MCGRATH RENTCORP
This Form 10-Q, including the following Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A"), contains forward-looking
statements under federal securities laws. Forward-looking statements are not
guarantees of future performance and involve a number of risks and
uncertainties. Our actual results could differ materially from those indicated
by forward-looking statements as a result of various factors. These factors
include, but are not limited to, those set forth under this Item, those
discussed in Part II-Item 1A, "Risk Factors" and elsewhere in this Form 10-Q and
those that may be identified from time to time in our reports and registration
statements filed with the SEC .
This discussion should be read in conjunction with the Condensed Consolidated
Financial Statements and related Notes included in Part I-Item 1 of this Form
10-Q and the Consolidated Financial Statements and related Notes and the
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in our Annual Report on Form 10-K for the year ended
December 31, 2019 , as filed with the SEC on February 25, 2020 (the "2019 Annual
Report"). In preparing the following MD&A, we presume that readers have access
to and have read the MD&A in our 2019 Annual Report, pursuant to Instruction 2
to paragraph (b) of Item 303 of Regulation S-K. We undertake no duty to update
any of these forward-looking statements after the date of filing of this Form
10-Q to conform such forward-looking statements to actual results or revised
expectations, except as otherwise required by law.
The full impact of the COVID-19 pandemic continues to evolve as of the date of
this report. As such, there is continued uncertainty as to the full magnitude
that the pandemic will have on the Company's financial condition, liquidity, and
future results of operations. Management is actively monitoring the impact of
the global situation on its financial condition, liquidity, operations,
suppliers, industry, and workforce. Given the continuing evolution of the
COVID-19 pandemic and the global responses to curb its spread, the Company is
not able to fully estimate the effects of the COVID-19 outbreak on its results
of operations, financial condition, or liquidity for fiscal year 2020. The
following discussions are subject to the future effects of the COVID-19
pandemic.
General
The Company, incorporated in 1979, is a leading rental provider of relocatable
modular buildings for classroom and office space, electronic test equipment for
general purpose and communications needs, and liquid and solid containment tanks
and boxes. The Company's primary emphasis is on equipment rentals. The Company
is comprised of four reportable business segments: (1) its modular building and
portable storage container rental segment ("Mobile Modular"); (2) its electronic
test equipment segment ("TRS-RenTelco"); (3) its containment solutions for the
storage of hazardous and non-hazardous liquids and solids segment ("Adler
Tanks"); and (4) its classroom manufacturing segment selling modular buildings
used primarily as classrooms in California ("Enviroplex").
The Mobile Modular business segment includes the results of operations of the
Mobile Modular Portable Storage division, which represented approximately 8% of
the Company's total revenues in the nine months ended September 30, 2020 . Mobile
Modular Portable Storage offers portable storage units and high security
portable office units for rent, lease and purchase.
In the nine months ended September 30, 2020 , Mobile Modular, TRS-RenTelco, Adler
Tanks and Enviroplex contributed 65%, 26%, 6% and 3% of the Company's income
before provision for taxes (the equivalent of "pretax income"), respectively,
compared to 51%, 27%, 12% and 10% for the same period in 2019.
The Company generates its revenues primarily from the rental of its equipment on
operating leases and from sales of equipment occurring in the normal course of
business. The Company requires significant capital outlay to purchase its rental
inventory and recovers its investment through rental and sales revenues. Rental
revenues and certain other service revenues negotiated as part of lease
agreements with customers and related costs are recognized on a straight-line
basis over the terms of the leases. Sales revenues and related costs are
recognized upon delivery and installation of the equipment to customers. Sales
revenues are less predictable and can fluctuate from quarter to quarter and year
to year depending on customer demands and requirements. Generally, rental
revenues less cash operating costs recover the equipment's capitalized cost in a
short period of time relative to the equipment's potential rental life and when
sold, sale proceeds are usually above its net book value.
The Company's modular revenues (consisting of revenues from Mobile Modular,
Mobile Modular Portable Storage and Enviroplex) are derived from rentals and
sales to education and commercial customers, with a majority of revenues
generated by education customers. Modular revenues are primarily affected by
demand for classrooms, which in turn is affected by shifting and fluctuating
school populations, the levels of state funding to public schools, the need for
temporary classroom space during reconstruction of older schools and changes in
policies regarding class size. As a result of any reduced funding, lower
expenditures by these schools may result in certain planned programs to increase
the number of classrooms, such as those that the Company provides, to be
postponed or terminated. However, reduced expenditures may also result in
schools reducing their long-term facility construction projects in favor of
using the Company's modular classroom solutions. At this time, the Company can
provide no assurances as to whether public schools will either reduce or
increase their demand for the Company's modular classrooms as a result of
fluctuations in state funding of public
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schools. Looking forward, the Company believes that any interruption in the
passage of facility bonds or contraction of class size reduction programs by
public schools may have a material adverse effect on both rental and sales
revenues of the Company. (For more information, see "Item 1.
Business - Relocatable Modular Buildings - Classroom Rentals and Sales to Public
Schools (K-12)" in the Company's 2019 Annual Report and "Item 1A. Risk Factors -
Significant reductions of, or delays in, funding to public schools have caused
the demand and pricing for our modular classroom units to decline, which has in
the past caused, and may cause in the future, a reduction in our revenues and
profitability" in Part II - Other Information of this Form 10-Q.)
Revenues of TRS-RenTelco are derived from the rental and sale of general purpose
and communications test equipment to a broad range of companies, from Fortune
500 to middle and smaller market companies primarily in the aerospace, defense,
communications, manufacturing and semiconductor industries. Electronic test
equipment revenues are primarily affected by the business activity within these
industries related to research and development, manufacturing, and communication
infrastructure installation and maintenance.
Revenues of Adler Tanks are derived from the rental and sale of fixed axle tanks
("tanks") and vacuum containers, dewatering containers and roll-off containers
(collectively referred to as "boxes"). These tanks and boxes are rented to a
broad range of industries and applications including oil and gas exploration and
field services, refinery, chemical and industrial plant maintenance,
environmental remediation and field services, infrastructure building
construction, marine services, pipeline construction and maintenance, tank
terminals services, wastewater treatment, and waste management and landfill
services for the containment of hazardous and non-hazardous liquids and solids.
The Company's rental operations include rental and rental related service
revenues which comprised approximately 79% and 80% of consolidated revenues in
the nine months ended September 30, 2020 and 2019, respectively. Of the total
rental operations revenues for the nine months ended September 30, 2020 , Mobile
Modular, TRS-RenTelco and Adler Tanks comprised 58%, 25% and 17%, respectively,
compared to 55%, 23% and 22%, respectively, in the same period of 2019. The
Company's direct costs of rental operations include depreciation of rental
equipment, rental related service costs, impairment of rental equipment (if
applicable), and other direct costs of rental operations (which include direct
labor, supplies, repairs, insurance, property taxes, license fees, cost of
sub-rentals and amortization of certain lease costs).
