United Rentals, Inc. (NYSE: URI) today announced financial
results for the second quarter 2010. Total revenue was $557 million
and rental revenue was $450 million, compared with $615 million and
$454 million, respectively, for the same period last year.
Operating income was $59 million, compared with $5 million for the
same period last year.
On a GAAP EPS basis, the company reported second quarter 2010
net income of $12 million, or $0.18 per diluted share, compared
with a net loss of $17 million, or a loss of $0.28 per diluted
share, for the same period in 2009. In the second quarter 2010, the
company revised its estimate of full-year projected income (loss)
and the resulting effective tax rate. As a result, the company’s
net income for the quarter reflects an income tax benefit of $9
million. Adjusted EPS for the quarter, which excludes the impact of
special items, was $0.25 per diluted share, compared with a loss of
$0.24 per diluted share the prior year. Adjusted EBITDA margin,
which also excludes the impact of special items, was 32.1% for the
quarter, compared with 24.4% for the prior year.
Second Quarter 2010 Highlights
- Time utilization increased 4.1
percentage points compared with last year to a second quarter
record of 65.4%, reflecting an increase in demand and more
effective management of a smaller fleet. Rental rates declined 2.0%
compared with last year. Dollar utilization, which reflects the
impact of time utilization and rental rates, increased 1.8
percentage points to 46.7%.
- Free cash flow was $8 million,
compared with $70 million last year. To meet increased demand, the
company raised its outlook for net rental capital expenditures
(defined as purchases of rental equipment less the proceeds from
sales of rental equipment) to a range of $160 million to $180
million, from its previous estimate of $100 million to $120
million. The company also reaffirmed its outlook for full year free
cash flow of a range of $200 million to $225 million.
- SG&A expense decreased by
$11 million, compared with last year. The company has reaffirmed
its outlook for full year SG&A expense reduction within a range
of $40 million to $50 million.
- Cost of equipment rentals,
excluding depreciation, decreased by $4 million compared with last
year. The company has updated its outlook for full year expense
reduction to a range of $30 million to $50 million, from its
previous estimate of $70 million to $90 million.
- The company sold $80 million of
used fleet on an original equipment cost basis and generated a
positive gross margin of 24.3%, compared with $271 million of used
fleet sold at a negative gross margin of 9.5% for the same period
last year.
CEO Comments
Michael Kneeland, chief executive officer of United Rentals,
said, "This was a strong quarter with a number of positive trends
in the underlying metrics. Our same-store rental revenues increased
2.7%, with year over year growth in six of our nine operating
regions. We reported the highest time utilization of any second
quarter in our company's history. Rental rates, while down year
over year, improved sequentially each month. We are also running
the business much more efficiently and spending capex where it
counts, purchasing fleet that we are confident will be in demand by
our target accounts.”
Kneeland continued, "While we continue to expect a choppy
recovery, we believe that we are seeing the early stages of a
cyclical upturn on top of the normal seasonal benefit. As
contractors take on work with limited access to capital, they are
choosing to rent rather than buy equipment. We find it encouraging
that demand is coming from more than one source as we move into a
recovery. Our branches are meeting these opportunities head-on with
a powerful strategy focused on larger construction and industrial
accounts, pricing discipline and customer service excellence.”
Six Months 2010 Results
For the first half 2010, the company reported total revenue of
$1,035 million and rental revenue of $830 million, compared with
$1,209 million and $902 million, respectively, for the same period
last year. Operating income was $57 million for the first half
2010, compared with $23 million for the same period last year.
On a GAAP basis, the company reported a net loss of $28 million,
or $0.46 per diluted share, for the first half 2010, compared with
a net loss of $36 million, or $0.60 per diluted share, for the same
period in 2009. Adjusted EPS, which excludes the impact of special
items, was a loss of $0.28 per diluted share, compared with a loss
of $0.56 per diluted share the prior year. Adjusted EBITDA margin,
which also excludes the impact of special items, was 28.4% for the
first half 2010, compared with 24.4% in 2009.
Free Cash Flow and Fleet Size
For the first half 2010, free cash flow was $107 million,
including the receipt of a previously announced $55 million federal
tax refund, and after total rental and non-rental capital
expenditures of $186 million. By comparison, free cash flow for the
first half 2009 was $199 million after total rental and non-rental
capital expenditures of $164 million.
The size of the rental fleet was $3.765 billion of original
equipment cost at June 30, 2010, compared with $3.794 billion at
June 30, 2009, and $3.763 billion at December 31, 2009. The age of
the rental fleet was 45.0 months on a unit-weighted basis at June
30, 2010, compared with 42.4 months at December 31, 2009.
Return on Invested Capital (ROIC)
Return on invested capital was 2.0% for the 12 months ended June
30, 2010, a decrease of 3.0 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, Wednesday,
July 21, 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 800-862-9098.
