Rental revenues decreased 35.1 percent in the third quarter for RSC Equipment Rental, posting $272 million, compared with $419 million for the third quarter of 2008. Total revenues were $316 million, down 32.4 percent from $467 million in last year’s third quarter.
Rental volume dropped 25.7 percent from last year’s third quarter following the drop in non-residential construction and weaker industrial activity. Rental rates dropped 9.4 percent compared with the year-ago quarter, however RSC achieved a 0.2-percent sequential increase in rental rates compared with the second quarter. Fleet utilization averaged 58.9 percent compared with 72.3 percent for the year-ago quarter.
Erik Olsson, president and CEO, noted some positives. “We executed well on our top priorities — customer service, cost controls and cash-flow generation,” Olsson said. “While we did not experience the typical seasonal upturn in volume, we achieved stability throughout the quarter in demand for our fleet, sequential rental rates and utilization. We delivered an impressive $125 million of free cash flow, clearly demonstrating the results of strong execution and the counter-cyclicality of our business model. Although the economic environment remains weak, we expect to deliver free cash flow of $365 - $380 million for the full year, which is above our previous estimate.”
RSC continued to aggressively manage its cost structure, reducing cost of rental and SG&A expenses by $57 million versus the third quarter of 2008. Headcount was reduced by 186 during the third quarter, with only one location closure. Since the beginning of 2008, RSC has closed 59 branches, 12 percent of its locations, and reduced employee headcount by 1,215, or 22 percent.
The company also opened two locations during the quarter, bringing total openings in 2009 to 16, primarily in locations that presented industrial growth opportunities.
“We have been diligent in taking the necessary actions to reduce our cost structure and, as a result, we remain on track to achieve more than $150 million of operating cost reduction this year,” added Olsson. “We continue to allocate resources to the industrial markets, expanding and improving our service offering for new and existing customers alike. Since the beginning of 2008, we have opened 43 new locations and deployed industrial business development managers throughout our regions. By proactively industrializing our business and thereby reducing our exposure to commercial construction, we are positioning the company to emerge stronger when the industrial cycle turns.”
For the fourth quarter, RSC expects business activity in the company’s served markets to continue to be down significantly, with demand declining sequentially during the slower winter months. The company expects rental rates to continue to be under pressure.
Based in Scottsdale, Ariz., RSC Equipment Rental is No. 2 on the RER 100.