28.02.2008 22:17:00
|
United Rentals Reports Record EPS and EBITDA for Fourth Quarter and Full Year 2007
United Rentals, Inc. (NYSE: URI) today announced record earnings per
share from continuing operations for both the fourth quarter and full
year 2007. For the fourth quarter, earnings per share of $0.84 increased
18.3% compared with $0.71 for the fourth quarter 2006. For the full
year, earnings per share of $2.76 increased 21.1% compared with $2.28
for the full year 2006.
2007 fourth quarter and full year earnings per share are before the
benefit the company realized from its receipt of $100 million following
the recent termination of its merger agreement with affiliates of
Cerberus, net of related costs and expenses. Including this one-time
benefit, the company reported 2007 fourth quarter and full year GAAP
earnings per share of $1.36 and $3.26, respectively, also a record.
Fourth Quarter and Full Year 2007 Financial Highlights Compared with
2006 (excluding merger termination benefit)
EBITDA increased 9.3% to a record $318 million for the fourth quarter
and increased 8.0% to a record $1.17 billion for the full year. EBITDA
margin improved 3.2 percentage points to 34.2% for the fourth quarter,
and 1.6 percentage points to 31.4% for the full year. As discussed
further below, the fourth quarter and full year EBITDA include a
currency benefit of $17 million ($11 million after-tax). EBITDA is a
non-GAAP measure.
Rental revenue increased 4.1% for the fourth quarter and 4.0% for the
full year.
Same-store rental revenue increased 3.7% for the fourth quarter and
3.1% for the full year.
Time utilization, on a larger fleet, increased 2.3 percentage points
for the fourth quarter and 2.5 percentage points for the full year,
more than offsetting rental rate declines of 2.1% and 1.1% for the
fourth quarter and full year, respectively.
SG&A expense as a percent of revenue improved 0.8 percentage points to
16.2% for the fourth quarter and 0.9 percentage points to 15.9% for
the full year.
Fourth quarter 2007 income from continuing operations of $94 million,
excluding a $59 million after-tax impact of the merger termination
benefit, increased 22.1% from $77 million for the fourth quarter 2006.
Full year 2007 income from continuing operations of $306 million,
excluding a $57 million after-tax impact of the merger termination
benefit, increased 22.9% from $249 million for the full year 2006.
Fourth quarter and full year 2007 income from continuing operations
includes net foreign currency transaction gains of $11 million, or $0.10
per diluted share, primarily related to the company’s
Canadian operations. Additionally, full year 2007 income from continuing
operations includes non-cash reductions in interest expense of $6
million, or $0.05 per diluted share, related to the mark-to-market
impact of certain interest rate swaps. Of this benefit, $4 million, or
$0.04 per diluted share, was recognized in the fourth quarter.
Total revenue from continuing operations was $930 million for the fourth
quarter 2007, a decrease of 1.0% from the fourth quarter 2006, and $3.73
billion for the full year 2007, an increase of 2.5% from the full year
2006. The slight decline in fourth quarter total revenue reflects
planned decreases in contractor supplies and used equipment sales of
20.6% and 12.6%, respectively, partially offset by a 4.1% increase in
equipment rental revenue.
Excluding the merger termination benefit, free cash flow for the full
year 2007 was $151 million after total rental and non-rental capital
expenditures of $990 million, compared with free cash flow of $235
million for the full year 2006 after total rental and non-rental capital
expenditures of $951 million. The year-over-year reduction in free cash
flow reflects an increase in cash taxes paid and working capital usage
in 2007 as compared to working capital generation in the prior year.
Free cash flow is a non-GAAP measure.
The size of the rental fleet, measured by the original equipment cost,
was $4.2 billion, and the average age of the fleet was 38 months at
December 31, 2007, compared with $3.9 billion and 39 months at year-end
2006.
Full Year 2008 Outlook
The company reaffirmed its full year 2008 outlook for earnings per share
of $2.80 to $3.00 based on anticipated rental revenue growth of 3.0% to
$2.71 billion and total revenue of $3.53 billion. Rental revenue
expectations reflect the following assumptions: an improvement in time
utilization, virtually no growth capital and modest growth in
non-residential construction activity. The company also expects to
generate $1.17 to $1.21 billion of EBITDA, representing an expected full
year EBITDA margin improvement to approximately 33.7% of revenues.
