United Rentals Inc. announced financial results for the fourth quarter and full year 2016, reporting flat rental revenue year over year. The company also announced its acquisition of NES Rentals Holdings II Inc. for approximately $965 million in cash.
United Rentals to Acquire NES Rentals
"We were very pleased with our fourth quarter results, which benefited from broad-based demand," said Michael Kneeland, chief executive officer of United Rentals. "While rental rates remained a year-on-year headwind, our sequential rate performance was somewhat better than expected, and OEC volumes were robust through the end of the quarter. These factors helped us exceed the upper-band of guidance on total revenue, adjusted EBITDA and free cash flow for the full year."
Kneeland continued, "2017 should be a year of notable growth for us on several fronts. We expect to close the NES acquisition early in the second quarter and immediately embark on our integration plan. The transaction should be accretive to earnings, revenue, EBITDA and free cash flow this year. Once the acquisition is complete, we will issue new 2017 guidance to reflect the combined operations."
He added, “In addition to M&A investment, we expect our performance to be driven by broad-based market opportunities and growing demand. Our confidence in the cycle is supported by internal data, customer sentiment, and the strength of key leading indicators. Longer-term, we expect our 2017 strategic investments in increased capital spending, sales and marketing, digital and Project XL to extend our market position and enhance future profitability."
For the fourth quarter of 2016, total revenue was $1.523 billion and rental revenue was $1.298 billion, compared with $1.523 billion and $1.278 billion, respectively, for the same period the prior year. On a GAAP basis, the company reported fourth quarter net income of $153 million, or $1.801 per diluted share, compared with $169 million, or $1.81 per diluted share, for the same period the prior year.
Adjusted EPS2 for the quarter was $2.67 per diluted share, compared with $2.19 for the same period the prior year. Adjusted EBITDA2 was $749 million and adjusted EBITDA margin was 49.2% for the quarter, compared with $744 million and 48.9%, respectively, for the same period the prior year.
For the full year 2016, total revenue was $5.762 billion and rental revenue was $4.941 billion, compared with $5.817 billion and $4.949 billion, respectively, for 2015. On a GAAP basis, full year net income was $566 million, or $6.45 per diluted share, compared with $585 million, or $6.07 per diluted share, for 2015.
Adjusted EPS for the full year was $8.65 per diluted share, compared with $8.02 per diluted share for 2015. Adjusted EBITDA was $2.759 billion and adjusted EBITDA margin was 47.9% for the full year, compared with $2.832 billion and 48.7%, respectively, for 2015.
2016 Highlights
• For the fourth quarter of 2016, rental revenue (which includes owned equipment rental revenue, re-rent revenue and ancillary items) increased 1.6% year-over-year. Within rental revenue, owned equipment rental revenue increased 1.9%, reflecting an increase of 4.3% in the volume of equipment on rent partially offset by a 1.8% decrease in rental rates.
• For the full year 2016, total revenue decreased 0.9% year-over-year, and rental revenue decreased 0.2%3. Within rental revenue, owned equipment rental revenue decreased 0.3%, reflecting a 2.2% decrease in rental rates largely offset by an increase of 3.1% in the volume of equipment on rent.
• For the fourth quarter of 2016, time utilization increased 110 basis points year-over-year to 69.3%. Full year 2016 time utilization increased 60 basis points year-over-year to 67.9%.
• For the fourth quarter and full year 2016, the company’s Trench, Power and Pump specialty segment's rental revenue increased by approximately 10% year-over-year, primarily on a same store basis.
• For the fourth quarter of 2016, the company generated $135 million of proceeds from used equipment sales at a GAAP gross margin of 43.0% and an adjusted gross margin of 49.6%, compared with $157 million of proceeds at a GAAP gross margin of 40.1% and an adjusted gross margin of 46.5% the prior year.4
• For the full year 2016, the company generated $496 million of proceeds from used equipment sales at a GAAP gross margin of 41.1% and an adjusted gross margin of 48.2%, compared with $538 million of proceeds at a GAAP gross margin of 42.2% and an adjusted gross margin of 47.6% for the prior year.
• For the full year 2016, the company generated $1.953 billion of net cash provided by operating activities and $1.182 billion of free cash flow5, compared with $1.995 billion and $919 million, respectively, for the same period last year. Net rental capital expenditures were $750 million, compared with $996 million for the same period last year.
• During 2016, the company 1) redeemed all $300 million of its 8 1/4 % Senior Notes due 2020, all $750 million of its 7 3/8 % Senior Notes due 2021, and $850 million of its 7 5/8 % Senior Notes due 2022, and 2) issued $750 million of 5 7/8 % Senior Notes due 2026 and $750 million of 5 1/2 % Senior Notes due 2027.
For more about United Rentals' fourth-quarter and 2016 full-year 2016 results...
