United Rentals Inc. announced financial results for the second quarter 2016, reporting a decrease of 1.6% in rental revenue since last year at this time, but showing net income up due to increased used equipment sales.
Total revenue was $1.421 billion and rental revenue was $1.204 billion for the second quarter, compared with $1.429 billion and $1.220 billion, respectively, for the same period last year. On a GAAP basis, the company reported second quarter net income of $134 million, or $1.52 per diluted share, compared with $86 million, or $0.88 per diluted share, for the same period last year.1
Adjusted EPS2 for the quarter was $2.06 per diluted share, compared with $1.95 per diluted share for the same period last year. Adjusted EBITDA2 was $679 million and adjusted EBITDA margin was 47.8%, reflecting decreases of $27 million and 160 basis points, respectively, from the same period last year.
Michael Kneeland, chief executive officer of United Rentals, said, "During our second quarter, we were pleased with the positive progression of monthly rental rates, which we attribute to the combined impact of our internal initiatives and solid growth in several of our core U.S. markets. While conditions remain challenging in Canada, we see solid customer activity on both the East and West Coasts of the U.S., at the same time that our emphasis on specialty rentals continues to pay dividends."
Kneeland continued, "Based on what we saw through the mid-year, and what we hear from the field, we continue to expect our business to improve both seasonally and cyclically. Consequently, we can reaffirm our 2016 revenue, EBITDA, capital spending and free cash flow guidance. While we remain mindful of the elevated uncertainty towards the direction of the global economy, we also know that we have considerable flexibility in operating our business to address changing market dynamics."
Second Quarter 2016 Highlights
• Within rental revenue3, owned equipment rental revenue decreased 1.6% year-over-year, reflecting a 2.4% drop in rental rates, offset by an increase of 3.0% in the volume of equipment on rent, which included the adverse impact from currency.
• In May and June, month-over-month sequential rates increased 50 basis points and 60 basis points, respectively, representing the first increases in sequential rates in 16 months. The company updated its 2016 outlook for rental rates to reflect a smaller expected year-over-year decrease.
• Time utilization increased 90 basis points year-over-year to 67.5%.
• Rental revenue generated by the company’s Trench Safety and Power & HVAC specialty businesses, combined, increased by 15% year-over-year, primarily on a same store basis.
• The company generated $134 million of proceeds from used equipment sales at a GAAP gross margin of 41.0% and an adjusted gross margin of 47.8%, compared with $124 million at a GAAP gross margin of 45.2% and an adjusted gross margin of 50.0% for the same period last year.4
• In May 2016, the company redeemed all $300 million of its 8 1/4 % Senior Notes and $550 million of its 7 3/8 % Senior Notes, and issued $750 million of 5 7/8 % Senior Notes. In August 2016, the company expects to redeem the remaining $200 million of its 7 3/8 % Senior Notes. The notes redeemed in May, as well as those expected to be redeemed in August, would have matured in 2020 and 2021, and the issued notes will mature in 2026. The company expects annualized interest savings of approximately $30 million as a result of these actions. In June 2016, the company extended the maturity date of its ABL facility to June 2021.