EX-99.1 2 a5011758ex991.txt EXHIBIT 99.1 Exhibit 99.1 McGrath RentCorp Announces Third Quarter Results; Q3 2005 EPS Increases 26% to $0.48; Company Increases 2005 EPS Guidance Range to $1.57 to $1.62 LIVERMORE, Calif.--(BUSINESS WIRE)--Nov. 3, 2005--McGrath RentCorp (NASDAQ:MGRC) today announced revenues for the quarter ended September 30, 2005, of $77.8 million, compared to $72.5 million in third quarter 2004. The Company reported net income of $12.1 million, or $0.48 per share, compared to $9.4 million, or $0.38 per share in the third quarter 2004. For the third quarter of 2005, Mobile Modular's total revenues increased 23% from $39.6 million to $48.7 million with both rental and sales revenues improving on the continued strength in the educational market. Sales revenues for the quarter included three large sale projects totaling $11.7 million, of which $5.8 million were related to damages caused by the recent hurricanes. The large sale projects recognized in the quarter are of a similar nature as the single sale project of $9.3 million recognized in third quarter 2004. The Company views these types of large sale projects as unique opportunities and generally would not expect sale projects of a similar size to occur on a regular basis. Mobile Modular's significant increase in revenues led to a 29% increase in its pre-tax income to $13.6 million. As of September 30, 2005, Mobile Modular's backlog of sale projects related to the recent hurricanes totaled $8.5 million and will be recognized during the fourth quarter 2005. Looking forward, Mobile Modular anticipates additional hurricane related rental and sale opportunities, although the extent and duration remains uncertain. For TRS-RenTelco, third quarter 2005 rental revenues decreased 2% to $18.4 million from $18.7 million, though, gross profit on rents increased to $7.9 million from $7.2 million a year ago due to lower depreciation expense, contributing to the quarter's pre-tax income increase to $5.1 million from $4.5 million. "Our third quarter 2005 earnings reflect our first full quarter-over-quarter comparison of TRS-RenTelco's results since the merger in June 2004," stated Dennis Kakures, President and CEO. "The EPS increase of 26% for the quarter demonstrates the impact of new classroom rental and sale activity in 2005 and greater profitability in our test equipment business. "We continue to measure the strength of our modular business by growth in both top-line rental revenues and gross profit on rents. We believe these metrics provide the best gauge of the potential horsepower of our modular economic engine going forward. Quarter-over-quarter growth for rental revenues was 13% to $20.9 million and related gross profit grew 22% to $13.3 million, both of which were records. We continue to benefit from the recurring rental stream from educational facility rentals in the geographic markets we serve. In California, we experienced higher than normal classroom returns during the quarter as public school modernization projects were completed and equipment was returned. We expect redeployment of the great majority of these classrooms to occur over the next twelve months. In Florida, business activity levels have continued very favorably, as we support the needs of school districts in both enrollment growth and the implementation of class size reduction. Also, as a result of the recent hurricanes, we have and will continue to respond to modular rental and sale opportunities in the Texas and Southeastern markets. "For our test equipment business, pre-tax income and gross profit on rents reached their highest levels to date for the combined TRS-RenTelco business. Although top-line rental revenues were down slightly from a year ago, we continue to more effectively manage our rental inventory by selling underutilized equipment, ending the quarter with utilization of 70.9%, which lowered depreciation as a percentage of rents and improved rental margin to 42.9%. We also continue to invest in the latest technology test equipment to support new rental opportunities and believe we have put in place the cost structure and operating disciplines that will support our future earnings growth." THIRD QUARTER 2005 HIGHLIGHTS (AS COMPARED TO THIRD QUARTER 2004) -- Rental revenues increased 6% to $39.2 million. Within rental revenues, Mobile Modular increased 13% from $18.4 million to $20.9 million; TRS-RenTelco decreased 