United Rentals Announces Second Quarter 2011 Results
Greenwich, CT - Jul 18, 2011
United Rentals, Inc. (NYSE: URI) today announced financial results for the second quarter 2011. Total revenue was $629 million and rental revenue was $524 million, compared with $557 million and $450 million, respectively, for the same period last year.
On a GAAP basis, the company reported second quarter 2011 income from continuing operations of $28 million, or $0.38 per diluted share, compared with $12 million, or $0.18 per diluted share, for the same period last year. Adjusted EPS for the quarter, which excludes the impact of special items, was $0.40 per diluted share, compared with $0.25 per diluted share the prior year.
Second Quarter 2011 Highlights
- Rental revenue increased 16.4%, reflecting year-over-year increases of 6.1% in rental rates and 13.8% in the volume of equipment on rent. The company has reaffirmed its outlook for an increase in rental rates of at least 5% for the full year.
- Time utilization was 69.0%, an increase of 3.6 percentage points from the same period last year, and a new second quarter record for the company. The company has raised its outlook for a full-year increase in time utilization to approximately 2.5 percentage points year-over-year.
- The company generated $41 million of proceeds from used equipment sales at a gross margin of 31.7%, compared with $37 million of proceeds at a gross margin of 24.3% for the same period last year.
- Adjusted EBITDA was $221 million, an increase of $42 million compared with the same period last year. Adjusted EBITDA margin was 35.1%, an increase of 3.0 percentage points compared with the same period last year.
Michael Kneeland, chief executive officer of United Rentals, said, “Our strong numbers in the quarter defied a flat construction environment, and elevated our performance well above the same period last year. It was our fifth consecutive quarter of record time utilization, with a gain of more than six points of rate on a larger fleet. As we capitalize on the increasing demand for our equipment, we are also scrutinizing our cost structure for sound ways to enhance our operating leverage."
Kneeland continued, "Looking to the balance of the year, we expect our performance to remain robust as we move closer to our near term goal of a billion dollars of EBITDA and stronger margins. Although the recovery itself can be difficult to predict, our results are being propelled by a strategic plan that does not rely on our operating environment. We are continuing to shape our customer mix, fleet mix and operations in ways that create demand for our equipment now and in the long term."
Six Months 2011 Results
For the first half 2011, the company reported total revenue of $1,152 million and rental revenue of $958 million, compared with $1,035 million and $830 million, respectively, for the same period last year.
On a GAAP basis, the company reported income from continuing operations of $8 million, or $0.10 per diluted share, for the first half 2011, compared with a loss of $28 million, or $0.46 per diluted share, for the same period last year. Adjusted EPS was $0.14 per diluted share, compared with a loss of $0.28 per diluted share last year. Adjusted EBITDA margin was 31.8% for the first half 2011, an increase of 3.4 percentage points compared with the same period last year.
Free Cash Flow and Fleet Size
For the first half 2011, free cash (usage) flow was $(48) million, after total rental and non-rental capital expenditures of $425 million. By comparison, free cash flow for the first half 2010 was $107 million after total rental and non-rental capital expenditures of $186 million. Free cash flow for the first half 2010 included the receipt of a $55 million federal tax refund.
The company has updated its outlook for full year free cash flow to a range of $5 million to $10 million, including net rental capital expenditures of $450 million to $500 million. Gross rental purchases are now estimated to be approximately $650 million.
The size of the rental fleet was $4.18 billion of original equipment cost at June 30, 2011, compared with $3.79 billion at December 31, 2010. The age of the rental fleet was 46.5 months on a unit-weighted basis at June 30, 2011, compared with 47.7 months at December 31, 2010.
Return on Invested Capital (ROIC)
Return on invested capital was 4.6% for the 12 months ended June 30, 2011, an increase of 2.0 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. To mitigate the volatility related to fluctuations in the company’s tax rate from period to period, the federal statutory tax rate of 35% is used to calculate after-tax operating income.
United Rentals will hold a conference call tomorrow, Wednesday, July 20, 2011, 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 866-261-2650.
Free cash (usage) 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), loss from discontinued operation, net of taxes, provision (benefit) for income taxes, interest expense, net, interest expense - subordinated convertible debentures, 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 and asset impairment charges and gains/losses on the repurchase/redemption of debt securities and retirement of subordinated convertible debentures. 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 (usage) 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 539 rental locations in 48 states and 10 Canadian provinces. The company’s approximately 7,500 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent approximately 2,900 classes of equipment with a total original cost of $4.18 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 vision, 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) a slowdown in the recovery of North American construction and industrial activities, which decreased during the economic downturn and significantly affected our revenues and profitability, may further reduce demand for equipment and prices that we can charge; (2) a decrease in levels of infrastructure spending, including lower than expected government funding for 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) restrictive covenants in our debt agreements, which could limit our financial and operation flexibility; (5) noncompliance with covenants in our debt agreements, which could result in termination of our credit facilities and acceleration of outstanding borrowings; (6) inability to access the capital that our business may require; (7) inability to collect on contracts with customers; (8) incurrence of impairment charges; (9) the potential consequences of litigation and other claims relating to our business, including certain claims that our insurance may not cover; (10) an increase in our loss reserves to address business operations or other claims and any claims that exceed our established levels of reserves; (11) incurrence of additional costs and expenses in connection with litigation, regulatory or investigatory matters; (12) increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual value of our equipment; (13) inability to sell our new or used fleet in the amounts, or at the prices, we expect; (14) challenges associated with past or future acquisitions, such as undiscovered liabilities and integration issues; (15) management turnover and inability to attract and retain key personnel; (16) our rates and time utilization being less than anticipated; (17) our costs being more than anticipated, the inability to realize expected savings and the inability to obtain key equipment and supplies; (18) disruptions in our information technology systems; (19) competition from existing and new competitors; and (20) labor difficulties and labor-based legislation affecting labor relations and operations generally.
For a more complete description of these and other possible risks and uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2010, 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.
Cell: (917) 847-4507