McGrath RentCorp Announces Results for Second Quarter 2020

Livermore, California, UNITED STATES


LIVERMORE, Calif., July 29, 2020 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended June 30, 2020 of $137.7 million, an increase of 8%, compared to the second quarter of 2019.  The Company reported net income of $22.5 million, or $0.92 per diluted share, for the second quarter of 2020, compared to net income of $19.5 million, or $0.79 per diluted share, for the second quarter of 2019. 

SECOND QUARTER 2020 COMPANY HIGHLIGHTS:

  • Income from operations increased 12% year-over-year to $32.7 million.
  • Rental revenues decreased 3% year-over-year to $85.6 million.
  • Adjusted EBITDA1 increased 11% year-over-year to $58.1 million.   
  • Dividend rate increased 12% year-over-year to $0.42 per share for the second quarter of 2020.  On an annualized basis, this dividend represents a 3.0% yield on the July 28, 2020 close price of $55.36 per share.

Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:

“During the second quarter, we were pleased that we successfully navigated an uncertain economic environment due to the COVID-19 pandemic while delivering an Adjusted EBITDA increase of 11%.  Across the business, our teams adapted to new and challenging requirements to operate safely while serving our customers.  The teams across the Company did impressive work in the quarter and we were able to deliver solid results despite unusually challenging market conditions.

For the second quarter, rental revenue growth of 4% at Mobile Modular and 2% at TRS-RenTelco was offset by a decline at Adler of 27%, resulting in an overall 3% decrease for the Company.  We realized strong sales in the quarter at Mobile Modular and our classroom manufacturer Enviroplex, which accounted for the overall Company growth in gross profit for the quarter compared to a year ago.  Even though some customer projects were halted at the start of the quarter due to the various statewide shelter in place orders, towards the middle of the quarter many projects resumed as customer sites gradually re-opened.

Looking forward to the second half of 2020, overall business conditions appear to have stabilized compared to April, however, we still face uncertainty as the pandemic remains an issue.  While we will continue to closely monitor evolving regional conditions, we are very well positioned to provide rental solutions to our customers, which is what many are looking for in a more uncertain and capital constrained environment.  We made good progress through unprecedented economic disruption in the second quarter and we are hoping for conditions to improve slowly but steadily through the remainder of the year.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended June 30, 2020 to the quarter ended June 30, 2019 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2020, the Company’s Mobile Modular division reported income from operations of $20.6 million, an increase of $4.3 million, or 26%.  Rental revenues increased 4% to $46.6 million, depreciation expense increased 5% to $5.7 million and other direct costs decreased 13% to $12.4 million, which resulted in an increase in gross profit on rental revenues of 14% to $28.5 million.  The rental revenue growth came from both commercial and education markets.  Rental related services revenues decreased 9% to $14.5 million, with associated gross profit decreasing 2% to $4.1 million.  Sales revenues more than doubled to $15.3 million, primarily due to higher new equipment sales with gross margin on sales decreasing to 29% from 37%, resulting in an 81% increase in gross profit on sales revenues to $4.5 million.  Selling and administrative expenses increased 8% to $16.9 million, primarily due to higher allocated corporate expenses.

TRS-RENTELCO

For the second quarter of 2020, the Company’s TRS-RenTelco division reported income from operations of $8.3 million, a decrease of $0.4 million, or 5%.  Rental revenues increased 2% to $26.0 million, depreciation expense increased 16% to $11.8 million and other direct costs decreased 11% to $3.6 million, which resulted in a 5% decrease in gross profit on rental revenues to $10.7 million.  The rental revenue growth was due to increased demand from the general purpose test equipment customers.  Sales revenues increased 11% to $5.9 million.  Gross margin on sales was 49% in 2020 compared to 51% in 2019, resulting in a 6% increase in gross profit on sales revenues to $2.9 million.  Selling and administrative expenses decreased 4% to $5.9 million, primarily due to lower marketing and administrative expenses.

