Geoffrey Buscher - IR Dennis Kakures - President and CEO Keith Pratt - Senior Vice President and CFO.

Scott Schneeberger - Oppenheimer David Gold - Sidoti Joe Box - KeyBanc Capital Markets Fred Poso - Schroder.

Welcome to the McGrath RentCorp Second Quarter 2014 Conference Call. At this time all conference participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions on how to signal for a question will be given at that time.

(Operator Instructions) This conference is being recorded today, Thursday, July 31, 2014. I would now like to turn the conference over to Geoffrey Buscher of SBG Investor Relations. Please go ahead..

Thank you, Operator. Good afternoon. I’m the Investor Relations Advisor of McGrath RentCorp and will be acting as moderator of the conference call today. 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 seven days following the call by dialing 1-888-203-1112 for domestic callers, and 1-719-457-0820 for international callers. The pass code for the call replay is 9026752.

This call is also being broadcast live over 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 today at approximately 4:05 PM Eastern Time or 1:05 PM Pacific Time.

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 related 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..

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 the Form 10-Q for the quarter. For the second quarter 2014, total revenues increased 10% to $95.7 million from $87.2 million for the same period in 2013.

Net income increased 4% to $10.2 million from $9.8 million and earnings per diluted share increased 3% to $0.39 from $0.38. Second quarter 2014 results included a $0.8 million non-operating gain on sale of an excess property, which contributed $0.02 per diluted share.

Reviewing the second quarter results for the company’s mobile modular division compared to the second quarter of 2013, total revenues increased $7.8 million or 26% to $37.3 million due to higher sales, rental and rental related services revenues.

Gross profit on rents increased 0.5 million or 6% to $9.2 million, primarily due to higher rental revenues, partly offset by a decrease in rental margins to 41% from 44%. Lower rental margins were primarily a result of $1.8 million higher of the direct cost for labor and materials and 0.4 million higher depreciation.

Selling and administrative expenses increased $1.5 million or 18% to $10.1 million primarily as a result of increased employee headcount, salaries and benefit costs.

Higher gross profit on sales, rental and rental related services revenues partly offset by higher selling and administrative expenses, resulted in an increase in operating income of $0.3 million or 12% to 3 million. Finally, average modular rental equipment at original cost for the quarter was $585 million, an increase of $45 million.

Equipment additions supported growth across all regions and at our portable storage business. Average utilization for the second quarter increased from 66.8% to 70.3%.

Turning next to second quarter results for the Company’s TRS-RenTelco division compared to the second quarter of 2013, total revenues decreased $1 million or 3% to $32.1 million, primarily due to lower rental and sales revenues. Gross profit on rents decreased $1.2 million or 10% to $11.2 million.

Rental revenues decreased $0.9 million or 4% and rental margins decreased to 46% from 49% as depreciation as a percentage of rent increased to 42% from 38%. Selling and administrative expenses decreased $0.3 million or 5% to $6 million, primarily due to decreased marketing and administrative costs.

As a result, operating income was flat at $9.1 million. Finally, average electronics rental equipment at original cost for the quarter was $261 million, a decrease of $3 million. Average utilization for the second quarter decreased from 63.5% to 59.3%.

Turning next to second quarter results for the Company’s Adler Tanks division compared to the second quarter of 2013, total revenues increased $0.8 million or 3%, to $25.2 million, primarily due to higher rental and rental related services revenues partially offset by lower sales revenues.

Gross profit on rents increased $0.5 million, or 4% to $12.3 million. Rental revenues increased $1 million, or 5%, and rental margins decreased to 66% from 67%. Lower rental margins were primarily due to $0.4 million higher depreciation expense.

Selling and administrative expenses increased $1.8 million or 14% to $6.9 million, primarily due to increased bad debt expense, and employee headcount salaries and benefit costs. As a result, operating income decreased 0.6 million, or 9%, to $6.7 million.

