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McGrath RentCorp Announces Results for Second Quarter 2018

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LIVERMORE, Calif., July 31, 2018 (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, 2018 of $117.0 million, an increase of 7%, compared to the second quarter of 2017.  The Company reported net income of $15.9 million, or $0.65 per diluted share for the second quarter of 2018, compared to net income of $11.5 million, or $0.48 per diluted share, in the second quarter of 2017. 

SECOND QUARTER 2018 COMPANY HIGHLIGHTS:

  • Income from operations increased 12% year-over-year to $24.4 million.
  • Rental revenues increased 10% year-over-year to $77.3 million.
  • Adjusted EBITDA1 increased 8% year-over-year to $45.4 million.   
  • Dividend rate increased 31% year-over-year to $0.34 per share for the second quarter of 2018.  On an annualized basis, this dividend represents a 2.3% yield on the July 30, 2018 close price of $58.19 per share.

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

"Our second quarter results reflect continued positive momentum in all of our divisions as we finished the quarter with a 12% improvement in operating profit.  Rental gross profits improved by $3.7 million and sales gross profits improved $1.0 million.  We were pleased to see that second quarter demand for our rental solutions was strong, contributing to solid results for the first half of 2018, and setting the stage for the remainder of the year.

Mobile Modular rental revenues for the quarter increased 9% from a year ago, driven by 8% improvement in average rental rates and 1% improvement in average utilization.  Rental revenue growth continued to be healthy across commercial and education markets.  Despite a dip in sales this quarter, sales bookings are healthy and reflect continued strong demand.  Portable Storage rental revenues continue to grow nicely on broad based activity in all regions. 

TRS-RenTelco rental revenues for the quarter increased 12%, primarily driven by 11% higher average rental equipment and improved utilization.  We continued to see broad-based needs for both communications and general purpose test equipment and we expect this trend to continue for the remainder of the year.

Adler Tank Rentals rental revenues for the quarter increased 12% from a year ago.  Rental revenue growth occurred across a wide mix of vertical markets across the country, including upstream oil and natural gas, which increased from 9% to 10% of total rental revenues. Utilization continues to progress as average equipment on rent increased 9%.  Rental rates also rose by 2% as we focused on increasing rental rates coupled with better demand, particularly for 21K tanks.

With the benefit of an overall healthy demand environment, these results reflect our continued commitment to drive value from our invested capital base.  Each of our divisions has been executing this important work with conviction and we have made good progress."   

________________________

  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 net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended June 30, 2018 to the quarter ended June 30, 2017 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2018, the Company's Mobile Modular division reported income from operations of $11.8 million, an increase of $0.5 million, or 4%.  Rental revenues increased 9% to $38.2 million, depreciation expense decreased 1% to $5.3 million and other direct costs increased 22% to $12.5 million, which resulted in an increase in gross profit on rental revenues of 5% to $20.5 million.  Rental related services revenues increased 4% to $12.4 million, with associated gross profit decreasing 7% to $2.8 million.  Sales revenues decreased 6% to $9.0 million.  Gross margin on sales increased to 35% from 26% in 2017 primarily due to higher margins on used equipment sales, resulting in a 24% increase in gross profit on sales revenues to $3.1 million.  Selling and administrative expenses increased 8% to $14.9 million, primarily due to increased salaries and employee benefit costs.

TRS-RENTELCO

For the second quarter of 2018, the Company's TRS-RenTelco division reported income from operations of $8.5 million, an increase of $1.3 million, or 19%.  Rental revenues increased 12% to $22.2 million, depreciation expense increased 11% to $8.9 million and other direct costs increased 9% to $3.6 million, which resulted in an increase in gross profit on rental revenues of 14% to $9.7 million.  Sales revenues increased 22% to $6.8 million.  Gross margin on sales decreased to 58% from 61% in 2017 primarily due to lower margins on used equipment sales, resulting in a 15% increase in gross profit on sales revenues to $4.0 million.  Selling and administrative expenses increased 11% to $5.9 million, primarily due to higher allocated corporate expenses.

ADLER TANKS

For the second quarter of 2018, the Company's Adler Tanks division reported income from operations of $4.1 million, an increase of $1.0 million, or 34%.  Rental revenues increased 12% to $16.9 million, depreciation expense increased 1% to $4.0 million and other direct costs increased 8% to $2.7 million, which resulted in an increase in gross profit on rental revenues of 18% to $10.2 million.  Rental related services revenues decreased 3% to $6.0 million, with gross profit on rental related services decreasing 20% to $1.2 million.  Selling and administrative expenses increased 3% to $7.5 million primarily, due to higher allocated corporate expenses.

