McGrath RentCorp Announces Results for Fourth Quarter 2020
McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2020 of $149.0 million, an increase of 1%, compared to the fourth quarter of 2019. The Company reported net income of $31.2 million, or $1.27 per diluted share, for the fourth quarter of 2020, compared to net income of $26.4 million, or $1.07 per diluted share, for the fourth quarter of 2019.
Total revenues for the year ended December 31, 2020 increased to $572.6 million from $570.2 million in 2019, with income from operations decreasing $0.6 million to $140.8 million. Net income for the year ended December 31, 2020 increased to $102.0 million, or $4.16 per diluted share, from $96.8 million, or $3.93 per diluted share, in 2019.
The Company also announced that the board of directors declared a quarterly cash dividend of $0.435 per share for the quarter ending March 31, 2021, an increase of $0.015, or 4%, over the prior year period. The cash dividend will be payable on April 30, 2021 to all shareholders of record on April 15, 2021. This marks the 30th consecutive year the Company has increased its annual dividend.
FOURTH QUARTER 2020 COMPANY HIGHLIGHTS:
Income from operations increased 7% year-over-year to $41.0 million. Total revenues increased 1% year-over-year to $149.0 million. Rental revenues decreased 4% year-over-year to $88.5 million. Adjusted EBITDA1 increased 3% year-over-year to $65.3 million. Dividend rate increased 12% year-over-year to $0.42 per share for the fourth quarter of 2020. On an annualized basis, this dividend represents a 2.1% yield on the February 22, 2021 close price of $80.48 per share.Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“We were pleased with our fourth quarter results. Strong sales revenues, primarily at Enviroplex, more than offset some softness in rental demand, primarily at Adler, compared to a year ago. The growth in total revenues, coupled with good management of costs, enabled us to grow operating income by 7%.
Our full year results demonstrated the resilience in our business and the dedication of our teams. Despite the many disruptions arising from the pandemic, we grew total revenues and delivered operating income comparable to the prior year. Growth in sales revenues, primarily at Mobile Modular, more than offset slightly lower rental revenue. I am grateful to our employees who persevered and adapted to the new work conditions arising from the pandemic, and who continued to provide excellent service to our customers.
We are entering 2021 with a solid business, an experienced leadership team, and a strong balance sheet. Our track record of execution combined with an improving economy should drive healthy free cash flow generation while we invest in additional fleet to meet customer needs. We are well positioned to continue growing the business as demand conditions improve during the year.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended December 31, 2020 to the quarter ended December 31, 2019 unless otherwise indicated.
MOBILE MODULAR
For the fourth quarter of 2020, the Company’s Mobile Modular division reported income from operations of $22.5 million, a decrease of $1.4 million, or 6%. Rental revenues decreased 2% to $47.5 million, depreciation expense increased 3% to $5.8 million and other direct costs decreased 4% to $11.0 million, which resulted in a decrease in gross profit on rental revenues of 2% to $30.8 million. The rental revenue decline was due to decreased demand from commercial and education customers. Rental related services revenues decreased 1% to $16.2 million, with associated gross profit increasing 10% to $4.5 million. Sales revenues decreased 23% to $12.0 million, primarily due to lower used equipment sales with gross margin on sales decreasing to 27% from 30%, resulting in a 30% decrease in gross profit on sales revenues to $3.3 million. Selling and administrative expenses decreased 7% to $16.5 million, primarily due to lower allocated corporate expenses.
TRS-RENTELCO
For the fourth quarter of 2020, the Company’s TRS-RenTelco division reported income from operations of $10.8 million, an increase of $1.3 million, or 14%. Rental revenues increased 1% to $27.9 million, depreciation expense decreased 1% to $11.3 million and other direct costs increased 7% to $4.4 million, which resulted in a 1% increase in gross profit on rental revenues to $12.2 million. The rental revenue growth was due to increased demand from general purpose test equipment customers. Sales revenues increased 62% to $8.7 million. Gross margin on sales was 47% in 2020 compared to 62% in 2019, resulting in a 23% increase in gross profit on sales revenues to $4.1 million. Selling and administrative expenses decreased 7% to $6.1 million, primarily due to lower salaries and benefit costs and lower travel, meals and meeting expenses.
ADLER TANKS
For the fourth quarter of 2020, the Company’s Adler Tanks division reported income from operations of $2.2 million, a decrease of $1.2 million, or 35%. Rental revenues decreased 18% to $13.1 million, depreciation expense decreased 1% to $4.1 million and other direct costs decreased 16% to $2.3 million, which resulted in a 27% decrease in gross profit on rental revenues to $6.7 million. The rental revenue decrease was primarily due to continued COVID-19 related market 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 24% to $5.3 million, with gross profit on rental related services decreasing 9% to $1.3 million. Selling and administrative expenses decreased 21% to $5.8 million, primarily due to lower allocated corporate expenses, decreased salaries and employee benefit costs and lower marketing and administrative costs.