ADLER TANKS

For the second quarter of 2020, the Company’s Adler Tanks division reported income from operations of $1.7 million, a decrease of $3.1 million, or 65%.  Rental revenues decreased 27% to $13.0 million, depreciation expense was flat at $4.1 million and other direct costs decreased 35% to $2.2 million, which resulted in a 36% decrease in gross profit on rental revenues to $6.7 million.  The rental revenue decrease was primarily due to COVID-19 related business disruptions and a decrease in the price of oil and gas, which contributed to weaker activities in multiple geographic and market segments.  Rental related services revenues decreased 31% to $5.3 million, with gross profit on rental related services decreasing 33% to $1.3 million.  Selling and administrative expenses decreased 19% to $6.4 million, primarily due to decreased allocated corporate expenses, lower marketing and administrative costs and decreased salaries and employee benefit costs.

FINANCIAL OUTLOOK:

For the third quarter 2020, the Company expects:

  • Total revenue: $140 million - $160 million
  • Adjusted EBITDA1,2: $54 million - $64 million
  • Gross rental equipment capital expenditures: $10 million to $15 million 
1.Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.  A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
2.Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release. 

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions.  The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions.  For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.com

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings.  You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.

CONFERENCE CALL NOTE:

As previously announced in its press release of July 1, 2020, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 29, 2020 to discuss the second quarter 2020 results.  To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/.  A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.).  The pass code for the conference call replay is 8995217.  In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements.  These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminologyIn particular, Mr. Hanna’s comments about the Company being very well positioned to provide rental solutions to its customers which is what many are looking for in a more uncertain capital constrained environment and the Company hoping for conditions to improve slowly but steadily through the remainder of the year, as well as the statement regarding the third quarter of 2020 outlook in the “Financial Outlook” section, are forward-looking.

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the duration of the COVID-19 pandemic and its economic impact, the extent and length of the shelter-in and other restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our performance improvement initiatives; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K, Form 10-Q and other SEC filings.

Forward-looking statements are made only as of the date hereof.  Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

  Three Months Ended June 30,  Six Months Ended June 30, 
(in thousands, except per share amounts) 2020  2019  2020  2019 
Revenues                
Rental $85,629  $88,105  $175,135  $170,801 
Rental related services  20,475   24,467   44,986   45,922 
Rental operations  106,104   112,572   220,121   216,723 
Sales  30,669   13,707   45,035   30,532 
Other  900   1,160   1,970   2,192 
Total revenues  137,673   127,439   267,126   249,447 
Costs and Expenses                
Direct costs of rental operations:                
Depreciation of rental equipment  21,583   19,726   43,221   38,687 
Rental related services  14,894   18,137   33,157   34,500 
Other  18,165   21,741   37,618   41,474 
Total direct costs of rental operations  54,642   59,604   113,996   114,661 
Costs of sales  19,799   7,954   28,242   17,900 
Total costs of revenues  74,441   67,558   142,238   132,561 
Gross profit  63,232   59,881   124,888   116,886 
Selling and administrative expenses  30,540   30,815   62,494   60,510 
Income from operations  32,692   29,066   62,394   56,376 
Other income (expense):                
Interest expense  (2,184)  (3,138)  (4,836)  (6,246)
Foreign currency exchange gain (loss)  117   37   (319)  86 
Income before provision for income taxes  30,625   25,965   57,239   50,216 
Provision for income taxes  8,076   6,477   14,531   12,279 
Net income $22,549  $19,488  $42,708  $37,937 
Earnings per share:                
Basic $0.93  $0.8  $1.76  $1.57 
Diluted $0.92  $0.79  $1.74  $1.54 
Shares used in per share calculation:                
Basic  24,121   24,246   24,207   24,221 
Diluted  24,471   24,579   24,612   24,561 
Cash dividends declared per share $0.420  $0.375  $0.840  $0.750 
                 

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

  June 30,  December 31, 
(in thousands) 2020  2019 
Assets        
Cash $694  $2,342 
Accounts receivable, net of allowance for doubtful accounts of $2,200 in 2020 and $1,883 in 2019  125,940   128,099 
Rental equipment, at cost:        
Relocatable modular buildings  892,339   868,807 
Electronic test equipment  337,987   335,343 
Liquid and solid containment tanks and boxes  316,497   316,261 
   1,546,823   1,520,411 
Less accumulated depreciation  (577,142)  (552,911)
Rental equipment, net  969,681   967,500 
Property, plant and equipment, net  133,610   131,047 
Prepaid expenses and other assets  46,997   45,356 
Intangible assets, net  7,223   7,334 
Goodwill  28,197   28,197 
Total assets $1,312,342  $1,309,875 
Liabilities and Shareholders' Equity        
Liabilities:        
Notes payable $272,149  $293,431 
Accounts payable and accrued liabilities  116,825   109,174 
Deferred income  60,779   54,964 
Deferred income taxes, net  218,753   218,270 
Total liabilities  668,506   675,839 
Shareholders’ equity:        
Common stock, no par value - Authorized 40,000 shares        
Issued and outstanding - 24,085 shares as of June 30, 2020 and 24,296 shares as of December 31, 2019  106,010   106,360 
Retained earnings  537,775   527,746 
Accumulated other comprehensive income (loss)  51   (70)
Total shareholders’ equity  643,836   634,036 
Total liabilities and shareholders’ equity $1,312,342  $1,309,875 
         

