1 stock split unless described as such. In the fourth quarter of 2004, Mobile Modular had record rental revenues of $19.1 million that contributed to an 11% increase in total modular revenues to $30.7 million. Mobile Modular's fourth quarter pre-tax income decreased 2% to $9.8 million from $10.0 million a year earlier predominantly due to increases in maintenance expenses associated with the preparation of unutilized equipment targeted for potential rental opportunities in 2005, as well as higher allocated overhead and interest expenses. Fourth quarter rental revenues at TRS-RenTelco increased to $18.5 million from $3.6 million in the fourth quarter of 2003, primarily from the TRS contribution, which resulted in divisional pre-tax income of $3.9 million, compared to pre-tax income of $1.1 million in the fourth quarter of 2003. Also, as a result of the acquired TRS operations, the fourth quarter effective tax rate was reduced from 39.9% to 35.0% due to recording a cumulative true-up adjustment for the state income tax accrual rate, increasing net income by $0.7 million or $0.05 per diluted share. "These results demonstrate the ongoing strength of Mobile Modular's California classroom rental business, and in particular, strong classroom booking levels experienced in early 2004 for modernization and reconstruction projects," stated Dennis Kakures, President & CEO. "The $19.1 million in rental revenues was our highest quarter ever for our modular rental division. This growth reflects our success as the leader in providing interim facilities to school districts throughout California. In addition, we continue to be pleased with the order activity we are generating in the Florida market, which we entered less than a year ago. Based upon our results to date, we are enthusiastic about the prospects for developing a meaningful educational rental business in Florida. "Our test equipment rental business turned in a solid quarter as we continued to work on key integration projects. With the initial steps of integrating TRS-RenTelco in place, we are turning our full attention to optimizing our day-to-day execution. We are excited about the potential our industry leadership position, operating efficiencies, and talented work force affords TRS-RenTelco in positioning it for earnings growth in the years ahead. "The 27% increase in the first quarter 2005 dividend is a one-time step up in the dividend pay out related to the TRS acquisition and reflects the increased amount of free cash flow that TRS is providing. Looking forward, we expect any future dividend increases beyond 2005 to generally reflect increases in our underlying growth rates. In our view, we create value for shareholders employing free cash flow and available debt capacity on strategic growth opportunities that we believe may result in increased earnings, and distributing excess cash flow in the form of dividends." Fourth Quarter 2004 Highlights as Compared to Fourth Quarter 2003 -- Rental revenues increased 84% to $37.7 million. Within rental revenues, Mobile Modular increased 13% to $19.1 million, driven by California educational rentals; and RenTelco increased $15.0 million to $18.5 million, primarily due to TRS's contribution since June 2, 2004. -- Sales revenues increased 30% to $14.7 million, primarily due to increased sales volume of TRS-RenTelco, offset by lower sales volumes at Mobile Modular and Enviroplex, resulting in a gross profit increase of $1.1 million. Sales revenues and margins can fluctuate from quarter to quarter depending on customer requirements and funding. -- Depreciation of rental equipment increased 257% to $11.7 million, primarily due to the purchase of TRS rental assets. -- Operating cash flow increased 67% to $31.0 million, primarily due to the revenue and net income contribution of the acquired TRS operations. -- Debt decreased $11.1 million during the quarter to $151.9 million with the Company's total liabilities to equity ratio decreasing from 2.05 to 1 as of September 30, 2004, to 1.85 to 1 as of December 31, 2004. At December 31, 2004, the Company, under existing bank lines of credit, had capacity to borrow up to an additional $43.1 million. -- Dividends increased to $0.22 per share for the fourth quarter 2004 as compared to $0.20 per share for the fourth quarter 2003. 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 Giving effect to the announced 2-for-1 stock split, the Company expects its 2005 full-year earnings per share guidance to be in a range of $1.45 to $1.55 per diluted share. This guidance range excludes the impact of the third quarter of 2005 adoption of Statement of Financial Standards No. 123R, "Share Based Payment", which requires the expensing of stock options at fair value effective for quarters beginning after June 15, 2005. Assuming the effective date for these rules is not extended, the Company anticipates application on a retrospective basis and expects the impact to reduce 2005 diluted earnings per share by approximately $0.05 per share. Such a forward-looking statement reflects McGrath RentCorp's expectations as of February 24, 2005. Actual 2005 full-year earnings per share results may be materially different and affected by many factors, including those factors 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 January 27, 2005, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 24, 2005 to discuss the fourth quarter 2005 results. To participate in the teleconference, dial 1-800-218-0204 (international callers dial 1-303-262-2130). 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 11019909. 