United Rentals announces first quarter 2010 results

April 24, 2010 – United Rentals, Inc. (NYSE: URI) has announced financial results for the first quarter 2010. Total revenue was $478 million and rental revenue was $380 million, compared with $594 million and $448 million, respectively, for the same period last year.

On a GAAP EPS basis, the company reported a first quarter 2010 net loss of $40 million, or $0.67 per diluted share, compared with a net loss of $19 million, or $0.32 per diluted share, for the same period in 2009. Adjusted EPS for the quarter, which excludes the impact of special items, was a loss of $0.57 per diluted share, compared with a loss of $0.32 per diluted share the prior year. Adjusted EBITDA margin, which also excludes the impact of special items, was 24.1% for the quarter, compared with 24.4% for the prior year.

First Quarter 2010 Highlights

•    Free cash flow was $99 million, compared with $129 million for the same period last year. The company has raised its outlook for full year free cash flow generation to a range of $200 million to $225 million, from its previous estimate of $175 million to $200 million.
•    SG&A expense decreased by $22 million, compared with last year. The company has raised its outlook for full year SG&A expense reduction to a range of $40 million to $50 million, from its previous estimate of $25 million to $35 million.
•    Cost of equipment rentals, excluding depreciation, decreased by $19 million, compared with last year. The company has reaffirmed its outlook for full year expense reduction within a range of $70 million to $90 million.
•    The company sold $77 million of fleet on an original equipment cost basis during the quarter and generated a used equipment gross margin of 31.4%, compared with $184 million of fleet sold at a gross margin of 11.9% for the same period last year.
•    Time utilization increased 0.1 percentage points to 56.2%, reflecting an increase in demand for earthmoving equipment and a 6% year-over-year reduction in total fleet based on original equipment cost, among other factors. Rental rates declined 6.5% compared with last year.  Dollar utilization, which reflects the impact of rental rates and time utilization, decreased 3.5 percentage points to 39.4%.

CEO Comments

Michael Kneeland, chief executive officer of United Rentals, said, "Twelve months ago, we were in the midst of an economic free fall in our end markets. Today we see signs of a more positive outlook for our industry, with the foremost indicator being used equipment prices. We fought back against the economic and seasonal challenges of the first quarter by holding firm on time utilization and mitigating the decline in rates. Our top line, while temporarily impacted by demand, reflects our shift toward a more optimal revenue mix. We are serving our most profitable customers more effectively and at lower cost. We now expect to outperform our initial estimates for SG&A savings and free cash flow this year."

Kneeland continued, “As conditions improve over time, the results of our strategic initiatives around customer segmentation and service, as well as our strong liquidity position and industry-leading scale, will be defining advantages. We are well prepared to benefit from the recovery with ample capital to invest in growth, and with our arms firmly around value creation. "

Free Cash Flow and Fleet Size
For the first quarter 2010, free cash flow was $99 million, including the receipt of a previously announced $55 million federal tax refund, and after total rental and non-rental capital expenditures of $54 million. By comparison, free cash flow for the first quarter 2009 was $129 million after total rental and non-rental capital expenditures of $64 million.
The size of the rental fleet was $3.7 billion of original equipment cost at March 31, 2010, compared with $3.8 billion at December 31, 2009. The age of the rental fleet was 44.1 months on a unit-weighted basis at March 31, 2010, compared with 42.4 months at December 31, 2009. 

Return on Invested Capital (ROIC)   

Return on invested capital was 1.6% for the 12 months ended March 31, 2010, a decrease of 5.0 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.

Conference Call

United Rentals will hold a conference call tomorrow, Thursday, April 22, 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 866-261-2650.

Non-GAAP Measures     

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 loss, 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 charge and the gains/losses on the repurchase of debt securities. 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.