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

  Six Months Ended June 30, 
(in thousands) 2020  2019 
Cash Flows from Operating Activities:        
Net income $42,708  $37,937 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  47,663   43,087 
Provision for doubtful accounts  833   371 
Share-based compensation  3,224   2,746 
Gain on sale of used rental equipment  (9,602)  (9,168)
Foreign currency exchange loss (gain)  319   (86)
Amortization of debt issuance costs  5   5 
  Change in:        
Accounts receivable  1,326   (373)
Prepaid expenses and other assets  (1,641)  (21,246)
Accounts payable and accrued liabilities  6,389   18,468 
Deferred income  5,815   16,909 
Deferred income taxes  483   3,337 
Net cash provided by operating activities  97,522   91,987 
Cash Flows from Investing Activities:        
Purchases of rental equipment  (57,564)  (90,701)
Purchases of property, plant and equipment  (6,893)  (3,961)
Proceeds from sales of used rental equipment  21,921   18,280 
Net cash used in investing activities  (42,536)  (76,382)
Cash Flows from Financing Activities:        
Net (repayment) borrowing under bank lines of credit  (21,288)  3,309 
Repurchase of common stock  (13,501)   
Taxes paid related to net share settlement of stock awards  (2,340)  (1,563)
Payment of dividends  (19,526)  (17,337)
Net cash used in financing activities  (56,655)  (15,591)
Effect of foreign currency exchange rate changes on cash  21   (26)
Net decrease in cash  (1,648)  (12)
Cash balance, beginning of period  2,342   1,508 
Cash balance, end of period $694  $1,496 
Supplemental Disclosure of Cash Flow Information:        
Interest paid, during the period $5,031  $6,210 
Net income taxes paid, during the period $2,153  $6,173 
Dividends accrued during the period, not yet paid $10,255  $9,163 
Rental equipment acquisitions, not yet paid $6,654  $8,930 
         


MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2020
(dollar amounts in thousands) Mobile  TRS-  Adler  Enviroplex  Consolidated 
ModularRenTelcoTanks
Revenues                    
Rental $46,628  $26,012  $12,989  $  $85,629 
Rental related services  14,463   670   5,342      20,475 
Rental operations  61,091   26,682   18,331      106,104 
Sales  15,316   5,922   232   9,199   30,669 
Other  355   475   70      900 
Total revenues  76,762   33,079   18,633   9,199   137,673 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  5,737   11,750   4,096      21,583 
Rental related services  10,362   517   4,015      14,894 
Other  12,376   3,562   2,227      18,165 
Total direct costs of rental operations  28,475   15,829   10,338      54,642 
Costs of sales  10,845   3,049   228   5,677   19,799 
Total costs of revenues  39,320   18,878   10,566   5,677   74,441 
                     
Gross Profit                    
Rental  28,514   10,700   6,666      45,880 
Rental related services  4,101   153   1,327      5,581 
Rental operations  32,615   10,853   7,993      51,461 
Sales  4,471   2,873   4   3,522   10,870 
Other  356   475   70      901 
Total gross profit  37,442   14,201   8,067   3,522   63,232 
Selling and administrative expenses  16,857   5,875   6,353   1,455   30,540 
Income from operations $20,585  $8,326  $1,714  $2,067   32,692 
Interest expense                  (2,184)
Foreign currency exchange gain                  117 
Provision for income taxes                  (8,076)
Net income                 $22,549 
                     