FINANCIAL OUTLOOK:

The Company reconfirms its expectation that total Company operating profit will increase 11% to 15% above 2017 results.

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company with four rental divisions.  Mobile Modular rents and sells modular buildings to fulfill customers' temporary and permanent classroom and office space needs in California, Texas, Florida, and the Mid-Atlantic from Washington D.C. to Georgia.  TRS-RenTelco rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas.  Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations serving key markets throughout the United States.  Mobile Modular Portable Storage provides portable storage solutions in the California, Texas, Florida, Northern Illinois, New Jersey, North Carolina and Georgia markets.  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 2, 2018, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 31, 2018 to discuss the second quarter 2018 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 7-day replay will be available 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 call replay is 2476588.  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 "believes," "expects," "will," or "anticipates" or the negative of these terms or other comparable terminology.  In particular, Mr. Hanna's comment that the second quarter demand for the Company's rental solutions have established a good foundation for the remainder of 2018, mobile modular sales bookings are healthy and reflect continued strong demand and that the Company expects broad-based needs for communications and general purpose test equipment for the remainder of the year, as well as the full year 2018 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 extent of the recovery underway in our modular building division; the state of the wireless communications network upgrade environment; the utilization levels and rental rates of our Adler Tanks liquid and sold 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 June 30,
  Six Months Ended June 30,
(in thousands, except per share amounts)   2018
  2017
  2018
  2017
Revenues                                
Rental   $ 77,267     $ 69,953     $ 151,528     $ 137,931  
Rental related services     19,086       18,796       36,917       36,731  
Rental operations     96,353       88,749       188,445       174,662  
Sales     19,546       20,187       31,637       28,482  
Other     1,084       646       1,986       1,275  
Total revenues     116,983       109,582       222,068       204,419  
Costs and Expenses                                
Direct costs of rental operations:                                
Depreciation of rental equipment     18,103       17,242       35,880       34,621  
Rental related services     15,018       14,312       28,786       28,145  
Other     18,753       16,039       35,022       31,398  
Total direct costs of rental operations     51,874       47,593       99,688       94,164  
Costs of sales     11,181       12,778       18,282       17,374  
Total costs of revenues     63,055       60,371       117,970       111,538  
Gross profit     53,928       49,211       104,098       92,881  
Selling and administrative expenses     29,479       27,365       57,607       55,213  
Income from operations     24,449       21,846       46,491       37,668  
Other income (expense):                                
Interest expense     (2,999 )     (2,949 )     (5,991 )     (5,738 )
Foreign currency exchange gain (loss)     (344 )     11       (376 )     237  
Income before provision for income taxes     21,106       18,908       40,124       32,167  
Provision for income taxes     5,194       7,447       9,746       12,733  
Net income   $ 15,912     $ 11,461     $ 30,378     $ 19,434  
Earnings per share:                                
Basic   $ 0.66     $ 0.48     $ 1.26     $ 0.81  
Diluted   $ 0.65     $ 0.48     $ 1.24     $ 0.80  
Shares used in per share calculation:                                
Basic     24,145       23,985       24,106       23,968  
Diluted     24,584       24,092       24,549       24,164  
Cash dividends declared per share   $ 0.340     $ 0.260     $ 0.680     $ 0.520  
                                 


MCGRATH RENTCORP

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

    June 30,
  December 31,
(in thousands)   2018
  2017
Assets                
Cash   $ 4,484     $ 2,501  
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2018 and $1,920 in 2017     105,095       105,872  
Rental equipment, at cost:                
Relocatable modular buildings     789,158       775,400  
Electronic test equipment     278,253       262,325  
Liquid and solid containment tanks and boxes     312,168       309,808  
      1,379,579       1,347,533  
Less accumulated depreciation     (503,057 )     (485,213 )
Rental equipment, net     876,522       862,320  
Property, plant and equipment, net     121,614       119,170  
Prepaid expenses and other assets     37,397       22,459  
Intangible assets, net     7,289       7,724  
Goodwill     27,808       27,808  
Total assets   $ 1,180,209     $ 1,147,854  
Liabilities and Shareholders' Equity                
Liabilities:                
Notes payable   $ 314,860     $ 303,414  
Accounts payable and accrued liabilities     89,064       86,408  
Deferred income     44,073       39,219  
Deferred income taxes, net     195,017       194,629  
Total liabilities     643,014       623,670  
Shareholders' equity:                
Common stock, no par value - Authorized 40,000 shares                
Issued and outstanding - 24,170 shares as of June 30, 2018 and 24,052 shares as of December 31, 2017     101,983       102,947  
Retained earnings     435,279       421,405  
Accumulated other comprehensive loss     (67 )     (168 )
Total shareholders' equity     537,195       524,184  
Total liabilities and shareholders' equity   $ 1,180,209     $ 1,147,854  
                 


MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

    Six Months Ended June 30,
(in thousands)   2018
  2017
Cash Flows from Operating Activities:                
Net income   $ 30,378     $ 19,434  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     40,288       38,752  
Impairment of rental assets     39        
Provision for doubtful accounts     181       597  
Share-based compensation     1,828       1,538  
Gain on sale of used rental equipment     (9,875 )     (7,914 )
Foreign currency exchange (gain) loss     376       (237 )
Amortization of debt issuance costs     15       25  
Change in:                
Accounts receivable     596       (259 )
Prepaid expenses and other assets     (14,938 )     (8,839 )
Accounts payable and accrued liabilities     (365 )     680  
Deferred income     4,854       5,034  
Deferred income taxes     388       587  
Net cash provided by operating activities     53,765       49,398  
Cash Flows from Investing Activities:                
Purchases of rental equipment     (58,662 )     (46,118 )
Purchases of property, plant and equipment     (6,417 )     (9,623 )
Proceeds from sales of used rental equipment     19,212       16,057  
Net cash used in investing activities     (45,867 )     (39,684 )
Cash Flows from Financing Activities:                
Net borrowings under bank lines of credit     31,431       23,996  
Principal payments on Series A senior notes     (20,000 )     (20,000 )
Taxes paid related to net share settlement of stock awards     (2,792 )     (319 )
Payment of dividends     (14,501 )     (12,390 )
Net cash used in financing activities     (5,862 )     (8,713 )
Effect of foreign currency exchange rate changes on cash     (53 )     18  
Net increase in cash     1,983       1,019  
Cash balance, beginning of period     2,501       852  
Cash balance, end of period   $ 4,484     $ 1,871  
Supplemental Disclosure of Cash Flow Information:                
Interest paid, during the period   $ 6,123     $ 5,817  
Net income taxes paid, during the period   $ 11,675     $ 18,141  
Dividends accrued during the period, not yet paid   $ 8,267     $ 6,214  
Rental equipment acquisitions, not yet paid   $ 7,201     $ 6,359  
                 


MCGRATH RENTCORP                                        
BUSINESS SEGMENT DATA (unaudited)                                        
Three months ended June 30, 2018                                        
(dollar amounts in thousands)   Mobile 
Modular
  TRS-
RenTelco 
  Adler Tanks
  Enviroplex
  Consolidated
Revenues                                        
Rental   $ 38,204     $ 22,165     $ 16,898     $     $ 77,267  
Rental related services     12,388       707       5,991             19,086  
Rental operations     50,592       22,872       22,889             96,353  
Sales     8,961       6,844       30       3,711       19,546  
Other     318       636       130             1,084  
Total revenues     59,871       30,352       23,049       3,711       116,983  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     5,273       8,866       3,964             18,103  
Rental related services     9,555       638       4,825             15,018  
Other     12,467       3,563       2,723             18,753  
Total direct costs of rental operations     27,295       13,067       11,512             51,874  
Costs of sales     5,847       2,891       21       2,422       11,181  
Total costs of revenues     33,142       15,958       11,533       2,422       63,055  
                                         
Gross Profit                                        
Rental     20,463       9,736       10,212             40,411  
Rental related services     2,833       69       1,166             4,068  
Rental operations     23,296       9,805       11,378             44,479  
Sales     3,115       3,953       8       1,289       8,365  
Other     318       636       130             1,084  
Total gross profit     26,729       14,394       11,516       1,289       53,928  
Selling and administrative expenses     14,918       5,942       7,460       1,159       29,479  
Income from operations   $ 11,811     $ 8,452     $ 4,056     $ 130       24,449  
Interest expense                                     (2,999 )
Foreign currency exchange loss                                     (344 )
Provision for income taxes                                     (5,194 )
Net income                                   $ 15,912  
                                         
