Mixed start for McGrath RentCorp

Improvements in US-based business-to-business rental company McGrath RentCorp’s modular division were largely offset weakness in its oil-sensitive liquid and solid containment business in the first quarter.

The company reported revenues for the first three months of the year of US$93.7 million (€82 million), up 4% year-on-year, while net income stood at US$6.6 million (€5.8 million), compared to US$6.8 million (€6 million) for the same period in 2015.

Modular division-wide rental revenues for the quarter increased 18% to US$31.2 million (€27 million) from a year ago. Modular division average rental equipment utilisation based on original acquisition cost for the quarter increased to 76.1% compared to 74.2% a year ago – the company’s highest first quarter utilisation level since the first quarter of 2009. Operating income at the division grew 88% year-on-year to US$8.2 million (€7.2 million).

The electronics division, TRS-RenTelco, reported first quarter operating income of US$5.2 million (€4.6 million) – flat year-on-year, while rental revenues dropped 5% to US$20.9 million (€18.3 million).

Meanwhile, the Adler Tanks division reported 67% decrease in operating income to US$1.7 million (€1.5 million), while rental revenues decreased 15% to US$14.4 million (€12.6 million).

President and CEO Dennis Kakures said, “We entered 2016 with many unknowns and forecasting challenges regarding the crude oil and natural gas industries’ evolving structural changes and their near-term impact to our liquid and solid containment rental business.

“Our first quarter results for Adler Tank Rentals are reflective of just how challenging an environment we are facing. On the positive side, our modular business is recovering nicely with a long runway of increasing earnings potential in front of it, including the very important California education market.

“We are also turning on a high-powered lens on return on invested capital (ROIC) for each of our businesses and should see benefits in 2017 and beyond (Please see my remarks on this topic in this year’s Letter to Shareholders). Our focus is to deploy less capital, and more selectively, for new rental assets over the next few years until we see sustainable higher ROIC levels.”