<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
COMMISSION FILE NUMBER 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.)
5700 LAS POSITAS ROAD, LIVERMORE, CA 94550
(Address of principal executive offices)
Registrant's telephone number: (925) 606-9200
---------------------------------------
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 14, 1999, 13,466,098 shares of Registrant's Common Stock
were outstanding.
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<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
----------------------------
(in thousands, except per share amounts) 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Rental $ 18,979 $ 16,981
Rental Related Services 2,434 2,223
-------- --------
Rental Operations 21,413 19,204
Sales 6,863 7,952
Other 218 194
-------- --------
Total Revenues 28,494 27,350
-------- --------
Costs and Expenses
Direct Costs of Rental Operations
Depreciation 4,666 3,847
Rental Related Services 1,338 1,664
Other 3,133 3,025
-------- --------
Total Direct Costs of Rental Operations 9,137 8,536
Costs of Sales 4,860 5,249
-------- --------
Total Costs 13,997 13,785
-------- --------
Gross Margin 14,497 13,565
Selling and Administrative 4,199 3,705
-------- --------
Income from Operations 10,298 9,860
Interest 1,516 1,451
-------- --------
Income Before Provision for Income Taxes 8,782 8,409
Provision for Income Taxes 3,447 3,313
-------- --------
Income Before Minority Interest 5,335 5,096
Minority Interest in Income of Subsidiary (36) 128
-------- --------
Net Income $ 5,371 $ 4,968
======== ========
Earnings Per Share:
Basic $ 0.39 $ 0.34
-------- --------
Diluted $ 0.38 $ 0.34
-------- --------
Shares Used in Per Share Calculation:
Basic 13,820 14,436
Diluted 13,991 14,635
- ------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE> 3
MCGRATH RENTCORP
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
------------------------------
(in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 4,749 $ 857
Accounts Receivable, less allowance for doubtful
accounts of $650 in 1999 and 1998 15,717 21,811
Rental Equipment, at cost:
Relocatable Modular Offices 218,335 216,414
Electronic Test Instruments 66,686 66,573
--------- ---------
285,021 282,987
Less Accumulated Depreciation (86,013) (82,959)
--------- ---------
Rental Equipment, net 199,008 200,028
--------- ---------
Land, at cost 18,953 18,953
Buildings, Land Improvements, Equipment and Furniture,
at cost, less accumulated depreciation of $4,210
in 1999 and $3,858 in 1998 31,791 31,460
Prepaid Expenses and Other Assets 4,558 5,567
--------- ---------
Total Assets $ 274,776 $ 278,676
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Notes Payable $ 101,450 $ 97,000
Accounts Payable and Accrued Liabilities 20,161 22,964
Deferred Income 2,753 5,574
Minority Interest in Subsidiary 2,548 2,584
Deferred Income Taxes 48,609 45,160
--------- ---------
Total Liabilities 175,521 173,282
--------- ---------
Shareholders' Equity:
Common Stock, no par value --
Authorized -- 40,000 shares
Outstanding -- 13,463 shares in 1999 and
13,970 shares in 1998 7,824 8,138
Retained Earnings 91,431 97,256
--------- ---------
Total Shareholders' Equity 99,255 105,394
--------- ---------
Total Liabilities and Shareholders' Equity $ 274,776 $ 278,676
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 4
MCGRATH RENTCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
----------------------------
(in thousands) 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net Income $ 5,371 $ 4,968
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 5,059 4,202
Gain on Sale of Rental Equipment (1,313) (1,389)
Proceeds from Sale of Rental Equipment 3,567 3,512
Change In:
Accounts Receivable 6,094 1,470
Prepaid Expenses and Other Assets 1,009 (794)
Accounts Payable and Accrued Liabilities (3,056) (10,636)
Deferred Income (2,821) 972
Deferred Income Taxes 3,448 3,299
-------- --------
Net Cash Provided by Operating Activities 17,358 5,604
-------- --------
Cash Flow from Investing Activities:
Purchase of Rental Equipment (5,901) (9,888)
Purchase of Land, Buildings, Land Improvements,
Equipment and Furniture (724) (784)
-------- --------
Net Cash Used in Investing Activities (6,625) (10,672)
-------- --------
Cash Flow from Financing Activities:
Net Borrowings Under Notes Payable 4,450 15,747
Net Proceeds from the Exercise of Stock Options -- 183
Repurchase of Common Stock (9,894) (8,795)
Payment of Dividends (1,397) (1,162)
-------- --------
Net Cash Provided (Used) by Financing
Activities (6,841) 5,973
-------- --------
Net Increase in Cash 3,892 905
Cash Balance, Beginning of Period 857 538
-------- --------
Cash Balance, End of Period $ 4,749 $ 1,443
======== ========
Interest Paid During the Period $ 2,075 $ 1,440
======== ========
Income Taxes Paid During the Period $ (8) $ 14
======== ========
Dividends Declared but not yet Paid $ 1,616 $ 1,414
======== ========
- ------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 5
MCGRATH RENTCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1. CONSOLIDATED FINANCIAL INFORMATION
The consolidated financial information for the three months ended March
31, 1999 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, 1999 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.
