RSC Equipment Rental posted a 7.0 percent first-quarter increase in rental revenues, with $372.3 million, compared with $348.0 in the first quarter of 2006. Same-store rental revenue growth was 4.6 percent for the quarter, while rental rates dropped 0.4 percent from the previous year’s first quarter.
Sales of used equipment grossed $31.4 million, down from $37.8 million in the 2007 first quarter, as the company slowed used sales to reduce capital expenditures in the current market environment and take advantage of its young fleet, which averaged 28 months at the end of the quarter. Utilization of the fleet was 68.6 percent in the quarter, down from 70.3 percent in last year’s first quarter.
Total revenue jumped 3.9 percent year over year, with $422.1 million compared with $406.3 million for the year-ago quarter.
“The non-residential market continued to grow in the first quarter and we continue to increase our share of this market,” said president and CEO Erik Olsson. “We are particularly strong in the industrial segment, which is the fastest growing part of our business and now constitutes more than 35 percent of our revenues.”
RSC opened five greenfield start-ups in the quarter, bringing RSC’s total to 478.
First-quarter operating income decreased 6.3 percent to $91.4 million, or 21.6 percent of total revenues, compared with $97.5 million or 24 percent of revenues in the year-ago quarter. Increased fleet depreciation, rising fuel costs, sales force expansion and additional costs of being a public entity all contributed to the decrease. The company expects the margin impact from these costs to lessen as the year progresses and utilization increases seasonally. Adjusted EBITDA increased 1.8 percent to $182.7 million in the first quarter compared to $179.4 million in the previous year’s first quarter.
Olsson said continued reduction in capital expenditures will be necessary to adjust to a slowdown in non-residential growth.
“For 2008, independent research firms are projecting that RSC’s major end markets will increase at a low single-digit rate,” added Olsson. “This is consistent with our assumptions. We expect rental revenues to range from $1.80 to $1.85 billion…. With the introduction of the federal Economic Stimulus Act of 2008, which includes bonus depreciation for 2008, we are increasing our free cash flow projections from a range of $100 million to $150 million to a range of $130 million to $180 million or $305 million to $355 million before reduction in accounts payable.”
With the expected generation of free cash flow in 2008, RSC is evaluating a variety of options including paying down debt, tuck-in acquisitions and the repurchasing of common stock or debt securities.
In other RSC news, the company named Gerard Gould vice president – investor relations effective, May 1. For the past 12 years, Gould was responsible for investor relations at The Stanley Works, in New Britain, Conn.
RSC Equipment Rental is based in Scottsdale, Ariz., and is No. 3 on the RER 100.