FINANCIAL OUTLOOK:
For the full year 2021, the Company currently expects:
Total revenue: $560 million - $595 million Adjusted EBITDA1,2: $230 million - $245 million Gross rental equipment capital expenditures: $90 million to $110 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 January 26, 2021, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 23, 2021 to discuss the fourth 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 3349708. 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 terminology. In particular, Mr. Hanna’s statements about entering 2021 with a solid business, an experienced leadership team, and a strong balance sheet, the Company’s track record of execution combined with an improving economy driving healthy free cash flow generation while investing in additional fleet to meet customer needs and being well positioned to continue growing the business as demand conditions improve during 2021 as well as the statements regarding the full year 2021 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 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 December 31,
Twelve Months Ended December 31,
(in thousands, except per share amounts)
2020
2019
2020
2019
Revenues
Rental
$
88,517
$
92,231
$
351,790
$
353,889
Rental related services
22,367
24,300
92,393
101,038
Rental operations
110,884
116,531
444,183
454,927
Sales
37,238
28,842
124,604
110,229
Other
858
1,848
3,767
5,074
Total revenues
148,980
147,221
572,554
570,230
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
21,226
21,169
85,866
80,391
Rental related services
16,345
18,734
68,105
76,241
Other
17,647
18,237
73,818
79,365
Total direct costs of rental operations
55,218
58,140
227,789
235,997
Costs of sales
23,108
18,084
81,019
68,068
Total costs of revenues
78,326
76,224
308,808
304,065
Gross profit
70,653
70,997
263,746
266,165
Selling and administrative expenses
29,628
32,749
122,993
124,793
Income from operations
41,025
38,248
140,753
141,372
Other income (expense):
Interest expense
(1,983
)
(2,924
)
(8,787
)
(12,331
)
Foreign currency exchange gain
267
130
78
84
Income before provision for income taxes
39,309
35,454
132,044
129,125
Provision for income taxes
8,133
9,053
30,060
32,319
Net income
$
31,176
$
26,401
$
101,984
$
96,806
Earnings per share:
Basic
$
1.29
$
1.09
$
4.22
$
3.99
Diluted
$
1.27
$
1.07
$
4.16
$
3.93
Shares used in per share calculation:
Basic
24,119
24,290
24,157
24,250
Diluted
24,453
24,697
24,531
24,623
Cash dividends declared per share
$
0.420
$
0.375
$
1.68
$
1.50
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31,
(in thousands)
2020
2019
Assets
Cash
$
1,238
$
2,342
Accounts receivable, net of allowance for doubtful accounts of $2,100 in 2020
and $1,883 in 2019
123,316
128,099
Rental equipment, at cost:
Relocatable modular buildings
882,115
868,807
Electronic test equipment
333,020
335,343
Liquid and solid containment tanks and boxes
315,706
316,261
1,530,841
1,520,411
Less accumulated depreciation
(592,725
)
(552,911
)
Rental equipment, net
938,116
967,500
Property, plant and equipment, net
136,210
131,047
Prepaid expenses and other assets
41,549
45,356
Intangible assets, net
7,118
7,334
Goodwill
28,197
28,197
Total assets
$
1,275,744
$
1,309,875
Liabilities and Shareholders' Equity
Liabilities:
Notes payable
$
222,754
$
293,431
Accounts payable and accrued liabilities
108,334
109,174
Deferred income
45,975
54,964
Deferred income taxes, net
216,077
218,270
Total liabilities
593,140
675,839
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,128 shares as of December 31, 2020 and 24,296 shares as of December 31, 2019
106,289
106,360
Retained earnings
576,419
527,746
Accumulated other comprehensive loss
(104
)
(70
)
Total shareholders’ equity
682,604
634,036
Total liabilities and shareholders’ equity
$
1,275,744
$
1,309,875
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended December 31,
(in thousands)
2020
2019
Cash Flows from Operating Activities:
Net income
$
101,984
$
96,806
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
94,643
89,476
Provision for doubtful accounts
1,343
1,013
Share-based compensation
5,549
5,892
Gain on sale of used rental equipment
(19,329
)
(21,309
)
Foreign currency exchange gain
(78
)
(84
)
Amortization of debt issuance costs
11
11
Change in:
Accounts receivable
3,440
(7,323
)