Other Information                                        
Average rental equipment 1   $ 748,689     $ 274,317     $ 309,853                  
Average monthly total yield 2     1.70 %     2.69 %     1.82 %                
Average utilization 3     77.1 %     63.2 %     59.1 %                
Average monthly rental rate 4     2.21 %     4.26 %     3.08 %                
                                         
  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, 2017                                        
(dollar amounts in thousands)   Mobile 
Modular
  TRS-
RenTelco
  Adler Tanks
  Enviroplex
  Consolidated 
Revenues                                        
Rental   $ 35,030     $ 19,805     $ 15,118     $     $ 69,953  
Rental related services     11,966       654       6,176             18,796  
Rental operations     46,996       20,459       21,294             88,749  
Sales     9,504       5,605       926       4,152       20,187  
Other     138       475       33             646  
Total revenues     56,638       26,539       22,253       4,152       109,582  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     5,333       7,980       3,929             17,242  
Rental related services     8,930       657       4,725             14,312  
Other     10,247       3,272       2,520             16,039  
Total direct costs of rental operations     24,510       11,909       11,174             47,593  
Costs of sales     6,994       2,176       802       2,806       12,778  
Total costs of revenues     31,504       14,085       11,976       2,806       60,371  
                                         
Gross Profit (Loss)                                        
Rental     19,451       8,553       8,669             36,673  
Rental related services     3,036       (3 )     1,450             4,483  
Rental operations     22,487       8,550       10,119             41,156  
Sales     2,509       3,429       125       1,346       7,409  
Other     138       475       33             646  
Total gross profit     25,134       12,454       10,277       1,346       49,211  
Selling and administrative expenses     13,817       5,330       7,261       957       27,365  
Income from operations   $ 11,317     $ 7,124     $ 3,016     $ 389       21,846  
Interest expense                                     (2,949 )
Foreign currency exchange gain                                     11  
Provision for income taxes                                     (7,447 )
Net income                                   $ 11,461  
                                         
Other Information                                        
Average rental equipment 1   $ 746,358     $ 248,117     $ 307,263                  
Average monthly total yield 2     1.56 %     2.66 %     1.64 %                
Average utilization 3     76.5 %     62.4 %     54.4 %                
Average monthly rental rate 4     2.05 %     4.27 %     3.01 %                
                                         
  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, 2018                                        
(dollar amounts in thousands)   Mobile 
Modular
  TRS-
RenTelco
  Adler Tanks
  Enviroplex
  Consolidated 
Revenues                                        
Rental   $ 75,231     $ 43,694     $ 32,603     $     $ 151,528  
Rental related services     24,322       1,514       11,081             36,917  
Rental operations     99,553       45,208       43,684             188,445  
Sales     13,554       12,019       335       5,729       31,637  
Other     615       1,163       208             1,986  
Total revenues     113,722       58,390       44,227       5,729       222,068  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     10,521       17,443       7,916             35,880  
Rental related services     18,574       1,259       8,953             28,786  
Other     22,798       7,067       5,157             35,022  
Total direct costs of rental operations     51,893       25,769       22,026             99,688  
Costs of sales     8,779       5,379       289       3,835       18,282  
Total costs of revenues     60,672       31,148       22,315       3,835       117,970  
                                         
Gross Profit                                        
Rental     41,911       19,184       19,531             80,626  
Rental related services     5,748       255       2,128             8,131  
Rental operations     47,659       19,439       21,659             88,757  
Sales     4,776       6,640       45       1,894       13,355  
Other     615       1,163       208             1,986  
Total gross profit     53,050       27,242       21,912       1,894       104,098  
Selling and administrative expenses     28,930       11,560       14,658       2,459       57,607  
Income (loss) from operations   $ 24,120     $ 15,682     $ 7,254     $ (565 )     46,491  
Interest expense                                     (5,991 )
Foreign currency exchange loss                                     (376 )
Provision for income taxes                                     (9,746 )
Net income                                   $ 30,378  
                                         
Other Information                                        
Average rental equipment 1   $ 747,614     $ 269,455     $ 309,411                  
Average monthly total yield 2     1.68 %     2.70 %     1.76 %                
Average utilization 3     77.3 %     62.8 %     58.5 %                
Average monthly rental rate 4     2.17 %     4.30 %     3.00 %                
                                         
