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Executives

Geoffrey Buscher - IR, SBG Investor Relations

Dennis Kakures - President & CEO

Keith Pratt - SVP & CFO

Analysts

David Gold - Sidoti

Scott Schneeberger - Oppenheimer

Jamie Sullivan - RBC Capital Markets

McGrath RentCorp (MGRC) Q1 2010 Earnings Call May 6, 2010 5:00 PM ET

Operator

Welcome to the McGrath RentCorp first quarter 2010 conference call. At this time, all conference participants are in a listen-only mode. Later we will conduct a question and answer session. (Operator Instructions) This conference is being recorded today Thursday, May 6, 2010.

I would now like to turn the conference over to Geoffrey Buscher of SBG Investor Relations. Please go ahead.

Geoffrey Buscher

Thank you, Operator. Good afternoon. I am the Investor Relations Advisor for McGrath RentCorp and will be acting as moderator of the conference call today. I’d like to start by offering our apologies to anyone who had trouble getting on to the call and we are using a new conference call vendor and understand there were some glitches and again we offer our apologies and will do our best to sure it doesn’t happening again.

Representatives on the call today from McGrath RentCorp are Dennis Kakures, President and CEO, and Keith Pratt, Senior Vice President and CFO. Please note that this call is being recorded and will be available for telephone replay for up to 48 hours following the call by dialing 1-888-286-8010 for domestic callers and 1-617-801-6888 for international callers. The pass-code for the call replay is 84608475.

This call is also being broadcast live via the internet and will be available for replay. We encourage you to visit the Investor Relations section of the company’s website at mgrc.com. A press release was sent out at approximately 4:05 PM Eastern Time or 1:05 Pacific Time today. If you did not receive a copy, but would like one, it is available online in the Investor Relations section of our website, or you may call 1-206-652-9704 and one will be sent to you.

Before getting started, let me remind everyone that the matters we will be discussing today that are not truly historical are forward-looking statements within the meaning of Section 21-E of the Securities and Exchange Act of 1934, including statements regarding McGrath RentCorp’s expectations, beliefs, intentions or strategies regarding the future.

All forward-looking statements are based upon information currently available to McGrath RentCorp, and McGrath RentCorp assumes no obligation to update any such forward-looking statements.

Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to McGrath RentCorp’s business are set forth in the documents filed by McGrath RentCorp with the Securities and Exchange Commission, including the Company’s most recent Form 10-K and Form 10-Q.

I would now like to turn the call over to Keith Pratt.

Keith Pratt

Thank you, Geoffrey. In addition to the press release issued today, the Company also filed with the SEC the earnings release on Form 8-K and its first quarter 2010 Form 10-Q.

For the first quarter of 2010 total revenues decreased 8% to $61.7 million from $67.2 million for the same period in 2009. Net income decreased 16% to $6.6 million or $0.28 per diluted share from $7.9 million or $0.33 per diluted share for the same period in 2009.

Reviewing the first quarter results for the Company’s Mobile Modular division compared to the first quarter of 2009, total revenues decreased $8.2 million or 23% to $27.5 million due to lower rental and rental related services revenues and sales revenues during the quarter.

Gross profit on rents decreased $4.3 million or 26% to $12.1 million primarily due to 17% lower rental revenues with rental margins, decreasing to 59% from 66%. Lower rental margins were a result of lower rental revenues combined with flat depreciation and flat other direct costs.

Selling and administrative expenses decreased 8% to $6.6 million. Lower gross profit on rental revenues, rental related services and sales partially offset by lower selling and administrative expenses resulted in a decrease in operating income of $4.6 million or 38% to $7.5 million.

Finally, average modular rental equipment for the quarter was $487 million, an increase of $9 million. Average utilization for the first quarter decreased from 78.3% in 2009 to 68% in 2010.

Turning to first quarter results for the Company’s TRS-RenTelco division compared to the first quarter of 2009, first quarter total revenues decreased $1.1 million or 4% to $24.3 million, due to lower rental revenues.

Gross profit on rents increased $0.5 million or 9% to $6.4 million. Rental revenues decreased $1 million or 5% and rental margins increased from 30% to 34% as depreciation as a percentage of rents decreased to 50% from 55%.

Selling and administrative expenses decreased $0.4 million or 7% to $5.4 million. As a result, operating income increased $1.3 million or 62% to $3.3 million.