Finally, average rental equipment at original cost for the quarter was $287 million, an increase of $26 million. Average utilization for the second quarter decreased from 65.8% to 63.2%. On a consolidated basis, interest expense for the second quarter 2014 increased 8% to $2.3 million from the same period in 2013.

As a result of the Company’s higher average debt levels and higher average interest rates. The second quarter provision for income taxes was based on an effective tax rate of 39.2%, unchanged from the second quarter 2013. Next, I’d like to review our 2014 cash flows.

For the six months ended June 30, 2014, highlights in our cash flows included net cash provided by operating activities was $55.2 million, a decrease of $11.1 million compared to 2013.

The decrease was primarily attributable to a lower increase in accounts payable and accrued liabilities and increase in accounts receivable, lower income from operations and other balance sheet changes.

We invested $68.1 million for rental equipment purchases, compared to $56.2 million for the same period in 2013, partly offset by $13.8 million proceeds from sales of used rental equipment. Property, plant and equipment purchases increased $1.9 million to $6.1 million in 2014 and we received $2.5 million from the sale of an excess property.

Net borrowings increased $17 million from $290 million at the end of 2013 to $307 million at the end of the second quarter 2014. Dividend payments to shareholders were $12.8 million.

With total debt at quarter end of $307 million, the Company had capacity to borrow an additional $243 million under its lines of credit, and the ratio of funded debt to the last 12 months actual adjusted EBITDA was 1.9:1.

For 2014, second quarter adjusted EBITDA increased $1.9 million, or 5%, to $48.2 million compared to the same period in 2013 with consolidated adjusted EBTIDA margin at 42%, compared to 44% in 2013. Our definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income are included in our press release for the quarter.

Turning next to 2014 earnings guidance, our 2014 full year earnings guidance range remains unchanged at a $1.70 to $1.85 per diluted share. Now I would like to turn the call over to Dennis..

Thank you, Keith. Now let’s take a closer look at rental business for the quarter. Modular division wide rental revenues for the quarter increased $2.7 million or 14% to $22.7 million from a year ago. This is the fifth consecutive year over year quarterly rental revenue increase for our modular division.

During the second quarter, we experienced a 29% increase in division-wide year-over-year first month’s rental revenue bookings for modular buildings with an increase of 23% in California and 33% outside of the state. Our favorable modular building rental booking trends have continued to date in the third quarter of 2014.

We're also continuing to see rental rates rise for various types of products as demand exceeds readily available supply. Modular division average and ending utilization for the second quarter 2014 reached 70% and 72% respectively, an increase from 67% and 68% a year ago.

This is the highest modular division second quarter average utilization level since 2009. Modular division income from operations for the quarter increased by $0.3 million or 11% to $3 million from a year ago.

The lower percentage increase in income from operations compared to rental revenues is primarily due to higher divisional booking levels and a significant increase in related inventory center cost for labor and materials to prepare and modify equipment for rental.

This is compounded by waiting to redeploy various rental assets that had been sitting ideal for extended time frames, which tend to have higher processing cost than inventory that turns more frequently.

In fact, inventory center cost, primarily for the preparation of modular building booked orders and anticipated near term orders were approximately $1.8 million or 23% higher than during the second quarter a year ago. These expenditures reinforce our belief that our modular building rental business has experienced a strong turn around.

Keep in mind that almost all of our inventory center cost for building preparation and modification work are expensed in the quarter which they are incurred. However, we benefit from the associated rental revenue stream from such expenditures in the quarters ahead.

Over the past few quarters we have begun to experience year-over-year rental revenue and utilization lift associated with these higher than normal inventory center expenditures. We also had higher SG&A expenses during the quarter from a year ago.

These costs were primarily related to increased sales and operation staffing levels to support the recovery of our modular rental business, as well as the continued expansion of our portable storage rental business. Finally, some of these increased costs were offset by higher gross profit on sales of equipment from a year ago.

