United Rentals, Inc. (NYSE: URI) today announced financial
results for the fourth quarter and full year 2010. For the fourth
quarter, total revenue was $597 million and rental revenue was $497
million, compared with $557 million and $450 million, respectively,
for the fourth quarter 2009.
2010 Highlights
- Rental revenue increased 10.4% for the
fourth quarter 2010, compared with the fourth quarter last year,
reflecting year-over-year increases of 1.2% in rental rates and
14.3% in same store rental revenues.
- Time utilization for the fourth quarter
2010 was 69.3%, an increase of 7.5 percentage points from the same
period last year, and a fourth quarter record for the company. Time
utilization for the full year 2010 was 65.6%, an increase of 4.9
percentage points from 2009, and a full year record for the
company.
- Free cash flow was $227 million for the
full year 2010, compared with $367 million for 2009. Full year net
rental capital expenditures (defined as purchases of rental
equipment less the proceeds from sales of rental equipment) were
$202 million, compared with $31 million in 2009.
- SG&A expense decreased by $4
million for the fourth quarter 2010 year-over-year, and decreased
by $41 million for the full year 2010 compared with 2009.
- Cost of equipment rentals, excluding
depreciation, increased by $25 million for the fourth quarter 2010,
compared with 2009, including an $18 million non-cash charge to
increase the company's self-insurance reserve. For the full year
2010, cost of equipment rentals increased by $14 million,
reflecting higher transaction volume and the self-insurance charge,
substantially offset by structural cost savings.
- For the full year 2010, the company
recognized $144 million from sales of rental equipment at a gross
margin of 28.5%, compared with $229 million from sales of rental
equipment at a gross margin of 3.1% last year.
2011 Outlook
The company provided the following financial targets for full
year 2011:
- An increase in rental rates of at least
5% year-over-year;
- An increase in time utilization of
approximately 1 percentage point year-over-year; and
- Free cash flow in the range of $10
million to $50 million, including net rental capital expenditures
of between $425 million and $475 million. Gross rental purchases
are anticipated to be approximately $625 million.
CEO Comments
Michael Kneeland, chief executive officer of United Rentals,
said, "We once again outperformed our markets, with double-digit
increases in rental revenue and volume, and record time utilization
for the quarter. Underlying these numbers is a systemic focus on
profitability that has helped us limit costs and turn the corner on
rates. Our year-over-year rate performance was positive for the
first time in 15 quarters, driven by an increase in demand and our
internal pricing initiatives. This is a very strong close to the
year, and gives us excellent momentum going into 2011.”
Kneeland continued, "This year is about profitable growth for
United Rentals. We are continuing to strengthen our metrics, our
margins and the levers that drive them, particularly our customer
service structure. Our strategy has been to stay in front of key
customer segments through the worst of times, earning their
confidence for exactly this point in the cycle. As a result, we
expect to outpace what we see as a modest recovery in our end
markets.”
2010 Financial Results
For the fourth quarter 2010, on a GAAP basis, the company
reported a loss from continuing operations of $17 million, or $0.29
per diluted share, compared with a loss of $24 million, or $0.39
per diluted share, for the same period in 2009. On an adjusted
basis, excluding the impact of special items, EPS for the fourth
quarter 2010 was income of $0.16 per diluted share, compared with a
loss of $0.21 per diluted share the prior year. The effective tax
rate for the fourth quarter 2010 was 57.5%.
Adjusted EBITDA and adjusted EBITDA margin were $181 million and
30.3%, respectively, for the quarter, compared with $149 million
and 26.8%, respectively, for the same period in 2009.
For the full year 2010, total revenue was $2.2 billion and
rental revenue was $1.8 billion, compared with $2.4 billion and
$1.8 billion, respectively, for the full year 2009. On a GAAP
basis, the company reported a loss from continuing operations of
$22 million, or $0.38 per diluted share, compared with a loss of
$60 million, or $0.98 per diluted share, for 2009. On an adjusted
basis, excluding the impact of special items, EPS for the full year
2010 was income of $0.33 per diluted share, compared with a loss of
$0.76 per diluted share the prior year. The effective tax rate for
2010 was 65.1%.
Adjusted EBITDA and adjusted EBITDA margin were $691 million and
30.9%, respectively, for 2010, compared with $628 million and
26.6%, respectively, for 2009.
The company’s EPS, adjusted EPS, adjusted EBITDA and adjusted
EBITDA margin for the fourth quarter and full year 2010 were all
negatively impacted by an $18 million non-cash charge ($11 million
after-tax) related to the provision for self-insurance
reserves.
Free Cash Flow and Fleet Size
For full year 2010, free cash flow, a non-GAAP measure, was $227
million, compared with free cash flow of $367 million for full year
2009. The year-over-year decrease in free cash flow was largely the
result of an increase in net rental capital expenditures.
