United Rentals last week posted first-quarter total revenue of $594 million and rental revenue of $448 million, compared with $772 million and $578 million, respectively, for the same period last year, decreases of 23 percent and 22.4 percent. Operating income was $18 million for the quarter, compared with $102 million for the same period last year, an 82-percent decrease.
On a GAAP basis, the company reported a first-quarter 2009 net loss of $19 million, or $0.32 per diluted share, compared with net income of $38 million, or $0.34 earnings per diluted share, for the same period in 2008. Adjusted EPS, which excludes the impact of a $3 million after-tax restructuring charge related to branch closures and severance, was a loss of $0.28 per diluted share, compared with earnings of $0.36 per diluted share for the prior year, excluding the impact of a $2 million after-tax restructuring charge. Adjusted EBITDA margin, which also excludes the impact of the restructuring charges, was 24.4 percent for the first quarter, compared with 29.7 percent in 2008. The decline in profitability reflects continued weakness in non-residential construction, partially offset by the savings realized from the company’s ongoing cost-cutting measures.
“Weak construction markets and intense pressure on rates constrained both our top line and our gross margin throughout the first quarter,” said Michael Kneeland, CEO of United Rentals. “While the decline has yet to run its course, there are many actions we are taking to mitigate its impact. We took another $21 million of SG&A expense out of the business in the quarter, further reduced our headcount by 5 percent, closed or consolidated 10 of our least profitable branches, continued to defleet, and accelerated our pursuit of national account customers. We plan to close an additional 39 branches in the second quarter, further evidence of the levers at our disposal.
“Given the depth and the potential duration of the downturn, liquidity is of paramount importance to our plan. We are maintaining our earlier estimate of $300 million of free cash flow this year. In the first quarter, we generated $129 million of free cash flow and made prudent use of it by reducing our debt by $113 million. As a result, we improved both our liquidity and capital structure. Proceeds from the sale of used equipment exceeded rental capex spent in the quarter by $15 million, and we now expect net rental capex for the year to be near zero. We will continue to manage our business in a way that is consistent with our long-term vision.”
In the quarter, the company achieved a first-quarter record of transferring $1.3 billion of rental equipment (original equipment cost) among branches, in line with its fleet management strategy.
Time utilization decreased 2.4 percentage points to 56.1 percent, and rental rates declined 11.5 percent, compared with the first quarter last year. Contractor supplies gross margin improved year-over-year by 6.7 percentage points to 28.1 percent.
For the first quarter 2009, free cash flow was $129 million after total rental and non-rental capital expenditures of $64 million, compared with free cash flow of $143 million after total rental and non-rental capital expenditures of $151 million for the same period last year.
The size of the rental fleet, as measured by the original equipment cost, was $4.0 billion and the age of the rental fleet was 40 months at March 31, compared with $4.1 billion and 39 months at December 31.
Return on invested capital was 6.6 percent for the 12 months ended March 31, a decrease of 2.4 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, debt and deferred taxes, net of average cash.
The company announced that it expects to record a charge in the second quarter 2009 of between $25 million and $30 million principally related to the planned closure of 39 branches. The charge is expected to include a non-cash component of approximately $14 million related to the aggregate impact of impairing certain rental assets and writing off leasehold improvements.
Greenwich, Conn.-based United Rentals is No. 1 on the RER 100.