Now let’s turn our attention to Adler Tank Rentals and their results. Rental revenues at Adler Tank Rentals, our liquid and solid containment tank and box division increased by $1 million or 5% to $18.7 million from a year ago. The year-over-year increase in rental revenues was driven by growth in branch locations open less than two years.

Average utilization was 63% for the quarter, which was down from 66% for the same period a year ago but up from 61% during the first quarter of 2014.

Average equipment on rent for the second quarter of 2014 was $181 million, compared to a $171 million during the same period a year ago, albeit on a higher average equipment level of $287 million in 2014, compared to $260 million in 2013.

Despite downward pressure on 21K tank asset utilizations levels and rental rates, we have continued to purchase boxes and specialty tank products to support market demand and to round out our fleet offerings in our newest markets. Overall, fleet average monthly rental rates for the quarter remain relatively flat at 3.44% compared to 3.45% a year ago.

We have been able to offset some of the downward pressure on rental rates to 21K tank assets by renting larger quantity of box and specialty tank products that have higher average monthly rental rates and yields, with shorter average rental terms.

At current utilization and inventory levels, our new equipment purchases likely will decrease significantly over the next 12 months as we have meaningful earnings horsepower potential from our existing pool of rental assets.

Adler is serving a wide variety of market segments including industrial plant, petrochemical, pipeline, oil and gas, waste management, environmental field service and heavy construction.

By design, we have pursued and have been successful in generating higher business activity levels across a broader mix of non-tracking and historically less volatile vertical markets. Fracking related rental revenues made up 12% of total rental revenues for the second quarter of 2014.

Despite higher rental revenues for the second quarter, Adler Tank Rentals income from operations decreased by $0.6 million or 9% to $6.7 million from a year ago.

The decline in income from operations was primarily driven by $0.8 million or 14% increase in SG&A expenses chiefly related to a single account bad debt write-off, increased employee headcount salaries and benefit costs and secondarily by an increase in rental equipment depreciation expense of $0.4 million or 11% from the same period a year ago.

As I shared earlier in this year, we have elected not to pursue any further geographic expansion during 2014 for our tank and box rental business. With having opened nine new locations since 2012, it is essential that we execute on making all of these new market investments successful before expanding our footprint.

Adler’s management team is working hard to refine its sales, operational, and administrative structures and processes in order to expand margin and enhance the customer experience. Now let me turn our attention to TRS-RenTelco and their result.

Rental revenues for TRS-RenTelco, our electronics division declined by $0.9 million or 4% to $24.4 million from a year ago. Average utilization for the second quarter fell to 59% from 64% year-over-year. However, ending second quarter utilization for 2014 with 62%, down only slightly compared to 63% in 2013.

The decline in rental revenues is primarily related to a greater churn of rental equipment. Although first month’s rental bookings are approximately 9% higher over the first half of 2014, compared to the same period in 2013, first month's rental returns are about 8%.

The combination of relatively flat net first months rental booking growth, coupled with shorter average rental terms in 2014 year-to-date compared to the first half of 2013 drove the lower rental revenue level.

We believe the increased churn of rental equipment is chiefly driven by a larger mix of communications versus general purpose test equipment business compared to a year ago. Communications test equipment rentals typically have shorter rental terms and for general purpose test equipment.

Despite the year-over-year quarterly rental revenue decline, income from operations was flat at $9.1 million. As compared to the same period in 2013 during the second quarter of 2014 we benefited from increased gross profit on equipment sales, lower SG&A and laboratory costs, partially offset by higher equipment depreciation expense.

Now let me take a moment and update everyone on our portable storage business. Mobile Modular Portable Storage continued to make good progress during the quarter in building its customer following, increasing booking levels and growing revenues, rental revenues from a year ago. Rental revenues for the second quarter of 2014 grew by 40% year-over-year.

Individual branch, as well as overall business segment profitability is continuing to grow. We entered the greater Chicago and Charlotte markets earlier this year and are looking forward to their contribution to our portable storage rental business long term financial success.