Prepaid expenses and other assets
3,807
(13,530
)
Accounts payable and accrued liabilities
316
20,298
Deferred income
(8,989
)
5,138
Deferred income taxes
(2,193
)
11,606
Net cash provided by operating activities
180,504
187,994
Cash Flows from Investing Activities:
Purchases of rental equipment
(86,329
)
(167,703
)
Purchases of property, plant and equipment
(13,724
)
(12,080
)
Cash paid for acquisition of business assets
—
(7,808
)
Proceeds from sales of used rental equipment
47,052
44,447
Net cash used in investing activities
(53,001
)
(143,144
)
Cash Flows from Financing Activities:
Net (repayment) borrowing under bank lines of credit
(70,689
)
(5,144
)
Repurchase of common stock
(13,617
)
—
Taxes paid related to net share settlement of stock awards
(4,376
)
(3,333
)
Payment of dividends
(39,769
)
(35,539
)
Net cash used in financing activities
(128,451
)
(44,016
)
Effect of foreign currency exchange rate changes on cash
(156
)
-
Net (decrease) increase in cash
(1,104
)
834
Cash balance, beginning of period
2,342
1,508
Cash balance, end of period
$
1,238
$
2,342
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
$
9,050
$
12,475
Net income taxes paid, during the period
$
34,903
$
17,528
Dividends accrued during the period, not yet paid
$
10,083
$
9,489
Rental equipment acquisitions, not yet paid
$
4,373
$
6,496
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2020
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
47,548
$
27,916
$
13,054
$
—
$
88,518
Rental related services
16,236
784
5,347
—
22,367
Rental operations
63,784
28,700
18,401
—
110,885
Sales
12,016
8,675
426
16,121
37,238
Other
351
438
68
—
857
Total revenues
76,151
37,813
18,895
16,121
148,980
Costs and Expenses
Direct costs of rental operations:
Depreciation
5,790
11,343
4,093
—
21,226
Rental related services
11,688
583
4,074
—
16,345
Other
10,989
4,371
2,287
—
17,647
Total direct costs of rental operations
28,467
16,297
10,454
—
55,218
Costs of sales
8,737
4,573
478
9,320
23,108
Total costs of revenues
37,204
20,870
10,932
9,320
78,326
Gross Profit
Rental
30,769
12,202
6,674
—
49,645
Rental related services
4,548
201
1,273
—
6,022
Rental operations
35,317
12,403
7,947
—
55,667
Sales
3,279
4,102
(52
)
6,801
14,130
Other
351
438
68
—
857
Total gross profit
38,947
16,943
7,963
6,801
70,654
Selling and administrative expenses
16,456
6,108
5,766
1,298
29,628
Income from operations
$
22,491
$
10,835
$
2,197
$
5,503
$
41,026
Interest expense
(1,983
)
Foreign currency exchange gain
267
Provision for income taxes
(8,134
)
Net income
$
31,176
Other Information
Average rental equipment 1
$
834,599
$
333,505
$
314,647
Average monthly total yield 2
1.90
%
2.74
%
1.38
%
Average utilization 3
76.2
%
68.4
%
42.6
%
Average monthly rental rate 4
2.49
%
4.08
%
3.25
%
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 December 31, 2019
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
48,580
$
27,654
$
15,997
$
—
$
92,231
Rental related services
16,449
835
7,016
—
24,300
Rental operations
65,029
28,489
23,013
—
116,531
Sales
15,642
5,361
263
7,576
28,842
Other
1,223
557
68
—
1,848
Total revenues
81,894
34,407
23,344
7,576
147,221
Costs and Expenses
Direct costs of rental operations:
Depreciation
5,622
11,415
4,132
—
21,169
Rental related services
12,333
783
5,618
—
18,734
Other
11,415
4,097
2,725
—
18,237
Total direct costs of rental operations
29,370
16,295
12,475
—
58,140
Costs of sales
10,935
2,037
235
4,877
18,084
Total costs of revenues
40,305
18,332
12,710
4,877
76,224
Gross Profit
Rental
31,543
12,142
9,140
—
52,825
Rental related services
4,116
52
1,398
—
5,566
Rental operations
35,659
12,194
10,538
—
58,391
Sales
4,707
3,324
28
2,699
10,758
Other
1,223
557
68
—
1,848
Total gross profit
41,589
16,075
10,634
2,699
70,997
Selling and administrative expenses
17,686
6,544
7,267
1,252
32,749
Income from operations
$
23,903
$
9,531
$
3,367
$
1,447
38,248
Interest expense
(2,924
)
Foreign currency exchange gain
130
Provision for income taxes
(9,053
)
Net income
$
26,401
Other Information
Average rental equipment 1
$
813,535
$
328,038
$
314,906
Average monthly total yield 2
1.99
%
2.81
%
1.69
%
Average utilization 3
79.3
%
66.8
%
50.0
%
Average monthly rental rate 4
2.51
%
4.20
%
3.39
%
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)
Twelve months ended December 31, 2020