Finally, average electronics rental equipment at original cost for the quarter was $239 million, a decrease of $14 million. Average utilization for the first quarter increased from 61.4% in 2009 to 64.6% in 2010.

Turning next to first quarter results for the Company’s Adler Tanks division, compared to the first quarter of 2009, firs quarter total revenues increased $2.2 million or 41% to $7.7 million primarily due to higher rental revenues.

Gross profit on rents increased $1.1 million or 39% to $3.9 million. Rental revenues increased $2 million or 50% and rental margins decreased to 65% from 71%. Selling and administrative expenses increased 44% to $2.7 million. As a result, operating income increased $0.2 million or 11% to $1.6.

Finally average rental equipment at original cost for the quarter was $80 million, an increase of $32 million. Average utilization for the first quarter decreased from 64.5% in 2009 to 64.1% in 2010.

On a consolidated basis, interest expense for the first quarter 2010 decreased $0.4 million to $1.5 million from the same period in 2009, as a result of the company’s lower average interest rates, and lower average debt levels. The first quarter provision for income taxes was based on an effective tax rate of 38.8% compared to 39.1% in the first quarter of 2009.

Next, I would like to review our 2010 cash flows. For the three months ended March 31, 2010, highlights in our cash flows included. Net cash provided by operating activities was $28.6 million, a decrease of $3.3 million or 11% compared to 2009. The decrease was primarily attributable to a lower decrease in accounts receivable and other balance sheet changes together with lower operating results.

We invested $25.1 million for rental equipment purchases compared to $20.4 million for the same period in 2009, partly offset by $5.2 million in proceeds from used equipment sales in 2010. Dividend payments to shareholders were $5.2 million. Net borrowings decreased $5.3 million from $247.3 million at the end of 2009 to $242 million at the end of the first quarter 2010.

With total debt at quarter end of $242 million, the company has capacity to borrow an additional $137 million under its lines of credit and the ratio of funded debt to the last 12 months actual adjusted EBITDA was 1.94 to 1. We continued to have a solid low leveraged balance sheet.

For 2010, first quarter adjusted EBITDA decreased $3.3 million or 10% to $28.6 million compared to $32 million in 2009, with consolidated adjusted EBITDA margin at 46% compared to 48% in 2009. Our definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income are included in our press release and Form 10-Q for the quarter.

Turning next to 2010 earnings guidance, at this time based on first quarter 2010 results and our outlook for the reminder of the year, we are reconfirming our full year earnings per share guidance to be in a range of $1.30 to $1.45 per diluted share.

At this point, I would like to turn the call over to Dennis.

Dennis Kakures

Thank you, Keith. Let us go right to our results for our Modular rental business. Mobile Modular’s rental revenues for the quarter decreased by 4.3 million or 17% from a year ago to $20.6 million, sequentially from the fourth quarter 2009, rental revenues were down approximately 4%.

During the first quarter, our Modular rental business continued to face challenges particularly in the California market related to an unsettled physical landscape and high unemployment. However, during the first four months of 2010, there were some important developments in our Modular business that we believe will support higher rental revenue levels moving forward.

First in March, the State of California sold approximately $6 billion in bonds to support state infrastructure and educational facility projects. We’re hopeful that as a result of these bond sales, we will see a greater number of school modernization projects going forward. Second, we’re continuing to see an increase in larger commercial construction project opportunities in California, primarily associated with State infrastructure development and public works projects. These projects are for waterway, public transit, healthcare, roadway and other public infrastructure improvement.

What’s especially favorable about these projects, is that they are typically for larger square footage modular buildings and tend to be for multiyear rental terms. We will benefit from the income streams from these larger projects in the quarters ahead. Lastly, rental booking levels for the first foremost of 2010 were higher by approximately 25% compared to the same period in 2009 in the California market.

Moving to our Texas modular operations, we are seeing modestly improving education and commercial business activity levels thus far in 2010. As the price of oil has risen and the economy has improved, we’re seeing more business activity with refineries in the petrochemical industry.

And as the Texas student population continues to grow at 70,000 plus pupils annually, we’re seeing more pressure on school districts and their facilities needs. In Florida, we’re seeing some lift in educational rental booking levels during 2010 as compared to 2009. We’re anticipating November 2010 constitutional amendment ballot measure on cost price reduction and potentially increasing the original laws for prior student-teacher ratios.