We are pleased with the progress we have made to-date towards building a meaningful sized storage container rental business with attractive operating metrics. Now for a few closing comments. Our full year EPS guidance range of $1.70 to a $1.85 remains wide due to the many moving parts to our portfolio of rental businesses.

Currently the most material variables include one, the strength of the recovery underway in our modular building division; two, increasing utilization levels of our liquid and solid containment tank and box rental business assets; three, the potential for further softness in general purpose test equipment rental demand in our electronics division; and four, no meaningful slowdown in modular building rental opportunity anticipated over the next few quarters.

With an eye in 2015 we may elect to invest in additional modular building preparation work completed in 2014 to support capturing a larger portion of the strong business activity levels we continue to experience. We are excited about the current strength and earnings outlook for a modular building rental business.

We have made a significant amount of investment in our tank and box modular and portable storage businesses over the past few years that have created near term EPS headwinds. These investments were made with significant forethought towards creating materially higher earnings levels in our future than if we had not made them.

We are working very hard to realize these objectives. Last, please keep in mind McGrath RentCorp has a very strong balance sheet for the funded debt to last 12 months actual adjusted EBITDA ratio of 1.9:1 and with the current capacity to borrow an additional $243 million under our lines of credit.

We can be very opportunistic in growing our business lines with the availability of such funding. We are committed to making each of our rental businesses meaningful in size and earnings contribution and with the best operating metrics by industry. We plan to continue to make favorable strides during 2014 towards achieving these goal.

And now Keith and I welcome your questions..

(Operator Instructions) First we’ll go to Scott Schneeberger with Oppenheimer..

Dennis, let's start out with California and what you anticipate for potential bond in the fall, updates on what you're hearing on the political front there, please, as it relates to Mobile Modular?.

With respect to the educational facilities bond, that has been in discussion for November 2014, we should know definitively within about two weeks whether or not there is going to be one on the ballet. The bond measure has received wide support from the educational community, from the trade unions, from the teachers union, as well as from parents.

However, the Governor is not aboard at this juncture. So you have a legislature that’s supporting it and these other impacted groups but the governor for variety of reasons, not the least of which he thinks that there perhaps should be a new funding medium rather than the state providing 50% of the funding through bonds.

And at this juncture there is not agreement on how to move forward.

Two weeks to go here is the timing and there's going be plenty of activity in terms of promoting -- supporting a bill to put before the Governor by these different groups and parties and we’ll have to see how that nets out here by really mid-August, which is pretty much the deadline to be able to get to something on the ballot.

But that’s the current status..

Thanks. And could you give us an update with regard to the size of the bond, what’s been proposed originally, has it changed, has it been maintained? Obviously the whole bond itself is in question. But could you just discuss magnitude of what it could be? Thanks..

The most recent information that I have -- that has been shared with me in discussion has been anywhere from $2 billion to $5 billion and my understanding within that range that the modernization of public school K-12 in particular good get the lion's share but again that purely what’s being discussed amongst different groups but without anything definitive.

But I think the latest numbers are from $2 billion to $5 billion.

Needless to say even a few billion dollars in support of monetization work will be very significant over the next few years until either a new funding mechanism gets agreed upon in terms of the state's contribution or we get back on track with the standard of stabilized bond fundamentals as we’ve done historically..

Thanks. In California, with regard to that, you said you might spend more next year with regard to CapEx on modulars, and it sounds like you're seeing a lot of demand. How much does the bond impact weigh on that? And how broad-based geographically is the demand that you're seeing? Thank you. .

Just to level set here, this is not capital expenditures, this is expense in our inventory centers for labor, materials to prepare equipment. So this is all expensed out within the quarters. It incurs the great majority of it. So the demand side of things has been very strong over the past 12 to 15 months.

It’s been very strong right through the end of July.