The Company's Mobile Modular, TRS-RenTelco and Adler Tanks business segments
sell modular units, electronic test equipment and liquid and solid containment
tanks and boxes, respectively, which are either new or previously rented. In
addition, Enviroplex sells new modular buildings used primarily as classrooms in
California . For the nine months ended September 30, 2020 and 2019, sales and
other revenues of modular, electronic test equipment and liquid and solid
containment tanks and boxes comprised approximately 21% and 20% of the Company's
consolidated revenues, respectively. Of the total sales and other revenues for
the nine months ended September 30, 2020 and 2019, Mobile Modular and Enviroplex
together comprised 77% and 76%, respectively, TRS-RenTelco comprised 21% and
22%, respectively, and Adler Tanks comprised 2% in both periods. The Company's
cost of sales includes the carrying value of the equipment sold and the direct
costs associated with the equipment sold, such as delivery, installation,
modifications and related site work.
Selling and administrative expenses primarily include personnel and benefit
costs, which include share-based compensation, depreciation and amortization,
bad debt expense, advertising costs, and professional service fees. The Company
believes that sharing of common facilities, financing, senior management, and
operating and accounting systems by all of the Company's operations results in
an efficient use of overhead. Historically, the Company's operating margins have
been impacted favorably to the extent its costs and expenses are leveraged over
a large installed customer base. However, there can be no assurances as to the
Company's ability to maintain a large installed customer base or ability to
sustain its historical operating margins.
Adjusted EBITDA
To supplement the Company's financial data presented on a basis consistent with accounting principles generally accepted inthe 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 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. 16 -------------------------------------------------------------------------------- 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 theSEC , 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
Three Months Ended Nine Months Ended Twelve Months Ended
(dollar amounts in thousands) September 30, September 30, September 30,
2020 2019 2020 2019 2020 2019
Net income $ 28,101 $ 32,468 $ 70,809 $ 70,405 $ 97,210 $ 94,654
Provision for income taxes 7,395 10,987 21,926 23,266 30,979 31,035
Interest expense 1,968 3,161 6,804 9,407 9,728 12,571
Depreciation and amortization 23,586 22,873 71,249 65,960 94,765 87,039
EBITDA 61,050 69,489 170,788 169,038 232,682 225,299
Share-based compensation 1,670 1,350 4,894 4,096 6,690 5,397
Adjusted EBITDA 1 $ 62,720 $ 70,839 $ 175,682 $ 173,134 $ 239,372 $ 230,696
Adjusted EBITDA margin 2 40 % 41 % 41 % 41 % 42 % 41 %
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
Three Months Ended Nine Months Ended Twelve Months Ended
(dollar amounts in thousands) September 30, September 30, September 30,
2020 2019 2020 2019 2020 2019
Adjusted EBITDA 1 $ 62,720 $ 70,839 $ 175,682 $ 173,134 $ 239,372 $ 230,696
Interest paid (1,798 ) (3,149 ) (6,829 ) (9,359 ) (9,945 ) (12,764 )
Income taxes paid, net of
refunds received (22,551 ) (3,857 ) (24,704 ) (10,030 ) (32,202 ) (12,132 )
Gain on sale of used rental
equipment (4,508 ) (6,000 ) (14,110 ) (15,168 ) (20,251 ) (19,683 )
Foreign currency exchange loss
(gain) (130 ) 132 189 46 59 30
Amortization of debt issuance
costs 3 3 8 8 11 10
Change in certain assets and
liabilities:
Accounts receivable, net (3,493 ) (16,272 ) (1,334 ) (16,274 ) 8,630 (22,201 )
Prepaid expenses and other
assets 327 9,512 (1,314 ) (11,734 ) (3,110 ) (10,890 )
Accounts payable and other
liabilities 5,669 (363 ) 358 15,300 2,315 17,167
Deferred income (2,224 ) (5,963 ) 3,591 10,946 (2,217 ) 12,463
Net cash provided by operating
activities $ 34,015 $ 44,882 $ 131,537 $ 136,869 $ 182,662 $ 182,696 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.
Adjusted EBITDA is a component of two restrictive financial covenants for the Company's unsecured Credit Facility, the Note Purchase Agreement, Series B Senior Notes and Series C Senior Notes (as defined and more fully described under the heading "Liquidity and Capital Resources" in this MD&A). These instruments contain financial covenants requiring the Company to not:
• Permit the Consolidated Fixed Charge Coverage Ratio (as defined in the
Credit Facility and the Note Purchase Agreement (as defined and more fully
described under the heading "Liquidity and Capital Resources" in this
MD&A)) of Adjusted
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EBITDA (as defined in the Credit Facility and the Note Purchase Agreement)
to fixed charges as of the end of any fiscal quarter to be less than 2.50
to 1. At
• Permit the Consolidated Leverage Ratio of funded debt (as defined in the
Credit Facility and the Note Purchase Agreement) to Adjusted EBITDA at any
time during any period of four consecutive quarters to be greater than
2.75 to 1. At September 30, 2020 , the actual ratio was 1.04 to 1.
At
Recent Developments
Dividends
OnSeptember 18, 2020 , the Company announced that the Board of Directors declared a quarterly cash dividend of$0.42 per common share for the quarter endedSeptember 30, 2020 , an increase of 12% over the prior year's comparable quarter.
Credit Facility and Note Purchase Agreement
OnMarch 31, 2020 , the Company renewed its$420 million credit facility with a syndicate of banks. The five year facility matures onMarch 31, 2025 and replaced the Company's existing$420 million line of credit.BofA Securities, Inc. served as Sole Bookrunner and Joint Lead Arranger.Bank of America, N.A . served as Administrative Agent,U.S. Bank National Association served as Joint Lead Arranger and Syndication Agent, andMUFG Union Bank N.A. andWells Fargo Bank, N.A . served as Syndication Agents. OnMarch 31, 2020 , the Company entered into an amended and restated$250 million note purchase and private shelf agreement withPrudential Private Capital (the "Note Purchase Agreement"). In addition to governing the terms of the current$40 million Series B Senior Notes and$60 million Series C Senior Notes outstanding, the new agreement allows for the issuance of up to an additional$150 million of senior notes on terms to be determined at such time that any additional notes are issued. OnOctober 1, 2020 , the Company entered into a rate lock agreement withPrudential Private Capital , pursuant to which, the Company agreed to a fixed interest rate of 2.57% for future issuance, if any, of senior unsecured notes in the aggregate amount of$40.0 million with a 7-year maturity. If issued, the funding for such notes would occur on or beforeMarch 17, 2021 and would be subject to the terms and conditions of the Note Purchase Agreement.