NOTE 2. NOTES PAYABLE
In April 1999, the Company amended its unsecured line of credit
agreement (the "Agreement") with its banks to reduce the minimum shareholders'
equity requirement to allow further repurchases of the Company's common stock.
The Agreement requires the Company to maintain shareholders' equity of not less
than $85,000,000 plus 50% of all net income generated subsequent to March 31,
1999 plus 90% of any new stock issuance proceeds. All other terms and conditions
remained the same.
NOTE 3. BUSINESS SEGMENTS
The Company defines its business segments based on the nature of
operations for the purpose of reporting under Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). The Company's three reportable segments are Mobile
Modular Management Corporation (Modulars), McGrath-RenTelco (Electronics), and
Enviroplex. The operations of these three segments are described in the notes to
the consolidated financial statements included in the Company's latest Form
10-K. As a separate corporate entity, Enviroplex revenues and expenses are
separately maintained from Modulars and Electronics. Excluding interest expense,
allocations of revenues and expenses not directly associated with Modulars or
Electronics are generally allocated to these segments based on their pro-rata
share of direct revenues. Interest expense is allocated between Modulars and
Electronics based on their pro-rata share of average rental equipment, accounts
receivable and customer security deposits. The Company does not report total
assets by business segment. Summarized financial information for the three
months ended March 31, 1999 and 1998 for the Company's reportable segments is
shown in the following table:
4
<PAGE> 6
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
(in thousands) MODULARS ELECTRONICS ENVIROPLEX CONSOLIDATED
-------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31,
1999
Rental Operation Revenues $ 14,882 $ 6,531 $ -- $ 21,413
Sales and Other Revenues 2,688 2,395 1,998 7,081
Total Revenues 17,570 8,926 1,998 28,494
Depreciation on Rental Equipment 2,498 2,168 -- 4,666
Interest Expense 1,161 399 (44) 1,516
Income before Income Taxes 5,824 3,174 (216) 8,782
Rental Equipment Acquisitions 2,465 3,436 -- 5,901
Accounts Receivable, net (period end) 6,554 7,379 1,784 15,717
Rental Equipment, at cost (period end) 218,335 66,686 -- 285,021
1998
Rental Operation Revenues $ 13,656 $ 5,548 $ -- $ 19,204
Sales and Other Revenues 2,102 2,696 3,348 8,146
Total Revenues 15,758 8,244 3,348 27,350
Depreciation on Rental Equipment 2,191 1,656 -- 3,847
Interest Expense 1,094 325 32 1,451
Income before Income Taxes 4,631 3,013 765 8,409
Rental Equipment Acquisitions 5,642 4,246 -- 9,888
Accounts Receivable, net (period end) 7,034 7,070 6,220 20,324
Rental Equipment, at cost (period end) 200,067 52,341 -- 252,408
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 7
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-Q contains statements which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear in a number of places.
Such statements can be identified by the use of forward-looking terminology such
as "believes", "expects", "may", "estimates", "will", "should", "plans" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may vary materially
from those in the forward-looking statements as a result of various factors.