What we’re seeing currently as we already have some significant orders that are going to be coming online in 2015 that are educationally driven and from what we are seeing in our pipelines from an educational demand standpoint, independent of whether a bond measure is passed or not is very favorable.

And some of this is driven by school districts that already have funding in place but just hadn’t moved forward with their projects or districts that are funding it 100% themselves, because they have the funds to do so.

So again, I just want to underscore independent of whether or not a bond measure gets passed this year, the momentum that we’re seeing from what had been pent-up demand in the state is starting to play itself out and school districts moving ahead and that’s a good thing for us.

The bond measure passing at this juncture would be icing on the cake for next year but if there was no bond this year and not another medium next year, then we feel that impact in 2016. So at this juncture we feel pretty good about 2015 from a bookings standpoint for schools in California..

Then just one more from me and we'll go over to TRS-RenTelco. In telcom versus general-purpose, could you just take us a level deeper within each, as far as what you're anticipating going forward? Some good color in the prepared remarks, but just a little bit more elaboration on each and then taking a step back, we’re in a hiccup right now.

Do you think it is a hiccup? Do you think it is something that could be longer term? How solid is your visibility at the moment?.

Well, first of all our belief on the general purpose side as to add to why there has been slowness and by the way this has been around now for just about a year is both from the semiconductor industry slowness as well as from more on the aerospace and defense but more on the defense piece of that. So those are what we believe is driving it.

How long it continues we don’t know and we can’t put our finger on anything else that is really having that -- driving the slowness in those verticals. So that’s just where we stand presently.

If you look at the manufacturers as well as of test equipment, they’re echoing the same things that we are for the most part in that they’ve seen their business levels down in those related sectors and those are just the current dynamics. We hope that we start seeing turnaround by now, but we haven’t yet.

So we’ll just have to see how this continues but there is nothing else that we can really point to at this junction..

Next we’ll go to David Gold with Sidoti..

So I wanted to follow up and see if we could get some additional color. I think now you called out on the investment costs during the quarter $1.8 million incremental year-to-year, if I got that right. And just wanted to see if you can give some sense on a couple of things; one, what the balance of the year could look like.

And then two, there was a small reference in the release towards having an eye towards 2015, you may elect to invest in additional preparation work. Just some color on that commentary as well.

How should we interpret that?.

David, just a couple of comments to try and be helpful. I think that second quarter level of expenditure and you're right, it was $1.8 million higher than the previous year, that should be our key quarter for the year and so what we're expecting a sequentially the number will drop in Q3 and then likely drop again in Q4.

The degree of those drops is really what Dennis discussed earlier in his remarks, as we look at the health of demand and potentially preparing some units in 2014 and incurring expense but they are units we expect to go out early in 2015. So those are some of the factors at play..

Got you. Okay. So there is already that spend baked in there, right, for the second half? I guess what I was curious on was, as I said, the wording in the release was along the lines of we may elect to invest. Just wanted to get a sense for if we elect to invest.

Is it fluid? Is it a function of, yes, there are orders or there's a pipeline that you're looking at, but if the orders come in, you will step up the investment spend? Or is it not quite that simple?.

Well, right now when you look at utilization, utilization is rising between 70% and 72%. If you look at any utilization and - the one we say 72%, we want to take full advantage of the demand while the demand is here.

So that could mean that if we are seeing the demand continue strongly into 2015 and that means in order to realize the higher utilization levels as early next year as possible, it means preparing equipment this year, we would gladly do that.

To what degree that demand will be there a lift, in terms of opportunity we don’t know but it’s really a good problem to have, that we didn’t take advantage of it. Yes, that would help EPS this year but it would be at the expense of higher EPS in future years. So demand has stayed strong.

How significant the demand will remain going forward, we feel good about but we don’t -- it’s hard to understand here how that will flow especially towards the end of the -- especially in the fourth quarter..

Got you.

Okay, so if that did happen and again, going back to the wide band of guidance, if you do see those demand drivers and you do elect to spend a little bit more, could that take you below, say, the low end of guidance? Or are we talking about something that’s within that band?.