Covid-19
The outbreak of a new strain of coronavirus, COVID-19, which began inDecember 2019 , has continued to spread globally including to every state inthe United States .The Center for Disease Control ("CDC") andWorld Health Organization ("WHO") have recognized this outbreak as a pandemic, which has caused shutdowns to businesses and cities worldwide while disrupting supply chains, business operations, travel, consumer confidence and business sentiment. Each of the states in which the Company operates, and in some cases the localities as well, have previously issued orders requiring the closure of non-essential business and/or requiring residents to stay at home, however, currently none of the Company's locations are required to be closed by local or state order. The Company is following guidelines established by theCDC andWHO and orders issued by state and local governments where the Company operates. The Company has taken a number of precautionary health and safety measures to safeguard its employees and customers, while maintaining business continuity to enable each of its operating segments and branch locations to continue providing services to customers identified as essential businesses under the relevant state and local rules. The Company has implemented remote work policies, restricted travel, separated work groups, enhanced cleaning and hygiene protocols in all of its facilities, products and vehicles, and requires distancing protocols for production and logistical personnel. The Company is continuing to monitor and assessing orders issued by federal, state and local governments to ensure compliance with evolving COVID-19 guidelines. The Company also continues to monitor the impact of COVID-19 on its existing customerswho themselves may be impacted by governmental shutdowns and other impacts due to the governmental orders. As of the date of this filing, significant uncertainty continues to exist concerning the magnitude of the impact and duration of the COVID-19 pandemic. While the Company's operating segments and branch locations currently continue to operate, the Company's results of operations may be negatively impacted by project delays; early returns of equipment currently on rent with customers; overall decreased customer demand for new rental orders, rental related services and sales of new and used rental equipment; and payment delay, or non-payment, by customerswho are significantly impacted by COVID-19. In light of the uncertain and rapidly evolving situation relating to the COVID-19 pandemic, the Company has taken a number of precautionary measures to manage its resources conservatively by reducing and/or deferring non-essential capital expenditures and operating expenses to mitigate the adverse impact of the pandemic. The Company will continue to assess its capital expenditure needs against its cash availability during the crisis to make the most strategic decisions for its business. Furthermore, the Company believes that its recently renewed$420 million credit facility, coupled with its ability to access additional capital through the issuance of up to$150 million in additional 18
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senior notes, will strengthen the Company's liquidity position and serve to mitigate some of the operational risk related to decreased customer demand for new rental orders and sales resulting from the COVID-19 pandemic.
While the Company has not seen a significant impact from COVID-19 in the
financial results for the third quarter of 2020 as set forth in the below
section discussing the results of operations for the third quarter of 2020, the
Company is currently unable to determine or predict the full nature, duration or
scope of the overall impact the COVID-19 pandemic will have on its business,
results of operations, liquidity or capital resources. The Company will continue
to actively monitor the situation and may take further actions that alter its
business operations as may be required by federal, state or local authorities or
that the Company determines are in the best interests of employees, customers
and shareholders.
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Results of Operations
Three Months Ended September 30, 2020 Compared to
Three Months Ended September 30, 2019
Overview
Consolidated revenues for the three months ended September 30, 2020 decreased
10% to $156.4 million from $173.6 million in the same period in
2019. Consolidated net income for the three months ended September 30, 2020
decreased 13% to $28.1 million , from $32.5 million for the same period in
2019. Earnings per diluted share for the three months ended September 30, 2020
decreased 13% to $1.15 from $1.32 for the same period in 2019.
For the three months ended
• Gross profit decreased
Mobile Modular's gross profit increased
to higher gross profit on sales and rental revenues, partly offset by
lower gross profit on rental related services revenues. TRS-RenTelco's
gross profit decreased
profit on rental and sales revenues.
rental related services revenues. Enviroplex's gross profit decreased
million, primarily due to $22.4 million lower sales revenues in 2020
compared to 2019, which had a large concentration of sales in the third
quarter of 2019.
• Selling and administrative expenses decreased
$30.9 million , primarily due to lower travel, meals and meeting costs. • Interest expense decreased 38%, to$2.0 million in 2020, compared to the
same period in 2019, due to 28% lower net average interest rates of 2.96%
in 2020 compared to 4.08% in 2019, and 14% lower average debt levels of
the Company.
• Pre-tax income contribution by Mobile Modular, TRS-RenTelco and Adler
Tanks was 67%, 24% and 6%, respectively, compared to 46%, 22% and 10%,
respectively, for the comparable 2019 period. These results are discussed
on a segment basis below. Enviroplex pre-tax income contribution was 3%
and 22% in 2020 and 2019, respectively.
• The provision for income taxes resulted in an effective tax rate of 20.8%
and 25.3% for the quarters ended September 30, 2020 and 2019,
respectively.
• Adjusted EBITDA decreased
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Mobile Modular
For the three months endedSeptember 30, 2020 , Mobile Modular's total revenues increased$9.1 million , or 11%, to$95.4 million compared to the same period in 2019, primarily due to higher sales and rental revenues, partly offset by lower rental related services revenues. The revenue increase, together with higher gross profit on sales and rental revenues, partly offset by higher selling and administrative expenses and lower gross profit on rental related services revenues, resulted in a 19% increase in pre-tax income to$23.7 million for the three months endedSeptember 30, 2020 , from$20.0 million for the same period in 2019.
The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.
Mobile Modular - Three Months Ended
Three Months Ended
(dollar amounts in thousands) September 30, Increase (Decrease)
2020 2019 $ %
Revenues
Rental $ 47,134 $ 46,738 $ 396 1 %
Rental related services 18,684 22,574 (3,890 ) (17 )%
Rental operations 65,818 69,312 (3,494 ) (5 )%
Sales 29,275 16,676 12,599 76 %
Other 320 314 6 2 %
Total revenues 95,413 86,302 9,111 11 %
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment 5,771 5,572 199 4 %
Rental related services 13,510 16,799 (3,289 ) (20 )%
Other 11,780 12,804 (1,024 ) (8 )%Total direct costs of rental operations 31,061 35,175
(4,114 ) (12 )% Costs of sales 21,726 11,963 9,763 82 % Total costs of revenues 52,787 47,138 5,649 12 % Gross Profit Rental 29,583 28,362 1,221 4 % Rental related services 5,174 5,775 (601 ) (10 )% Rental operations 34,757 34,137 620 2 % Sales 7,549 4,713 2,836 60 % Other 320 314 6 2 % Total gross profit 42,626 39,164 3,462 9 % Selling and administrative expenses 17,739 16,966 773 5 % Income from operations 24,887 22,198 2,689 12 % Interest expense allocation (1,156 ) (2,187 ) (1,031 ) (47 )% Pre-tax income$ 23,731 $ 20,011 $ 3,720 19 % Other Selected Information Average rental equipment 1$ 829,460 $ 802,718 $ 26,742 3 % Average rental equipment on rent$ 632,780 $ 637,142 $ (4,362 ) (1 )% Average monthly total yield 2 1.89 % 1.94 % (3 )% Average utilization 3 76.3 % 79.4 % (4 )% Average monthly rental rate 4 2.48 % 2.45 % 1 % Period end rental equipment 1$ 832,643 $ 812,534 $ 20,109 2 % Period end utilization 3 76.5 % 79.5 % (4 )% 1. Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
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. Period end utilization is calculated by dividing the cost of rental equipment
on rent by the total cost of rental equipment, excluding new equipment
inventory and accessory equipment. Average utilization for the period is
calculated using the average month end 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.
