Record Utilization, Rising Rates Slow the Bleeding at United Rentals

  • 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.
  • Time utilization increased 7.5 percentage points to set a fourth quarter record for the company, and increased 4.9 percentage points for the full year to 65.6%, setting a full year record.
  • Full year net rental capital expenditures (purchases of rental equipment less proceeds from sales of rental equipment) were $202 million, compared with $31 million in 2009.
  • SG&A expense decreased by $41 million in 2010 compared with 2009.
  • For the full year 2010, cost of equipment rentals increased by $14 million, reflecting higher transaction volume and an $18 million non-cash charge in the fourth quarter to increase the company's self-insurance reserve.
  • 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.

 

Greenwich, Conn. United Rentals Inc. (NYSE: URI) announced financial results for the fourth quarter and full year 2010 showing rental revenue increased 10.4% for the fourth quarter, compared with 2009, reflecting year-over-year increases of 1.2% in rental rates and 14.3% in same store rental revenues. Total fourth-quarter revenue was $597 million, a 7% increase compared to 2009.

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.

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.

"We once again outperformed our markets, with double-digit increases in rental revenue and volume, and record time utilization for the quarter," said Michael Kneeland, chief executive officer of United Rentals. "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.

"This year is about profitable growth for United Rentals," Kneeland continued. "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.”

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 the $18 million non-cash charge related to the providing self-insurance reserves.

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.

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. United Rentals is a member of the Standard & Poor’s MidCap 400 Index and the Russell 2000 Index. Additional information about United Rentals is available at unitedrentals.com.

 

Loading