I think that the later that we would be within the band, it should not take us below..

Okay, perfect. And then also, a little bit of color there by way of I guess there was some commentary as to Adler with the write-down for some bad debt. If you can just give a little color on that. .

It was one account, it was an account and it’s a gas and oil field services company that we actually have done business with for a number of years, I think probably four year relationship and they got into some -- they got overextended and we obviously collected a lot of money for them over a number of years and they obviously hit a bump in the road and were unable pay us on some monies that we expected to get from them.

So, unfortunate.

I will say this, we've really made a number of material changes in our credit quality screen, as well as in our beefing up our team and I would hope that those types of write-offs are truly an exception going forward but the gas and oil field services piece of it, obviously that’s been a sore point for Adler and hopefully we’ve got a great, great majority of those challenges behind us at this point with the changes that we’ve made.

Keith, you want to add anything..

No, I think that’s it..

(Operator Instructions) We’ll go to Joe Box of KeyBanc Capital Markets..

Just a follow-up on David's question.

So how much was the bad debt expense and if you were to x that out, would Adler EBITDA margins actually have been positive in the quarter?.

Yes. The bad debt was higher year-over-year by $300,000..

Okay.

So I don't think that would have been enough to drive EBITDA margin expansion at Adler?.

No..

Would it have?.

No..

Okay. Well, it sounds like most of your team is in place and you're kind of, happy with the infrastructure at Adler now.

So how should we be thinking about maybe SG&A on an absolute number going forward and just the prospects for margin expansion at that business?.

We really -- from an SG&A perspective we move in to lock it down to really start working with what we have, not only in terms of equipment which is obviously separate than SG&A but the staffing we have. We’ve got a few sales positions that are currently open, that our revenue generating. Those are -- they pay for themselves.

But from a staffing standpoint, driver standpoint, truck purchase standpoint, we’ve really, we’ve got the geography that we ideally want to have right now and as you can tell from my other comments our newest markets contributed nicely towards that increase.

And now it’s a time to really fine tune the business and there's not really from an SG&A standpoint we’re honing it..

We also made significant investments in systems over the last year and that’s all reflecting on the run rate of the SG&A of the Adler business..

Got it. And then on the CapEx front, you guys have been adding about $6 million to $7 million per quarter in assets just at Adler. With you being closer to where you want to be, how should we be thinking about maybe the incremental spend in that business? I think you said it was going to decline.

But does it go to $2 million? Does it go to $3 million?.

It will reduce materially from what we have been doing over the year without question and to what degree -- but it will be significantly less because we quite frankly have made the appropriate moves that we've needed to make with rounding out inventory and moving the equipment between locations.

So we feel we’re in pretty good shape right now with what we have and the mix of the equipment we have. Not that we won’t be buying some from time to time but we’ve worked hard to be able to build out the footprint and be in a position to start realizing higher profit levels..

Right. Switching over to the mobile modular business, I do just want to flesh out the rates a little bit. If you look at the rates this quarter, this is literally the first time since I think it was '07 that rates didn't decline. So kudos on that front. But in terms of maybe the pace of the recovery, I know it's going to be a slow turn.

But should we think about the rate recovery on a year-over-year basis, kind of trending in the low single digit range? Or is that maybe a bit conservative? Just any color you could give us on that front would be helpful?.

Yes. So a lot of mix issues at play there. We see different rates between educational product and commercial product. Rate can also be impacted based on the term of a contact that we sign with a customer. And you also have regional variation. So I would agree with your comment.

We were very pleased to see that metric which is a fleet wide average metric show a sign of stability and not decline for the first time in a long time. On the other hand we wouldn’t be shocked if that rate moves around a bit on us.

Really what I'd look at first is utilization, what we believe internally is, utilization is going to be the key here over the next year or two with rate following gradually and perhaps with some ups and downs along the way..