The size of the rental fleet, as measured by the original
equipment cost, was $3.79 billion at December 31, 2010, and $3.76
billion at December 31, 2009. The age of the rental fleet was 47.7
months on a unit-weighted basis at December 31, 2010, compared with
42.4 months at December 31, 2009.
Return on Invested Capital (ROIC)
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. To
mitigate the volatility related to fluctuations in our tax rate
from period to period, the federal statutory tax rate of 35% is
used to calculate after-tax operating income. The company’s ROIC
was 3.7% for the 12 months ended December 31, 2010, an increase of
1.5 percentage points from the same period last year.
Conference Call
United Rentals will hold a conference call tomorrow, Wednesday,
February 2, 2011, at 11:00 a.m. Eastern Time. The conference call
will be available live by audio webcast at ur.com, where it will be archived until the next
earnings call, and by calling 866-261-7147.
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), loss from discontinued operation, net of taxes, provision
(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 531 rental locations in 48
states and 10 Canadian provinces. The company’s approximately 7,300
employees serve construction and industrial customers, utilities,
municipalities, homeowners and others. The company offers for rent
approximately 2,900 classes of equipment with a total original cost
of $3.79 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 vision, 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) a slowdown in the
recovery of North American construction and industrial activities,
which decreased during the economic downturn and significantly
affected our revenues and profitability, may further reduce demand
for equipment and prices that we can charge; (2) a decrease in
levels of infrastructure spending, including lower than expected
government funding for 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) restrictive covenants in our debt
agreements, which could limit our financial and operation
flexibility; (5) noncompliance with covenants in our debt
agreements, which could result in termination of our credit
facilities and acceleration of outstanding borrowings; (6)
inability to access the capital that our business may require;
(7) inability to collect on contracts with customers; (8)
incurrence of impairment charges; (9) the potential
consequences of litigation and other claims relating to our
business, including certain claims that our insurance may not
cover; (10) an increase in our loss reserves to address business
operations or other claims and any claims that exceed our
established levels of reserves; (11) incurrence of additional
costs and expenses in connection with litigation, regulatory or
investigatory matters; (12) increases in our maintenance and
replacement costs as we age our fleet, and decreases in the
residual value of our equipment; (13) inability to sell our new or
used fleet in the amounts, or at the prices, we expect;
(14) challenges associated with past or future acquisitions,
such as undiscovered liabilities and integration issues;
(15) management turnover and inability to attract and retain
key personnel; (16) our rates and time utilization being less
than anticipated; (17) our costs being more than anticipated,
the inability to realize expected savings and the inability to
obtain key equipment and supplies; (18) disruptions in our
information technology systems; (19) competition from existing
and new competitors; and (20) labor difficulties and
labor-based legislation affecting labor relations and operations
generally. For a more complete description of these and other
possible risks and uncertainties, please refer to our Annual Report
on Form 10-K for the year ended December 31, 2010, 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 Year Ended December
31, December 31, 2010
2009 2010
2009 Revenues: Equipment rentals $ 497 $
450 $ 1,834 $ 1,830 Sales of rental equipment 40 37 144 229 Sales
of new equipment 19 23 78 86 Contractor supplies sales 22 26 95 121
Service and other revenues 19 21
86 92
Total revenues 597
557 2,237
2,358 Cost of revenues: Cost of equipment
rentals, excluding depreciation 256 231 924
910 Depreciation of rental equipment 100 101 389 417 Cost of rental
equipment sales 29 33 103 222 Cost of new equipment sales 16 20 65
73 Cost of contractor supplies sales 15 19 66 89 Cost of service
and other revenues 6 8 32
37
Total cost of revenues 422
412 1,579
1,748 Gross profit 175
145 658 610 Selling, general and
administrative expenses 96 100 367 408 Restructuring charge 15 6 34
31 Non-rental depreciation and amortization 17
15 60 57
Operating
income 47 24 197 114
Interest expense, net 85 72 255 226 Interest expense - subordinated
convertible debentures, net 2 2 8 (4 ) Other income, net -