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
188,719
$
109,083
$
53,988
$
—
$
351,790
Rental related services
67,527
3,080
21,786
—
92,393
Rental operations
256,246
112,163
75,774
—
444,183
Sales
63,863
26,618
1,386
32,737
124,604
Other
1,415
2,030
322
—
3,767
Total revenues
321,524
140,811
77,482
32,737
572,554
Costs and Expenses
Direct costs of rental operations:
Depreciation
22,967
46,472
16,427
—
85,866
Rental related services
48,910
2,419
16,776
—
68,105
Other
47,762
17,133
8,923
—
73,818
Total direct costs of rental operations
119,639
66,024
42,126
—
227,789
Costs of sales
46,011
13,923
1,277
19,808
81,019
Total costs of revenues
165,650
79,947
43,403
19,808
308,808
Gross Profit
Rental
117,990
45,478
28,638
—
192,106
Rental related services
18,617
661
5,010
—
24,288
Rental operations
136,607
46,139
33,648
—
216,394
Sales
17,852
12,695
109
12,929
43,585
Other
1,415
2,030
322
—
3,767
Total gross profit
155,874
60,864
34,079
12,929
263,746
Selling and administrative expenses
68,470
24,306
24,764
5,453
122,993
Income from operations
$
87,404
$
36,558
$
9,315
$
7,476
$
140,753
Interest expense
(8,787
)
Foreign currency exchange gain
78
Provision for income taxes
(30,060
)
Net income
$
101,984
Other Information
Average rental equipment 1
$
825,614
$
336,399
$
314,797
Average monthly total yield 2
1.88
%
2.70
%
1.43
%
Average utilization 3
77.2
%
66.2
%
44.6
%
Average monthly rental rate 4
2.47
%
4.08
%
3.21
%
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)
Twelve months ended December 31, 2019
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
182,316
$
103,704
$
67,869
$
—
$
353,889
Rental related services
69,395
3,260
28,383
—
101,038
Rental operations
251,711
106,964
96,252
—
454,927
Sales
47,043
22,106
1,266
39,814
110,229
Other
2,256
2,413
405
—
5,074
Total revenues
301,010
131,483
97,923
39,814
570,230
Costs and Expenses
Direct costs of rental operations:
Depreciation
22,071
41,948
16,372
—
80,391
Rental related services
51,787
2,791
21,663
—
76,241
Other
51,136
16,303
11,926
—
79,365
Total direct costs of rental operations
124,994
61,042
49,961
—
235,997
Costs of sales
32,398
9,693
948
25,029
68,068
Total costs of revenues
157,392
70,735
50,909
25,029
304,065
Gross Profit
Rental
109,109
45,453
39,571
—
194,133
Rental related services
17,608
469
6,720
—
24,797
Rental operations
126,717
45,922
46,291
—
218,930
Sales
14,645
12,413
318
14,785
42,161
Other
2,256
2,413
405
—
5,074
Total gross profit
143,618
60,748
47,014
14,785
266,165
Selling and administrative expenses
65,699
24,645
29,321
5,128
124,793
Income from operations
$
77,919
$
36,103
$
17,693
$
9,657
$
141,372
Interest expense
(12,331
)
Foreign currency exchange loss
84
Provision for income taxes
(32,319
)
Net income
$
96,806
Other Information
Average rental equipment 1
$
795,250
$
306,426
$
313,810
Average monthly total yield 2
1.90
%
2.82
%
1.80
%
Average utilization 3
79.2
%
66.2
%
54.7
%
Average monthly rental rate 4
2.41
%
4.26
%
3.29
%
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
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Net income
$
31,175
$
26,401
$
101,984
$
96,806
Provision for income taxes
8,134
9,053
30,060
32,319
Interest expense
1,983
2,924
8,787
12,331
Depreciation and amortization
23,394
23,516
94,643
89,476
EBITDA
64,686
61,894
235,474
230,932
Share-based compensation
655
1,796
5,549
5,892
Adjusted EBITDA 1
$
65,341
$
63,690
$
241,023
$
236,824
Adjusted EBITDA margin 2
44
%
43
%
42
%
42
%
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Adjusted EBITDA 1
$
65,341
$
63,690
$
241,023
$
236,824
Interest paid
(2,221
)
(3,116
)
(9,050
)
(12,475
)
Income taxes paid, net of refunds received
(10,199
)
(7,498
)
(34,903
)
(17,528
)
Gain on sale of used rental equipment
(5,219
)
(6,141
)
(19,329
)
(21,309
)
Foreign currency exchange loss (gain)
(267
)
(130
)
(78
)
(84
)
Amortization of debt issuance costs
3
3
11
11
Change in certain assets and liabilities:
Accounts receivable, net
6,117
9,964
4,783
(6,310
)
Prepaid expenses and other assets
5,121
(1,796
)
3,807
(13,530
)
Accounts payable and other liabilities
2,871
1,957
3,229
17,257
Deferred income
(12,580
)
(5,808
)
(8,989
)
5,138
Net cash provided by operating activities
$
48,967
$
51,125
$
180,504
$
187,994
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.
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