  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, 2017                                        
(dollar amounts in thousands)   Mobile 
Modular
  TRS-
RenTelco
  Adler Tanks
  Enviroplex
  Consolidated
Revenues                                        
Rental   $ 68,684     $ 39,551     $ 29,696     $     $ 137,931  
Rental related services     23,554       1,312       11,865             36,731  
Rental operations     92,238       40,863       41,561             174,662  
Sales     12,468       9,988       1,115       4,911       28,482  
Other     235       1,002       38             1,275  
Total revenues     104,941       51,853       42,714       4,147       203,655  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     10,666       16,071       7,884             34,621  
Rental related services     17,727       1,254       9,164             28,145  
Other     19,894       6,605       4,899             31,398  
Total direct costs of rental operations     48,287       23,930       21,947             94,164  
Costs of sales     9,076       4,076       935       3,287       17,374  
Total costs of revenues     57,363       28,006       22,882       3,287       111,538  
                                         
Gross Profit                                        
Rental     38,125       16,875       16,913             71,913  
Rental related services     5,827       58       2,700             8,585  
Rental operations     43,952       16,933       19,613             80,498  
Sales     3,391       5,912       181       1,624       11,108  
Other     235       1,002       38             1,275  
Total gross profit     47,578       23,847       19,832       1,624       92,881  
Selling and administrative expenses     27,617       11,019       14,528       2,049       55,213  
Income (loss) from operations   $ 19,961     $ 12,828     $ 5,304     $ (425 )     37,668  
Interest expense                                     (5,738 )
Foreign currency exchange gain                                     237  
Provision for income taxes                                     (12,733 )
Net income                                   $ 19,434  
                                         
Other Information                                        
Average rental equipment 1   $ 745,508     $ 247,099     $ 307,048                  
Average monthly total yield 2     1.54 %     2.67 %     1.61 %                
Average utilization 3     76.7 %     62.3 %     53.4 %                
Average monthly rental rate 4     2.00 %     4.28 %     3.02 %                
                                         
  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, non-cash impairment costs 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 
June 30, 
  Six Months Ended 
June 30,
  Twelve Months Ended 
June 30,
  2018
  2017
  2018
  2017
  2018
  2017
Net income $ 15,912     $ 11,461     $ 30,378     $ 19,434     $ 164,864     $ 42,040  
Provision (benefit) for income taxes   5,194       7,447       9,746       12,733       (73,455 )     31,199  
Interest   2,999       2,949       5,991       5,738       11,875       11,399  
Depreciation and amortization   20,360       19,348       40,288       38,752       79,952       78,514  
EBITDA   44,465       41,205       86,403       76,657       183,236       163,152  
Impairment of rental assets               39             1,678        
Share-based compensation   964       732       1,828       1,538       3,488       3,043  
Adjusted EBITDA 1 $ 45,429     $ 41,937     $ 88,270     $ 78,195     $ 188,402     $ 166,195  
Adjusted EBITDA margin 2   39 %     38 %     40 %     38 %     39 %     38 %
                                               

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands) Three Months Ended 
June 30, 
  Six Months Ended 
June 30, 
  Twelve Months Ended 
June 30,
  2018
  2017
  2018
  2017
  2018    2017
Adjusted EBITDA 1 $ 45,429     $ 41,937     $ 88,270     $ 78,195     $ 188,402     $ 166,195  
Interest paid   (3,586 )     (3,397 )     (6,123 )     (5,817 )     (12,131 )     (11,607 )
Income taxes paid, net of refunds received   (10,103 )     (12,576 )     (11,675 )     (18,141 )     (23,038 )     (28,017 )
Gain on sale of used rental equipment   (6,027 )     (4,971 )     (9,875 )     (7,914 )     (19,694 )     (15,371 )
Foreign currency exchange loss (gain)   344       (11 )     376       (237 )     279       (42 )
Amortization of debt financing cost   2       12       15       25       40       51  
Change in certain assets and liabilities:                                              
Accounts receivable, net   (7,003 )     (3,987 )     777       338       (8,556 )     (925 )
Prepaid expenses and other assets   (11,635 )     (7,303 )     (14,938 )     (8,839 )     (2,975 )     (4,027 )
Accounts payable and other liabilities   9,621       11,218       2,084       6,754       2,905       7,943  
Deferred income   5,571       2,646       4,854       5,034       1,540       3,509  
Net cash provided by operating activities $ 22,613     $ 23,568     $ 53,765     $ 49,398     $ 126,772     $ 117,709  
                                               
  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.
  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

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