United Rentals Announces Second Quarter and First Half 2008 Results; Updates Full Year Outlook to Reflect Completion of Share Repurchases; Calls $125 Million of New 14% HoldCo Notes

Greenwich, CT -


United Rentals, Inc. (NYSE: URI) today announced second quarter 2008 income from continuing operations of $37 million, compared with $67 million for the second quarter 2007; and first half 2008 income from continuing operations of $75 million, compared with $99 million for the first half 2007. The decreases primarily reflect lower gross profit in a softening equipment rental environment as well as the previously disclosed $14 million after-tax provision relating to the SEC inquiry, partially offset by the company's successful cost-cutting initiatives, including reductions in SG&A expense of $21 million and $39 million for the second quarter and first half 2008, respectively.

On a GAAP basis, the company reported a second quarter 2008 continuing operations loss per share of $2.33, compared with continuing operations earnings per share of $0.60 for the second quarter 2007; and a first half 2008 continuing operations loss per share of $1.89, compared with continuing operations earnings per share of $0.90 for the first half 2007. Second quarter and first half 2008 losses per share reflect the impact of a $239 million preferred stock redemption charge that reduces income available to common stockholders for EPS purposes, but does not affect net income. As previously disclosed, this one-time redemption charge relates to the company's June 2008 repurchase of all of its outstanding Series C and D preferred stock. The company's second quarter and first half 2008 loss per share amounts also reflect an $8 million after-tax charge principally related to the establishment of a foreign tax credit valuation allowance as a result of the additional leverage from the share repurchase, as well as the SEC provision.

EBITDA was $252 million and $476 million for the second quarter and first half 2008, respectively, compared with EBITDA of $295 million and $508 million, respectively, for the same periods last year. Excluding the impact of the SEC provision, the company's pro-forma EBITDA margin improved 1.3 percentage points to 32.0% for the second quarter 2008, and improved 2.4 percentage points to 30.6% for the first half 2008, reflecting the beneficial impact of the company's ongoing initiatives to reduce operating costs.

For the second quarter 2008, rental revenue was $621 million and total revenue was $831 million, compared with $659 million and $962 million, respectively, for the second quarter 2007. For the first half 2008, rental revenue was $1,192 million and total revenue was $1,603 million, compared with $1,226 million and $1,800 million, respectively, for the first half 2007. The reduction in rental revenue in the second quarter 2008 reflects declines of 1.4 percent in rental rates and 0.8 percentage points in time utilization. Total revenue performance also reflects a planned reduction in sales of contractor supplies, consistent with the company's strategy to focus on its core rental business.

The company also reported pro-forma continuing operations earnings per share for the second quarter and first half 2008, reflecting the reduced share count from the preferred stock repurchase. Pro-forma EPS, which excludes the impact of the preferred stock redemption charge, the $8 million after-tax charge, and the SEC provision, was:

  • $0.62 for the second quarter 2008.
  • $1.03 for the first half 2008.

Full Year 2008 Outlook

Based on a reduced, anticipated full year weighted-average share count of 85 million shares, the company recalculated its full year 2008 outlook for pro-forma earnings per share to a range of $3.15 to $3.25. The outlook continues to anticipate total revenue of $3.3 billion to $3.4 billion and pro-forma EBITDA of $1.15 billion to $1.17 billion. The company also expects $350 million to $400 million of free cash flow after total capital expenditures of approximately $715 million.

Excluding the impact of the preferred stock repurchase, the common share repurchases discussed below and the provision related to the SEC matter, the company's outlook range would have been unchanged from its previous guidance range of $2.65 to $2.75.

Share Repurchases

On June 10, 2008, the company announced that it had repurchased all of its outstanding Series C preferred stock and Series D preferred stock, which, on a converted basis, was the equivalent of 17 million common shares. In addition, on June 17, 2008, the company commenced a "modified Dutch auction" tender offer to repurchase up to 27.16 million of its common shares at a price not greater than $25.00 nor less than $22.00 per share. On July 23, 2008, the company announced the final results of the tender, and accepted for purchase the full allotment of 27.16 million shares at a price of $22.00 per share. As a result, the company's outstanding shares of common stock were reduced to approximately 59.3 million.

On June 9, 2008, and in anticipation of the share repurchases, the company entered into a new $1.25 billion asset-based revolving credit facility and repaid the approximately $462 million outstanding under the company's former revolving credit facility and term loan. It also issued $425 million in new 14% HoldCo notes due 2014 to the holders of the preferred stock as partial payment for the repurchase. These notes are callable at par at any time.

Company Calls $125 Million of New 14% HoldCo Notes

The company has recently given notice for the repayment of $125 million of the principal amount of its new 14% HoldCo notes. The company expects to retire this amount by the end of the 2008 third quarter.

CEO Comments

Michael Kneeland, chief executive officer of United Rentals, said, "Our second quarter performance reflects the impact of expected market weakness on our core rental business, counteracted in part by the proactive implementation of our profit improvement strategy. Although our rental revenue declined, we drove our EBITDA margin higher through rigorous reductions of workforce and facility costs. By the time the construction economy softened in the quarter, we had already adjusted our fleet plan to slow rental capex spending by $80 million.