Other Information                    
Average rental equipment 1 $822,743  $338,919  $314,780         
Average monthly total yield 2  1.89%  2.56%  1.38%        
Average utilization 3  77.7%  63.9%  44.3%        
Average monthly rental rate 4  2.43%  4.00%  3.10%        
  1. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
  2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
  3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
  4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2019
(dollar amounts in thousands) Mobile  TRS-  Adler  Enviroplex  Consolidated 
ModularRenTelcoTanks
Revenues                    
Rental $44,737  $25,489  $17,879  $  $88,105 
Rental related services  15,901   854   7,712      24,467 
Rental operations  60,638   26,343   25,591      112,572 
Sales  6,725   5,317   593   1,072   13,707 
Other  359   650   151      1,160 
Total revenues  67,722   32,310   26,335   1,072   127,439 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  5,469   10,164   4,093      19,726 
Rental related services  11,728   686   5,723      18,137 
Other  14,282   4,018   3,441      21,741 
Total direct costs of rental operations  31,479   14,868   13,257      59,604 
Costs of sales  4,257   2,617   415   665   7,954 
Total costs of revenues  35,736   17,485   13,672   665   67,558 
                     
Gross Profit                    
Rental  24,986   11,307   10,345      46,638 
Rental related services  4,173   168   1,989      6,330 
Rental operations  29,159   11,475   12,334      52,968 
Sales  2,468   2,700   178   407   5,753 
Other  359   650   151      1,160 
Total gross profit  31,986   14,825   12,663   407   59,881 
Selling and administrative expenses  15,677   6,093   7,814   1,231   30,815 
Income (loss) from operations $16,309  $8,732  $4,849  $(824)  29,066 
Interest expense                  (3,138)
Foreign currency exchange gain                  37 
Provision for income taxes                  (6,477)
Net income                 $19,488 
                     
Other Information                    
Average rental equipment 1 $786,512  $297,379  $313,552         
Average monthly total yield 2  1.90%  2.86%  1.90%        
Average utilization 3  79.2%  67.2%  57.5%        
Average monthly rental rate 4  2.39%  4.25%  3.31%        
  1. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
  2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
  3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
  4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP 
BUSINESS SEGMENT DATA (unaudited) 
Six months ended June 30, 2020 
(dollar amounts in thousands) Mobile  TRS-  Adler  Enviroplex  Consolidated 
ModularRenTelcoTanks
Revenues                    
Rental $94,038  $53,548  $27,549  $  $175,135 
Rental related services  32,607   1,496   10,883      44,986 
Rental operations  126,645   55,044   38,432      220,121 
Sales  22,572   11,031   730   10,702   45,035 
Other  743   1,067   160      1,970 
Total revenues  149,960   67,142   39,322   10,702   267,126 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  11,406   23,582   8,233      43,221 
Rental related services  23,712   1,163   8,282      33,157 
Other  24,993   7,942   4,683      37,618 
Total direct costs of rental operations  60,111   32,687   21,198      113,996 
Costs of sales  15,548   5,497   548   6,649   28,242 
Total costs of revenues  75,659   38,184   21,746   6,649   142,238 
                     
Gross Profit                    
Rental  57,638   22,024   14,633      94,295 
Rental related services  8,895   333   2,601      11,829 
Rental operations  66,533   22,357   17,234      106,124 
Sales  7,024   5,534   182   4,053   16,793 
Other  744   1,067   160      1,971 
Total gross profit  74,301   28,958   17,576   4,053   124,888 
Selling and administrative expenses  34,275   12,236   13,177   2,806   62,494 
Income from operations $40,026  $16,722  $4,399  $1,247   62,394 
Interest expense                  (4,836)
Foreign currency exchange loss                  (319)
Provision for income taxes                  (14,531)
Net income                 $42,708 
                     
Other Information                    
Average rental equipment 1 $819,212  $338,066  $314,823         
Average monthly total yield 2  1.90%  2.64%  1.46%        
Average utilization 3  78.2%  64.7%  45.9%        
Average monthly rental rate 4  2.45%  4.08%  3.18%        
  1. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
  2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
  3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
  4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP 
BUSINESS SEGMENT DATA (unaudited) 
Six months ended June 30, 2019 
(dollar amounts in thousands) Mobile  TRS-  Adler  Enviroplex  Consolidated 
ModularRenTelcoTanks
Revenues                    
Rental $86,998  $49,112  $34,691  $  $170,801 
Rental related services  30,372   1,562   13,988      45,922 
Rental operations  117,370   50,674   48,679      216,723 
Sales  14,725   11,067   863   3,877   30,532 
Other  719   1,245   228      2,192 
Total revenues  132,814   62,986   49,770   3,877   249,447 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  10,877   19,684   8,126      38,687 
Rental related services  22,655   1,313   10,532      34,500 
Other  26,917   8,118   6,439      41,474 
Total direct costs of rental operations  60,449   29,115   25,097      114,661 
Costs of sales  9,500   5,379   587   2,434   17,900 
Total costs of revenues  69,949   34,494   25,684   2,434   132,561 
                     
