United Rentals Announces Second Quarter 2010 Results
Greenwich, CT - Jul 19, 2010
United Rentals, Inc. (NYSE: URI) today announced financial results for the second quarter 2010. Total revenue was $557 million and rental revenue was $450 million, compared with $615 million and $454 million, respectively, for the same period last year. Operating income was $59 million, compared with $5 million for the same period last year.
On a GAAP EPS basis, the company reported second quarter 2010 net income of $12 million, or $0.18 per diluted share, compared with a net loss of $17 million, or a loss of $0.28 per diluted share, for the same period in 2009. In the second quarter 2010, the company revised its estimate of full-year projected income (loss) and the resulting effective tax rate. As a result, the company’s net income for the quarter reflects an income tax benefit of $9 million. Adjusted EPS for the quarter, which excludes the impact of special items, was $0.25 per diluted share, compared with a loss of $0.24 per diluted share the prior year. Adjusted EBITDA margin, which also excludes the impact of special items, was 32.1% for the quarter, compared with 24.4% for the prior year.
Second Quarter 2010 Highlights
- Time utilization increased 4.1 percentage points compared with last year to a second quarter record of 65.4%, reflecting an increase in demand and more effective management of a smaller fleet. Rental rates declined 2.0% compared with last year. Dollar utilization, which reflects the impact of time utilization and rental rates, increased 1.8 percentage points to 46.7%.
- Free cash flow was $8 million, compared with $70 million last year. To meet increased demand, the company raised its outlook for net rental capital expenditures (defined as purchases of rental equipment less the proceeds from sales of rental equipment) to a range of $160 million to $180 million, from its previous estimate of $100 million to $120 million. The company also reaffirmed its outlook for full year free cash flow of a range of $200 million to $225 million.
- SG&A expense decreased by $11 million, compared with last year. The company has reaffirmed its outlook for full year SG&A expense reduction within a range of $40 million to $50 million.
- Cost of equipment rentals, excluding depreciation, decreased by $4 million compared with last year. The company has updated its outlook for full year expense reduction to a range of $30 million to $50 million, from its previous estimate of $70 million to $90 million.
- The company sold $80 million of used fleet on an original equipment cost basis and generated a positive gross margin of 24.3%, compared with $271 million of used fleet sold at a negative gross margin of 9.5% for the same period last year.
Michael Kneeland, chief executive officer of United Rentals, said, "This was a strong quarter with a number of positive trends in the underlying metrics. Our same-store rental revenues increased 2.7%, with year over year growth in six of our nine operating regions. We reported the highest time utilization of any second quarter in our company's history. Rental rates, while down year over year, improved sequentially each month. We are also running the business much more efficiently and spending capex where it counts, purchasing fleet that we are confident will be in demand by our target accounts.”
Kneeland continued, "While we continue to expect a choppy recovery, we believe that we are seeing the early stages of a cyclical upturn on top of the normal seasonal benefit. As contractors take on work with limited access to capital, they are choosing to rent rather than buy equipment. We find it encouraging that demand is coming from more than one source as we move into a recovery. Our branches are meeting these opportunities head-on with a powerful strategy focused on larger construction and industrial accounts, pricing discipline and customer service excellence.”
Six Months 2010 Results
For the first half 2010, the company reported total revenue of $1,035 million and rental revenue of $830 million, compared with $1,209 million and $902 million, respectively, for the same period last year. Operating income was $57 million for the first half 2010, compared with $23 million for the same period last year.
On a GAAP basis, the company reported a net loss of $28 million, or $0.46 per diluted share, for the first half 2010, compared with a net loss of $36 million, or $0.60 per diluted share, for the same period in 2009. Adjusted EPS, which excludes the impact of special items, was a loss of $0.28 per diluted share, compared with a loss of $0.56 per diluted share the prior year. Adjusted EBITDA margin, which also excludes the impact of special items, was 28.4% for the first half 2010, compared with 24.4% in 2009.