60% voter approval is required for passage, ideally we would like to see the laws original student-teacher ratio requirements met at the individual class room level, which have to implemented by districts versus at the school average class room level as has been proposed in the ballot measure.

However, we believe we will still benefit if the amendment passes, this is due to some school districts having chosen not to move forward with meeting the school average class room student-teacher ratios until the determination was made on potential student-teacher ratio changes from the original legislation.

Moving to our Commercial Modular business in Florida, we continue to face the challenges of lower business activity levels and a highly price competitive environment we are hoping for improved market conditions and higher business activity levels as the Florida economy recovers going forward. As a result of the continued challenges we faced across our Modular Rental division during the quarter, period end utilization feel to 67.6% compared to 69% at the end of the fourth quarter 2009.

We are hopeful that further downward pressure in utilization is limited. It’s important to keep in mind that our Modular Rental business results tent to behave differently than other types of businesses during the economic recession and recovery. During the down turn due to a large install base of rental contacts, but orderly return of equipment over time as customer’s needs are fulfilled tends to lower rental revenues gradually.

The same dynamic applies during the recovery and that new rentals coming online at the lower installed base of rental contracts and builds over time. In other words, there are typically not dramatic swings down or up with rental revenue levels in the near term. As 2010 progresses we’re optimistic that we will see higher business activity levels and improving market conditions for our Modular division, however, we expect it to remain in a very price competitive environment in all of the markets in which we operate until utilization levels begin to rise.

There also were the higher percentage of our Modular business is generated outside of California today then at any time in our history improvement in our division wide financial performance is cheaply depended on the health of and our success in the California market.

Although California has not solved its but challenges at state level and unemployment remains high, there are several more positive signs said in just a few months ago that point to likely improvement in the results going forward.

Now let me turn our attention to TRS-RenTelco results. TRS-RenTelco income from operations increased by 62% or 3.3 million quarter-over-quarter, this is also driven primarily from 13% lower deprecation expense and secondarily from various SG&A cost reductions and improved gross profit on sales of equipment. Although our rental revenue top line was down 5% quarter-over-quarter, rental business activity levels and bookings increase significantly during the latter part of the first quarter and are continuing. This new business activity is much stronger than a year ago and is being driven by a variety of electronics in markets including semi conductors and aero space and defense.

We’ve done a good job of taking cost out of the business by selling under utilized equipment and lower depreciation expense, as well as having made adjustments in our staffing levels. In the first quarter our gross margin percentage on sales was 36%, which is consistent with the past few quarters and speaks to the health of the secondary broker and end-customer sales markets.

Ending first quarter utilization increased to 65.8% compared to ending fourth quarter 2009 utilization at 63.1%. Due to the higher business activity in booking levels, we are experiencing with our electronics business and adjustments we’ve made in our cost structure, we would expect these items to influence favorably TRS-RenTelco’s quarter-over-quarter results in the second quarter of 2010.

Now let’s turn our attention to Adler Tank Rentals. Our Tank Rental business produced a 50% increase in rental revenues to $6 million from a year ago. The strong increase was directly related to higher business activity levels supported by the addition of new branch locations increasing the size of Adler sales force and expanding Adler’s rental equivalent inventory.

We are seeing a wide variety of market segments, including industrial plant, we’re seeing a wide variety of market segments including industrial plant, petrochemicals, pipeline, oil and gas, waste management, environmental field service and heavy construction.

Although quarter-over-quarter income from operations increased only the 11% compared to the higher increase in rental revenues, this is a function of our continuing investment in new employees and other start-up expenses associated with ramping the other business nationally.

Business activity levels and booking have continued very favorably into the second quarter of 2010. Period end utilization for the first quarter of 2010 increased to 64.1% compared 56.5% at the end of the first quarter in 2009. Looking forward we are very enthusiastic about prospectus for Adler becoming an increasingly significant contributor to McGrath RentCorp’s earnings.

Now let me take a moment and update everyone on our newest organic initiatives. First, TRS-Environmental, our environmental test equipment rental initiative made very favorable strides in growing its number of opportunities rental customers and rental revenues throughout the first quarter of 2010.

In addition, April was our highest rental booking month to-date and our outlook for the remainder of the year is very positive. We believe that as the economy improves and project work increases coupled with our country’s increasing sensitivity on environmental matters, we can become a significant rental provider in the environmental test equipment industry.

