Benefit Plans

12 Months Ended

Dec. 31, 2012

Benefit Plans [Abstract]

BENEFIT PLANS

NOTE 5. BENEFIT PLANS

Stock Plans

The Company adopted the 2007 Stock Incentive Plan (the “2007 Plan”) effective June 6, 2007, under which 1,875,000 shares of common stock of the Company, plus the number of shares that remained available for grants of awards under the Company’s 1998 Stock Option Plan (the “1998 Plan”) and those shares that become available as a result of forfeiture, termination, or expiration of awards previously granted under the 1998 Plan, were reserved for the grant of awards to its employees, directors and consultants to acquire common stock of the Company. The 2007 Plan provides for the grant of awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units or other rights and benefits. Options under the 2007 Plan are granted at an exercise price of not less than 100% of the fair market value of the Company’s common stock on the date of grant. The 2007 Plan replaced the Company’s 1998 Plan and the 2000 Long-Term Bonus Plan.

Stock Options

As of December 31, 2012, a cumulative total of 6,424,600 shares subject to options have been granted with exercise prices ranging from $11.74 to $34.28. Of these, options have been exercised for the purchase of 2,733,845 shares, while options for 852,202 shares have been terminated, and options for 2,838,553 shares remain outstanding under the stock plans. Most of these options vest over five years and expire seven and ten years after grant. To date, no options have been issued to any of the Company’s non-employee advisors. As of December 31, 2012, 1,561,002 shares remain available for issuance of awards under the stock plans.

Option activity and options exercisable including the weighted average exercise price for the three years ended December 31, 2012 are as follows:

	Year Ended December 31,
	2012					2011					2010
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding at January 1,		3,086,019		$	23.52		3,344,450		$	22.80		3,504,319		$	22.09
Options granted during the year		128,500			29.63		160,600			27.41		282,000			23.72
Options exercised during the year		(327,498	)		17.95		(309,447	)		17.19		(422,069	)		17.78
Options terminated during the year		(48,468	)		27.63		(109,584	)		25.01		(19,800	)		22.03
Options outstanding at December 31,		2,838,553			24.37		3,086,019			23.52		3,344,450			22.80
Options exercisable at December 31,		2,322,258			24.64		2,306,159			24.43		2,148,100			23.91

The intrinsic value of stock options at any point in time is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. The aggregate intrinsic value of options outstanding as of December 31, 2012 and 2011 was $13.4 million and $16.9 million, respectively, and had a weighted average remaining contract life of 2.74 years and 3.52 years, respectively. The intrinsic value for options exercisable as of December 31, 2012 and 2011 was $10.4 million and $10.5 million, respectively, and had a weighted average remaining contract life of 2.36 years and 3.22 years, respectively. The aggregate intrinsic value of options exercised and sold under the Company’s stock option plans was $3.7 million, $3.7 million and $3.6 million for the years ended December 31, 2012, 2011 and 2010, respectively, determined as of the date of option exercise. As of December 31, 2012, there was approximately $3.5 million of total unrecognized compensation cost related to unvested share-based compensation option arrangements granted under the Company’s stock plans, which is expected to be recognized over a weighted-average period of 1.6 years.

The following table indicates the options outstanding and options exercisable by exercise price with the weighted average remaining contractual life for the options outstanding and the weighted average exercise price at December 31, 2012:

	Options Outstanding						Options Exercisable
Exercise Price	Number Outstanding at December 31, 2012		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable at December 31, 2012		Weighted Average Exercise Price
$10–15		20,000		0.25	$	11.74		20,000	$	11.74
15–20		420,608		2.86		15.65		265,608		15.67
20–25		1,161,150		2.57		21.73		1,008,275		21.55
25–30		688,295		3.61		28.93		575,375		29.81
30–35		548,500		2.03		31.39		453,000		31.39
10–35		2,838,553		2.74		24.37		2,322,258		24.64

