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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 11-K

 

 

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-13292

 

 

 

A.	Full title of the plan and the address of the plan, if different from that of the issuer named below:

McGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN

 

B.	Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

McGRATH RENTCORP

5700 Las Positas Road

Livermore, California 94551-7800

 

 

 

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TABLE OF CONTENTS

 

		Page
Report of Independent Registered Public Accounting Firm			1
Financial Statements
Statements of Net Assets Available for Benefits			2
Statement of Changes in Net Assets Available for Benefits			3
Notes to Financial Statements			4
Supplemental Schedules
Schedule H, line 4a – Schedule of Delinquent Participant Contributions			18
Schedule H, line 4i – Schedule of Assets (Held at End of Year)			19

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Plan Administrator of the

McGrath RentCorp Employee Stock Ownership and 401(k) Plan

We have audited the accompanying statements of net assets available for benefits of the McGrath RentCorp Employee Stock Ownership and 401(k) Plan (the “Plan”) as of December 31, 2013 and 2012, and the related statement of changes in net assets available for benefits for the year ended December 31, 2013. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the McGrath RentCorp Employee Stock Ownership and 401(k) Plan as of December 31, 2013 and 2012, and the changes in net assets available for benefits for the year ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of Delinquent Participant Contributions for the year ended December 31, 2013 and Assets (Held at End of Year) as of December 31, 2013 are presented for purposes of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

GRANT THORNTON LLP

Los Angeles, California

June 10, 2014

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

Statements of Net Assets Available for Benefits

December 31, 2013 and 2012

 

		2013				2012
Assets
Investments, at fair value:
Mutual Funds		$	24,828,891			$	18,518,229
McGrath RentCorp Unitized Stock Fund			13,818,000				10,566,890
Collective Investment Trust			892,061				1,218,201
Brokerage Accounts			1,332,776				1,119,322
Total Investments, at fair value			40,871,728				31,422,642
Receivables:
Employer Contributions			1,220,844				1,072,100
Notes Receivable from Participants			1,074,193				812,228
Dividends and Other			83,440				83,616
Total Receivables			2,378,477				1,967,944
Total Assets			43,250,205				33,390,586
Liabilities
Accrued Expenses			20,121				24,889
Total Liabilities			20,121				24,889
Net Assets Available for Benefits at Fair Value			43,230,084				33,365,697
Adjustment from fair value to contract value for fully benefit-responsive investment contract			(11,969	)			(67,870	)
Net Assets Available for Benefits		$	43,218,115			$	33,297,827

The accompanying notes are an integral part of these financial statements.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

Statement of Changes in Net Assets Available for Benefits

For the Year Ended December 31, 2013

 

Additions to Net Assets
Contributions:
Participant Deferral Contributions		$	2,457,232
Employer Contributions			1,220,844
Participant Rollover Contributions			577,901
Total Contributions			4,255,977
Investment Income:
Net Appreciation in Fair Value of Investments			7,545,597
Dividends			964,684
Total Investment Income			8,510,281
Interest Income on Participant Loans			37,756
Total additions to net assets			12,804,014
Deductions from Net Assets
Benefits Paid to Participants			2,778,075
Administrative Fees			105,651
Total deductions from net assets			2,883,726
Net increase in Net Assets Available for Benefits			9,920,288
Net Assets Available for Benefits, at beginning of year			33,297,827
Net Assets Available for Benefits, at end of year		$	43,218,115

The accompanying notes are an integral part of these financial statements.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

December 31, 2013 and 2012

NOTE 1 – DESCRIPTION OF THE PLAN

The following description of the McGrath RentCorp Employee Stock Ownership and 401(k) Plan (the “KSOP” or “Plan”) provides only general information. Participants should refer to the KSOP agreement for a more complete description of the KSOP’s provisions.

General

The KSOP is intended to qualify as an employee stock ownership plan as defined in Section 4975(e)(7) of the Internal Revenue Code (the “Code”), a stock bonus plan under Section 401(a) of the Code and a cash or deferred plan under Section 401(k) of the Code and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Prior to August 1, 2012, McGrath RentCorp (the “Company”) maintained two separate qualified plans, one of which was known as the McGrath RentCorp Employee Stock Ownership Plan (“ESOP”) and the other of which was known as the McGrath RentCorp 401(k) Plan (“McGrath 401(k)”). Effective August 1, 2012, the Company merged the McGrath 401(k) Plan and the 401(k) plan covering the employees of Enviroplex, Inc. (a wholly owned subsidiary of the Company) (“Enviroplex 401(k)”), into the ESOP, and renamed and restated the resulting plan, which is now the KSOP. The assets of these two 401(k) plans were transferred to the KSOP.