(1 ) (3 ) (1 )
Loss from
continuing operations before benefit for income taxes
(40 ) (49 ) (63 )
(107 ) Benefit for income taxes (23 )
(25 ) (41 ) (47 ) Loss from continuing
operations (17 ) (24 ) (22 ) (60 ) Loss from discontinued
operation, net of taxes (4 ) (2 ) (4 ) (2 )
Net loss
$ (21 ) $ (26 ) $
(26 ) $ (62 )
Diluted loss per share: Loss from continuing operations $
(0.29 ) $ (0.39 ) $ (0.38 ) $ (0.98 ) Loss from discontinued
operation (0.06 ) (0.04 ) (0.06 ) (0.04
)
Net loss $ (0.35 ) $
(0.43 ) $ (0.44 ) $
(1.02 ) UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions)
December
31, 2010 2009
ASSETS Cash and cash equivalents $ 203 $ 169
Accounts receivable, net 377 337 Inventory 39 44 Prepaid expenses
and other assets 37 89 Deferred taxes 69
66 Total current assets 725 705 Rental
equipment, net 2,280 2,414 Property and equipment, net 393 434
Goodwill and other intangible assets, net 227 231 Other long-term
assets 68 75
Total assets $ 3,693 $
3,859 LIABILITIES AND
STOCKHOLDERS' DEFICIT Current maturities of long-term debt $
229 $ 125 Accounts payable 132 128 Accrued expenses and other
liabilities 208 208 Total
current liabilities 569 461 Long-term debt 2,576 2,826
Subordinated convertible debentures 124 124 Deferred taxes 385 424
Other long-term liabilities 59
43
Total liabilities 3,713
3,878 Common stock 1 1
Additional paid-in capital 492 487 Accumulated deficit (600 ) (574
) Accumulated other comprehensive income 87
67
Total stockholders' deficit
(20 ) (19 )
Total liabilities and stockholders' deficit $
3,693 $ 3,859
UNITED RENTALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In millions)
Three Months Ended Year
Ended December 31, December 31,
2010 2009
2010
2009
Cash Flows From Operating Activities: Net loss $ (21 ) $ (26
) $ (26 ) $ (62 ) Adjustments to reconcile net loss to net cash
provided by operating activities: Depreciation and amortization 117
116 449 474 Amortization of deferred financing costs and original
issue discounts 6 4 23 17 Gain on sales of rental equipment (11 )
(4 ) (41 ) (7 ) Loss on sales of non-rental equipment 1 - - 1 Stock
compensation expense, net 2 2 8 8 Restructuring charge 15 6 34 31
Loss (gain) on repurchase/redemption of debt securities 25 9 28 (7
) Gain on retirement of subordinated convertible debentures - - -
(13 ) (Decrease) increase in deferred taxes (23 ) 8 (58 ) 4 Changes
in operating assets and liabilities: Decrease (increase) in
accounts receivable 24 34 (38 ) 128 Decrease in inventory 9 9 5 16
(Increase) decrease in prepaid expenses and other assets (1 ) (49 )
61 (36 ) (Decrease) increase in accounts payable (35 ) (15 ) 4 (32
) Increase (decrease) in accrued expenses and other liabilities
1 (9 ) 3 (84 ) Net cash
provided by operating activities 109 85 452 438
Cash
Flows From Investing Activities: Purchases of rental equipment
(59 ) (62 ) (346 ) (260 ) Purchases of non-rental equipment (8 )
(17 ) (28 ) (51 ) Proceeds from sales of rental equipment 40 37 144
229 Proceeds from sales of non-rental equipment 1 2 7 13 Purchases
of other companies - 1 -
(25 ) Net cash used in investing activities (26 ) (39 ) (223
) (94 )
Cash Flows From Financing Activities:
Proceeds from debt 1,942 1,449 3,423 3,452 Payments of debt (1,981
) (1,431 ) (3,606 ) (3,658 ) Payments of financing costs (18 ) (19
) (18 ) (33 ) Proceeds from sale of common stock options 1 - 1 -
Shares repurchased and retired - (1 ) (1 ) (1 ) Excess tax benefits
from share-based payment arrangements, net - - (2 ) (2 ) Cash paid
in connection with convertible note hedge transactions -
(26 ) - (26 ) Net cash
used in financing activities (56 ) (28 ) (203 ) (268 )
Effect of foreign exchange rates 6 2
8 16 Net increase in cash and
cash equivalents 33 20 34 92 Cash and cash equivalents at beginning
of period 170 149 169
77 Cash and cash equivalents at end of period
$ 203 $ 169 $ 203 $ 169
Supplemental disclosure of cash flow information: Cash paid
for interest $ 89 $ 79 $ 229 $ 234 Cash paid (received) for income
taxes, net
- 1 (49 ) 3
UNITED RENTALS, INC.
SEGMENT PERFORMANCE ($ in millions)
Three Months Ended Year
Ended December 31, December 31,
2010 2009
Change 2010
2009 Change
General Rentals Reportable segment revenue $ 555 $ 520 6.7%
$ 2,071 $ 2,202 (5.9%) Reportable segment operating income 55 26
111.5% 199 123 61.8% Reportable segment operating margin 9.9% 5.0%
4.9 pp 9.6% 5.6% 4.0 pp
Trench Safety, Power &
HVAC Reportable segment revenue $ 42 $ 37 13.5% $ 166 $ 156
6.4% Reportable segment operating income 7 4 75.0% 32 22 45.5%
Reportable segment operating margin 16.7% 10.8% 5.9 pp 19.3% 14.1%
5.2 pp
Total United Rentals Total revenue $ 597 $ 557
7.2% $ 2,237 $ 2,358 (5.1%) Total segment operating income (1) 62
30 106.7% 231 145 59.3% Total segment operating margin (1) 10.4%
5.4% 5.0 pp 10.3% 6.1% 4.2 pp (1) Excludes unallocated
restructuring charge.