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 income
(loss), benefit for income taxes, interest expense, net, interest
expense-subordinated convertible debentures, net, 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, the gains/losses on
the repurchase/redemption of debt securities and retirement of
subordinated convertible debentures, and the asset impairment
charge. 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 554 rental locations in 48
states and 10 Canadian provinces. The company’s approximately 7,400
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.
Forward-Looking Statements
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) inability to benefit from
government spending associated with 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) 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; (5) inability to
access the capital that our business may require; (6) increases in
our maintenance and replacement costs as we age our fleet, and
decreases in the residual value of our equipment; (7) inability to
sell our new or used fleet in the amounts, or at the prices, we
expect; (8) rates we can charge and time utilization we can achieve
being less than anticipated; and (9) 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, 2009, 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.
UNITED RENTALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In millions, except per share amounts)
Three
Months Ended Six Months Ended June 30, June
30, 2010 2009
2010 2009 Revenues:
Equipment rentals $ 450 $ 454 $ 830 $ 902 Sales of rental equipment
37 84 72 151 New equipment sales 21 20 40 43 Contractor supplies
sales 26 33 49 65 Service and other revenues 23
24 44 48
Total
revenues 557 615
1,035 1,209 Cost
of revenues: Cost of equipment rentals, excluding depreciation 217
221 431
454 Depreciation of rental equipment 95 110 191 216 Cost of rental
equipment sales 28 92 52 151 Cost of new equipment sales 18 17 34
37 Cost of contractor supplies sales 19 25 35 48 Cost of service
and other revenues 9 9 18
18
Total cost of revenues 386
474 761
924 Gross profit 171 141
274 285 Selling, general and administrative
expenses 90 101 176 209 Restructuring charge 6 20 12 24 Non-rental
depreciation and amortization 16 15
29 29
Operating income
59 5 57 23 Interest expense, net
54 42 115 92 Interest expense - subordinated convertible
debentures, net 2 (10 ) 4 (8 ) Other (income) expense, net -
2 (1 ) 1
Income (loss) before benefit for income taxes 3
(29 ) (61 ) (62 )
Benefit for income taxes (9 ) (12 ) (33 )
(26 )
Net income (loss) $ 12
$ (17 ) $ (28 ) $
(36 ) Diluted earnings (loss) per
share $ 0.18 $ (0.28 )
$ (0.46 ) $ (0.60 )
UNITED RENTALS, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (In millions)
June 30, December 31, 2010 2009
ASSETS Cash and cash equivalents $ 30 $ 169 Accounts
receivable, net 344 337 Inventory 60 44 Prepaid expenses and other
assets 40 89 Deferred taxes 57 66 Total
current assets 531 705 Rental equipment, net 2,334 2,414
Property and equipment, net 417 434 Goodwill and other intangible
assets, net 227 231 Other long-term assets 65
75
Total assets $ 3,574
$ 3,859 LIABILITIES AND
STOCKHOLDERS' DEFICIT Current maturities of long-term debt $
124 $ 125 Accounts payable 188 128 Accrued expenses and other
liabilities 195 208 Total current
liabilities 507 461 Long-term debt 2,587 2,826 Subordinated
convertible debentures 124 124 Deferred taxes 369 424 Other
long-term liabilities 37 43
Total
liabilities 3,624 3,878
Common stock 1 1 Additional paid-in capital 489 487
Accumulated deficit (602 ) (574 ) Accumulated other comprehensive
income 62 67
Total stockholders'
deficit (50 ) (19 )
Total liabilities and stockholders' deficit $
3,574 $ 3,859 UNITED
RENTALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In millions)
Three Months Ended Six Months Ended
June 30, June 30, 2010
2009 2010
2009 Cash Flows From Operating
Activities: Net income (loss) $ 12 $ (17 ) $ (28 ) $ (36 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization 111 125 220 245
Amortization of deferred financing costs and original issue
discounts 5 4 11 8 (Gain) loss on sales of rental equipment (9 ) 8
(20 ) - Loss (gain) on sales of non-rental equipment - 2 (1 ) 1
Stock compensation expense, net 3 2 4 4 Restructuring charge 6 20
12 24 (Gain) loss on repurchase/redemption of debt securities (1 )
(13 ) 3 (17 ) Gain on retirement of subordinated convertible