The Company created a trust to hold plan assets, effective August 1, 2012, and appointed Charles Schwab Bank as the Trustee of that trust. Schwab Retirement Plan Services serves as the record keeper to maintain the individual accounts of each of the Plan’s participants.

The Plan documents provide for the ability to borrow, with a portion of the Company shares held by the Plan used as collateral. The Company’s Board of Directors currently has no plans to undertake such a transaction.

Significant provisions and amendments to the Plan are summarized in these Notes to Financial Statements.

Administration of the Plan

The KSOP’s assets are held by the Trustee of the KSOP. Company contributions are held by the Trustee, which invests cash received, interest and dividend income per the instruction from participants and makes distributions to participants. The Company is designated as the Plan Administrator within the meaning of ERISA.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

Eligibility

Effective with the merger of the plans, all employees of the Company and any affiliate which had adopted the KSOP who were 21 years or older and had at least three months of eligibility service for elective deferral contribution were eligible to participate in the KSOP except:

 

•

those included in a unit of employees covered by a collective bargaining agreement, if retirement benefits were subject of a good faith bargaining agreement, and if the collective bargaining agreement does not provide for participation in the Plan,

 

•

any leased employee and

 

•

any employee who is a non-resident alien who receives no earned income which constitutes income from services provided in the United States.

Contributions

Eligible employees may elect to defer a percentage of his or her compensation, not to exceed the statutory limit. Employees who have completed a minimum of 1,000 hours and one year of service to the Company by January 1^st and July 1^st of any year are also entitled to a Safe Harbor matching contribution, as defined in the Code, from the Company equal to 100% of the employee’s deferral into the KSOP, up to a maximum of 4% of the employee’s eligible compensation. The Company may also make additional discretionary contributions, which, if made, are allocated based on the units held by each eligible participant. For this purpose, a participant is considered to have one unit for each $1,000 of compensation during the plan year plus two units for each year of service. Highly compensated employees do not receive unit credit for any years of service. Trust income or loss is allocated based on the respective account balances of participants.

Participant Accounts

The KSOP is a defined contribution plan under which a separate individual account is established for each participant. Each participant’s account is credited with the participants elective 401k contribution, an allocation of the Company’s contribution, earnings or losses related to the net assets in their accounts, and an allocation of forfeitures of terminated participants’ unvested accounts.

Vesting

A participant receives one year of credited service for vesting purposes at the end of each Plan year in which he or she completes 1,000 hours of service, starting with their first hour of employment, and regardless of whether or not he or she completes twelve months of service during the first year. A participant’s account balance is 100 percent vested upon death, disability, or normal retirement (age 65). A participant is always fully (100 percent) vested in his or her salary reduction contributions, employer Safe Harbor matching contributions, and rollover contributions, plus actual earnings thereon. In the event the

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

Company elects to make a discretionary non-elective contribution, the participant vests in his or her contributions over a six year graded vesting schedule as follows:

 

Years of Credited Service		Vesting Percentage
Less than 2 years			0	%
2 years but less than 3 years			20	%
3 years but less than 4 years			40	%
4 years but less than 5 years			60	%
5 years but less than 6 years			80	%
6 or more years			100	%

The vesting schedule will be accelerated and the Company’s contributions and KSOP allocations will be modified if the KSOP becomes a “top heavy plan” under the Code.

Forfeitures

Any forfeited KSOP benefits are allocated in the same manner as the Company’s contributions (toward matching contributions to the extent of the matching formula, and as discretionary contributions in excess of the matching formula) among the accounts of participants who remain employed throughout the year and have worked a minimum number of hours or whose employment has terminated due to death, disability or normal retirement during that year.

Forfeitures of common stock and cash with a value of $25,079 were reallocated to participants in the year ended December 31, 2013.

Notes Receivable from Participants

Effective with the merger of the plans, participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000, or 50% of their account balance. Loan terms generally range from one to five years, but can be up to 15 years for the purchase of a principal residence. A participant may not have more than three loans outstanding at any time. The loans are secured by the balance in the participant’s account. A participant’s account is charged monthly interest on the outstanding loan balance. Principal and interest is paid ratably through payroll deductions. Participant loans are reflected in the accompanying statement of net assets available for benefits.