Yes. The yield dynamic, Joe, as you might have imagine, as we rent more classrooms which, we’ve got a good amount out towards and in Q2, but the largest amount will be going out in Q3 for the year. Those tend to be much longer term then commercial rentals but they go out at a lower rate.

So we much -- we’re just fine trading in term for what is a more customary lower rate product because when you look at the overall yield on that product versus commercial, it can be very attractive.

So even though you may see rate have some pressure on it, because that’s just more the typical type of class room rental rate that we would experience versus commercial..

And Joe when we look at our rate for particular types of product across various markets, various geographies, the majority of those markets are showing rate increases year-over-year..

Great. Thanks for that.

And then maybe just lastly, I apologize if I missed this; but are you still guiding 5% to 10% growth in rental revenue this year for the entire business?.

Yes. Joe, we haven’t updated that. I think our philosophy when we look at that, the guidance parameters, we told you everything we though at the beginning of the year. We set our range.

Clearly as the year progress, some of those parameters are going to move around a little bit, I think on that particular parameter, we’re very likely to be within that range for the year..

Perfect. It looks like 1Q was about 3%; this quarter it was 4% and….

Yes. Well, keep in mind that’s rental -- Joe, just be careful. Its rental operations. A lot of our competitors include the delivery piece as well.

So when you look at it like that I think our year-to-date on that metric is we’re up 7% year-over-year, to include the rental revenue stream and then the rental related services stream, add those together and look at it year-over-year, I think you’ll find 7% year-over-year growth compared to that comment at the beginning of the year of expecting to be in 5% to 10% range..

Okay, good. That’s helpful. I was actually thinking it was the other way around. That’s it for me. Thanks for taking my questions. .

And next we’ll go to Fred Poso with Schroder..

My question is on utilization in modular. I was wondering, you saw nice improvement year-over-year.

Was that improvement of a similar scale in commercial and in educational, or is there any major deviation?.

My question is on utilization in modular. I was wondering, you saw nice improvement year-over-year.

Was that improvement of a similar scale in commercial and in educational, or is there any major deviation?.

For Q2 commercial was the primary contributor to the improvement in utilization as in most typical years we get our big impact from educational rentals and utilization in Q3 and Q4..

So was commercial up more than 300 basis points in utilization year-over-year?.

So was commercial up more than 300 basis points in utilization year-over-year?.

Let’s just say this, that they were the line share..

Okay.

Can you talk maybe about where you’re seeing the best growth and the best rate opportunities outside California?.

Okay.

Can you talk maybe about where you’re seeing the best growth and the best rate opportunities outside California?.

Actually Texas and the Mid-Atlantic have both been very strong in commercial as well as educational and as you know Florida is predominantly an educational market which has done very nicely. It’s really coming back. So that’s the across the board outside of California, we’re very pleased. There is not really a weak spot that we can speak to..

And any Greenfield opportunities or any regions that you’re, that look attractive?.

And any Greenfield opportunities or any regions that you’re, that look attractive?.

Well not in terms of new geographies. We’re in the right geography. It is the matter of taking market share and also capturing the new business and I think we’re very well positioned to do both..

Mid Atlantic for us is a very large region and there is a lot of long-term opportunity to pursue..

And as far as rate, what is the strongest region on the commercial side outside California?.

And as far as rate, what is the strongest region on the commercial side outside California?.

It's hard to say. Texas is probably, if you had to pick a region it’s probably the strongest in rate, but quite frankly based upon the opportunity and based upon the type of product, can very strong just on a transaction-by-transaction basis in any of the markets..

And we have no further questions I’ll now turn the conference back over to management for any additional closing remarks..

Well, thank you all for joining us for our Q2 call today. We appreciate your continued support. We’re going to continue working hard here over the next few months and look forward to chatting with you again in late October or early November for our Q3 call. Thank you so much. Bye, bye..

This does conclude today’s conference. We do thank you all for your participation..