Our portable storage initiative continued to make good progress during the first quarter 2010 rental revenues continued to increase on a sequential quarterly basis in the first quarter of the New Year. We are working hard at a expanding our portable storage business in the California, Texas and Florida markets and we’re continuing to explore smaller fleet acquisition opportunities to accelerate our growth. We also continue to add sales professionals and operations staff in growing the business.

Lastly, our Mid-Atlantic modular expansion continues to achieve favorable growth, quarterly rental revenues increased sequentially during the first quarter of 2010 as they have done during each quarter 2009. We’re continuing to make good progress in capturing new educational classroom rental business with our innovative class room products designed specifically for these markets.

We’re also growing our level of commercial market opportunities. Our outlook for growing the base of rental revenues and profitability for the Mid-Atlantic region during 2010 is very positive. Keep in mind that all of these initiatives are relatively small today compared to our legacy panel businesses and Adler Tank rentals, collectively between our environmental test equivalent, portable storage in Mid-Atlantic initiatives, they’re contributing on an annualized basis just over $5 million in rental revenues. It should also be noted that these results were achieved during a severe recessionary period. That being said, we believe that we will be able to grow the current base of rental revenues for each of this new initiatives to much higher levels as we move forward in an improving economy.

Now for some closing remarks, essential to our overall earnings improvement are the recovery of our California modular classroom and commercial rental markets. The good news is that we are seeing some positive science to support higher rental revenues including the $6 billion in State bond sales in March in part to support additional school modernization projects and increased number of larger commercial constriction project opportunities primarily associated with state infrastructure and public works project and a solid increase in our rental booking levels in California for the first two months, four months of 2010 over the comparable period in 2009. What is less certain is the timing of when will see a more significant level of school modernization project opportunities.

I can be more enthusiastic about all of the positives McGrath RentCorp has working for today, towards generating higher rental revenues earnings and share value through both our legacy and new rental businesses.

The broader platform of rental products in geographies in place today, should serve our future earnings growth very favorably. And will be on employees and their ability to execute on all of our plans that will make the difference.

So let’s come to work each day with enthusiasm and an understating of the opportunities before them in making each of our businesses significant in scale highly profitable and better then the best of our competitors. They are in the sweet spot and working on creating competitive differentiation, growing the customer base and refining our operating models. They are our most important asset towards the achieving success.

It shouldn’t go unmentioned that 2009 marked the 18th consecutive year that McGrath RentCorp has increased its dividend. At our current share price, a dividend yield is approximately 3.5%. We believe that McGrath RentCorp’s shares offer the best to both worlds. We have a very favorable growth platform to support higher earnings and share value levels, and quarterly, our investors receive a return on their investment in the form of a cash dividend.

Finally, we invite you to join us at our up coming shareholders meeting on Tuesday, June 8, at our corporate headquarters in Northern California Sales and Inventory Centre in Livermore, California. If you are attending during your visit we will be pleased to provide you with a tour of our 140 acre facility and in particular our modular portable storage and tank rental products and operations.

And now Keith and I welcome your questions.

Question-and-Answer-Session

Operator

(Operator Instruction) Your first question comes from the line of David Gold with Sidoti.

David Gold - Sidoti

A couple of questions for you, one, wanted to get a little more color if you can, basically on how best to think about California? Obviously, it’s tough for all of us, I guess for you guys as well. But I guess there was a big quite decision yesterday, and if I understood it right, it allows the governor to take a couple of billion dollars that were being held for redevelopment and transfer it to school operations.

Does that affect to you? Does that basically pull from redevelopment funds that potentially would have been put to schools? Doesn’t that make you think that’s it’s more likely that we’ll see dollars going to basically operating, keeping the schools going for over a little bit longer then to redevelopment any time soon?

Dennis Kakures

David, I’ve read the headline on that today, and I just read the brief opening, quite frankly, I don’t think its very material towards us and the dynamics of modernization of schools with our bond sales that support that, the local school districts are flushed with bond monies. So I think now with the bond sales in March, the $6 then effective state just sold, was able to sell 3 billion in bonds yesterday, which are actually to refinance some debt, but I think the landscape of these bond sales in March and the austerity that has occurred over the last year to 18 months for schools. I think for bodes well for us going forward. I’m going to read more on that which you shared in terms of the Governors ability to borrow, but…

David Gold - Sidoti & Company

It might be steeling not borrow.

