United Rentals Announces Third Quarter 2008 Results and Revises Full Year Outlook

Greenwich, CT -


United Rentals, Inc. (NYSE: URI) today announced financial results for its third quarter 2008. Rental revenue was $677 million and total revenue was $873 million for the third quarter 2008, compared with $718 million and $990 million, respectively, for the same period last year.

Income from continuing operations was $74 million for third quarter 2008, compared with $111 million for third quarter 2007. The decline in income primarily reflects the impact of continued softness in the company's end markets, as well as increased interest expense of $26 million pre-tax following the company's preferred and common share repurchases earlier in the year.

Third quarter 2008 continuing operations earnings per share of $0.98, based on a diluted share count of 77.4 million shares, includes a non-cash charge of $2 million after-tax, or $0.03 per share, related to the retirement of $125 million of HoldCo Notes in September. In 2007, third quarter continuing operations earnings per share was $0.97 and the diluted share count was 115.1 million shares.

EBITDA, a non-GAAP measure, was $318 million for third quarter 2008, compared with $342 million for the same period last year.

Third Quarter Highlights

  • EBITDA margin improved 1.9 percentage points to 36.4%
  • Time utilization of 68.0% was flat year-over-year, while rental rates declined 3.4%
  • A record $1.5 billion OEC of fleet was transferred among locations
  • Contractor supplies gross margin improved 5.3 percentage points to 24.1%
  • SG&A expense decreased by $17 million, resulting in a flat SG&A margin of 15.2%

Full Year 2008 Outlook

The company revised its full year 2008 outlook for pro-forma earnings per share to a range of $2.55 to $2.65, from a previous range of $3.15 to $3.25, reflecting the acceleration of softness in the company's end markets. The guidance also includes the impact of an anticipated fourth quarter charge of approximately $0.13 per share principally related to the planned closing of approximately 30 branches. The revised outlook anticipates total revenue of $3.3 billion to $3.4 billion and pro-forma EBITDA of $1.07 billion to $1.10 billion. The company's expectations for free cash flow remain unchanged at $350 million to $400 million after total capital expenditures of approximately $715 million.

The pro-forma EPS outlook excludes the impact of the preferred stock redemption charge, an $8 million charge to establish a foreign tax credit valuation allowance, and the SEC charge, all of which are discussed below under "Nine Months 2008 Results."

CEO Comments

Michael Kneeland, chief executive officer of United Rentals, said, "We are continuing to manage the business through the current environment with a steadfast strategy that drove our EBITDA margin higher for the third straight quarter, brought down our SG&A costs by $17 million, and improved our fleet management practices. At the same time we are taking the right actions to set the stage for long-term, profitable growth, such as our recent acquisition of a Texas-based rental company, which expanded our presence in the under- penetrated industrial sector."

Mr. Kneeland continued, "We are prepared for our operating environment to become steadily more challenging as economic pressures and the credit crisis combine to suppress construction spending. As we move through the fourth quarter and into 2009, we will continue to pull the many levers at our disposal, including fleet transfers, used equipment sales and the closing of approximately 30 more branches. Our 2008 outlook reflects both the reality of the current construction cycle and our ability to navigate through it by adjusting our operations and fleet."

Nine Months 2008 Results

The company reported income from continuing operations of $149 million, compared with $210 million for the first nine months 2007. The decline in profitability primarily reflects lower gross profit in a softening construction environment as well as the previously announced second quarter $14 million after-tax charge in anticipation of the September SEC settlement, partially offset by the company's successful cost-cutting initiatives, including a pre-tax reduction of $56 million in SG&A expense.

EBITDA was $796 million for the first nine months 2008, compared with $850 million for the same period last year. EBITDA margin was 32.1% for the first nine months 2008. Excluding the impact of the SEC charge, the company's pro-forma EBITDA margin was 32.7%, an improvement of 2.2 percentage points from the 30.5% margin in the same period last year, reflecting the beneficial impact of the company's cost reductions and strategic focus on its core rental business.

On a GAAP basis, for the first nine months 2008 the company reported a continuing operations loss per share of $1.12 compared with continuing operations earnings per share of $1.87 for the same period last year. The loss per share reflects the impact of a $239 million preferred stock redemption charge recognized in the second quarter 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 loss per share also reflects the following second quarter items: 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 preferred stock repurchase, and the SEC charge.

The company reported pro-forma continuing operations earnings per share of $1.95 for the first nine months 2008, reflecting the reduced share count from the share repurchases. Pro-forma EPS excludes the impact of the preferred stock redemption charge, the $8 million after-tax charge, and the SEC charge.

Change to ABL Facility

The company also announced that it recently upsized its five-year $1.250 billion asset-based revolving credit facility to $1.285 billion, further increasing its liquidity.

Free Cash Flow and Fleet Size

For the first nine months 2008, free cash flow was $136 million after total rental and non-rental capital expenditures of $631 million, compared with free cash usage of $91 million after total rental and non-rental capital expenditures of $866 million for the same period last year. The year-over-year improvement in free cash flow was largely the result of a $235 million reduction in capital purchases.

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 September 30, 2008, compared with $4.3 billion and 37 months at the same point last year.

Return on Invested Capital (ROIC)

Return on invested capital was 12.0% for the twelve months ended September 30, 2008, a decrease of 2.0 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.

Conference Call

United Rentals will hold a conference call tomorrow, Wednesday, October 29, 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) 639-1127.

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 charge recognized in anticipation of the SEC settlement. 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 operating performance. Additionally, the company believes pro-forma EPS provides useful information concerning future profitability with consideration to its changed 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 10,400 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 purported class action lawsuits and derivative actions filed in light of the recently-settled 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 (10) we may incur additional significant costs and expenses (including indemnification obligations) in connection with 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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