United Rentals last week announced a 15-percent drop in fourth-quarter total revenue. In the quarter, total revenue was $791 million, a 15-percent drop from its 4Q07 total of $925 million. Rental revenue of $600 million in the fourth quarter was down 12-percent from $681 million a year ago. For the full year 2008, total revenue was down 11 percent to $3.3 billion from $3.7 billion in 2007. Full-year rental revenue was $2.5 billion, a 4-percent drop from $2.6 billion for the full year 2007.
The company reported a fourth-quarter 2008 loss of $853 million, or a loss of $14.25 per diluted share, compared with income of $153 million, or $1.36 earnings per diluted share, for the fourth quarter 2007. It reported a full-year 2008 loss of $704 million, or a loss of $12.62 per diluted share, compared with income of $363 million, or $3.26 earnings per diluted share, for full year 2007.
“Our 2008 performance reflects our ability to pull the key levers that are within our control, especially our cost structure, liquidity and fleet performance, to confront a challenging environment,” said Michael Kneeland, United Rentals CEO. “Despite weak end markets as the year progressed, we succeeded in increasing our full-year cash flow, pro forma EBITDA margin and SG&A ratio. These improvements are the result of a disciplined internal plan designed to ensure short-term stability and long-term growth.”
United Rentals closed or consolidated 75 underperforming branches during the year and reduced headcount by approximately 1,000. In addition, a record $1.3 billion of equipment (original equipment cost) was transferred among branches, on average each quarter, to better align fleet with demand. Time utilization was 64.2 percent for the fourth quarter and 63.6 percent for the full year 2008, a decrease of 0.8 percentage points and 0.4 percentage points, respectively, from 2007; and rental rates declined 6.4 percent for the quarter and 3.1 percent for the year.
“Our rates ended down 3.1 percent year-over-year, which included a 6.4-percent drop in the fourth quarter,” Kneeland said. “Some of that decline comes from competitive pressure in the marketplace. Our salespeople are focused on our most profitable customers, rather than chasing every rock-bottom deal that's out there, but there's still a large area of business that falls in the middle ground and no one in our industry is immune from rate pressure. Now given the severity in duration of the recession we expect rates to continue to be challenging this year.”
The company reported pro-forma continuing operations EPS of $0.65 for the fourth-quarter 2008 as compared to $0.75 for the prior year. The decline in profitability primarily reflects lower equipment rental revenue and gross profit in a softening construction environment, partially offset by a lower share count as well as the company’s successful cost-cutting initiatives. 2008 pro-forma EPS excludes the impact of the goodwill impairment charge, the gain on the repurchase of the notes, the aggregate impact of branch closures and asset impairments, and the foreign currency transaction loss, while 2007 pro-forma EPS excludes the impact of the merger termination benefit as well as the foreign currency transaction gains.
EBITDA, a non-GAAP measure, was $234 million and EBITDA margin was 29.6 percent for fourth-quarter 2008, compared with $415 million and 44.9 percent for fourth quarter 2007. Fourth-quarter 2008 EBITDA includes $11 million of branch-closure charges and a $1 million foreign currency transaction loss. Fourth-quarter 2007 EBITDA includes a gain of $94 million associated with the Cerberus merger termination benefit as well as foreign currency transaction gains of $17 million.
The company reported pro-forma continuing operations EPS of $2.62 for 2008 as compared to $2.67 for the prior year. The decline in profitability primarily reflects lower equipment rental revenue and gross profit in a softening construction environment, partially offset by the company’s successful cost-cutting initiatives as well as a lower share count.
Full-year 2008 EBITDA was $1.03 billion and EBITDA margin was 31.5 percent, compared with $1.27 billion and 34.1 percent for full-year 2007. Full-year 2008 EBITDA includes $14 million of branch-closure charges, the $14 million SEC charge, and the $1 million foreign currency transaction loss.
For full-year 2008, free cash flow, a non-GAAP measure, was $335 million after total rental and non-rental capital expenditures of $704 million, compared with free cash flow of $242 million after total rental and non-rental capital expenditures of $990 million for full-year 2007. The year-over-year increase in free cash flow was largely the result of a reduction in capital purchases, partially offset by the absence of the $91 merger termination benefit that enhanced the company’s 2007 results.
The size of the rental fleet, as measured by the original equipment cost, was $4.1 billion and the age of the rental fleet was 39 months at Dec. 31, compared with $4.2 billion and 38 months at Dec. 31, 2007.
“We are entering 2009 with a continued focus on cost control, a sound capital structure that provides ample liquidity, and the ability to limit capex and to generate positive cash flow,” Kneeland said. “In January we launched a company-wide initiative for customer service leadership that will give us strategic advantages now and in a recovery."
The company also announced that it will suspend issuing formal guidance due to continued uncertainty in the macro-economy and the impact of the credit environment on its customers.
Headquartered in Greenwich, Conn., United Rentals is No. 1 on the RER 100. It has an integrated network of more than 625 rental locations in 48 states, 10 Canadian provinces and Mexico.