Dennis Kakures

At the end of that, I just don’t think it would be material. And if we determine to be more we’ll certainly share them off, but I just don’t think it is from everything I had read prior to that was being proposed, I don’t think there were a lot of shock waves that we felt here.

David Gold - Sidoti & Company

Okay and then I guess part two of that, as we think about the sort of likely outcome for I don’t know the next unanimous, presumably you guys, California still has to pass the budget and then once that happens, I mean, I guess we still have a big gap, but once that’s all sort of set and done, do we think that you see some more off-season rental this year because of that pent-up demand or do we sort of miss most of the booking season after say out for another nine months?

Dennis Kakures

Yeah, I think quite frankly, I think it’s a mixed bag, I think there were some districts that if the funding is there they are going to move forward and now that the state has sold bonds and also the local [coppers] are fairly forward bond monies. I think it’s a mixed bag and I think we’ll see some more bookings before the end of the ordering seasonal this year. I wouldn’t be surprise if we saw some off-season activity. So, hard to tell at this point, but feedback from districts is that there is a mix so.

David Gold - Sidoti & Company

Okay, and then can you speak a little bit to the mix of your equipment purchases, the $25 million that you spend, it looks like that was going into modular largely, is it containers for the new initiatives or?

Dennis Kakures

Of the 25 million roughly half went into Adler and Adler continues to be focus area for us, it was last year, it continues to be this year. Then the other important area we have started putting more capital into is our electronics business, you will see that utilization has been hedging upwards over the last few quarters and as we see more heath in that business, we’re returning to what I call a more normal turn over of the equipment tool, so you’ll see us put some more capital in there and then within modulars that does include our portable storage initiative and we’re certainly investing in that initiative as well as supporting some of the regional growth in the Mid-Atlantic.

David Gold - Sidoti & Company

And just one last if I might, pricing in TRS, it looks like and then used to come in some, what are you seeing out there?

Dennis Kakures

The price environment has been fairly stable some of what you see in price changes is mix of equipment? And that is probably the biggest dynamic there, what you have, the general price. You are doing more general propose equipment rentals that has low rental rate at longer life as opposed to communications. So when you look at those numbers of Q1, that’s probably what’s you seeing?

Operator

Your next question comes from the line of Scott Schneeberger with Oppenheimer.

Scott Schneeberger - Oppenheimer

I think I didn’t see in this press release, what we had talked before with the annual guidance on the top line or will you start feel for that modular down in the single digit, mid-single digit, is that still what we are talking about for that segment?

Keith Pratt

Yeah, I don’t know we quantified what the decline would be in modules, but certainly we did say that for 2010 on the rental revenue side modulars we fully expect to be lower than 2009 and then we expect some growth at TRS and at Adler. And then that has the potential to add actually low single digit percentage increase at the consolidated level for rental revenues.

Scott Schneeberger - Oppenheimer

It sounds like nothing is really off from that outlook at this point?

Keith Pratt

No, no general change.

Dennis Kakures

A comment just to add to that is, we had a very nice uptick in booking in the first four month in California and X amount of those bookings are not in the billing system yet, I mean they have shipped but not billed. And overall for division, they are up about 15% of course California being the biggest part of that. So, in this school orientation is not completed yet in terms of what will be in there that will flow into late Q2 and Q3.

Scott Schneeberger - Oppenheimer

Switching on swap, on the matter of modulars, how did the mix work, with initiative in the Mid-Atlantic, our roughly how big is California anymore, just tell me any grading where you can provide with regard to California Texas, Florida, Mid-Atlantic?

Dennis Kakures

Well, California is probably somewhere in the 65% to 70% of total rental revenues for the modular division, Keith, I think that’s fairly consistent.

Keith Pratt

Correct.

Dennis Kakures

And as you know the Mid-Atlantic is considerably smaller than our other divisions, however, it’s growing very nicely. We won’t for competitive reasons break out just how well we are doing there, but it has grown sequentially for the last five quarters very favorably. When you look at Texas and Florida, they are certainly down from their higher levels, but starting to show recovery in those percentages or make up the bulk of problem about even between the two of them that make up the difference there.

Scott Schneeberger - Oppenheimer

And then similar to modules I was curious about the commercial construction project opportunities you are seeing. Could you take us little deeper and tell us what’s driving that, just infrastructure or broader?

