United Rentals Inc. announced financial results for the third quarter 20141. Total revenue was $1.544 billion and rental revenue was $1.315 billion, compared with $1.311 billion and $1.138 billion, respectively, for the same period last year. On a GAAP basis, the company reported third quarter net income of $192 million, or $1.84 per diluted share, compared with $143 million, or $1.35 per diluted share, for the same period last year.
Adjusted EPS2 for the quarter was $2.20 per diluted share, compared with $1.63 per diluted share for the same period last year. Adjusted EBITDA3 was $761 million and adjusted EBITDA margin was a company record 49.3% for the quarter.
Third Quarter 2014 Highlights
• Rental revenue (which includes owned equipment rental revenue, re-rent revenue and ancillary items) increased 15.6% year-over-year. Within rental revenue, owned equipment rental revenue increased 15.4%, reflecting year-over-year increases of 9.5% in the volume of equipment on rent and 4.7% in rental rates. The company has reaffirmed its outlook for a full-year increase in rental rates of approximately 4.5%, and full year total revenue in a range of $5.55 billion to $5.65 billion.
• Adjusted EBITDA was $761 million and adjusted EBITDA margin was 49.3%, an increase of $119 million and 30 basis points, respectively, from the same period last year. The company has reaffirmed its outlook for full year adjusted EBITDA in a range of $2.65 billion to $2.70 billion.
• ROIC was 8.4% for the 12 months ended September 30, 2014, an increase of 1.3 percentage points from the 12 months ended September 30, 2013.
• Time utilization increased 70 basis points year-over-year to 71.5%. The company has reaffirmed its outlook for full year time utilization of approximately 68.5%.
• The company generated $140 million of proceeds from used equipment sales at an adjusted gross margin of 47.9%, compared with $102 million and 48.0% for the same period last year.4
• Flow-through, which represents the year-over-year change in adjusted EBITDA divided by the year-over-year change in total revenue, was 51.1% for the quarter.
- In April 2014, the company acquired certain assets of the following four entities: National Pump & Compressor, Ltd., Canadian Pump and Compressor Ltd., GulfCo Industrial Equipment, LP and LD Services, LLC (collectively “National Pump”). National Pump is included in the company's results subsequent to the April 2014 acquisition date.
- Adjusted EPS is a non-GAAP measure that excludes the impact of the following special items: (i) merger related costs; (ii) restructuring charge; (iii) asset impairment charge; (iv) impact on interest expense related to fair value adjustment of acquired RSC indebtedness; (v) impact on depreciation related to acquired RSC fleet and property and equipment; (vi) impact of the fair value mark-up of acquired RSC fleet; (vii) merger related intangible asset amortization and (viii) loss on repurchase/redemption of debt securities and retirement of subordinated convertible debentures. See table below for amounts.
- Adjusted EBITDA is a non-GAAP measure that excludes the impact of the following special items: (i) merger related costs; (ii) restructuring charge; (iii) impact of the fair-value mark up of acquired RSC fleet; (iv) gain/loss on sale of software subsidiary and (v) stock compensation expense, net. See table below for amounts.
- Used equipment sales adjusted gross margin excludes the impact of the fair value mark-up of acquired RSC fleet that was sold.
Michael Kneeland, chief executive officer of United Rentals, said, "The third quarter provided further confirmation that our strategy and the North American construction recovery are both solidly on track. Our end markets are continuing to rally, creating numerous opportunities for well-managed, profitable growth. We reported a robust 16% increase in rental revenue for the quarter— and more importantly, the discipline behind that growth is evident in our record EBITDA margin and gains in volume, utilization and rates."
Kneeland continued, "While we reported very strong results, we believe they reflect just a fraction of what our company can achieve over multiple years in the forecasted upcycle. More immediately, we believe that the current uncertainty in the financial markets relates to global concerns, and not North America. We'll continue to take the actions that drive returns over time, including rigorous fleet management, the expansion of our specialty rental lines, and transformational measures for greater productivity."