Payment of Benefits

In the event of a termination of service due to death, disability or retirement, benefits become payable. Benefits are normally paid in the form of a periodic distribution or, if the participant so elects, in a lump sum. For account balances below $5,000, a lump sum may be paid out without regard to the participant’s election. Distributions are made in cash or, if the participant elects, in the form of Company common stock.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

The Company has determined that cash dividends paid by the Company on shares of the Company’s Common Stock held by the KSOPs McGrath RentCorp Unitized Stock Fund (the “Unitized Stock Fund”) are to be paid out to the participants. The Company has the right to revoke this decision at any time. Benefits paid to participants during 2013 were $2,778,075, which included $222,423 of cash dividends paid by the Company on such common stock.

Voting Rights

Each participant is entitled to exercise voting rights attributable to the Company shares allocated to his or her account through his or her holdings in the Unitized Stock Fund and is notified by the Trustee prior to the time that such rights are to be exercised. The Trustee is required to vote any unallocated shares held by the KSOP and any allocated shares for which instructions have not been given by a participant in the same proportion as the shares for which voting instructions have been received, subject to the power, responsibility and obligation of the Administrator to direct the Trustee to act with respect to the voting of such shares in a different manner, if the Administrator determines that such action is consistent with and/or required by its fiduciary obligations under ERISA.

Plan Termination

Although the KSOP is intended to be permanent in nature, the Company may terminate the KSOP at its discretion, subject to the provisions of ERISA. If the KSOP is terminated, participants will become fully vested in their accounts.

Diversification

Each participant is permitted to direct any contributions made to their account be invested in investment options available under the Plan.

Put Option

For so long as the Company’s shares are readily tradable on an established market, the Company shall not be required to provide the Participant or Beneficiary with an option to put the shares to the Company, in accordance with Section 409(h) of the Code.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements of the KSOP are prepared on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.

Investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared using the contract value basis for fully benefit-responsive investment contracts.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of additions to and deductions from net assets available for benefits during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties

The Plan assets consist of various investments which are exposed to a number of risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the statements of net assets available for Plan benefits and the statement of changes in net assets available for Plan benefits.

Investment Valuation and Income Recognition

The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Plan Administrator determines the Plan’s valuation policies utilizing information provided by the investment advisers, custodians and insurance company. See Note 4 for discussion of fair value measurements.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

Purchases and sales of investments are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

Notes Receivable from Participants

Loans to participants are reported at their unpaid principal balances plus any accrued but unpaid interest. Interest income is recorded on the accrual basis. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2013 or 2012. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be in default, the participant loan balance is reduced and a benefit payment is recorded.

Payment of Benefits

Benefits are recorded when paid.

Administrative Expenses

Investment and administrative costs charged by the Trustee totaling $105,651 for 2013 were paid from participant’s accounts. The Company pays all of the Plan’s other administrative costs.

NOTE 3 – INVESTMENTS

The fair value of individual investments that represents 5% or more of the Plan’s net assets available for benefits were as follows:

 

		As of December 31,
		2013				2012
McGrath RentCorp Unitized Stock Fund		$	13,818,000			$	10,566,890
T Rowe Price Retirement 2025			3,495,453				2,638,059
T Rowe Price Retirement 2030			3,185,843				2,396,802
T Rowe Price Retirement 2035			2,228,541				—

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

NOTE 4 – FAIR VALUE MEASUREMENT

During 2013, the Plan’s investments, including gains and losses on investments sold, changed in value as follows:

 

Mutual Funds		$	3,631,112
McGrath RentCorp Unitized Stock Fund			3,800,341
Collective Investment Trust			35,241
Brokerage Accounts			78,903
Net Appreciation in Fair Value of Investments		$	7,545,597

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value and establishes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

 

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

The following is a description of the valuation methodologies used by the Plan for assets measured at fair value. There have been no changes to the methodologies used at December 31, 2013 and 2012.

Mutual Funds

Valued at the daily closing price as reported by the fund. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily NAV and to transact at that price. The mutual funds held by the Plan are actively traded.