debentures - (13 ) - (13 ) Decrease in deferred taxes (23 ) (4 )
(47 ) (7 ) Changes in operating assets and liabilities: (Increase)
decrease in accounts receivable (24 ) (10 ) (7 ) 83 (Increase)
decrease in inventory (14 ) 4 (16 ) 4 Decrease in prepaid expenses
and other assets 18 2 55 9 Increase (decrease) in accounts payable
51 (11 ) 61 (14 ) Decrease in accrued expenses and other
liabilities (34 ) (18 ) (28 ) (86 ) Net
cash provided by operating activities 101 81 219 205
Cash
Flows From Investing Activities: Purchases of rental equipment
(125 ) (86 ) (174 ) (138 ) Purchases of non-rental equipment (7 )
(14 ) (12 ) (26 ) Proceeds from sales of rental equipment 37 84 72
151 Proceeds from sales of non-rental equipment 2 5 3 8 Purchases
of other companies - 1 -
(1 ) Net cash used in investing activities (93 ) (10 ) (111
) (6 )
Cash Flows From Financing Activities: Proceeds
from debt 445 1,200 1,090 1,520 Payments of debt (435 ) (1,235 )
(1,332 ) (1,661 ) Payments of financing costs - (14 ) - (14 )
Shares repurchased and retired - - (1 ) - Excess tax benefits from
share-based payment arrangements, net - -
(1 ) (1 ) Net cash provided by (used
in) financing activities 10 (49 ) (244 ) (156 ) Effect of
foreign exchange rates (8 ) 7 (3 )
5 Net increase (decrease) in cash and cash
equivalents 10 29 (139 ) 48 Cash and cash equivalents at beginning
of period 20 96 169
77 Cash and cash equivalents at end of period
$ 30 $ 125 $ 30 $ 125
Supplemental disclosure of cash flow information: Cash
(paid) received for income taxes, net $ (3 ) $ 6 $ 50 $ 4
UNITED RENTALS, INC. SEGMENT PERFORMANCE ($ in
millions)
Three Months Ended Six Months Ended
June 30,
June 30,
2010
2009
Change
2010
2009
Change
General Rentals Reportable segment revenue $ 515 $
576 (10.6 %) $ 958 $ 1,134 (15.5 %) Reportable segment operating
income 56 18 211.1 % 57 38 50.0 % Reportable segment operating
margin 10.9 % 3.1 % 7.8 pts 5.9 % 3.4 % 2.5 pts
Trench
Safety, Power & HVAC * Reportable segment revenue $ 42 $ 39
7.7 % $ 77 $ 75 2.7 % Reportable segment operating income 9 7 28.6
% 12 9 33.3 % Reportable segment operating margin 21.4 % 17.9 % 3.5
pts 15.6 % 12.0 % 3.6 pts
Total United Rentals Total
revenue $ 557 $ 615 (9.4 %) $ 1,035 $ 1,209 (14.4 %) Total
operating income (1) 65 25 160.0 % 69 47 46.8 % Total operating
margin (1) 11.7 % 4.1 % 7.6 pts 6.7 % 3.9 % 2.8 pts (1)
Excludes unallocated restructuring charge. * Effective April
1, 2010, the company's reportable segment for specialty operations
was renamed Trench Safety, Power & HVAC to better reflect its
fleet and service components. Trench Safety, Power & HVAC
includes the rental of equipment for underground construction,
temporary power, climate control and disaster recovery, and related
services such as training. The segment was previously reported as
Trench Safety, Pump and Power.
DILUTED EARNINGS (LOSS)
PER SHARE CALCULATION (In millions, except per share
data) Three Months Ended
Six Months Ended June
30, June 30,
2010
2009
2010
2009
Net income (loss) $ 12 $ (17 ) $ (28 ) $ (36 ) Convertible
debt interest-1 7/8 % notes - - -
- Net income (loss) available to common
stockholders $ 12 $ (17 ) $ (28 ) $ (36 ) Weighted-average
common shares 60.5 60.1 60.4 60.1 Employee stock options and
warrants 0.3 - - - Convertible subordinated notes - 1 7/8 % 5.3 - -
- Convertible subordinated notes - 4 % 1.0 - - - Restricted stock
units 0.6 - - -
Weighted average diluted shares 67.7 60.1 60.4 60.1
Diluted earnings (loss) per share $ 0.18 $ (0.28 ) $ (0.46 ) $
(0.60 )
UNITED RENTALS, INC. ADJUSTED EARNINGS
(LOSS) PER SHARE GAAP RECONCILIATION We define
"Earnings (loss) per share - adjusted" as the sum of (i) earnings
(loss) per share - GAAP, as reported, plus the after-tax impacts of
(ii) restructuring charge, (iii) (gain) loss on
repurchases/redemptions of debt securities and retirement of
subordinated convertible debentures and (iv) asset impairment
charge. Management believes adjusted earnings (loss) per share
provides useful information concerning future profitability.
However, adjusted earnings (loss) per share is not a measure of
financial performance under GAAP. Accordingly, adjusted earnings
(loss) per share should not be considered an alternative to GAAP
earnings (loss) per share. The table below provides a
reconciliation between earnings (loss) per share - GAAP, as
reported, and earnings (loss) per share - adjusted.