Additionally, the company expects to generate $325 million to $375
million of free cash flow after planned total capital expenditures of
approximately $715 million.
CEO Comments
Michael Kneeland, chief executive officer for United Rentals, said, "The
record EPS and EBITDA we generated in 2007 were the direct result of a
new strategic plan that is intensely focused on profitable growth. In
mid-year, we put our operations under a microscope and returned our
sales and service focus to our core equipment rental business, where we
have numerous competitive advantages. This helped drive significant
increases in time utilization and organic rental revenue growth.
Additionally, we took action to improve our cost structure with a 9%
headcount reduction, branch network optimization, and approximately $22
million in cumulative savings through better sourcing.”
Mr. Kneeland continued, "In 2008, we expect to continue to improve our
performance as we move forward with the disciplined execution of our
plan. In the first quarter, we're on pace to double our equipment
transfers compared with 2007. Our agility with fleet management and our
ongoing cost containment initiatives should help drive a 33.7% EBITDA
margin and strong free cash flow in 2008, given the current construction
outlook. Our guidance is consistent with our goal of realizing $500
million in incremental annual EBITDA within five years."
Return on Invested Capital (ROIC)
Return on invested capital was 14.5% for the twelve months ended
December 31, 2007, an improvement of 0.6 percentage points from
September 30, 2007, and a decline of 0.2 percentage points from December
31, 2006. The company’s ROIC metric uses
operating income for the trailing twelve months divided by the averages
of stockholders’ equity, debt and deferred
taxes, net of average cash. The company reports ROIC to provide
information on the company’s efficiency and
effectiveness in deploying its capital and improving stockholder value.
Additional Information on 2007 Results and Status of SEC Inquiry
For additional information concerning the company’s
2007 fourth quarter and full year results, including segment performance
for its general rentals and trench safety, pump and power businesses, as
well as the status of the previously announced SEC inquiry of the
company and related matters, please see the company’s
2007 Form 10-K filed today with the SEC.
CEO Search
The company also reported that its board of directors has retained the
executive recruitment firm of Heidrick & Struggles to conduct a search
for a permanent chief executive officer. In doing so, the board
confirmed that Michael Kneeland, who currently serves as CEO on an
interim basis, is a candidate for the position. The board also commended
Mr. Kneeland on his leadership of the company since June 2007.
Conference Call
United Rentals will hold a conference call tomorrow, Friday, February
29th, at 11:00 a.m. Eastern Time. The conference will be available live
by audio webcast at www.unitedrentals.com,
where it will be archived until the company’s
next call.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in the
world, with an integrated network of over 690 rental locations in 48
states, 10 Canadian provinces and Mexico. The company’s
approximately 10,900 employees serve construction and industrial
customers, utilities, municipalities, homeowners and others. The company
offers for rent over 2,900 classes of rental equipment with a total
original cost of $4.2 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 www.unitedrentals.com.