McGrath RentCorp Unitized Stock Fund (“Fund”)

The Fund consists of the Company’s common stock and short-term cash which provides liquidity for daily trading. The Company’s common stock is valued at the quoted market price from a national securities exchange and the short-term cash investments are held in a money market mutual fund and are valued at fair value based on the Net Asset Value (“NAV”) per share. A market-based NAV per share is calculated on a periodic basis and is not guaranteed to always remain at $1.00 per share. Shares can be redeemed on a same day basis but only directly from the Fund. Such transactions do not constitute an active market.

Collective Investment Trust

The Wilmington Trust Retirement and Institutional Services Company Collective Investment Trust III for MetLife Group Annuity Contract No. 25554 (the “Contract”) is a common collective trust (“CCT”). The CCT primarily owns investment contracts that invest in conventional, synthetic and separate account investment contracts (collectively “contracts”) issued by life insurance companies, banks and other financial institutions. The contracts are valued at contract value, which represents invested principal plus accrued interest thereon. In determining contract value, the fund manager considers such factors as the benefit responsiveness of the contracts, the ability of the parties to the contracts to perform in accordance with the terms of the contracts and the likelihood of default by the issuer of an investment security. In accordance with accounting principles generally accepted in the United States of America, the statement of net assets available for benefits present the Contract, which invests primarily in benefit-responsive investment contracts, at fair value as well as an additional line showing an adjustment of the fully benefit-responsive investment contracts from fair value to contract value. Contract value represents contributions made under the fund, plus earnings, less participant withdrawals. The fair value of the investments in the common/collective trust are determined by the investee’s trustee based on the fair value of the underlying securities within the investment, which represent the NAV of shares held by the Plan at year end.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

Brokerage Account

A brokerage account allows an investor to buy or sell investments such as stocks, bonds, and mutual funds. The fair value of the brokerage account is the aggregation of the fair value of the underlying assets, all of which are actively traded.

The following tables set forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2013 and 2012:

Assets at Fair Value as of December 31, 2013:

 

						Fair Value Measurements Using:
		Fair Value 12/31/2013				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Mutual Funds:
Eagle Small Cap Growth		$	187,057			$	187,057
Europacific Growth			1,153,870				1,153,870
Harbor Capital Appreciation			1,091,341				1,091,341
Harbor International Fund			803,808				803,808
JP Morgan Midcap Value Institutional			629,308				629,308
MFS Value Fund			920,901				920,901
PIMCO Total Return Fund			1,488,221				1,488,221
Prudential Jennison MCP Growth			805,291				805,291
T Rowe Price Target-date Retirement Funds			14,263,611				14,263,611
Vanguard Funds(1)			3,303,625				3,303,625
Victory Small Co Opportunity			181,858				181,858
McGrath RentCorp Unitized Stock Fund:
McGrath RentCorp Common Stock			13,510,403				13,510,403
Money Market Fund			307,597							$	307,597
Collective Investment Trust:
MetLife Group Annuity Contract			892,061								892,061
Brokerage Accounts:
Schwab Money Market Fund			848,223				848,223
Common Stock			307,068				307,068
Mutual Funds			126,338				126,338
Unit Investment Trusts			51,147				51,147
Totals		$	40,871,728			$	39,672,070			$	1,199,658			$	—

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

Assets at Fair Value as of December 31, 2012:

 

						Fair Value Measurements Using:
		Fair Value 12/31/2012				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Mutual Funds:
Eagle Small Cap Growth		$	84,635			$	84,635
Europacific Growth			1,085,888				1,085,888
Harbor Capital Appreciation			743,780				743,780
Harbor International Fund			656,592				656,592
JP Morgan Midcap Value Institutional			381,857				381,857
MFS Value			472,028				472,028
PIMCO Total Return Fund			1,400,485				1,400,485
Prudential Jennison MCP Growth			675,341				675,341
T Rowe Price Target-date Retirement Funds			11,068,108				11,068,108
Vanguard Funds(1)			1,848,549				1,848,549
Victory Small Co Opportunity			100,966				100,966
McGrath RentCorp Unitized Stock Fund:
McGrath RentCorp Common Stock			10,283,571				10,283,571
Money Market Fund			283,319							$	283,319
Collective Investment Trust:
MetLife Group Annuity Contract			1,218,201								1,218,201
Brokerage Accounts:
Schwab Money Market Fund			883,689				883,689
Common Stock			124,628				124,628
Mutual Funds			60,300				60,300
Unit Investment Trusts			50,705				50,705
Totals		$	31,422,642			$	29,921,122			$	1,501,520			$	—

 