Dennis Kakures

What’s driving it is in parts and Federal stimulus monies, but also state bond money sales that few years ago we had $30 billion in bond sales in November of ‘06 and those bonds are lot of that work got deferred and we’re starting to see some impact from that and it’s very broad-based I mean we’re seeing transportation systems, bridges, dams, roadways every type of almost public works type project you can think of and that in some respect kind of manage a little bit of the FDR era and that leading the country out of recession, so California is work is plentiful. We’ve seen very strong first four months of that type of activity and as I mentioned in my prepared comments that good news is, a lot of that work is, in fact, almost all of it is larger building work and it’s for multi year terms, so that’s the rental that keeps on giving in the commercial market. And so there is a lot of potential good news there.

Scott Schneeberger - Oppenheimer

Okay, sounds good. Just on (inaudible) potential versus realized, are we starting to see very good realization or some more in the potential phase?

Dennis Kakures

Our booking are up and they are up in particular related to obviously school work coming online, but also commercial construction of the nature I just mentioned and that’s a big supporter when you look at the up-tick in bookings over the last year, that’s a significant part of that, but the good news is that’s continuing. I mean in my rounds with our sales force just this morning talking about what is in the opportunity pool, it just feels very good, lead along what we booked today.

Scott Schneeberger - Oppenheimer

Just a couple more if I could, incremental investment in Adler sounds like feeding the relatively hot hand. I guess the duration; indefinitely continue to see Adler really in a multi year growth rate here.

Dennis Kakures

I don’t think there is any question we are in a multi year ramp of that business. The acquisition was finalized in December of 2008 we had a I think a very strong year and probably the most difficult year of our economy in the last seventy or eighty years and we were able to grow and the first part of this year has just been tremendous and when you look at expanding that international footprint, we’ve been making investment in 2009 and we continue in 2010, there is a lot of runway to become a very significant player and we’re making all the, what we believe are, appropriate investments to ramp that as soon as we can to take advantage of an improving economy, so we are very exited about Adler.

Scott Schneeberger - Oppenheimer

One last one from me, what are you specifically buying and selling in TRS and why?

Keith Pratt

Well, if you look at selling typically as assets get older in their age, their utilization, optimization declines and so we’re selling off older equipment as new technologies come along, but you also maintain X amount of the older, because X amount of customers still use that technology, you got it, which you need to be buying are, is the latest technology whether in communications or general purpose test equipments. So it’s really an orderly exchange of older going out, newer coming in. As I mentioned in my prepared comments, the margins are holding very nicely in our new sales numbers.

Operator

(Operator Instructions) Your next question comes from the line of Jamie Sullivan with RBC Capital Markets.

Jamie Sullivan - RBC Capital Markets

In TRS, if you listen to what some of the OEMs and instrumentation providers talk about, they seem to be really exceeding their plans and kind of ahead of schedule versus expectations. I’m just wondering, is that sort of how things have trended for you in TRS, I know there are lot of puts and takes in other parts of the business, but is TRS still kind of running hard versus your expectations?

Keith Pratt

They’re running very favorably, I mean if you look at bookings for the first four months of 2010 over 2009, we’re up about 21% and it feels like the business is improving from there. So April was a strong month so, with this trend later in the quarters here we’re seeing in Q1 we saw improvement and then April if you look at our, we actually have a rent ability number and now it was up nicely over March so the trajectory feels very good in speaking with division management that the pipeline also feels very good; and you know the first part of the year, there were some seasonality that business on the communication side. So we would expect the later part of year to you have more opportunities in that part of the business, the first part of the year was predominately related to general purpose you know that’s where we’ve seen the ramp, so we feel very optimistic about the rest of the year.

Dennis Kakures

Jamie through pointing out for that division typically that first quarter is a seasonally slower time for business and so, I think we were pleased with what we saw in terms of results from the first quarter and we typically expect to see the business growing from that point forward.

Jamie Sullivan - RBC Capital Markets

Then I guess moving to modular, I think you said, California booking there up 15% at year-to-date.

Dennis Kakures

Actually, California was that approximately 25%

Jamie Sullivan - RBC Capital Markets

25% year-to-date and what is the up at a similar level sequentially or we coming off of a real draft that’s from 1,209

Keith Pratt

There’s no question, 2009 was a challenging four months as measured against, and I don’t have in front me to for as somebody looking for that right now.

Jamie Sullivan - RBC Capital Markets

So move on to next one, let’s you have in handy?