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Mobile Modular's gross profit for the three months ended
• Gross Profit on Rental Revenues - Rental revenues increased
or 1%, primarily due to 1% higher average monthly rental rates, partly
offset by 1% lower average rental equipment on rent in 2020. As a
percentage of rental revenues, depreciation was 12% in both 2020 and 2019,
and other direct costs were 25% in 2020 and 27% in 2019, which resulted in
gross margin percentages of 63% in 2020 and 61% in 2019. The higher rental
revenues and higher rental margins, resulted in gross profit on rental
revenues increasing
• Gross Profit on Rental Related Services - Rental related services revenues
decreased
revenues are negotiated with the initial modular building lease and are
recognized on a straight-line basis with the associated costs over the
initial term of the lease. The decrease in rental related servicesrevenues was primarily attributable to lower amortization of modular
building delivery and return delivery and dismantle revenues and lower
repair revenues. The lower revenues, partly offset by higher gross margin
percentage of 28% in 2020, compared to 26% in 2019, resulted in rental
related services gross profit decreasing $0.6 million , or 10%, to
$5.2 million in 2020.
• Gross Profit on Sales - Sales revenues increased
compared to 2019, due to higher new equipment sales. The higher sales
revenues, partly offset by lower gross margin percentage of 26% in 2020
compared to 28% in 2019, resulted in gross profit on sales increasing
million, or 60%, to
of Mobile Modular's rental business; however, these sales and related
gross margins can fluctuate from quarter to quarter and year to year
depending on customer requirements, equipment availability and funding.
For the three months ended
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TRS-RenTelco
For the three months endedSeptember 30, 2020 , TRS-RenTelco's total revenues increased$1.8 million , or 5%, to$35.9 million compared to the same period in 2019, primarily due to higher sales and rental revenues. Pre-tax income decreased$1.1 million , or 11%, to$8.7 million for the three months endedSeptember 30, 2020 compared to the same period in 2019, primarily due to lower gross profit on rental and sales revenues.
The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.
TRS-RenTelco - Three Months Ended9/30/20 compared to Three Months Ended9/30/19 (Unaudited) Three Months Ended (dollar amounts in thousands) September 30, Increase (Decrease) 2020 2019 $ % Revenues Rental$ 27,619 $ 26,938 $ 681 3 % Rental related services 800 863 (63 ) (7 )% Rental operations 28,419 27,801 618 2 % Sales 6,912 5,678 1,234 22 % Other 525 611 (86 ) (14 )% Total revenues 35,856 34,090 1,766 5 % Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 11,547 10,849 698 6 % Rental related services 673 695 (22 ) (3 )% Other 4,820 4,088 732 18 %
Total direct costs of rental operations 17,040 15,632
1,408 9 % Costs of sales 3,853 2,277 1,576 69 % Total costs of revenues 20,893 17,909 2,984 17 % Gross Profit Rental 11,252 12,001 (749 ) (6 )% Rental related services 127 168 (41 ) (24 )% Rental operations 11,379 12,169 (790 ) (6 )% Sales 3,059 3,401 (342 ) (10 )% Other 525 611 (86 ) (14 )% Total gross profit 14,963 16,181 (1,218 ) (8 )% Selling and administrative expenses 5,962 6,038 (76 ) (1 )% Income from operations 9,001 10,143 (1,142 ) (11 )% Interest expense allocation (459 ) (277 ) 182 66 % Foreign currency exchange gain (loss) 130 (132 ) 262 198 % Pre-tax income$ 8,672 $ 9,734 $ (1,062 ) (11 )% Other Selected Information Average rental equipment 1$ 336,015 $ 314,428 $ 21,587 7 % Average rental equipment on rent$ 225,606 $ 210,275 $ 15,331 7 % Average monthly total yield 2 2.74 % 2.86 % (4 )% Average utilization 3 67.1 % 66.9 % 0 % Average monthly rental rate 4 4.08 % 4.27 % (4 )% Period end rental equipment 1$ 334,129 $ 320,710 $ 13,419 4 % Period end utilization 3 68.4 % 67.1 % 2 % 1. Average and Period end rental equipment represents the cost of rental equipment, excluding accessory equipment.
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. Period end utilization is calculated by dividing the cost of rental equipment
on rent by the total cost of rental equipment, excluding accessory equipment.
Average utilization for the period is calculated using the average month end
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.
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TRS-RenTelco's gross profit for the three months ended
• Gross Profit on Rental Revenues - Rental revenues increased
or 3%, and depreciation expense increased
in a 6% decrease in gross profit on rental revenues to
percentage of rental revenues, depreciation was 42% in 2020 and 40% in
2019, and other direct costs were 17% in 2020 and 15% in 2019, which
resulted in a gross margin percentage of 41% in 2020 compared to 45% in
2019. The rental revenues increase was due to 7% higher average rental
equipment on rent in 2020 as compared to 2019, partly offset by 4% lower
average monthly rental rates. The lower rental rates were primarily
related to business mix, with more general purpose equipment and less
communications equipment on rent compared to the prior year.
• Gross Profit on Sales - Sales revenues increased
10%, to
to 60% in 2019. Sales occur as a normal part of TRS-RenTelco's rental
business; however, these sales and related gross margins can fluctuate
from quarter to quarter depending on customer requirements and related mix
of equipment sold, equipment availability and funding.
For the three months ended
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For the three months endedSeptember 30, 2020 ,Adler Tanks' total revenues decreased$5.5 million , or 22%, to$19.3 million compared to the same period in 2019, primarily due to lower rental, rental related services revenues, partly offset by higher sales revenues. Lower gross profit on rental, rental related services and sales revenues, partly offset by lower selling and administrative expenses, resulted in a$1.9 million , or 46%, decrease in pre-tax income to$2.2 million for the three months endedSeptember 30, 2020 , compared to the same period in 2019.
The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.