2% from $18.7 million to $18.4 million, yet improved sequentially from the second quarter 2005 level of $17.2 million. -- Sales revenues increased 10% to $31.0 million, resulting primarily from Mobile Modular's increased sales volume, which included $5.8 million of sales revenues related to requirements related to the recent hurricanes. Higher sales volume combined with a higher gross margin percentage, 26.5% in 2005 compared to 20.3% in 2004, resulted in a gross profit increase of $2.5 million. Sales revenues and related gross margins can fluctuate from quarter to quarter depending on customer requirements, equipment availability and funding. -- Depreciation of rental equipment decreased 7% to $10.8 million, with Mobile Modular increasing 13% to $2.4 million and TRS-RenTelco decreasing 12% to $8.3 million from $9.4 million in 2004. The TRS-RenTelco decrease was due to the determination in April 2005 to extend the useful lives on two models of test equipment (quarterly impact of $0.6 million) and the net impact of selling underutilized equipment and rental equipment becoming fully depreciated, offset by new equipment purchases. -- Debt decreased $11.4 million during the quarter to $154.6 million, with the Company's total liabilities to equity ratio decreasing from 1.83 to 1 at June 30, 2005 to 1.80 to 1 as of September 30, 2005. On July 11, 2005, the Company amended its existing lines of credit to increase the borrowing capacity from $135.0 million to $195.0 million and extend the expiration dates to June 30, 2008. As of September 30, 2005, the Company, under its lines of credit, had capacity to borrow an additional $100.4 million. -- Dividend rate increased 27% to $0.14 per share for the third quarter 2005, as compared to $0.11 per share for the third quarter of 2004. On an annualized basis, this dividend represents a 2.0% yield on the November 2, 2005 close price of $28.18. 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. FINANCIAL GUIDANCE The Company expects its 2005 full-year earnings per share to be in a range of $1.57 to $1.62 per diluted share. Such a forward-looking statement reflects McGrath RentCorp's expectations as of November 3, 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 customers' 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. 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 12, 2005, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on November 3, 2005 to discuss the third quarter 2005 results. To participate in the teleconference, dial 1-800-218-8862 (international callers dial 1-303-262-2143). 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 11041135. 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 revenue being generated from our backlog of sale projects related to the recent hurricanes, our expectation regarding additional future hurricane related rental and sale opportunities, our expectation regarding redeployment of the higher than normal California classroom returns over the next twelve months, our expectation that the cost structure and operating disciplines in our TRS-RenTelco business will support future earnings growth for that business, our expectation regarding the annual 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 Nine Months Ended September 30, September 30, -------------------------- ------------------ 2005 2004 2005 2004 ------------------------ ------------- ------------ --------- -------- REVENUES ------------------------ Rental $ 39,240 $ 37,113 $112,000 $82,696 Rental Related Services 6,929 6,613 18,439 16,958 ------------- ------------ --------- -------- Rental Operations 46,169 43,726 130,439 99,654 Sales 30,986 28,208 62,093 42,489 Other 607 606 2,033 1,065 ------------- ------------ --------- -------- Total Revenues 77,762 72,540 194,565 143,208 ------------- ------------ --------- -------- COSTS AND EXPENSES ------------------------ Direct Costs of Rental Operations Depreciation of Rental Equipment 10,763 11,589 33,090 20,725 Rental Related Services 4,474 3,981 12,206 10,246 Other 7,338 7,465 22,062 17,214 ------------- ------------ --------- -------- Total Direct Costs of Rental Operations 22,575 23,035 67,358 48,185 Costs of Sales 22,767 22,496 45,175 32,729 ------------- ------------ --------- -------- Total Costs 45,342 45,531 112,533 80,914 ------------- ------------ --------- -------- Gross Profit 32,420 27,009 82,032 62,294 Selling and Administrative 10,543 