Dennis Kakures

Let’s walk you in an excellent. In meantime, we’ll do the quick math on that.

Jamie Sullivan - RBC Capital Markets

Do you mention the California bonds that the $6 billion, where those general obligation bonds?

Keith Pratt

There are about non-taxable, there’s a variety of bonds, but the majority of general obligation.

Jamie Sullivan - RBC Capital Markets

It sounds if you’re description with the state and the districts both have a fair amount of cash to put the work at this point --?

Dennis Kakures

What some districts did was actually through their local bond sales. They actually, I think they fund it themselves and they’re reimbursing themselves, money is coming in from the State, when they will coming in the future that’s how favorable local bond sales have been over the last couple of years.

Jamie Sullivan - RBC Capital Markets

So I’d say they’re up nicely from Q4.

Dennis Kakures

Yes, we’re actually doing that. Did you get Jamie?

Jamie Sullivan - RBC Capital Markets

Yes, up nicely, so year-over-year --?

Dennis Kakures

Actually, we did the quick look and Dave is actually doing the math, but we should be up very nicely so.

Jamie Sullivan - RBC Capital Markets

So I guess with the money flow in California, is there a milestone that we can pay attention to watch for, is the money works its way through, or is it simply decisions that close the trigger because the money is just there ready to go when the projects are already laid out?

Dennis Kakures

My understand, how the system works is that state, goes out in sales the bonds and then they determine how the money gets distributed amongst the different states, other educational or other infrastructure needs and so we typically, find out fairly quickly up to the bonds sales, how the money is going to be spend, but we know when the dollars are as bigger they are and with the other information we’re getting on from our [log] is that there is favorable amounts going towards education and we also benefit on the other going to infrastructure development and that’s what we’re seeing now in the higher booking levels in Q1 and the opportunity pool increasing in a related state accounting local government infrastructure and I also might mention university systems on the Community College level as well.

Keith Pratt

I would say Q1 bookings were roughly double, what we saw in Q4 and again you have to keep in mind seasonally, typically in education, it’s Q4 tends to be a slower period for bookings, so up substantially and with the caveat it’s not necessarily an apple-to-apple in it bookings for education or not has significant in Q4 as they would be in Q1.

Jamie Sullivan - RBC Capital Markets

Alright I guess and how do cancellations were in education, if they put know and for some reason the projects now move forward in the fall, is there a cancellation fee, how does that work?

Dennis Kakures

I’m going to honest with your cancellations or extremely rare when you book a school project or a large project. So typically if it’s a standard product and I got cancel in your held inventory and someway and you could start seeing, but cancellations are just not a common occurrence at all.

Jamie Sullivan - RBC Capital Markets

Then just one last one and then I’ll hop off. So TRS booking is very strong, Mobile Modular bookings very strong, typically have pretty good visibility their. I’m wondering was that sort of what you were planning or is that, we kind of ahead of schedule. I’m just wondering in terms of the guidance with that towards the higher end of the range or --?

Keith Pratt

I characterize things if I can. I think Modular is favorably strong. I’d say electronics is filling considerably favorable and stronger. I would say Adler is very, very strong. We see with our new initiatives, they’re both doing very favorably and in particular portable storage is continuing to hit some very good numbers month-after-month, so that all I would kind of sum it on.

Dennis Kakures

I think Jamie somebody said earlier that thing to keep in mind is these comparisons are against to very weak year in 2009. I think we expected to see a bounce back in 2010 and I think the common share hearing say yes, we’ve been seeing that from a bookings point of view and in some of the parts of the business, it’s already reflecting in rental revenues and other parts of the business. It will take a little longer to work through, but I would say things are playing out; broadly inline with what we would expected if you look at the business is all.

Keith Pratt

We might also had that keep in mind for Modular that the school piece of things typically, you’re not going to see income statement impact for the most part of Q3 because most of those project shift laid in Q2 or during Q3. So that’s the typical way that product works.

Operator

At this moment, I’m showing there are no further questions. Gentlemen, I’d like to hand the call back to you for closing remarks.

Geoffrey Buscher

Thank you all for joining us on this afternoon’s or this evening’s call and we have our upcoming annual meeting here and we love to see as many of you as we can and if you can’t otherwise it will be webcast and you can listen in them. So thank you all for your continuing support. Have a nice evening.

Operator

Thank you for you participation on today’s conference. This concludes your presentation. You may now disconnect. Have a great day.

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