Forward Looking Statements Certain statements in this press release are forward-looking
statements within the meaning of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. These
statements can generally be identified by words such as "believes,"
"expects," "plans," "intends," "projects," "forecasts," "may," "will,"
"should," "on track" or "anticipates," or the negative thereof or
comparable terminology, or by discussions of vision, strategy or
outlook. Our businesses and operations are subject to a variety of risks
and uncertainties, many of which are beyond our control, and,
consequently, actual results may differ materially from those projected
by any forward-looking statements. Factors that could cause actual
results to differ from those projected include, but are not limited to,
the following: (1) weaker or unfavorable economic or industry conditions
can reduce demand and prices for our products and services, (2)
non-residential construction spending, or governmental funding for
infrastructure and other construction projects, may not reach expected
levels, (3) we may not always have access to capital that our businesses
or growth plans may require, (4) any companies we acquire could have
undiscovered liabilities, may strain our management capabilities or may
be difficult to integrate, (5) rates we can charge and time utilization
we can achieve may be less than anticipated, (6) costs we incur may be
more than anticipated, including by having expected savings not be
realized in the amounts or time frames we have planned, (7) competition
in our industry for talented employees is intense, which can affect our
employee costs and retention rates, (8) we have (and the ability to
incur additional) significant leverage, 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, (9) we are subject to an ongoing inquiry by the SEC, and
there can be no assurance as to its outcome, or any other potential
consequences thereof for us, (10) we are subject to purported class
action lawsuits and derivative actions filed in light of the SEC inquiry
and additional purported class action lawsuits relating to the
terminated merger transaction with Cerberus affiliates, and there can be
no assurance as to their outcome or any other potential consequences
thereof for us, and (11) we may incur additional significant costs and
expenses (including indemnification obligations) in connection with the
SEC inquiry, the purported class action lawsuits and derivative actions
referenced above, the U.S. Attorney’s office
inquiry, or other litigation, regulatory or investigatory matters,
related to the foregoing or otherwise. 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, 2007, 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. UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data)
Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 % Change 2007 2006 % Change
Revenues:
Equipment rentals
$
683
$
656
4.1
%
$
2,630
$
2,530
4.0
%
Sales of rental equipment
76
87
(12.6
%)
319
335
(4.8
%)
New equipment sales
53
60
(11.7
%)
230
232
(0.9
%)
Contractor supplies sales
77
97
(20.6
%)
378
385
(1.8
%)
Service and other revenues
41
39
5.1
%
174
158
10.1
%
Total revenues
930
939
(1.0
%)
3,731
3,640
2.5
%
Cost of revenues:
Cost of equipment rentals, excluding
depreciation
294
287
2.4
%
1,179
1,137
3.7
%
Depreciation of rental equipment
113
104
8.7
%
434
408
6.4
%
Cost of rental equipment sales
61
65
(6.2
%)
235
237
(0.8
%)
Cost of new equipment sales
43
50
(14.0
%)
190
191
(0.5
%)
Cost of contractor supplies sales
61
68
(10.3
%)
306
302
1.3
%
Cost of service and other revenue
19
18
5.6
%
79
76
3.9
%
Total cost of revenues
591
592
(0.2
%)
2,423
2,351
3.1
%
Gross profit 339 347
(2.3
%)
1,308 1,289
1.5
%
Selling, general and administrative expenses
151
160
(5.6
%)
595
613
(2.9
%)
Non-rental depreciation and amortization
16
13
23.1
%
54
50
8.0
%
Operating income 172 174
(1.1
%)
659 626
5.3
%
Interest expense, net
41
51
187
208
Interest expense - subordinated
convertible debentures
2
2
9
13
Other income
(111
)
-
(115
)
-
Income from continuing operations before provision for income taxes 240 121
98.3
%
578 405
42.7
%
Provision for income taxes
87
44
215
156
Income from continuing operations 153 77
98.7
%
363 249
45.8
%
Loss from discontinued operation,
net of taxes
-
(24
)
(1
)
(25
)
Net income $ 153
$ 53
188.7
%
$ 362
$ 224
61.6
%
Diluted earnings per share:
Income from continuing operations
$
1.36
$
0.71