Gross Profit                    
Rental  49,204   21,310   20,126      90,640 
Rental related services  7,717   249   3,456      11,422 
Rental operations  56,921   21,559   23,582      102,062 
Sales  5,225   5,688   276   1,443   12,632 
Other  719   1,245   228      2,192 
Total gross profit  62,865   28,492   24,086   1,443   116,886 
Selling and administrative expenses  31,047   12,063   14,894   2,506   60,510 
Income (loss) from operations $31,818  $16,429  $9,192  $(1,063)  56,376 
Interest expense                  (6,246)
Foreign currency exchange gain                  86 
Provision for income taxes                  (12,279)
Net income                 $37,937 
                     
Other Information                    
Average rental equipment 1 $782,562  $291,590  $313,032         
Average monthly total yield 2  1.85%  2.81%  1.85%        
Average utilization 3  79.1%  65.7%  57.1%        
Average monthly rental rate 4  2.34%  4.27%  3.23%        
  1. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
  2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
  3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
  4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation.  The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company. 

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements.  Management believes the exclusion of non-cash charges, including share-based compensation, is useful in measuring the Company’s cash available for operations and performance of the Company.  Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.  

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity.  Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges.  The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow.  In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance.  Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP. 

Reconciliation of Net Income to Adjusted EBITDA

(dollar amounts in thousands) Three Months Ended  Six Months Ended  Twelve Months Ended 
June 30,June 30,June 30,
  2020  2019  2020  2019  2020  2019 
Net income $22,549  $19,488  $42,708  $37,937  $101,577  $86,965 
Provision for income taxes  8,076   6,477   14,531   12,279   34,571   27,822 
Interest expense  2,184   3,138   4,836   6,246   10,921   12,552 
Depreciation and amortization  23,801   21,987   47,663   43,087   94,052   84,774 
EBITDA  56,610   51,090   109,738   99,549   241,121   212,113 
Share-based compensation  1,501   1,354   3,224   2,746   6,370   5,029 
Adjusted EBITDA 1 $58,111  $52,444  $112,962  $102,295  $247,491  $217,142 
Adjusted EBITDA margin 2  42%  41%  42%  41%  42%  41%
                         

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands) Three Months Ended  Six Months Ended  Twelve Months Ended 
June 30,June 30,June 30,
  2020  2019  2020  2019  2020  2019 
Adjusted EBITDA 1 $58,111  $52,444  $112,962  $102,295  $247,491  $217,142 
Interest paid  (2,172)  (3,382)  (5,031)  (6,210)  (11,296)  (12,685)
Income taxes paid, net of refunds received  (1,790)  (5,463)  (2,153)  (6,173)  (13,508)  (12,655)
Gain on sale of used rental equipment  (4,814)  (4,553)  (9,602)  (9,168)  (21,743)  (18,852)
Foreign currency exchange loss (gain)  (117)  (37)  319   (86)  321   27 
Amortization of debt issuance cost  2   2   5   5   11   10 
Change in certain assets and liabilities:                        
Accounts receivable, net  (106)  (1,615)  2,159   (2)  (4,149)  (15,923)
Prepaid expenses and other assets  (2,004)  (9,726)  (1,641)  (21,246)  6,075   (15,659)
Accounts payable and other liabilities  5,858   9,380   (5,311)  15,663   (3,717)  17,171 
Deferred income  (1,128)  8,431   5,815   16,909   (5,956)  22,313 
Net cash provided by operating activities $51,840  $45,481  $97,522  $91,987  $193,529  $180,889 
                         
  1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation.
  2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

FOR INFORMATION CONTACT:Keith E. Pratt
 EVP & Chief Financial Officer
 925-606-9200