These factors include the effectiveness of management's strategies and
decisions, general economic and business conditions, new or modified statutory
or regulatory requirements and changing prices and market conditions. This
report identifies other factors that could cause such differences. No assurance
can be given that these are all of the factors that could cause actual results
to vary materially from the forward-looking statements.
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Rental revenues for the three months ended March 31, 1999 increased
$1,998,000 (12%) over the comparative period in 1998, with Mobile Modular
Management Corporation ("MMMC") contributing $1,018,000 and McGrath-RenTelco
contributing $980,000. MMMC's rental revenues increased as a result of having
$17,182,000 more equipment on rent compared to a year earlier. For Modulars,
average monthly yield of 1.93% and average utilization of 82.2%, exclusive of
equipment not previously rented, were approximately the same for each period
reported. McGrath-RenTelco's rental revenues increased as a result of having
$4,724,000 more equipment on rent compared to a year earlier offset by an
average monthly yield decline from 3.53% in 1998 to 3.20% in 1999. Electronics
average utilization for the first quarter declined from 55.5% in 1998 to 51.3%
in 1999.
Rental related services revenues for the three months ended March 31,
1999 increased $211,000 (9%) as compared to the same period in 1998 as a result
of higher volume of modular equipment movements and site requirements in 1999.
Gross margins on these services for the quarter increased from 25% in 1998 to
45% in 1999 due to the mix of services performed in 1999 and approximates the
1998 annual gross margin of 43%.
Sales for the three months ended March 31, 1999 declined $1,089,000
(14%) as compared to the same period in 1998 primarily due to fewer sales by
Enviroplex of manufactured classrooms to school districts. MMMC and
McGrath-RenTelco's sales volumes were consistent with the 1998 comparative
period. Consolidated gross margin on sales declined for the quarter from 34% in
1998 to 29% in 1999 due to Enviroplex's lower margin on classrooms sold during
the first quarter of 1999. Sales continue to occur routinely as a normal part of
the Company's rental business; however, these sales can fluctuate from quarter
to quarter and year to year depending on customer demands and requirements.
Enviroplex's backlog of orders as of March 31, 1999 and 1998 was
$4,042,000 and $14,322,000, respectively. Management believes schools have
delayed placing orders until allocation of funds from the $9.2 billion
California bond measure, which passed in November 1998, is determined.
Enviroplex has taken additional orders since March 31, 1999 and the backlog as
of May 7, 1999 was $5,969,000. Backlog is not significant in MMMC's modular
business or in McGrath-RenTelco's electronics business.
Depreciation on rental equipment for the three months ended March 31,
1999 increased $819,000 (21%) over the comparative period in 1998 due to the
additional rental equipment purchased during 1998. Modular rental equipment, at
cost, increased 9% and Electronics rental equipment, at cost, increased 27%
between March 31, 1998 and March 31, 1999. Other direct costs of rental
operations increased $108,000 (4%) over the first quarter in 1998 primarily due
to increased maintenance costs of the modular rental equipment.
Selling and administrative expenses increased $494,000 (13%) for the
three months ended March 31, 1999 compared to the same period in 1998 primarily
due to higher bad debt expense ($292,000) resulting from an unusual
6
<PAGE> 8
write-off of $282,000. Additionally, higher advertising expenses ($83,000) for
brochure development, web page design, and yellow page advertising contributed
to the increase in selling and administrative expenses.
Interest expense for the three months ended March 31, 1999 increased
$65,000 (4%) over 1998 as a result of a higher average borrowing level offset by
a lower average interest rate in 1999. The debt increase funded part of the
significant rental equipment purchases made during 1998.
Income before provision for taxes for the three months ended March 31,
1999 increased $373,000 (4%) from $8,409,000 in 1998 to $8,782,000 in 1999
while net income increased $403,000 (8%) from $4,968,000 in 1998 to $5,371,000
in 1999. The higher percentage increase for net income in 1999 is due to the
decrease in minority interest in income of Enviroplex combined with a lower
effective tax rate in 1999 of 39.25% compared to 39.40% in 1998. Earnings per
share for the three months ending March 31, 1999 increased 13% over the same
period in 1998 from $0.34 per share to $0.39 per share as a result of higher
earnings and fewer outstanding shares.
