United Rentals Announces First Quarter 2010 Results

United Rentals, Inc. (NYSE: URI) today announced financial results for the first quarter 2010. Total revenue was $478 million and rental revenue was $380 million, compared with $594 million and $448 million, respectively, for the same period last year.

On a GAAP EPS basis, the company reported a first quarter 2010 net loss of $40 million, or $0.67 per diluted share, compared with a net loss of $19 million, or $0.32 per diluted share, for the same period in 2009. Adjusted EPS for the quarter, which excludes the impact of special items, was a loss of $0.57 per diluted share, compared with a loss of $0.32 per diluted share the prior year. Adjusted EBITDA margin, which also excludes the impact of special items, was 24.1% for the quarter, compared with 24.4% for the prior year.

First Quarter 2010 Highlights

• Free cash flow was $99 million, compared with $129 million for the same period last year. The company has raised its outlook for full year free cash flow generation to a range of $200 million to $225 million, from its previous estimate of $175 million to $200 million.
• SG&A expense decreased by $22 million, compared with last year. The company has raised its outlook for full year SG&A expense reduction to a range of $40 million to $50 million, from its previous estimate of $25 million to $35 million.
• Cost of equipment rentals, excluding depreciation, decreased by $19 million, compared with last year. The company has reaffirmed its outlook for full year expense reduction within a range of $70 million to $90 million.
• The company sold $77 million of fleet on an original equipment cost basis during the quarter and generated a used equipment gross margin of 31.4%, compared with $184 million of fleet sold at a gross margin of 11.9% for the same period last year.
• Time utilization increased 0.1 percentage points to 56.2%, reflecting an increase in demand for earthmoving equipment and a 6% year-over-year reduction in total fleet based on original equipment cost, among other factors. Rental rates declined 6.5% compared with last year. Dollar utilization, which reflects the impact of rental rates and time utilization, decreased 3.5 percentage points to 39.4%.

CEO Comments

Michael Kneeland, chief executive officer of United Rentals, said, "Twelve months ago, we were in the midst of an economic free fall in our end markets. Today we see signs of a more positive outlook for our industry, with the foremost indicator being used equipment prices. We fought back against the economic and seasonal challenges of the first quarter by holding firm on time utilization and mitigating the decline in rates. Our top line, while temporarily impacted by demand, reflects our shift toward a more optimal revenue mix. We are serving our most profitable customers more effectively and at lower cost. We now expect to outperform our initial estimates for SG&A savings and free cash flow this year."

Kneeland continued, "As conditions improve over time, the results of our strategic initiatives around customer segmentation and service, as well as our strong liquidity position and industry-leading scale, will be defining advantages. We are well prepared to benefit from the recovery with ample capital to invest in growth, and with our arms firmly around value creation. "

Free Cash Flow and Fleet Size

For the first quarter 2010, free cash flow was $99 million, including the receipt of a previously announced $55 million federal tax refund, and after total rental and non-rental capital expenditures of $54 million. By comparison, free cash flow for the first quarter 2009 was $129 million after total rental and non-rental capital expenditures of $64 million.

The size of the rental fleet was $3.7 billion of original equipment cost at March 31, 2010, compared with $3.8 billion at December 31, 2009. The age of the rental fleet was 44.1 months on a unit-weighted basis at March 31, 2010, compared with 42.4 months at December 31, 2009.

Return on Invested Capital (ROIC)

Return on invested capital was 1.6% for the 12 months ended March 31, 2010, a decrease of 5.0 percentage points from the same period last year. 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.

Conference Call

United Rentals will hold a conference call tomorrow, Thursday, April 22, 2010, at 11:00 a.m. Eastern Time. The conference call will be available live by audio webcast at unitedrentals.com, where it will be archived, and by calling 866-261-2650.

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 loss, benefit for income taxes, interest expense, net, interest expense-subordinated convertible debentures, 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 and the gains/losses on the repurchase of debt securities. 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 562 rental locations in 48 states, 10 Canadian provinces and Mexico. The company’s approximately 7,500 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent approximately 3,000 classes of equipment with a total original cost of $3.7 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 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) on-going decreases in North American construction and industrial activities, which have significantly affected revenues and, because many of our costs are fixed, our profitability, and which may further reduce demand and prices for our products and services; (2) inability to benefit from government spending associated with 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) noncompliance with financial or other covenants in our debt agreements, which could result in our lenders terminating our credit facilities and requiring us to repay outstanding borrowings; (5) inability to access the capital that our businesses or growth plans may require; (6) increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual value of our equipment; (7) inability to sell our new or used fleet in the amounts, or at the prices, we expect; (8) rates we can charge and time utilization we can achieve being less than anticipated; and (9) costs we incur being more than anticipated, and the inability to realize expected savings in the amounts or time frames planned. For a fuller description of these and other possible uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2009, 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.