United Rentals Announces Third Quarter 2009 Results
Greenwich, CT - Oct 27, 2009
United Rentals, Inc. (NYSE: URI) today announced financial results for the third quarter 2009. Total revenue was $592 million and rental revenue was $478 million, compared with $873 million and $684 million, respectively, for the same period last year. Operating income was $67 million for the quarter, compared with $188 million for the same period last year.
On a GAAP basis, the company reported third quarter 2009 net income of $0, or $0.00 per diluted share, compared with net income of $74 million, or $0.98 per diluted share, for the third quarter 2008. Adjusted EPS, which excludes the impact of special items, was $0.01 per diluted share for the quarter, compared with $1.02 per diluted share for the prior year. Adjusted EBITDA margin, which also excludes the impact of special items, was 31.1% for the third quarter, compared with 36.9% in 2008. The change in profitability primarily reflects a continued decline in non-residential construction activity and its negative impact on pricing, partially offset by the savings realized from the company’s ongoing cost-cutting initiatives.
Third Quarter 2009 Highlights
- Free cash flow was $123 million, compared with $20 million for the same period last year. The company expects to generate approximately $350 million of free cash flow for full-year 2009, an increase from its previous estimate of $325 million.
- Total debt decreased by $73 million during the quarter. The company repurchased and retired $162 million aggregate principal amount of outstanding indebtedness.
- SG&A expense decreased by $33 million compared with the same period last year. The company expects to reduce its full year SG&A expense by $95 million to $100 million, an increase from its previous estimate of $80 million to $90 million.
- The company sold $100 million of fleet on an original equipment cost basis with an average age of 76 months.
- Cost of equipment rentals, excluding depreciation, decreased by $64 million compared with the third quarter last year. The company expects to reduce its full year cost of equipment rentals, excluding depreciation, by $240 million to $250 million, an increase from its previous estimate of $190 million to $210 million.
- Time utilization decreased 3.8 percentage points to 64.2%, and rental rates declined 11.8%, compared with the third quarter last year. Dollar utilization, which reflects the impact of both rental rates and time utilization, decreased 12.2 percentage points to 48.7%.
Michael Kneeland, chief executive officer of United Rentals, said, "We are making progress on key areas of the business that are within our control, despite the further deterioration of activity in most of our end markets. Our continued focus on costs was instrumental in reducing SG&A expense and cost of rentals, and we now expect our free cash flow to come in higher than previously projected for the full year. Rental rates, while down year over year, showed a sequential improvement from the second quarter."
Mr. Kneeland continued, “From our current vantage point, our expectations for the timing of the cycle remain unchanged. We are planning for a modest recovery late in 2010, with demand building gradually throughout 2011 as lending resumes for non-residential construction projects. The strategic and financial actions that we have taken over the past year will also allow us to manage the business for profitable growth when the cycle turns in our favor.”
Nine Months 2009 Results
For the first nine months of 2009, the company reported total revenue of $1,801 million and rental revenue of $1,380 million, compared with $2,476 million and $1,890 million, respectively, for the same period last year. Operating income was $90 million for the first nine months of 2009, compared with $418 million for the same period last year.
On a GAAP basis, the company reported a net loss of $36 million, or $0.60 per diluted share, for the first nine months of 2009, compared with a net loss available to common stockholders of $90 million, or $1.12 per diluted share, for the same period in 2008. Adjusted EPS, which excludes the impact of special items, was a loss of $0.55 per diluted share for the first nine months 2009, compared with earnings of $2.22 per diluted share for the prior year. Adjusted EBITDA margin, which also excludes the impact of special items, was 26.6% for the first nine months of 2009, compared with 33.1% in 2008. The change in profitability primarily reflects a continued decline in non-residential construction activity and its negative impact on pricing, partially offset by savings realized from the company’s ongoing cost-cutting initiatives.
Free Cash Flow and Fleet Size
For the first nine months of 2009, free cash flow was $322 million after total rental and non-rental capital expenditures of $232 million, compared with free cash flow of $137 million after total rental and non-rental capital expenditures of $631 million for the same period last year. The year-over-year improvement in free cash flow was largely the result of a $392 million reduction in rental capital expenditures, consistent with our strategy in this environment, partially offset by lower cash generated from operating activities.
The size of the rental fleet, as measured by the original equipment cost, was $3.8 billion and the age of the rental fleet was 41 months at September 30, 2009, compared with $4.1 billion and 39 months at December 31, 2008.
Return on Invested Capital (ROIC)
Return on invested capital was 3.4% for the 12 months ended September 30, 2009, a decrease of 4.3 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, Thursday, October 29, 2009, 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 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. EBITDA represents the sum of net income (loss), provision (benefit) for income taxes, interest expense, net, interest expense-subordinated convertible debentures, net, depreciation-rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the restructuring charge, the charge related to the settlement of the SEC inquiry and stock compensation expense, net. Adjusted EPS represents EPS plus (i) the sum of the restructuring and asset impairment charges, the losses on the repurchase/retirement of debt securities and subordinated convertible debentures, the charge related to the settlement of the SEC inquiry, the preferred stock redemption charge and the foreign tax credit valuation allowance and other less (ii) the gains on the repurchase/retirement of debt securities and 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 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 580 rental locations in 48 states, 10 Canadian provinces and Mexico. The company’s approximately 8,400 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) 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; (3) 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; (4) inability to access the capital that our businesses or growth plans may require; (5) increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual value of our equipment; (6) inability to sell our new or used fleet in the amounts, or at the prices, we expect; (7) rates we can charge and time utilization we can achieve being less than anticipated; and (8) 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, 2008, 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