91.5
%
$
3.26
$
2.28
43.0
%
Loss from discontinued operation
(0.01
)
(0.22
)
(0.01
)
(0.22
)
Net income
$ 1.35
$ 0.49
175.5
%
$ 3.25
$ 2.06
57.8
%
UNITED RENTALS, INC. CONSOLIDATED BALANCE SHEETS (In millions)
December 31, 2007 2006 ASSETS
Cash and cash equivalents
$
381
$
119
Accounts receivable, net
519
502
Inventory
91
139
Assets of discontinued operation
-
107
Prepaid expenses and other assets
57
56
Deferred taxes
72
82
Total current assets
1,120
1,005
Rental equipment, net
2,826
2,561
Property and equipment, net
440
359
Goodwill and other intangible assets, net
1,404
1,376
Other long-term assets
52
65
Total assets $ 5,842 $ 5,366 LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt
$
15
$
37
Accounts payable
195
218
Accrued expenses and other liabilities
310
322
Liabilities related to discontinued operation
-
22
Total current liabilities
520
599
Long-term debt
2,555
2,519
Subordinated convertible debentures
146
146
Deferred taxes
539
463
Other long-term liabilities
64
101
Total liabilities
3,824
3,828
Common stock
1
1
Additional paid-in capital
1,494
1,421
Retained earnings
431
69
Accumulated other comprehensive income
92
47
Total stockholders' equity
2,018
1,538
Total liabilities and stockholders' equity $ 5,842 $ 5,366 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 Cash Flows From Operating Activities:
Income from continuing operations
$
153
$
77
$
363
$
249
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Depreciation and amortization
129
117
488
458
Amortization of deferred financing costs
2
2
9
10
Gain on sales of rental equipment
(15
)
(22
)
(84
)
(98
)
Gain on sales of non-rental equipment
-
(2
)
(5
)
(4
)
Foreign currency transaction gain
(17
)
-
(17
)
-
Non-cash adjustments to equipment
10
(1
)
9
7
Stock compensation expense
3
5
15
16
Write-off deferred financing fees and unamortized premiums
on interest rate caps
-
1
-
9
Increase in deferred taxes
20
38
61
130
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable
74
39
(5
)
10
Decrease in inventory
35
12
51
16
(Increase) decrease in prepaid expenses and other assets
(1
)
(1
)
-
5
(Decrease) increase in accounts payable
(60
)
(31
)
(30
)
9
Increase in accrued expenses and other liabilities
42
11
4
17
Net cash provided by operating activities - continuing operations
375
245
859
834
Net cash provided by operating activities - discontinued operation
-
7
9
24
Net cash provided by operating activities
375
252
868
858
Cash Flows From Investing Activities:
Purchases of rental equipment
(85
)
(86
)
(870
)
(873
)
Purchases of non-rental equipment
(39
)
(28
)
(120
)
(78
)
Proceeds from sales of rental equipment
76
87
319
335
Proceeds from sales of non-rental equipment
3
4
23
17
Purchases of other companies
-
-
(23
)
(39
)
Net cash used in investing activities - continuing operations
(45
)
(23
)
(671
)
(638
)
Net cash provided by (used in) investing activities -
discontinued operation
-
1
67
(10
)
Net cash used in investing activities
(45
)
(22
)
(604
)
(648
)
Cash Flows From Financing Activities:
Proceeds from debt
39
-
460
265
Payments on debt
(111
)
(246
)
(531
)
(669
)
Proceeds from the exercise of common stock options
10
14
32
78
Shares repurchased and retired
(1
)
(3
)
(5
)
(4
)
Excess tax benefits from share-based payment
arrangements
3
-
31
-
Proceeds received in conjunction with partial termination
of interest rate caps
-
-
-
3
Subordinated convertible debentures repurchased and retired
-
(13
)
-
(77
)
Net cash used in financing activities
(60
)
(248
)
(13
)
(404
)
Effect of foreign exchange rates
(1
)
(3
)
11
(3
)
Net increase (decrease) in cash and cash equivalents
269
(21
)
262
(197
)
Cash and cash equivalents at beginning of period
112
140
119
316
Cash and cash equivalents at end of period
$
381
$
119
$
381
$
119
UNITED RENTALS, INC. SEGMENT PERFORMANCE ($ in millions)
Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 % Change 2007 2006 % Change
General Rentals
Total revenues
$
876
$
888
(1.4
%)
$
3,508
$
3,423
2.5
%
Operating income
159
159
-
602
568
6.0
%
Operating margin
18.2
%
17.9
%
0.3 pts
17.2
%
16.6
%
0.6 pts
Trench Safety, Pump and Power
Total revenues
54
51
5.9
%
223
217
2.8
%
Operating income
13
15
(13.3
%)
57
58
(1.7
%)
Operating margin
24.1
%
29.4
%
(5.3 pts)
25.6
%
26.7
%
(1.1 pts)
Total United Rentals
Total revenues
$
930
$
939
(1.0
%)
$
3,731
$
3,640
2.5
%
Operating income
172
174
(1.1
%)
659
626
5.3
%
Operating margin
18.5
%
18.5
%
-
17.7
%
17.2
%
0.5 pts