LIQUIDITY AND CAPITAL RESOURCES
This section contains statements that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See the statement at the beginning of this Item for cautionary
information with respect to such forward-looking statements.
The Company had a total liabilities to equity ratio of 1.77 to 1 and
1.64 to 1 as of March 31, 1999 and December 31, 1998, respectively. The debt
(notes payable) to equity ratio was 1.02 to 1 and 0.92 to 1 as of March 31, 1999
and December 31, 1998, respectively.
The Company has made purchases of shares of its common stock from time
to time in the over-the-counter market (NASDAQ) and/or through privately
negotiated, large block transactions under an authorization of the Board of
Directors. Shares repurchased by the Company are cancelled and returned to the
status of authorized but unissued stock. During the three months ended March 31,
1999, the Company repurchased 540,400 shares of its outstanding common stock for
an aggregate purchase price of $9,893,562 (or an average price of $18.31 per
share). On March 18, 1999, the Board of Directors authorized the repurchase of
up to 1,000,000 shares of its common stock. As of May 14, 1999, 887,000 shares
remain authorized for repurchase.
The Company believes that its needs for working capital and capital
expenditures through 1999 and beyond will adequately be met by cash flow and
bank borrowings.
MARKET RISK
This section contains statements that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See the statement at the beginning of this Item for cautionary
information with respect to such forward-looking statements.
The Company currently has no material derivative financial instruments
that expose the Company to significant market risk. The Company is exposed to
cash flow and fair value risk due to changes in interest rates with respect to
its notes payable. As of March 31, 1999, the Company believes that the carrying
amounts of its financial instruments (cash and notes payable) approximate fair
value.
YEAR 2000
This section contains statements that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See the statement at the beginning of this Item for cautionary
information with respect to such forward-looking statements.
7
<PAGE> 9
The "Year 2000" issue is the result of computer programs using two
digits rather than four to determine the applicable year. This could affect
date-sensitive calculations that treat "00" as the year 1900 rather than the
year 2000. An assessment of the Company's exposure related to Year 2000 issues
has been completed and it is not expected to have a significant impact on the
Company.
The Company initiated a number of major system projects in 1997 and 1998
to upgrade core computer hardware, networking and software systems. These
projects are replacing existing systems as opposed to simply fixing Year 2000
problems. Most of these projects have been completed and are operational; the
balance is expected to be operational by September 1999. Capitalized
expenditures for this process totaled $1,400,000 for the period January 1, 1997
to March 31, 1999 for external labor, hardware and software costs. This amount
includes the cost of new software applications installed as a result of
strategic replacement projects. Prior to December 31, 1998, the Company did not
separately track the internal costs incurred related to Year 2000 issues or the
system conversions described above. Such internal costs are principally the
related payroll costs for its information systems personnel and are not
necessarily considered incremental costs to the Company. Effective January 1,
1999, the Company began to track these internal costs in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." The Company estimates approximately
$600,000 for completion of its system upgrades for the remainder of 1999, of
which approximately $200,000 is expected to be related to internal costs. All
future costs will be funded from operating cash flow.
The Company does not significantly rely on "embedded technology" in its
critical processes. Embedded technology, which means microprocessor-controlled
devices as opposed to multi-purpose computers, does control some building and
security operations, such as electric power management, ventilation, and
building access. All building facilities are presently being evaluated, and the
Company expects all systems using embedded technology to be confirmed as Year
2000 ready by June 1999. The electronics test and measurement rental equipment
has been evaluated, and it appears only minor quantities of equipment pose a
Year 2000 problem. If deemed important, some equipment may be upgraded. The
Company asks its customers to seek definitive Year 2000 compliance guidance
directly from the equipment manufacturers.
The Company cannot predict the likelihood of a significant disruption of
its customers' or suppliers' businesses or the economy as a whole, either of
which could have a material adverse impact on the Company. However, because the
markets for the Company's products are comprised of numerous customers with a
variety of sizes and levels of sophistication, the noncompliance with Year 2000
of any one would not be expected to have a detrimental impact on the Company's
financial position or results of operations. As a normal course of business, the
Company seeks to maintain multiple suppliers where possible. The Company
continues to communicate with vendors, customers, suppliers, service providers,
and government agencies to monitor their compliance.