9,641 29,524 23,294 ------------- ------------ --------- -------- Income from Operations 21,877 17,368 52,508 39,000 Interest 2,095 1,576 5,726 3,524 ------------- ------------ --------- -------- Income Before Provision for Income Taxes 19,782 15,792 46,782 35,476 Provision for Income Taxes 7,517 6,301 17,777 14,155 ------------- ------------ --------- -------- Income Before Minority Interest 12,265 9,491 29,005 21,321 Minority Interest in Income of Subsidiary 194 111 291 82 ------------- ------------ --------- -------- Net Income $ 12,071 $ 9,380 $ 28,714 $21,239 ============= ============ ========= ======== Earnings Per Share: Basic $ 0.49 $ 0.39 $ 1.17 $ 0.87 Diluted $ 0.48 $ 0.38 $ 1.14 $ 0.86 Shares Used in Per Share Calculation: Basic 24,678 24,354 24,626 24,304 Diluted 25,382 24,842 25,255 24,716 September 30, December 31, BALANCE SHEET DATA 2005 2004 ------------------------ ------------- ------------ Rental Equipment, net $ 391,170 $ 357,788 Total Assets 529,407 474,280 Notes Payable 154,623 151,888 Shareholders' Equity 188,933 166,888 SEGMENT DATA (Unaudited) ---------------------------------------------------------------------- (in thousands) Modulars Electronics Enviroplex Consolidated --------- ----------- ---------- ------------ Three Months Ended September 30, ------------------------ 2005 Rental Revenues $ 20,886 $ 18,354 $ -- $ 39,240 Rental Related Services Revenues 6,670 259 -- 6,929 Sales and Other Revenues 21,112 6,251 4,230 31,593 Total Revenues 48,668 24,864 4,230 77,762 Depreciation of Rental Equipment 2,422 8,341 -- 10,763 Gross Profit 20,824 10,017 1,579 32,420 Interest Expense (Income) Allocation 1,514 638 (57) 2,095 Income before Provision for Income Taxes 13,615 5,068 1,099 19,782 Rental Equipment Acquisitions 19,450 8,651 -- 28,101 Accounts Receivable, net (period end) 48,673 18,209 7,328 74,210 Rental Equipment, at cost (period end) 388,814 152,474 -- 541,288 Rental Equipment, net book value (period end) 290,309 100,861 -- 391,170 Utilization (period end)(1) 84.1% 70.9% Average Utilization(1) 84.7% 68.3% 2004 Rental Revenues $ 18,416 $ 18,697 $ -- $ 37,113 Rental Related Services Revenues 6,264 349 -- 6,613 Sales and Other Revenues 14,893 7,752 6,169 28,814 Total Revenues 39,573 26,798 6,169 72,540 Depreciation of Rental Equipment 2,152 9,437 -- 11,589 Gross Profit 16,458 9,304 1,247 27,009 Interest Expense (Income) Allocation 1,094 518 (36) 1,576 Income before Provision for Income Taxes 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 book value (period end) 238,659 117,201 -- 355,860 Utilization (period end)(1) 86.3% 65.2% Average Utilization(1) 86.3% 65.0% ---------------------------------------------------------------------- SEGMENT DATA (Unaudited) ---------------------------------------------------------------------- (in thousands) Modulars Electronics Enviroplex Consolidated --------- ----------- ---------- ------------ Nine Months Ended September 30, ------------------------ 2005 Rental Revenues $ 59,498 $ 52,502 $ -- $ 112,000 Rental Related Services Revenues 17,449 990 -- 18,439 Sales and Other Revenues 35,193 20,596 8,337 64,126 Total Revenues 112,140 74,088 8,337 194,565 Depreciation of Rental Equipment 6,814 26,276 -- 33,090 Gross Profit 52,582 26,251 3,199 82,032 Interest Expense (Income) Allocation 4,089 1,810 (173) 5,726 Income before Provision for Income Taxes 33,401 11,721 1,660 46,782 Rental Equipment Acquisitions 55,132 25,518 -- 80,650 Accounts Receivable, net (period end) 48,673 18,209 7,328 74,210 Rental Equipment, at cost (period end) 388,814 152,474 -- 541,288 Rental Equipment, net book value (period end) 290,309 100,861 -- 391,170 Utilization (period end)(1) 84.1% 70.9% Average Utilization(1) 85.3% 64.9% 2004 Rental Revenues $ 52,314 $ 30,382 $ -- $ 82,696 Rental Related Services Revenues 16,239 719 -- 16,958 Sales and Other Revenues 22,381 13,324 7,849 43,554 Total Revenues 90,934 44,425 7,849 143,208 Depreciation of Rental Equipment 6,201 14,524 -- 20,725 Gross Profit 44,284 16,345 1,665 62,294 Interest Expense (Income) Allocation 2,802 834 (112) 3,524 Income before Provision for Income Taxes 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 book value (period end) 238,659 117,201 -- 355,860 Utilization (period end)(1) 86.3% 65.2% Average Utilization(1) 85.4% 60.6% ---------------------------------------------------------------------- (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