Adler Tanks - Three Months Ended9/30/20 compared to Three Months Ended9/30/19 (Unaudited) Three Months Ended (dollar amounts in thousands) September 30, Increase (Decrease) 2020 2019 $ % Revenues Rental$ 13,385 $ 17,181 $ (3,796 ) (22 )% Rental related services 5,556 7,379 (1,823 ) (25 )% Rental operations 18,941 24,560 (5,619 ) (23 )% Sales 230 140 90 64 % Other 94 109 (15 ) (14 )% Total revenues 19,265 24,809 (5,544 ) (22 )% Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 4,101 4,114 (13 ) (0 )% Rental related services 4,420 5,513 (1,093 ) (20 )% Other 1,953 2,762 (809 ) (29 )% Total direct costs of rental operations 10,474 12,389 (1,915 ) (15 )% Costs of sales 251 126 125 99 % Total costs of revenues 10,725 12,515 (1,790 ) (14 )% Gross Profit (Loss) Rental 7,331 10,305 (2,974 ) (29 )% Rental related services 1,136 1,866 (730 ) (39 )% Rental operations 8,467 12,171 (3,704 ) (30 )% Sales (21 ) 14 (35 ) (250 )% Other 94 109 (15 ) (14 )% Total gross profit 8,540 12,294 (3,754 ) (31 )% Selling and administrative expenses 5,821 7,160 (1,339 ) (19 )% Income from operations 2,719 5,134 (2,415 ) (47 )% Interest expense allocation (472 ) (952 ) (480 ) (50 )% Pre-tax income$ 2,247 $ 4,182 $ (1,935 ) (46 )% Other Selected Information Average rental equipment 1$ 314,933 $ 314,314 $ 619 0 % Average rental equipment on rent$ 138,919 $ 171,335 $ (32,416 ) (19 )% Average monthly total yield 2 1.42 % 1.82 % (22 )% Average utilization 3 44.1 % 54.5 % (19 )% Average monthly rental rate 4 3.21 % 3.34 % (4 )% Period end rental equipment 1$ 314,815 $ 314,844 $ (29 ) (0 )% Period end utilization 3 45.5 % 51.0 % (11 )% 1. Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
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. Period end utilization is calculated by dividing the cost of rental equipment
on rent by the total cost of rental equipment, excluding new equipment
inventory and accessory equipment. Average utilization for the period is
calculated using the average month end 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.
25
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• Gross Profit on Rental Revenues - Rental revenues decreased
or 22%, due to 19% lower average rental equipment on rent and 4% lower
average monthly rental rates in 2020 compared to 2019. COVID-19 related
business disruptions and a decrease in the price of oil and gas,
contributed to weaker activities in multiple geographic and market
segments, which resulted in decreased rental revenues compared to 2019. As
a percentage of rental revenues, depreciation was 31% in 2020 and 24% in
2019, and other direct costs were 15% and 16% in 2020 and 2019,
respectively, which resulted in gross margin percentages of 55% and 60% in
2020 and 2019, respectively. The lower rental revenues, and lower rentalmargins resulted in a 29% decrease in gross profit on rental revenues to
• Gross Profit on Rental Related Services - Rental related services revenues
decreased $1.8 million , or 25%, to $5.6 million compared to 2019. Lower
rental related services revenues and lower gross margin percentage of 20%in 2020, compared to 25% in 2019 resulted in rental related services gross
profit decreasing 39% to
For the three months ended
26
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Nine Months Ended September 30, 2020 Compared to
Nine Months Ended September 30, 2019
Overview
Consolidated revenues for the nine months September 30, 2020 increased $0.6
million to $423.6 million from the same period in 2019. Consolidated net income
for the nine months ended September 30, 2020 increased 1% to $70.8 million , from
$70.4 million for the same period in 2019. Earnings per diluted share for the
nine months ended September 30, 2020 increased 1% to $2.88 from the same period
in 2019.
For the nine months ended
• Gross profit decreased
2020. Mobile Modular's gross profit increased
primarily due to higher gross profit on rental, sales and rental related
services revenues. TRS-RenTelco's gross profit decreased
2%, primarily due to lower gross profit on sales and rental revenues,
partly offset by higher gross profit on rental related services
revenues.
primarily due to lower gross profit on rental, rental related services and
sales revenues. Enviroplex's gross profit decreased
primarily due to
2020 compared to 2019, which had a large concentration of sales in the
third quarter of 2019.
• Selling and administrative expenses increased 1% to
employee salaries and employee benefit costs.
• Interest expense decreased 28% to
average interest rates of 3.22% in 2020, compared to 4.16% in 2019, and 6%
lower debt levels of the Company.
• Pre-tax income contribution by Mobile Modular, TRS-RenTelco and Adler
Tanks was 65%, 26% and 6%, respectively, compared to 51%, 27% and 12%,
respectively, for the comparable 2019 period. These results are discussed
on a segment basis below. Pre-tax income contribution by Enviroplex was 3%
in 2020, compared to 10% in 2019.
• The provision for income taxes resulted in an effective tax rate of 23.6%
and 24.8% for the nine months ended September 30, 2020 and 2019,
respectively
• Adjusted EBITDA increased
27
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Mobile Modular
For the nine months endedSeptember 30, 2020 , Mobile Modular's total revenues increased$26.3 million , or 12%, to$245.4 million compared to the same period in 2019, primarily due to higher sales and rental revenues partly offset by lower rental related services revenues during the period. The revenue increase, together with higher gross profit on rental, rental related services and sales revenues, partly offset by higher selling and administrative expenses, resulted in a 27% increase in pre-tax income to$60.9 million for the nine months endedSeptember 30, 2020 , from$48.1 million for the same period in 2019.
The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income, and other selected information.
Mobile Modular - Nine Months Ended9/30/20 compared to Nine Months Ended9/30/19 (Unaudited) Nine Months Ended (dollar amounts in thousands) September 30, Increase (Decrease) 2020 2019 $ % Revenues Rental$ 141,172 $ 133,736 $ 7,436 6 % Rental related services 51,291 52,946 (1,655 ) (3 )% Rental operations 192,463 186,682 5,781 3 % Sales 51,847 31,401 20,446 65 % Other 1,063 1,033 30 3 % Total revenues 245,373 219,116 26,257 12 % Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 17,177 16,449 728 4 % Rental related services 37,222 39,454 (2,232 ) (6 )% Other 36,773 39,721 (2,948 ) (7 )%
Total direct costs of rental operations 91,172 95,624
(4,452 ) (5 )% Costs of sales 37,274 21,463 15,811 74 % Total costs of revenues 128,446 117,087 11,359 10 % Gross Profit Rental 87,222 77,566 9,656 12 % Rental related services 14,069 13,492 577 4 % Rental operations 101,291 91,058 10,233 11 % Sales 14,573 9,938 4,635 47 % Other 1,064 1,033 31 3 % Total gross profit 116,928 102,029 14,899 15 % Selling and administrative expenses 52,014 48,013 4,001 8 % Income from operations 64,914 54,016 10,898 20 % Interest expense allocation (3,982 ) (5,948 ) (1,966 ) (33 )% Pre-tax income$ 60,932 $ 48,068 $ 12,864 27 % Other Selected Information Average rental equipment 1$ 822,723 $ 789,664 $ 33,059 4 % Average rental equipment on rent$ 637,962 $ 624,827 $ 13,135 2 % Average monthly total yield 2 1.89 % 1.88 % 1 % Average utilization 3 77.5 % 79.1 % (2 )% Average monthly rental rate 4 2.46 % 2.38 % 3 % Period end rental equipment 1$ 832,634 $ 812,534 $ 20,100 2 % Period end utilization 3 76.5 % 79.5 % (4 )% 1. Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
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. Period end utilization is calculated by dividing the cost of rental equipment
on rent by the total cost of rental equipment, excluding new equipment
inventory and accessory equipment. Average utilization for the period is
calculated using the average month end 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.