Three Months Ended Six Months
Ended June 30, June 30,
2010
2009
2010
2009
Earnings (loss) per share - GAAP, as
reported $ 0.18 $ (0.28 )
$ (0.46 ) $ (0.60 )
After-tax impact of: Restructuring charge (1)
0.06 0.22 0.13 0.25 (Gain) loss on repurchases/redemptions
of debt securities and retirement of subordinated convertible
debentures (0.01 ) (0.27 ) 0.03 (0.31 ) Asset impairment
charge (2) 0.02 0.09 0.02
0.10
Earnings (loss) per share -
adjusted
$ 0.25 $ (0.24 ) $
(0.28 ) $ (0.56 )
(1) Relates to branch closure charges and severance costs.
(2) Includes the impact of impairing certain rental equipment and
leasehold improvements.
UNITED RENTALS, INC.
EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATION (In
millions) EBITDA represents the sum of net income
(loss), benefit for income taxes, interest expense, net, interest
expense-subordinated convertible debentures, net, 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. These items are
excluded from adjusted EBITDA internally when evaluating our
operating performance and allow investors to make a more meaningful
comparison between our core business operating results over
different periods of time, as well as with those of other similar
companies. Management believes that EBITDA and adjusted EBITDA,
when viewed with the Company's results under GAAP and the
accompanying reconciliation, provide useful information about
operating performance and period-over-period growth, and provide
additional information that is useful for evaluating the operating
performance of our core business without regard to potential
distortions. Additionally, management believes that EBITDA and
adjusted EBITDA permit investors to gain an understanding of the
factors and trends affecting our ongoing cash earnings, from which
capital investments are made and debt is serviced. However, EBITDA
and adjusted EBITDA are not measures of financial performance or
liquidity under GAAP and, accordingly, should not be considered as
alternatives to net income (loss) or cash flow from operating
activities as indicators of operating performance or liquidity. The
table below provides a reconciliation between net income (loss) and
EBITDA and adjusted EBITDA.
Three Months Ended Six Months Ended June 30,
June 30,
2010
2009
2010
2009
Net income (loss) $ 12 $ (17 ) $ (28 ) $ (36 ) Benefit for
income taxes (9 ) (12 ) (33 ) (26 ) Interest expense, net 54 42 115
92 Interest expense - subordinated convertible debentures, net 2
(10 ) 4 (8 ) Depreciation of rental equipment 95 110 191 216
Non-rental depreciation and amortization 16 15
29 29
EBITDA (A)
170 128 278 267 Restructuring charge
(1) 6 20 12 24 Stock compensation expense, net (2) 3
2 4 4
Adjusted EBITDA
(B) $ 179 $ 150
$ 294 $ 295
(A) Our EBITDA margin was 30.5% and 20.8% for the three months
ended June 30, 2010 and 2009, respectively, and 26.9% and 22.1% for
the six months ended June 30, 2010 and 2009, respectively.
(B) Our adjusted EBITDA margin was 32.1% and 24.4% for the three
months ended June 30, 2010 and 2009, respectively, and 28.4% and
24.4% for the six months ended June 30, 2010 and 2009,
respectively. (1) Relates to branch closure charges
and severance costs. (2) Represents non-cash, share-based
payments associated with the granting of equity instruments.
UNITED RENTALS, INC. FREE CASH FLOW GAAP
RECONCILIATION (In millions) We define
free cash flow as (i) net cash provided by operating activities
less (ii) purchases of rental and non-rental equipment plus (iii)
proceeds from sales of rental and non-rental equipment and excess
tax benefits from share-based payment arrangements, net. Management
believes that free cash flow provides useful additional information
concerning cash flow available to meet future debt service
obligations and working capital requirements. However, free cash
flow is not a measure of financial performance or liquidity under
GAAP. Accordingly, free cash flow should not be considered an
alternative to net income (loss) or cash flow from operating
activities as an indicator of operating performance or liquidity.
The table below provides a reconciliation between net cash provided
by operating activities and free cash flow.
Three Months Ended Six Months Ended
June 30, June 30,
2010
2009
2010
2009
Net cash provided by operating activities $ 101 $ 81 $ 219 $
205 Purchases of rental equipment (125 ) (86 ) (174 ) (138 )
Purchases of non-rental equipment (7 ) (14 ) (12 ) (26 ) Proceeds
from sales of rental equipment 37 84 72 151 Proceeds from sales of
non-rental equipment 2 5 3 8 Excess tax benefits from share-based
payment arrangements, net - - (1
) (1 )
Free cash flow $ 8
$ 70 $ 107 $
199
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