Free Cash Flow and Fleet Size
For the first half 2010, free cash flow was $107 million, including the receipt of a previously announced $55 million federal tax refund, and after total rental and non-rental capital expenditures of $186 million. By comparison, free cash flow for the first half 2009 was $199 million after total rental and non-rental capital expenditures of $164 million.
The size of the rental fleet was $3.765 billion of original equipment cost at June 30, 2010, compared with $3.794 billion at June 30, 2009, and $3.763 billion at December 31, 2009. The age of the rental fleet was 45.0 months on a unit-weighted basis at June 30, 2010, compared with 42.4 months at December 31, 2009.
Return on Invested Capital (ROIC)
Return on invested capital was 2.0% for the 12 months ended June 30, 2010, a decrease of 3.0 percentage points from the same period last year. The company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by the averages of stockholders’ equity (deficit), debt and deferred taxes, net of average cash.
United Rentals will hold a conference call tomorrow, Wednesday, July 21, 2010, at 11:00 a.m. Eastern Time. The conference call will be available live by audio webcast at unitedrentals.com, where it will be archived, and by calling 800-862-9098.
Free cash flow, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, and adjusted earnings per share (adjusted EPS) are non-GAAP financial measures as defined under the rules of the SEC. Free cash flow represents net cash provided by operating activities, less purchases of rental and non-rental equipment plus proceeds from sales of rental and non-rental equipment and excess tax benefits from share-based payment arrangements, net. EBITDA represents the sum of net income (loss), benefit for income taxes, interest expense, net, interest expense-subordinated convertible debentures, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the restructuring charge and stock compensation expense, net. Adjusted EPS represents EPS plus the sum of the restructuring charge, the gains/losses on the repurchase/redemption of debt securities and retirement of subordinated convertible debentures, and the asset impairment charge. The company believes that: (i) free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements; (ii) EBITDA and adjusted EBITDA provide useful information about operating performance and period-over-period growth; and (iii) adjusted EPS provides useful information concerning future profitability. However, none of these measures should be considered as alternatives to net income, cash flows from operating activities or earnings per share under GAAP as indicators of operating performance or liquidity. Information reconciling forward-looking free cash flow to a GAAP financial measure is unavailable to the company without unreasonable effort.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in the world, with an integrated network of 554 rental locations in 48 states and 10 Canadian provinces. The company’s approximately 7,400 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent approximately 3,000 classes of equipment with a total original cost of $3.8 billion. United Rentals is a member of the Standard & Poor’s MidCap 400 Index and the Russell 2000 Index® and is headquartered in Greenwich, Conn. Additional information about United Rentals is available at unitedrentals.com.
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,” “plan,” “project,” “forecast,” “intend” or “anticipate,” or the negative thereof or comparable terminology, or by discussions of strategy or outlook. You are cautioned that our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, our actual results may differ materially from those projected. Factors that could cause actual results to differ materially from those projected include, but are not limited to, the following: (1) on-going decreases in North American construction and industrial activities, which have significantly affected revenues and, because many of our costs are fixed, our profitability, and which may further reduce demand and prices for our products and services; (2) inability to benefit from government spending associated with stimulus-related construction projects; (3) our highly leveraged capital structure, which requires us to use a substantial portion of our cash flow for debt service and can constrain our flexibility in responding to unanticipated or adverse business conditions; (4) noncompliance with financial or other covenants in our debt agreements, which could result in our lenders terminating our credit facilities and requiring us to repay outstanding borrowings; (5) inability to access the capital that our business may require; (6) increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual value of our equipment; (7) inability to sell our new or used fleet in the amounts, or at the prices, we expect; (8) rates we can charge and time utilization we can achieve being less than anticipated; and (9) costs we incur being more than anticipated, and the inability to realize expected savings in the amounts or time frames planned. For a fuller description of these and other possible uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2009, as well as to our subsequent filings with the SEC. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.
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