28
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Mobile Modular's gross profit for the nine months ended
• Gross Profit on Rental Revenues - Rental revenues increased
or 6%, primarily due to 3% higher average monthly rental rates and 2%
higher average rental equipment on rent in 2020 as compared to 2019. As a
percentage of rental revenues, depreciation was 12% in 2020 and 14% in
2019, and other direct costs were 26% in 2020 and 29% in 2019, which
resulted in gross margin percentage of 62% in 2020 compared to 58% in
2019. The higher rental revenues and higher rental margins resulted in
gross profit on rental revenues increasing
million in 2020.
• Gross Profit on Rental Related Services - Rental related services revenues
decreased
revenues are negotiated with the initial modular building lease and are
recognized on a straight-line basis with the associated costs over the
initial term of the lease. The decrease in rental related servicesrevenues was primarily attributable to lower amortization of modular
building delivery and return delivery and dismantle revenues and lower
repair revenues. The lower revenues, offset by higher gross margin
percentage of 27% in 2020 compared to 26% in 2019, resulted in rental
related services gross profit increasing
million in 2020.
• Gross Profit on Sales - Sales revenues increased
primarily due to higher new and used equipment sales compared to 2019. The
higher sales revenues, partly offset by lower gross margin percentage of
28% in 2020 compared to 32% in 2019 resulted in sales gross profit
increasing
routinely as a normal part of Mobile Modular's rental business; however,
these sales and related gross margins can fluctuate from quarter to
quarter and year to year depending on customer requirements, equipment
availability and funding.
For the nine months ended
29
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TRS-RenTelco
For the nine months endedSeptember 30, 2020 , TRS-RenTelco's total revenues increased$5.9 million , or 6%, to$103.0 million compared to the same period in 2019, primarily due to higher rental and sales revenues. Pre-tax income decreased 4%, to$23.9 million for the nine months endedSeptember 30, 2020 compared to$24.9 million for the same period in 2019, primarily due to lower gross profit on sales revenues.
The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income, and other selected information.
TRS-RenTelco - Nine Months Ended9/30/20 compared to Nine Months Ended9/30/19 (Unaudited) Nine Months Ended (dollar amounts in thousands) September 30, Increase (Decrease) 2020 2019 $ % Revenues Rental$ 81,167 $ 76,050 $ 5,117 7 % Rental related services 2,296 2,425 (129 ) (5 )% Rental operations 83,463 78,475 4,988 6 % Sales 17,943 16,745 1,198 7 % Other 1,592 1,856 (264 ) (14 )% Total revenues 102,998 97,076 5,922 6 % Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 35,129 30,533 4,596 15 % Rental related services 1,836 2,008 (172 ) (9 )% Other 12,762 12,206 556 5 %
Total direct costs of rental operations 49,727 44,747
4,980 11 % Costs of sales 9,350 7,656 1,694 22 % Total costs of revenues 59,077 52,403 6,674 13 % Gross Profit Rental 33,276 33,311 (35 ) (0 )% Rental related services 460 417 43 10 % Rental operations 33,736 33,728 8 0 % Sales 8,593 9,089 (496 ) (5 )% Other 1,592 1,856 (264 ) (14 )% Total gross profit 43,921 44,673 (752 ) (2 )% Selling and administrative expenses 18,198 18,101 97 1 % Income from operations 25,723 26,572 (849 ) (3 )% Interest expense allocation (1,606 ) (1,662 ) 56 (3 )% Foreign currency exchange (loss) gain (189 ) (46 ) 143 nm Pre-tax income$ 23,928 $ 24,864 $ (936 ) (4 )% Other Selected Information Average rental equipment 1$ 337,330 $ 299,210 $ 38,120 13 % Average rental equipment on rent$ 221,195 $ 197,503 $ 23,692 12 % Average monthly total yield 2 2.67 % 2.82 % (5 )% Average utilization 3 65.6 % 66.0 % (1 )% Average monthly rental rate 4 4.08 % 4.28 % (5 )% Period end rental equipment 1$ 334,129 $ 320,710 $ 13,419 4 % Period end utilization 3 68.4 % 67.1 % 2 % 1. Average and Period end rental equipment represents the cost of rental equipment, excluding accessory equipment.
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. Period end utilization is calculated by dividing the cost of rental equipment
on rent by the total cost of rental equipment, excluding accessory equipment.
Average utilization for the period is calculated using the average month end
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.
nm Not meaningful
30--------------------------------------------------------------------------------
TRS-RenTelco's gross profit for the nine months ended
• Gross Profit on Rental Revenues - Rental revenues increased
or 7%, with depreciation expense increasing
million and other direct costs increasing $0.6 million , or 5%, to $12.8
million , resulting in comparable gross profit on rental revenues of $33.3 million. As a percentage of rental revenues, depreciation was 43% in 2020,
compared to 40% in 2019, and other direct costs were 16% in 2020 and 2019,
which resulted in a gross margin percentage of 41% in 2020, compared to
44% in 2019. The rental revenues increase was due to 12% higher average
rental equipment on rent, partly offset by 5% lower average monthly rental
rates, compared to 2019.
• Gross Profit on Sales - Sales revenues increased
gross margin percentage decreasing to 48% from 54% in 2019, primarily due
to lower margins on used equipment sales. Sales occur routinely as a
normal part of TRS-RenTelco's rental business; however, these sales andrelated gross margins can fluctuate from quarter to quarter depending on
customer requirements, equipment availability and funding.
For the nine months ended
31
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For the nine months endedSeptember 30, 2020 ,Adler Tanks' total revenues decreased$16.0 million , or 21%, to$58.6 million compared to the same period in 2019, primarily due to lower rental and rental related services revenues during the period. The revenue decrease together with lower total gross profit, partly offset by lower selling and administrative expenses, resulted in a 53% decrease in pre-tax income to$5.5 million for the nine months endedSeptember 30, 2020 , from$11.7 million for the same period in 2019.
The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income, and other selected information.
