FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
Commission File No. 0-13292
McGRATH RENTCORP
(Exact name of registrant as specified in its Charter)
California 94-2579843
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2500 Grant Avenue
San Lorenzo, California 94580
(Address of principal executive offices)
Registrant's telephone number: (510) 276-2626
_________________________
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
______ _______
At May 1, 1996, 7,585,675 shares of Registrant's Common Stock were
outstanding.
_________________________
McGrath RentCorp
First Quarter 1996 Form 10-Q
Page 1
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended
March 31,
-----------------------
1996 1995
----------- -----------
REVENUES:
Rental operations-
Rental $11,557,798 $11,074,099
Rental related services 1,658,386 2,030,738
----------- -----------
13,216,184 13,104,837
Sales and related services 4,489,167 3,544,632
----------- -----------
Total revenues 17,705,351 16,649,469
----------- -----------
COSTS & EXPENSES:
Direct costs of rental operations-
Depreciation 3,005,653 2,754,380
Rental related services 1,026,590 1,175,651
Other 1,228,130 1,152,418
----------- -----------
5,260,373 5,082,449
Cost of sales and related services 3,100,825 2,328,899
----------- -----------
8,361,198 7,411,348
----------- -----------
Gross margin 9,344,153 9,238,121
Selling and administrative expenses 3,610,473 3,302,686
----------- -----------
Income from operations 5,733,680 5,935,435
Interest expense 635,274 675,454
----------- -----------
Income before provision
for income taxes 5,098,406 5,259,981
Provision for income taxes 2,024,829 2,083,012
----------- -----------
Net income $ 3,073,577 $ 3,176,969
=========== ===========
Net income per share $ 0.39 $ 0.38
=========== ===========
The accompanying notes are an integral part of these financial statements.
McGrath RentCorp
First Quarter 1996 Form 10-Q
Page 2
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
------------ ------------
ASSETS
Cash $ 70,284 $ 221,075
Accounts receivable, less allowance for
doubtful accounts of $605,000 in 1996
and in 1995 12,113,836 13,201,196
Rental equipment, at cost:
Relocatable modular offices 146,444,288 146,867,850
Electronic test instruments 37,478,705 34,932,807
Accessory equipment 3,778,950 3,755,754
------------ ------------
187,701,943 185,556,411
Less - Accumulated depreciation (59,488,379) (57,948,456)
------------ ------------
128,213,564 127,607,955
Land, at cost 19,489,300 19,489,300
Land improvements, furniture and equipment,
at cost, less accumulated depreciation of
$2,824,369 in 1996 and $2,708,404 in 1995 13,914,579 12,713,095
Prepaid expenses and other assets 1,755,564 1,897,700
------------ ------------
$175,557,127 $175,130,321
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $ 35,855,000 $ 37,080,000
Accounts payable and accrued liabilities 12,710,970 11,701,417
Deferred income 4,754,285 5,967,063
Deferred income taxes 36,302,720 34,488,695
------------ ------------
Total liabilities 89,622,975 89,237,175
------------ ------------
Shareholders' equity:
Common stock, no par value -
Authorized - 2O,OOO,OOO shares
Outstanding - 7,693,315 shares in 1996
and 7,769,813 in 1995 6,950,308 8,913,311
Retained earnings 78,983,844 76,979,835
------------ ------------
Total shareholders' equity 85,934,152 85,893,146
------------ ------------
$175,557,127 $175,130,321
============ ============
The accompanying notes are an integral part of these financial statements.
McGrath RentCorp
First Quarter 1996 Form 10-Q
Page 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash
(Unaudited)
Three months ended
March 31,
-----------------------
1996 1995
----------- -----------
Cash flows from operating activities:
Net income $ 3,073,577 $ 3,176,969
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,178,949 3,208,414
Gain on sale of rental equipment (1,115,396) (906,519)
Change in:
Accounts receivable 1,087,360 1,039,808
Prepaids and other assets 142,136 (291,993)
Accounts payable and accrued liabilities 875,338 405,812
Deferred income (1,212,778) (1,091,226)
Deferred income taxes 1,814,025 1,583,171
----------- -----------
Net cash provided by operating activities 7,843,211 7,124,436
----------- -----------
Cash flows from investing activities:
Purchase of rental equipment (5,501,792) (3,691,143)
Purchase of land improvements, furniture and equipment (1,374,781) (2,841,304)
Proceeds from sale of rental equipment 3,005,926 2,326,353
----------- -----------
Net cash used in investing activities (3,870,647) (4,206,094)
----------- -----------
Cash flows from financing activities:
Net borrowings (payments) under line of credit (1,225,000) (1,900,000)
Proceeds from the exercise of stock options 252,125 26,865
Repurchase of common stock (2,215,127) (714,037)
Payment of dividends (935,353) (900,344)
----------- -----------
Net cash used in financing activities (4,123,355) (3,487,516)
----------- -----------
Net increase (decrease) in cash (150,791) (569,174)
Cash balance, beginning of period 221,075 1,151,648
----------- -----------
Cash balance, end of period $ 70,284 $ 582,474
=========== ===========
Interest paid during period $ 641,163 $ 700,880
=========== ===========
Income taxes paid during period $ 210,804 $ ---
=========== ===========
Dividends declared but not yet paid $ 1,069,567 $ 977,940
=========== ===========
The accompanying notes are an integral part of these financial statements.