"With the share repurchases complete, we expect the company's 2009 fully-diluted share count to decrease by approximately 39% to 70 million shares. As we stated in June, these repurchases have given us the opportunity to achieve significantly more EPS accretion, and to capture it more quickly, than through other means."

Mr. Kneeland continued, "Our full year outlook continues to balance our assessment of what we believe will be an increasingly challenging environment against the dramatic actions we have already taken. Our strategy is now well-established, and we will continue to use the many operating levers at our disposal, such as capex and labor adjustments, to optimize our performance and generate free cash flow."

Free Cash Flow and Fleet Size

For the first half 2008, free cash flow was $117 million after total rental and non-rental capital expenditures of $469 million, compared with free cash usage of $152 million after total rental and non-rental capital expenditures of $657 million for the same period last year. The year-over-year improvement in free cash flow was largely the result of a $188 million reduction in capital expenditures, as well as improved working capital generation in 2008.

The size of the rental fleet, as measured by the original equipment cost, was $4.3 billion and the age of the rental fleet was 38 months at June 30, 2008, compared with $4.2 billion and 38 months at year-end 2007, and $4.2 billion and 37 months at June 30, 2007. The modest increase in OEC versus 2007 year-end reflects the impact of purchasing new equipment at current prices while selling older fleet. The number of units in the fleet is essentially flat as compared to year-end 2007.

Return on Invested Capital (ROIC)

Return on invested capital was 12.9% for the twelve months ended June 30, 2008, a decrease of 1.1 percentage points from the same period last year. The company's ROIC metric uses operating income for the trailing twelve months divided by the averages of stockholders' equity, debt and deferred taxes, net of average cash.

Additional Information on 2Q 2008 Results, Share Repurchases and Status of SEC Inquiry

For additional information concerning the company's second quarter 2008 results, including segment performance for its general rentals and trench safety, pump and power businesses, the share repurchases as well as the status of the previously announced SEC inquiry of the company and related matters, please see the company's second quarter 2008 Form 10 Q filed today with the SEC.

Conference Call

United Rentals will hold a conference call tomorrow, Wednesday, July 30, 2008, 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, or by calling (703) 639-1365.

Non-GAAP Measures

Free cash flow, earnings before interest, taxes, depreciation and amortization (EBITDA), pro-forma EBITDA, and pro-forma earnings per share 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. EBITDA represents the sum of income from continuing operations before provision for income taxes, interest expense, net, interest expense-subordinated convertible debentures, depreciation-rental equipment and non-rental depreciation and amortization. Pro-forma EBITDA represents the sum of EBITDA and the impact of the provision recognized in conjunction with the SEC inquiry. Pro-forma EPS represents pro-forma income from continuing operations available to common stockholders divided by pro-forma weighted-average diluted shares outstanding. The company believes that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements and EBITDA and pro-forma EBITDA provide an enhanced perspective of our operating performance. Additionally, the company believes pro-forma EPS provides useful information concerning future profitability with consideration to our new capital structure. However, none of these measures should be considered as alternatives to net income, cash flows from operating activities under GAAP, or earnings per share as indicators of operating performance or liquidity. Information reconciling forward-looking free cash flow, EBITDA, pro-forma EBITDA and pro-forma EPS expectations 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 over 665 rental locations in 48 states, 10 Canadian provinces and Mexico. The company's approximately 10,500 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 2,900 classes of rental equipment with a total original cost of $4.3 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 www.unitedrentals.com.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements. These statements can generally be identified by words such as "believes," "expects," "plans," "intends," "projects," "forecasts," "may," "will," "should," "on track" or "anticipates," or the negative thereof or comparable terminology, or by discussions of vision, strategy or outlook. Our businesses and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) weaker or unfavorable economic or industry conditions can reduce demand and prices for our products and services, (2) non-residential construction spending, or governmental funding for infrastructure and other construction projects, may not reach expected levels, (3) we may not always have access to capital that our businesses or growth plans may require, (4) any companies we acquire could have undiscovered liabilities, may strain our management capabilities or may be difficult to integrate, (5) rates we can charge and time utilization we can achieve may be less than anticipated, (6) costs we incur may be more than anticipated, including by having expected savings not be realized in the amounts or time frames we have planned, (7) competition in our industry for talented employees is intense, which can affect our employee costs and retention rates, (8) we have incurred additional significant leverage in connection with our completed share repurchase transactions, which leverage requires us to use a substantial portion of our cash flow for debt service and will constrain our flexibility in responding to unanticipated or adverse business conditions, (9) we are subject to an ongoing inquiry by the SEC, and there can be no assurance as to its outcome, or any other potential consequences thereof for us, (10) we are subject to purported class action lawsuits and derivative actions filed in light of the SEC inquiry and additional purported class action lawsuits relating to the terminated merger transaction with Cerberus affiliates, and there can be no assurance as to their outcome or any other potential consequences thereof for us, and (11) we may incur additional significant costs and expenses (including indemnification obligations) in connection with the SEC inquiry, the purported class action lawsuits and derivative actions referenced above, the U.S. Attorney's Office inquiry, or other litigation, regulatory or investigatory matters, related to the foregoing or otherwise. 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, 2007, 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.


Hyde Park Financial Communications
Fred Bratman
(203) 618-7318 
Cell: (917) 847-4507
[email protected]


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