(1)	Vanguard funds include 500 index, mid cap, small cap, total bond market and total international stock funds.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

The following table presents the Plan’s investments with a reported NAV at December 31, 2013 and 2012:

 

		2013				2012
Collective Investment Trust:
Fair Value		$	892,061			$	1,218,201
Unfunded Commitment			—				—
Redemption Frequency (if currently eligible)			Daily				Daily
Redemption Notice Period			60 Day				60 Day

The Collective Investment Trust, through its investment in the group annuity contract, simulates the performance of a guaranteed investment contract through an issuer’s guarantee of a specific interest rate and portfolio of financial instruments that are owned by the issuer, MetLife. The investment in the Collective Investment Trust at contract value amounted to $880,092 and $1,150,331 at December 31, 2013 and 2012, respectively.

Unrealized gains/(losses) from the collective investment trust are not included in the statement of changes in net assets available for benefits as the contract is recorded at contract value for purposes of the statement of net assets available for benefits.

NOTE 5 – COLLECTIVE INVESTMENT TRUST

The Plan includes an investment option to participants in a CCT. The CCT invests in a group annuity contract (“GAC”) which includes underlying assets that are held in a trust owned by MetLife. The contract provides that participants execute Plan transactions at contract value. Contract value represents contributions made to the fund, plus earnings, less participant withdrawals. The investment is stated at fair value as reported by MetLife and adjusted to contract value on the statement of assets available for benefits. The GAC’s fair value equals the fluctuating value of the separate account of the assets backing the contract. The Plan’s fair value of the investment equals the Plan’s guaranteed value times the ratio of the GAC’s guaranteed value to the GAC’s fair value.

The crediting interest rate was 2.21% and 2.52% at December 31, 2013 and 2012, respectively. The average yield was (1.94%) for the year ended December 31, 2013. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise. MetLife will guarantee principal and accrued interest, based on crediting interest rates, for participant-initiated withdrawals as long as the contract remains active. Interest is credited to the contract at interest rates that reflect the performance of the underlying portfolio. MetLife will reset the rate quarterly, by amortizing the difference between the market value of the portfolio and the guaranteed value over the weighted average duration of the fund’s investments.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

Participants will receive the principal and accrued earnings credited to their accounts on withdrawal for allowed events. These events include transfers to other Plan investment options, and payments because of retirement, termination of employment, disability, death and in-service withdrawals as permitted by the Plan. Certain events, such as Plan termination or a Plan merger initiated by the Plan sponsor, may limit the ability of the Plan to transact at contract value. The Plan sponsor does not believe any events that may limit the ability of the Plan to transact at contract value are probable.

NOTE 6 – TAX STATUS

The Plan filed the Application for Determination for Employee Benefit Plan with the Internal Revenue Service (“IRS”) on September 16, 2013. The Determination Letter has not yet been issued.

The Plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code, that the Plan is qualified and the related trust is tax-exempt.

Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service and state taxing authorities. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2013, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan tax returns generally remain open for IRS audit for a period of three years from filing date.

NOTE 7 – PARTY-IN-INTEREST TRANSACTION

The Unitized Stock Fund includes shares of common stock issued by the Company. During the year ended December 31, 2013, the Plan made purchases of $924,952 and sales of $1,492,673 of McGrath RentCorp common stock on behalf of KSOP participants.

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

December 31, 2013 and 2012

 

The KSOP also has notes receivable from participants, which qualify as party in interest transactions.

Officers or employees of the Company perform certain administrative functions for the KSOP. No officer or employee receives compensation from the Plan.

NOTE 8 – RECONCILIATION TO FORM 5500

The following is a reconciliation of the net assets available for benefits per the financial statements to Form 5500:

 

		As of December 31,
		2013				2012
Statements of net assets available for benefits:
Net assets available for benefits per the financial statements		$	43,218,115			$	33,297,827
Adjustment from contract value to fair value for fully benefit-responsive investment contracts			11,969				67,870
Net assets available for benefits per Form 5500		$	43,230,084			$	33,365,697

The following is a reconciliation of the Plan’s net investment income reported per the financial statements to the investment income per Form 5500 for the year ended December 31, 2013:

 

Statement of changes in net assets available for benefits:
Net increase in net assets per the financial statements		$	9,920,288
Change in adjustment from contract value to fair valuefor fully benefit-responsive investment contracts			55,901
Net income per Form 5500		$	9,864,387

NOTE 9 – SUBSEQUENT EVENTS

The Plan has evaluated all events or transactions that occurred through June 10, 2014, the date the financial statements were issued and determined that there are no matters requiring adjustment to or disclosure in the accompanying financial statements and related notes.