The Company presently believes that its Year 2000 exposures will not
present a material adverse risk to the Company's future consolidated results of
operations, liquidity, and capital resources. However, if all systems are not
completed in a timely manner, or the level of timely compliance by key suppliers
or service providers is not sufficient, the Year 2000 issue could have a
material adverse effect on the Company's operations. This includes, but is not
limited to, delays of equipment shipments resulting in loss of revenues,
increased operating costs, loss of customers and suppliers, or other significant
disruptions to the Company's business.
The Company's contingency plan includes (1) all critical computer
operating and financial data will be backed-up and printed at key dates to
provide the basis, if necessary, for a manual system, (2) in the event a
significant number of customers are unable to issue payments, the Company has
sufficient liquidity with its existing line of credit to function adequately,
and (3) the Company continues to look for multiple suppliers and is also
evaluating power and communication alternatives in the event of a loss of
service. The contingency plan is enhanced by the fact that existing management
has been in place since before computer systems were used.
8
<PAGE> 10
PART II OTHER INFORMATION
ITEM 3. OTHER INFORMATION
On March 18, 1999, the Company declared a quarterly dividend on its
Common Stock; the dividend was $0.12 per share. Subject to its continued
profitability and favorable cash flow, the Company intends to continue the
payment of quarterly dividends.
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
------ ----------- ----------------
<S> <C> <C>
3.1 Amendment of By-Laws of McGrath RentCorp Filed herewith.
4.1 Fourth Amendment to the Restated Credit Agreement Filed herewith.
27.1 Financial Data Schedule Filed herewith.
</TABLE>
(b) Reports on Form 8-K.
No reports on form 8-K have been filed during the quarter for which this
report is filed.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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 14, 1999 MCGRATH RENTCORP
by: /s/ Delight Saxton
-------------------------------------
Delight Saxton
Senior Vice President, Chief
Financial Officer (Chief Accounting
Officer) and Secretary
9
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION METHOD OF FILING
------ ----------- ----------------
<S> <C> <C>
3.1 Amendment of By-Laws of McGrath RentCorp Filed herewith.
4.1 Fourth Amendment to the Restated Credit Agreement Filed herewith.
27.1 Financial Data Schedule Filed herewith.
</TABLE>
<PAGE> 1
Exhibit 3.1
<PAGE> 2
Exhibit 3.1
Amendment of By-Laws of McGrath RentCorp
RESOLVED FURTHER: Section 3.2 of the By-Laws of this corporation is hereby
amended to read in its entirety:
"3.2 Number of Directors. The number of directors of this corporation
shall be not less than four (4) nor more than seven (7). The exact
number of directors shall be five (5) until changed, within the limits
specified above, by an amendment to this section 3.2 duly adopted by
either the Board of Directors or the shareholders. The indefinite number
of directors may be changed, or a definite number fixed without
provision for an indefinite number, by an amendment to this section 3.2
adopted by the vote or written consent of a majority of the outstanding
shares entitled to vote."
<PAGE> 1
Exhibit 4.1
<PAGE> 2
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT ("Fourth Amendment") is entered into as of April 30,
1999, by and among McGRATH RENTCORP, a California corporation as "Borrower", the
banks listed on the signature pages hereof (individually a "Bank" and
collectively, "Banks"), and UNION BANK OF CALILFORNIA, NATIONAL ASSOCIATION, as
agent for Banks (in such capacity, "Agent").
RECITALS
A. Borrower is obligated to Agent and Banks pursuant to that certain Credit
Agreement dated as of July 10, 1997 (as amended, supplemented, extended,
restated, or renewed from time to time, "Agreement").
B. Agent, Banks and Borrower mutually desire to amend the Agreement as set
forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 7.12(a) of the Agreement is hereby deleted in its entirety and
replaced with the following:
"(a) Tangible Net Worth at all times of at least the sum of (i)
Eighty Five Million Dollars ($85,000,000), plus (ii) fifty percent (50%)
of Borrower's Net income (without reduction for any Net Loss) generated
after March 31, 1999; plus (iii) ninety percent (90%) of the proceeds
from the issuance of Borrower's capital stock after March 31, 1999,
excluding the first Two Million Six Hundred Fifty Thousand Dollars
($2,650,000) of such proceeds from the exercise of stock options after
March 31, 1999."