McGrath RentCorp
First Quarter 1996 Form 10-Q
Page 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
------------------------------------------
1. The consolidated financial information for the three months ended March
31, 1996 has not been audited, but in the opinion of management, all
adjustments (consisting of only normal recurring accruals, consolidation
and eliminating entries) necessary for the fair presentation of the
consolidated results of operations, financial position, and cash flows of
McGrath RentCorp (the "Company") have been made. The consolidated results
of the three months ended March 31, 1996 should not be considered as
necessarily indicative of the consolidated results for the entire year. It
is suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's latest Form 10-K.
2. The number of outstanding shares and equivalent shares used in the
earnings per common share calculations were as follows:
Quarter ended March 31, Primary Fully Diluted
----------------------- --------- -------------
1996 7,878,185 7,881,295
1995 8,262,300 8,262,300
McGrath RentCorp
First Quarter 1996 Form 10-Q
Page 5
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Three Months Ended March 31, 1996 and 1995
Rental revenues for the first quarter of 1996 increased by $483,699, a
4% increase over the same period in 1995. The rental revenue increase
from electronics of $819,584 was offset by a $335,885 decline in rental
revenues from relocatable modular offices. Average utilization during the
first quarter declined for electronic equipment from 56.7% to 54.7% and
modular equipment from 75.5% to 70.0% compared to the same period in 1995.
Rental related services for the three months ended March 31, 1996
decreased $372,352, an 18% decrease from the same period in 1995. The
decrease was due primarily to fewer site work requirements experienced in
1996 and less incentive fees earned during the quarter for equipment
management.
Sales and related services for the three months ended March 31, 1996
increased $944,535, a 27% increase, compared to the same period in 1995.
Sales and related services from quarter to quarter have fluctuated
depending on customer requirements. Gross margins on sales and related
services declined from 34% in 1995 to 31% in 1996.
Selling and administrative expenses increased $307,787 (9%) for the
three months ended March 31, 1996 compared to the same period in 1995
primarily due to increased staffing levels and personnel costs.
Income before provision for taxes decreased $161,575 (3%) for the
three months ended March 31, 1996 from the same period in 1995 with after
tax income decreasing $103,392 (3%). Earnings per share for the quarter
increased from $0.38 per share to $0.39 per share as a result of fewer
outstanding shares.
McGrath RentCorp
First Quarter 1996 Form 10-Q
Page 6
Liquidity and Capital Resources.
The debt (notes payable) to equity ratio was 0.42 to 1 at March 31,
1996 compared to 0.43 to 1 at December 31, 1995. The debt (total
liabilities) to equity ratio at the end of the current period and as of
December 31, 1995 was 1.04 to 1.
The Company continues to make purchases of shares of its common
stock from time to time in the over-the-counter market (NASDQ) and/or
through privately negotiated, large block transactions under an
authorization of the Board of Directors. The Board of Directors believes
the Company's shares are currently undervalued by the market and that the
repurchase of its shares is a good investment for the Company at this time.
Shares repurchased by the Company will be cancelled and returned to the
status of authorized but unissued stock. From January 1, 1996 thru May 1,
1996, the Company has repurchased a total of 225,700 shares of common stock
with an aggregate cost of $4,377,324 or an average price of $19.39 per
share. As of May 1, 1996, 269,300 shares remain authorized for repurchase.
The Company's primary use of funds is to purchase rental equipment,
and funds will continue to be used for this purpose in the future.
Additionally, the Company plans to make further improvements to the land at
their inventory facility located Northern California. The Company also
pays quarterly dividends, which will constitute an additional use of cash
in 1996.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On March 29, 1996 the Company declared a quarterly dividend on its
Common Stock; the dividend was $0.14 per share. Subject to its continued
profitability and favorable cash flow, the Company intends to continue the
payment of quarterly dividends. The Company's loan agreement with its
banks prohibits payment of dividends in excess of 50% of net income in any
one year without the banks' consent.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. No exhibits included.
(b) REPORTS ON FORM 8-K. No reports on form 8-K have been filed during the
quarter for which this report is filed.
McGrath RentCorp
First Quarter 1996 Form 10-Q
Page 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: May 1, 1996 McGRATH RENTCORP
By: /s/ Delight Saxton
___________________________
Delight Saxton
Vice-President of Administration,
Chief Financial Officer and
Secretary