Adler Tanks - Nine Months Ended9/30/20 compared to Nine Months Ended9/30/19 (Unaudited) Nine Months Ended (dollar amounts in thousands) September 30, Increase (Decrease) 2020 2019 $ % Revenues Rental$ 40,934 $ 51,872 $ (10,938 ) (21 )% Rental related services 16,439 21,367 (4,928 ) (23 )% Rental operations 57,373 73,239 (15,866 ) (22 )% Sales 960 1,003 (43 ) (4 )% Other 254 337 (83 ) (25 )% Total revenues 58,587 74,579 (15,992 ) (21 )% Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 12,334 12,240 94 1 % Rental related services 12,702 16,045 (3,343 ) (21 )% Other 6,636 9,201 (2,565 ) (28 )% Total direct costs of rental operations 31,672 37,486 (5,814 ) (16 )% Costs of sales 799 713 86 12 % Total costs of revenues 32,471 38,199 (5,728 ) (15 )% Gross Profit Rental 21,964 30,431 (8,467 ) (28 )% Rental related services 3,737 5,322 (1,585 ) (30 )% Rental operations 25,701 35,753 (10,052 ) (28 )% Sales 161 290 (129 ) (44 )% Other 254 337 (83 ) (25 )% Total gross profit 26,116 36,380 (10,264 ) (28 )% Selling and administrative expenses 18,998 22,054 (3,056 ) (14 )% Income from operations 7,118 14,326 (7,208 ) (50 )% Interest expense allocation (1,651 ) (2,598 ) (947 ) (36 )% Pre-tax income$ 5,467 $ 11,728 $ (6,261 ) (53 )% Other Selected Information Average rental equipment 1$ 314,859 $ 313,475 $ 1,384 0 % Average rental equipment on rent$ 143,142 $ 176,304 $ (33,162 ) (19 )% Average monthly total yield 2 1.44 % 1.84 % (22 )% Average utilization 3 45.5 % 56.2 % (19 )% Average monthly rental rate 4 3.18 % 3.27 % (3 )% Period end rental equipment 1$ 314,815 $ 314,844 $ (29 ) (0 )% Period end utilization 3 45.5 % 51.0 % (11 )% 1. Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
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. Period end utilization is calculated by dividing the cost of rental equipment
on rent by the total cost of rental equipment, excluding new equipment
inventory accessory equipment. Average utilization for the period is
calculated using the average month end 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.
32
--------------------------------------------------------------------------------Adler Tanks' gross profit for the nine months endedSeptember 30, 2020 decreased$10.3 million , or 28%, to$26.1 million . For the nine months endedSeptember 30, 2020 compared to the same period in 2019:
• Gross Profit on Rental Revenues - Rental revenues decreased
or 21%, primarily due to 19% lower average rental equipment on rent, and
3% lower average monthly rental rates in 2020 as compared to 2019.
COVID-19 related business disruptions and a decrease in the price of oil
and gas, contributed to weaker activities in multiple geographic andmarket segments, which resulted in decreased rental revenues compared to
2019. As a percentage of rental revenues, depreciation was 30% in 2020 and
24% in 2019, and other direct costs were 16% and 18% in 2020 and 2019,
respectively, which resulted in gross margin percentages of 54% and 59% in
2020 and 2019, respectively. The lower rental revenues and lower rental
margins resulted in gross profit on rental revenues decreasing $8.5
million , or 28%, to $22.0 million in 2020.
• Gross Profit on Rental Related Services - Rental related services revenues
decreased
lower gross margin percentage of 23% in 2020 compared to 25% in 2019,
resulted in rental related services gross profit decreasing
or 30%, to
For the nine months ended
33--------------------------------------------------------------------------------
Liquidity and Capital Resources
The Company's rental businesses are capital intensive and generate significant cash flows. Cash flows for the Company for the nine months endedSeptember 30, 2020 compared to the same period in 2019 are summarized as follows: Cash Flows from Operating Activities: The Company's operations provided net cash of$131.5 million in 2020 compared to$136.9 million in 2019. The 4% decrease in net cash provided by operating activities was primarily attributable to a lower increase in accounts payable and accrued liabilities, deferred income and accounts receivable, partly offset by lower increase in prepaid expenses and other assets. Cash Flows from Investing Activities: Net cash used in investing activities was$41.5 million in 2020, compared to$110.6 million in 2019. The$69.2 million decrease was primarily due to$61.6 million lower purchases of rental equipment of$65.7 million in 2020 compared to 2019,$7.4 million lower cash paid for the acquisition of business assets and$3.0 million higher proceeds from sales of used rental equipment, partly offset by$2.8 million higher purchases of property, plant and equipment. Cash Flows from Financing Activities: Net cash used in financing activities was$90.6 million in 2020, compared to$25.4 million in 2019. The$65.3 million increase was due to$46.4 million higher net repayment under bank lines of credit,$13.6 million higher repurchases of common stock and$3.2 million higher dividend payments. Significant capital expenditures are required to maintain and grow the Company's rental assets. During the last three years, the Company has financed its working capital and capital expenditure requirements through cash flow from operations, proceeds from the sale of rental equipment and from borrowings. Sales occur routinely as a normal part of the Company's rental business. However, these sales can fluctuate from period to period depending on customer requirements and funding. Although the net proceeds received from sales may fluctuate from period to period, the Company believes its liquidity will not be adversely impacted from lower sales in any given year because it believes it has the ability to increase its bank borrowings and conserve its cash in the future by reducing the amount of cash it uses to purchase rental equipment, pay dividends, or repurchase the Company's common stock.
Unsecured Revolving Lines of Credit
OnMarch 31, 2020 , the Company entered into an amended and restated credit agreement withBank of America, N.A ., as Administrative Agent, SwingLine Lender , L/C Issuer and lender, and other lenders named therein (the "Credit Facility"). The Credit Facility provides for a$420.0 million unsecured revolving credit facility (which may be further increased to$670.0 million by adding one or more tranches of term loans and/or increasing the aggregate revolving commitments), which includes a$25.0 million sublimit for the issuance of standby letters of credit and a$10.0 million sublimit for swingline loans. The proceeds of the Credit Facility are available to be used for general corporate purposes, including permitted acquisitions. The Credit Facility permits the Company's existing indebtedness to remain, which includes the Company's$12.0 million Treasury Sweep Note dueMarch 31, 2025 , the Company's existing senior notes issued pursuant to the Note Purchase and Private Shelf Agreement withPrudential Investment Management, Inc. , dated as ofApril 21, 2011 (as amended, the "the Prior NPA"): (i) the$40.0 million aggregate outstanding principal of notes issuedMarch 17, 2014 and dueMarch 17, 2021 , and (ii) the$60.0 million aggregate outstanding principal of notes issuedNovember 5, 2015 and dueNovember 5, 2022 . In addition, the Company may incur additional senior note indebtedness in an aggregate amount not to exceed$250.0 million . The Credit Facility matures onMarch 31, 2025 and replaced the Company's prior$420.0 million credit facility datedMarch 31, 2016 withBank of America, N.A ., as agent, as amended. All obligations outstanding under the prior credit facility as of the date of the Credit Facility were refinanced by the Credit Facility onMarch 31, 2020 . OnMarch 30, 2020 , the Company entered into an amended and restated Credit Facility Letter Agreement and a CreditLine Note in favor ofMUFG Union Bank, N.A. , which provides for a$12.0 million line of credit facility related to its cash management services ("Sweep Service Facility"). The Sweep Service Facility matures on the earlier ofMarch 31, 2025 , or the date the Company ceases to utilizeMUFG Union Bank, N.A. for its cash management services. The Sweep Service Facility replaced the Company's prior$12.0 million sweep service facility, dated as ofMarch 31, 2016 . AtSeptember 30, 2020 , under the Credit Facility and Sweep Service Facility, the Company had unsecured lines of credit that permit it to borrow up to$432.0 million of which$150.0 million was outstanding, and had capacity to borrow up to an additional$282.0 million . The Credit Facility contains financial covenants requiring the Company to not (all defined terms used below not otherwise defined herein have the meaning assigned to such terms in the Credit Facility):
• Permit the Consolidated Fixed Charge Coverage Ratio as of the end of any
fiscal quarter to be less than 2.50 to 1. At September 30, 2020 , the
actual ratio was 4.30 to 1.