2. Conditions Precedent. Borrower understands that this Fourth Amendment
shall not be effective and Agent and Banks shall have no obligation to
amend the Loan Documents, unless and until each of the following
conditions precedent has been satisfied:
(a) Borrower shall have executed and delivered to Agent this Fourth
Amendment in such number and counterparts as Agent may require.
(b) On or before such time as Agent and Banks may require, Borrower
shall have taken any and all actions and executed and delivered
to Agent any and all documents necessary or appropriate in Agent
and Banks' sole discretion to effectuate this Fourth Amendment.
3. Full Force and Effect. Except as specifically provided herein, all terms
and conditions of the Agreement and each of the Loan Documents remain in
full force and effect, without waiver or modification. This Fourth
Amendment, the preceding amendments and the Agreement shall be read
together as one document.
4. Representations and Warranties. As part of the consideration for Agent
and Banks to enter into this Fourth Amendment, the Borrower represents
and warrants to Agent and Banks as follows:
(a) The execution, delivery and performance by Borrower of this
Fourth Amendment are within Borrower's corporate powers, have
been duly authorized by all necessary corporate action by or in
respect of, or filing with, any governmental body, agency or
official, and the execution, delivery and performance by
Borrower of this Fourth Amendment do not contravene, or
constitute a default under, any provision of applicable law or
requirements or of the certificate or articles of incorporation
or the by-laws of Borrower or of any material agreement,
judgment, injunction, order, decree or other instrument binding
upon Borrower or any assets of Borrower, or result in the
creation or imposition of any Lien on any asset of Borrower.
<PAGE> 3
(b) This Fourth Amendment constitutes the valid and binding
obligation of Borrower, enforceable against it in accordance
with its terms, except as enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, equity of
redemption, moratorium or other laws now or hereafter in effect
relating to creditors rights, and to general principles of
equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(c) No Event of Default has occurred and is continuing, and the
representations and warranties of Borrower in the Agreement and
other Loan Documents delivered pursuant thereto are true and
correct in all material respects as of the date hereof as if
made on the date hereof.
(d) The officer of Borrower executing and delivering this Fourth
Amendment on behalf of the Borrower has been duly authorized by
appropriate corporate resolutions to so execute and deliver this
Fourth Amendment.
5. Counterparts. This Fourth Amendment may be executed by the parties
hereto in one or more counterparts and all such counterparts, when taken
together, shall constitute one and the same Fourth Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
become effective as of the date set forth in the preamble.
BANKS: BORROWER:
UNION BANK OF CALIFORNIA, McGRATH RENTCORP, a
NATIONAL ASSOCIATION California corporation
As a Bank and as Agent
By: By: /s/ Delight Saxton
-------------------------------- -------------------------------------
Title: Title: CFO
----------------------------- ----------------------------------
FLEET BANK, N. A.
By:
--------------------------------
Title:
-----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
--------------------------------
Title:
-----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MCGRATH
RENTCORP FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,749
<SECURITIES> 0
<RECEIVABLES> 16,367
<ALLOWANCES> (650)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 339,975<F1>
<DEPRECIATION> (90,223)<F2>
<TOTAL-ASSETS> 274,776
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,824
<OTHER-SE> 91,431
<TOTAL-LIABILITY-AND-EQUITY> 274,776
<SALES> 28,494
<TOTAL-REVENUES> 28,494
<CGS> 13,997
<TOTAL-COSTS> 13,997
<OTHER-EXPENSES> 4,199
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,516
<INCOME-PRETAX> 8,782
<INCOME-TAX> 3,447
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,371<F3>
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.38
<FN>
<F1>Includes rental equipment, Land, Buildings, Land Improvements,
Furniture and Equipment.
<F2>Accumulated depreciation related to PP&E footnote above.
<F3>Net income includes reduction of minority interest in income of
subsidiary.
</FN>
</TABLE>