Restricted Stock Units

The following table summarizes the activity of the Company’s restricted stock units for the years ended December 31, 2012 and 2011:

	Year Ended December 31,
	2012					2011
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Restricted stock unvested as of January 1,		187,810		$	26.33		110,200		$	23.61
Restricted stock granted during the year		109,200			31.37		125,800			27.99
Restricted stock vested during the year		(34,190	)		27.85		(39,105	)		23.91
Restricted stock forfeited during the year		—			—		(9,085	)		25.36
Restricted stock unvested as of December 31,		262,820			28.22		187,810			26.33

Stock-based compensation expense for restricted stock for the year ended December 31, 2012 and 2011 was $1.8 million and $2.6 million, respectively. As of December 31, 2012, the total unrecognized compensation expense net of forfeitures related to unvested restricted stock awards not yet recognized was $6.1 million and is expected to be recognized over a period of 3.3 years.

Employee Stock Ownership Plan

In 1985, the Company established a non-leveraged Employee Stock Ownership Plan (“Plan”). Under the terms of the Plan, as amended, the Company makes annual contributions in the form of cash or common stock of McGrath RentCorp to a trust for the benefit of eligible employees. Employees of the Company are generally eligible to participate in the Plan on the January 1^st, or July 1 ^st, immediately following the completion of the minimum of 1,000 hours and twelve months of service. The amount of the contribution is determined annually by the Board of Directors. There was no contribution approved in 2012, 2011 or 2010. Contributions to the Plan are allocated to participants following a formula based upon years of service and covered compensation. Dividends paid to Plan participants are treated as ordinary dividends and, in accordance with existing tax laws, are deducted by the Company in the year paid. For the years ended December 31, 2012, 2011 and 2010, dividends deducted by the Company were $0.2 million, $0.4 million and $0.5 million, respectively, which resulted in a tax benefit of approximately $0.1 million in 2012 and $0.2 million in 2011 and 2010.

401(k) Plans

In 1995, McGrath RentCorp established a contributory retirement plan, the McGrath RentCorp 401(k) Plan, as amended, covering eligible employees of McGrath RentCorp with at least three months of service. The McGrath RentCorp 401(k) Plan provides that each participant may annually contribute an elected percentage of his or her salary, not to exceed the statutory limit. McGrath RentCorp, at its discretion, may make contributions. Contributions are expensed in the year approved by the Board of Directors. The Company expensed $1.1 million in 2011. No amounts were expensed in 2012 and 2010.

In 1997, Enviroplex established a contributory retirement plan, the Enviroplex 401(k) Plan, as amended, covering eligible employees of Enviroplex with at least three months of service. The Enviroplex 401(k) Plan provides that each participant may annually contribute an elected percentage of his or her salary, not to exceed the statutory limit. Enviroplex at its discretion may make a matching contribution. Enviroplex made contributions of $35,000 in 2011. No contributions were made in 2012 and 2010.

Employee Stock Ownership and 401(k) Plans

On August 1, 2012 the Company amended and restated the Employee Stock Ownership Plan, the 401(k) Plans and the Enviroplex 401(k) Plans (“Plans”) to become the McGrath RentCorp Employee Stock Ownership and 401(k) Plan (the “KSOP”). In conjunction with this, the Plans’ assets totaling approximately $16.4 million in cash were concurrently transferred into the KSOP. The KSOP plan provides that each participant may annually contribute an elected percentage of his or her salary, not to exceed the statutory limit. The Company, at its discretion, may make matching contributions. Contributions are expensed in the year approved by the Board of Directors. Dividends on the Company’s stock held by the KSOP are treated as ordinary dividends and, in accordance with existing tax laws, are deducted by the Company in the year paid. For the year ended December 31, 2012 dividends deducted by the Company were $0.2 million, which resulted in a tax benefit of approximately $0.1 million in 2012.

KSOP shares outstanding at December 31, 2012 were 354,467, or less than 2% of total common shares outstanding, and are included in basic and diluted earnings per share calculations.