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 expectation regarding the opportunity for a meaningful educational rental business in Florida, our expectation regarding our ability to grow the TRS-RenTelco business in 2005 and its earnings in the years ahead, our expectation regarding the step-up in our dividend level due to the increased amount of free cash flow that TRS is providing and our expectations regarding our dividend levels in 2005 and beyond 2005, our future dividend increases generally, our belief that strategic growth opportunities may result in increased earnings, our annualized dividend yield, and our 2005 full-year earnings per share guidance. 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 Twelve Months Ended December 31, December 31, ------------------- ------------------- 2004 2003 2004 2003 ---------------------------- -------- -------- -------- ------- REVENUES -------- Rental $ 37,662 $ 20,426 $120,358 $76,678 Rental Related Services 6,640 5,192 23,907 16,746 -------- -------- -------- ------- Rental Operations 44,302 25,618 144,265 93,424 Sales 14,673 11,249 57,162 36,745 Other 337 204 1,093 802 -------- -------- -------- ------- Total Revenues 59,312 37,071 202,520 130,971 -------- -------- -------- ------- COSTS AND EXPENSES ------------------ Direct Costs of Rental Operations Depreciation of Rental Equipment 11,701 3,277 32,426 12,745 Rental Related Services 4,926 3,482 15,172 10,356 Other 6,793 4,079 24,007 18,623 -------- -------- -------- ------- Total Direct Costs of Rental Operations 23,420 10,838 71,605 41,724 Costs of Sales 10,405 8,083 43,134 25,913 -------- -------- -------- ------- Total Costs 33,825 18,921 114,739 67,637 -------- -------- -------- ------- Gross Margin 25,487 18,150 87,781 63,334 Selling and Administrative 10,411 5,753 33,705 22,626 -------- -------- -------- ------- Income from Operations 15,076 12,397 54,076 40,708 Interest 1,664 583 5,188 2,668 -------- -------- -------- ------- Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 13,412 11,814 48,888 38,040 Provision for Income Taxes 4,688 4,714 18,843 15,178 -------- -------- -------- ------- Income Before Minority Interest in Income of Subsidiary 8,724 7,100 30,045 22,862 Minority Interest in Income of Subsidiary (34) 81 48 170 -------- -------- -------- ------- Net Income $ 8,758 $ 7,019 $ 29,997 $22,692 ======== ======== ======== ======= Earnings Per Share: Basic $ 0.72 $ 0.58 $ 2.46 $ 1.87 Diluted $ 0.70 $ 0.57 $ 2.42 $ 1.85 Shares Used in Per Share Calculation: Basic 12,232 12,119 12,172 12,125 Diluted 12,510 12,274 12,402 12,259 December December 31, 31, BALANCE SHEET DATA 2004 2003 ------------------ -------- -------- Rental Equipment, net $357,788 $232,046 Total Assets 474,280 323,858 Notes Payable 151,888 47,266 Shareholders' Equity 166,888 143,978 ---------------------------------------------------------------------- SEGMENT DATA Modulars Electronics Enviroplex Consolidated ------------- -------- ----------- ---------- ------------ Three Months Ended December 31, ------------------- 2004 Rental Revenues $ 19,146 $ 18,516 $ -- $ 37,662 Rental Related Services Revenues 5,903 737 -- 6,640 Sales and Other Revenues 5,680 7,925 1,405 15,010 Total Revenues 30,729 27,178 1,405 59,312 Depreciation of Rental Equipment 2,173 9,528 -- 11,701 Gross Margin 15,527 9,643 317 25,487 Interest Expense (Income) Allocation 1,145 578 (59) 1,664 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 9,761 3,887 (236) 13,412 Rental Equipment Acquisitions 11,341 7,898 -- 19,239 Accounts Receivable, net (period end) 28,237 22,558 3,051 53,846 Rental Equipment, at cost (period end) 339,537 149,437 -- 488,974 Rental Equipment, net (period end) 245,924 111,864 -- 357,788 Utilization (period end)(1) 86.1% 61.6% Average Utilization (1) 86.3% 63.9% 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 Gross Margin 14,702 2,318 1,130 18,150 Interest Expense (Income) Allocation 557 71 (45) 583 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 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 (period end) 215,589 16,457 -- 232,046 Utilization (period end)(1) 84.6% 45.2% Average Utilization (1) 85.1% 46.6% ---------------------------------------------------------------------- SEGMENT DATA Modulars Electronics Enviroplex Consolidated ------------- -------- ----------- ---------- ------------ Twelve Months Ended December 31, ------------------- 2004 Rental Revenues $ 71,460 $ 48,898 $ -- $120,358 Rental Related Services Revenues 22,142 1,765 -- 23,907 Sales and Other Revenues 28,061 20,940 9,254 58,255 Total Revenues 121,663 71,603 9,254 202,520 Depreciation of Rental Equipment 8,374 24,052 -- 32,426 Gross Margin 59,812 25,986 1,983 87,781 Interest Expense (Income) Allocation 3,947 1,412 (171) 5,188 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 37,850 10,718 320 48,888 Rental Equipment Acquisitions 44,679 132,379 -- 177,058 Accounts Receivable, net (period end) 28,237 22,558 3,051 53,846 Rental Equipment, at cost (period end) 339,537 149,437 -- 488,974 Rental Equipment, net (period end) 245,924 111,864 -- 357,788 Utilization (period end)(1) 86.1% 61.6% Average Utilization (1) 85.6% 61.7% 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 Gross Margin 52,007 8,071 3,255 63,333 Interest Expense (Income) Allocation 2,505 343 (180) 2,668 Income Before Provision for Income Taxes and Minority Interest in Income of Subsidiary 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 (period end) 215,589 16,457 -- 232,046 Utilization (period end)(1) 84.6% 45.2% Average Utilization (1) 84.2% 45.3% ---------------------------------------------------------------------- (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