 

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SUPPLEMENTAL SCHEDULES

 

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MCGRATH RENTCORP, INC. 401(k) PLAN

Plan Sponsor EIN 94-2579843

Plan Number 001

Schedule H, line 4a – Schedule of Delinquent Participant Contributions

For the year ended December 31, 2013

 

(a)				(b)				(c)				(d)				(e)
Participant Contributions Transferred Late to Plan (Includes Loan Payments)				Contributions Not Corrected				Contributions Corrected Outside VFCP				Contributions Pending Correction in VFCP				Total Fully Corrected Under VFCP and PTE 2002-51
$	1,868			$	—			$	—			$	1,868			$	—

 

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MCGRATH RENTCORP

EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

EIN 94-2579843

Plan Number 001

Schedule H, line 4i – Schedule of Assets (Held at End of Year)

December 31, 2013

 

(a)		(b)		(c)		(e)
		Identity of issuer, borrower, lessor,		Description of investment including maturity date, rate of interest,		Current
		or similar party		collateral, par or maturity value		Value
*		McGrath RentCorp		Common 339,406 shares			13,510,403
		State Street Global Advisers		Money Market Fund			307,597
		Eagle Asset Management		Eagle Small Cap Growth			187,057
		Europacific Growth Fund		International Growth – Class R6 Shares			1,153,870
		Harbor Funds		Harbor Capital Appreciation			1,091,341
		Harbor Funds		Harbor International Fund			803,808
		JP Morgan Fleming Mutual Fund Group		JP Morgan Midcap Value Institutional			629,308
		MFS Series Trust Fund		MFS Value Fund – Class R4 Shares			920,901
		PIMCO Investment		PIMCO Total Return Fund			1,488,221
		Prudential		Prudential Jennison MCP Growth			805,291
		T Rowe Price		T Rowe Price Retirement Fund 2005			42,224
		T Rowe Price		T Rowe Price Retirement Fund 2010			294,603
		T Rowe Price		T Rowe Price Retirement Fund 2015			833,133
		T Rowe Price		T Rowe Price Retirement Fund 2020			1,481,913
		T Rowe Price		T Rowe Price Retirement Fund 2025			3,495,453
		T Rowe Price		T Rowe Price Retirement Fund 2030			3,185,843
		T Rowe Price		T Rowe Price Retirement Fund 2035			2,228,541
		T Rowe Price		T Rowe Price Retirement Fund 2040			2,060,748
		T Rowe Price		T Rowe Price Retirement Fund 2045			471,413
		T Rowe Price		T Rowe Price Retirement Fund 2050			112,632
		T Rowe Price		T Rowe Price Retirement Fund 2055			37,498
		T Rowe Price		T Rowe Price Retirement Income			19,610
		Vanguard		Vanguard 500 Index Signal			2,079,109
		Vanguard		Vanguard Mid Cap Index Signal			164,569
		Vanguard		Vanguard Small Cap Index Signal			611,113
		Vanguard		Vanguard Total BD Market Index Signal			386,149
		Vanguard		Vanguard Total Int’l Stock Index Signal			62,685
		Victory Capital Management		Victory Small Co Opportunity			181,858
		Metlife		Metlife Group Annuity Contract			892,061
		Brokerage Account		Schwab Money Market Fund			848,223
		Brokerage Account		Common Stock			307,068
		Brokerage Account		Mutual Funds			126,338
		Brokerage Account		Unit Investment Trusts			51,147
*		Notes Receivable from Participants		Interest rates ranging from 3.25% to 9.75% per annum with terms of up to 15years.			1,074,193
				Total		$	41,945,921

 

*	A party-in-interest as defined by ERISA

Column (d), Cost, has been omitted as all investments are participant directed.

 

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Exhibit Number		Exhibit Title
11		Consent of Independent Registered Public Accounting Firm

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the plan administrator of the McGrath RentCorp Employee Stock Ownership and 401(k) Plan has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: June 10, 2014						McGrath RentCorp Employee Stock Ownership and 401(k) plan
						By:		/s/ Kay Dashner
								Kay Dashner Vice President, Human Resources and Plan Administrator

 

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