Total revenue dropped 25.6 percent in the first quarter of 2010 for RSC Rentals, posting $261 million compared with $351 million in the first quarter of 2009. Rental revenue dropped 22.6 percent, with RSC posting $222 million, compared with $287 million in rental revenue for the first quarter a year ago. The company reported a first-quarter net loss of $38 million, or 37 cents per diluted share, compared with a net loss of $14 million or 13 cents per diluted share for the first quarter of 2009.
Adjusted EBITDA was $66 million for the quarter, compared with $108 million for the year-ago quarter. Adjusted EBITDA margin was 25.3 percent for the first quarter, compared with 30.6 percent in 2009. The change in profitability primarily reflects a decline in business activity and the resulting negative impact on volume and pricing, which were partially offset by RSC’s cost-cutting initiatives.
On the positive side, the company achieved strong growth in fleet on rent, increasing 21 percent during the quarter compared to a 7-percent decline in the same period a year ago. RSC invested $45 million of gross rental capital expenditures in response to growing demand for select categories. RSC sold $65 million of fleet at original equipment cost with margins of 9 percent, an increase of 4 percent compared with the fourth quarter.
RSC generated free cash flow of $50 million and decreased debt by $45 million during the quarter and had $558 million of borrowing availability under the ABL revolver as of the end of the quarter.
Fleet utilization was 54.8 percent and rental rates declined 9.9 percent compared with the first quarter of 2009. And the company launched five new locations in response to continued success in the industrial segment.
“While operating in a still-challenging economy, we drove utilization up with momentum building throughout the quarter,” said Erik Olsson, president and CEO. “Our industrial diversification strategy and transition to playing offense enabled us to meet or exceed our first-quarter revenue, adjusted EBITDA, and free cash flow expectations. To build on this momentum, we continued to position the company for the future with five new location openings, selective investment in our rental fleet and further investment in our sales and marketing organization with an emphasis on key account management. In addition, our execution on key customer service requirements is being validated by the marketplace, as evidenced by reaching a record level in our net promoter customer loyalty scores.”
Looking ahead, the company said declines on a sequential basis appear to be moderating. However, with industry-wide fleet levels continuing to exceed demand, rental rates will continue to be under pressure. The company expects utilization and fleet on rent to continue to build in the second quarter, resulting in positive year-over-year volume growth, while pricing remains challenging and, as a result, year-over-year comparisons for rental revenues for the quarter will likely be unfavorable. RSC expects rental revenue in the $245- to $260-million range in the second quarter, with total revenues in the $285- to $300-million ballpark.
“We continue to expect 2010 to be a year of transition, with demand bottoming out, followed by a modest recovery in the second half,” Olsson added. “Given this outlook, we expect positive year-over-year comparisons starting in the second half. Building on the momentum started in the first quarter, we believe our strategy of preparing for improved market conditions positions us to emerge stronger as the cycle turns.”
Based in Scottsdale, Ariz., RSC Rentals in No. 2 on the RER 100.