• Permit the Consolidated Leverage Ratio at any time during any period of
four consecutive fiscal quarters to be greater than 2.75 to 1. At
September 30, 2020 , the actual ratio was 1.04 to 1.
34
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At
Note Purchase and Private Shelf Agreement
OnMarch 31, 2020 , the Company entered into an Amended and Restated Note Purchase and Private Shelf Agreement (the "Note Purchase Agreement") withPGIM, Inc. ("PGIM") and the holders of Series B and Series C Notes previously issued pursuant to the Prior NPA, among the Company and the other parties to the Note Purchase Agreement. The Note Purchase Agreement amended and restated, and superseded in its entirety, the Prior NPA. Pursuant to the Prior NPA, the Company issued (i)$40.0 million aggregate principal amount of its 3.68% Series B Senior Notes dueMarch 17, 2021 , and (ii)$60.0 million aggregate principal amount of its 3.84% Series C Senior Notes dueNovember 5, 2022 , to which the terms of the Note Purchase Agreement shall apply. In addition, pursuant to the Note Purchase Agreement, the Company may authorize the issuance and sale of additional senior notes (the "Shelf Notes") in the aggregate principal amount of (x)$250 million minus (y) the amount of other notes (such as the Series B Senior Notes and Series C Senior Notes, each defined below) then outstanding, to be dated the date of issuance thereof, to mature, in case of each Shelf Note so issued, no more than 15 years after the date of original issuance thereof, to have an average life, in the case of each Shelf Note so issued, of no more than 15 years after the date of original issuance thereof, to bear interest on the unpaid balance thereof from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Shelf Note so issued, in accordance with the Note Purchase Agreement. Shelf Notes may be issued and sold from time to time at the discretion of the Company's Board of Directors and in such amounts as the Board of Directors may determine, subject to prospective purchasers' agreement to purchase the Shelf Notes. The Company will sell the Shelf Notes directly to such purchasers. The full net proceeds of each Shelf Note will be used in the manner described in the applicable Request for Purchase with respect to such Shelf Note. OnOctober 1, 2020 , the Company entered into a rate lock agreement withPrudential Private Capital , pursuant to which, the Company agreed to a fixed interest rate of 2.57% for future issuance, if any, of senior unsecured notes in the aggregate amount of$40.0 million with a 7-year maturity. If issued, the funding for such notes would occur on or beforeMarch 17, 2021 and would be subject to the terms and conditions of the Note Purchase Agreement.
3.68% Senior Notes Due in 2021
OnMarch 17, 2014 , the Company issued and sold to the purchaser a$40.0 million aggregate principal amount of its 3.68% Series B Senior Notes (the "Series B Senior Notes") pursuant to the terms of the Prior NPA. The Series B Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 3.68% per annum and mature onMarch 17, 2021 . Interest on the Series B Senior Notes is payable semi-annually beginning onSeptember 17, 2014 and continuing thereafter onMarch 17 andSeptember 17 of each year until maturity. The full net proceeds from the Series B Senior Notes were used for working capital and other general corporate purposes. AtSeptember 30, 2020 , the principal balance outstanding under the Series B Senior Notes was$40.0 million .
3.84% Senior Notes Due in 2022
OnNovember 5, 2015 , the Company issued and sold to the purchaser a$60.0 million aggregate principal amount of its 3.84% Series C Senior Notes (the "Series C Senior Notes") pursuant to the terms of the Prior NPA. The Series C Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 3.84% per annum and mature onNovember 5, 2022 . Interest on the Series C Senior Notes is payable semi-annually beginning onMay 5, 2016 and continuing thereafter onNovember 5 andMay 5 of each year until maturity. The principal balance is due when the notes mature onNovember 5, 2022 . The full net proceeds from the Series C Senior Notes were used to reduce the outstanding balance on the Company's revolving credit line. AtSeptember 30, 2020 , the principal balance outstanding under the Series C Senior Notes was$60.0 million . Among other restrictions, the Note Purchase Agreement, which has superseded in its entirety the Prior NPA, under which the Series B Senior Notes and Series C Senior Notes were sold, contains financial covenants requiring the Company to not (all defined terms used below not otherwise defined herein have the meaning assigned to such terms in the Note Purchase Agreement): • Permit the Consolidated Fixed Charge Coverage Ratio of EBITDA to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1. AtSeptember 30, 2020 , the actual ratio was 4.30 to 1.
• Permit the Consolidated Leverage Ratio of funded debt to EBITDA at any
time during any period of four consecutive quarters to be greater than
2.75 to 1. At September 30, 2020 , the actual ratio was 1.04 to 1.
35
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At
Although no assurance can be given, the Company believes it will continue to be able to negotiate general bank lines of credit and issue senior notes adequate to meet capital requirements not otherwise met by operational cash flows and proceeds from sales of rental equipment. Furthermore, the Company believes it has the financial resources to weather the expected short-term impacts of COVID-19. However, the Company has limited insight into the extent to which its business may be impacted by COVID-19, and there are many uncertainties, including how long and how severely the Company will be impacted. An extended and severe impact may materially and adversely affect the Company's future operations, financial position and liquidity.
Common Stock Purchase
The Company has in the past made purchases of shares of its common stock from time to time in over-the-counter market (NASDAQ) transactions, through privately negotiated, large block transactions and through a share repurchase plan, in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. InAugust 2015 , the Company's Board of Directors authorized the Company to repurchase up to 2,000,000 shares of the Company's outstanding common stock (the "Repurchase Plan"). The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management's discretion. All shares repurchased by the Company are canceled and returned to the status of authorized but unissued shares of common stock. There can be no assurance that any authorized shares will be repurchased and the Repurchase Plan may be modified, extended or terminated by the Company's Board of Directors at any time. There were 282,221 shares of common stock repurchased during the nine months endedSeptember 30, 2020 for the aggregate purchase price of$13.6 million or an average price of$48.25 per repurchased share. There were no shares repurchased in the nine months endedSeptember 30, 2019 . As ofSeptember 30, 2020 , 1,309,805 shares remained authorized for repurchase under the Repurchase Plan.
Contractual Obligations
We believe that our contractual obligations have not changed materially from those included in our 2019 Annual Report.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements as of
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