DILUTED EARNINGS PER SHARE CALCULATION (In millions, except per share data)
Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 % Change 2007 2006 % Change
Income from continuing operations
$
153
$
77
98.7
%
$
363
$
249
45.8
%
Loss from discontinued operation, net of taxes
-
(24
)
(1
)
(25
)
Net income
153
53
188.7
%
362
224
61.6
%
Convertible subordinated note interest
-
-
2
2
Subordinated convertible debentures interest
2
2
5
8
Net income available to common stockholders
$
155
$
55
181.8
%
$
369
$
234
57.7
%
Weighted average common shares
86.1
81.1
6.2
%
83.4
79.6
4.8
%
Series C and D preferred shares
17.0
17.0
-
17.0
17.0
-
Convertible subordinated notes
6.5
6.5
-
6.5
6.5
-
Stock options, warrants, restricted stock
units and phantom shares
1.8
4.7
(61.7
%)
3.5
6.0
(41.7
%)
Subordinated convertible debentures
3.3
3.5
(5.7
%)
3.3
4.7
(29.8
%)
Total weighted average diluted shares
114.7
112.8
1.7
%
113.7
113.8
(0.1
%)
Diluted earnings available to common stockholders:
Income from continuing operations
$
1.36
$
0.71
91.5
%
$
3.26
$
2.28
43.0
%
Loss from discontinued operation
(0.01
)
(0.22
)
(0.01
)
(0.22
)
Net income
$
1.35
$
0.49
175.5
%
$
3.25
$
2.06
57.8
%
UNITED RENTALS, INC. FREE CASH FLOW GAAP RECONCILIATION (In millions)
We define "free cash flow”
as (i) net cash provided by operating activities –
continuing operations less (ii) purchases of rental and non-rental
equipment plus (iii) proceeds from sales of rental and non-rental
equipment and excess tax benefits from share-based payment arrangements.
Management believes free cash flow provides useful additional
information concerning cash flow available to meet future debt service
obligations and working capital requirements. However, free cash flow is
not a measure of financial performance or liquidity under Generally
Accepted Accounting Principles ("GAAP”).
Accordingly, free cash flow should not be considered an alternative to
net income or cash flow from operating activities as indicators of
operating performance or liquidity. Information reconciling
forward-looking free cash flow expectations to a GAAP financial measure
is unavailable to the company without unreasonable effort. The table
below provides a reconciliation between net cash provided by operating
activities – continuing operations and free
cash flow.
Three Months Ended
Twelve Months Ended December 31, December 31, 2007
2006 2007
2006
Net cash provided by operating activities - continuing operations
$
375
$
245
$
859
$
834
Purchases of rental equipment
(85
)
(86
)
(870
)
(873
)
Purchases of non-rental equipment
(39
)
(28
)
(120
)
(78
)
Proceeds from sales of rental equipment
76
87
319
335
Proceeds from sales of non-rental equipment
3
4
23
17
Excess tax benefits from share-based payment arrangements
3
-
31
-
Free Cash Flow (1) $ 333
$ 222
$ 242
$ 235
(1) Fourth quarter and full year 2007 free cash flow includes $94
and $91, respectively, related to the merger termination benefit.
UNITED RENTALS, INC. EBITDA GAAP RECONCILIATION (In millions)
"EBITDA" represents the sum of income from continuing operations before
provision for income taxes, interest expense, net, interest
expense-subordinated convertible debentures, depreciation-rental
equipment and non-rental depreciation and amortization. Management
believes EBITDA provides useful information about operating performance
and period-over-period growth. However, EBITDA is not a measure of
financial performance or liquidity under GAAP and accordingly should not
be considered an alternative to net income or cash flow from operating
activities as an indicator of operating performance or liquidity. The
table below provides a reconciliation between income from continuing
operations before provision for income taxes and EBITDA.
Three Months Ended
Twelve Months Ended December 31, December 31, 2007
2006 2007
2006
Income from continuing operations before provision for
income taxes
$
240
$
121
$
578
$
405
Interest expense, net
41
51
187
208
Interest expense - subordinated convertible debentures
2
2
9
13
Depreciation - rental equipment
113
104
434
408
Non-rental depreciation and amortization
16
13
54
50
EBITDA (1) $ 412 $ 291 $ 1,262 $ 1,084
(1) Fourth quarter and full year 2007 EBITDA includes a merger
termination benefit of $94 and $91, respectively.
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United Rentals Inc. | 751,60 | -1,49% |
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S&P 400 MidCap | 1 854,40 | -0,45% |