DILUTED LOSS PER SHARE
CALCULATION (In millions, except per share data)
Three Months Ended
Year Ended December 31, December 31,
2010 2009
2010
2009
Loss from continuing operations $ (17 ) $ (24 ) $ (22 ) $
(60 ) Loss from discontinued operation, net of taxes (4 )
(2 ) (4 ) (2 ) Net loss (21 ) (26 ) (26 ) (62
) Weighted average diluted shares 60.6 60.2 60.5 60.1
Diluted loss per share: Loss from continuing
operations $ (0.29 ) $ (0.39 ) $ (0.38 ) $ (0.98 ) Loss from
discontinued operation (0.06 ) (0.04 ) (0.06 )
(0.04 ) Net loss $ (0.35 ) $ (0.43 ) $ (0.44 ) $ (1.02 )
UNITED RENTALS, INC. ADJUSTED EARNINGS (LOSS) PER
SHARE GAAP RECONCILIATION
We define "Earnings (loss) per share from
continuing operations - adjusted" as the sum of (i) loss per share
from continuing operations - GAAP, as reported plus the after-tax
impacts of (ii) restructuring charge, (iii) loss (gain) on
repurchases/redemptions of debt securities and retirement of
subordinated convertible debentures and (iv) asset impairment
charge. Management believes adjusted earnings (loss) per share from
continuing operations provides useful information concerning future
profitability. However, adjusted earnings (loss) per share from
continuing operations is not a measure of financial performance
under GAAP. Accordingly, adjusted earnings (loss) per share from
continuing operations should not be considered an alternative to
GAAP loss per share from continuing operations. The table below
provides a reconciliation between loss per share from continuing
operations - GAAP, as reported, and earnings (loss) per share from
continuing operations - adjusted.
Three Months
Ended Year Ended December 31,
December 31, 2010
2009
2010
2009
Loss per share from continuing operations -
GAAP, as reported $ (0.29 ) $
(0.39 ) $ (0.38 ) $
(0.98 ) After-tax impact of:
Restructuring charge (1) 0.15 0.07 0.34 0.29 Loss (gain) on
repurchases/redemptions of debt securities and retirement of
subordinated convertible debentures 0.24 0.08 0.28 (0.19 )
Asset impairment charge (2) 0.06 0.03
0.09 0.12
Earnings (loss) per share from
continuing operations - adjusted
$ 0.16 $ (0.21 ) $
0.33 $ (0.76 )
(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
loss, loss from discontinued operation, net of taxes, 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 loss and EBITDA
and adjusted EBITDA.
Three Months Ended
Year Ended December 31, December 31,
2010 2009
2010
2009
Net loss $ (21 ) $ (26 ) $ (26 ) $ (62 ) Loss from
discontinued operation, net of taxes 4 2 4 2 Benefit for income
taxes (23 ) (25 ) (41 ) (47 ) Interest expense, net 85 72 255 226
Interest expense - subordinated convertible debentures, net 2 2 8
(4 ) Depreciation of rental equipment 100 101 389 417 Non-rental
depreciation and amortization 17 15
60 57
EBITDA (A) 164
141 649 589 Restructuring charge (1) 15 6 34
31 Stock compensation expense, net (2) 2 2
8 8
Adjusted EBITDA (B)
$ 181 $ 149 $
691 $ 628 (A) Our
EBITDA margin was 27.5% and 25.3% for the three months ended
December 31, 2010 and 2009, respectively, and 29.0% and 25.0% for
the years ended December 31, 2010 and 2009, respectively.
(B) Our adjusted EBITDA margin was 30.3% and 26.8% for the three
months ended December 31, 2010 and 2009, respectively, and 30.9%
and 26.6% for the years ended December 31, 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 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 Year Ended December 31, December 31,
2010 2009
2010
2009
Net cash provided by operating activities $ 109 $ 85 $ 452 $
438 Purchases of rental equipment (59 ) (62 ) (346 ) (260 )
Purchases of non-rental equipment (8 ) (17 ) (28 ) (51 ) Proceeds
from sales of rental equipment 40 37 144 229 Proceeds from sales of
non-rental equipment 1 2 7 13 Excess tax benefits from share-based
payment arrangements, net - - (2
) (2 )
Free cash flow $ 83
$ 45 $ 227 $
367
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