United Rentals Announces 4Q08 Non-Cash Goodwill Impairment Charge; Updates Full-Year ’08 Guidance

Jan. 23, 2009
United Rentals last week announced that it anticipates recording a non-cash goodwill impairment charge in the fourth quarter of 2008. The company currently expects the total charge, which was identified in connection with the company’s annual fourth-quarter impairment test and reflects year-end market conditions, to be approximately $1.1 billion. Substantially all of the impairment charge relates to goodwill arising out of acquisitions made by the company between 1997 and 2000. The impairment charge will not result in any cash expenditures and will not affect the company’s cash position, cash flow from operating activities, free cash flow, liquidity position or availability under its credit facilities.

United Rentals last week announced that it anticipates recording a non-cash goodwill impairment charge in the fourth quarter of 2008. The company currently expects the total charge, which was identified in connection with the company’s annual fourth-quarter impairment test and reflects year-end market conditions, to be approximately $1.1 billion. Substantially all of the impairment charge relates to goodwill arising out of acquisitions made by the company between 1997 and 2000. The impairment charge will not result in any cash expenditures and will not affect the company’s cash position, cash flow from operating activities, free cash flow, liquidity position or availability under its credit facilities.

The company also announced that during the fourth quarter it made open market repurchases of an aggregate $130 million principal amount of outstanding 6 ½ percent senior notes due 2012, 7 ¾ percent senior subordinated notes due 2013, and 7 percent senior subordinated notes due 2014. In connection with the repurchases of the notes, the company anticipates recognizing a pre-tax gain of approximately $45 million in the fourth quarter of 2008, representing the difference between the net carrying amount of these securities and the total repurchase price of $82 million.

The company revised its full-year 2008 guidance for total revenues to $3.27 billion, as compared to the previous range of $3.3 billion to $3.4 billion, and free cash flow to a range of $330 million to $340 million, slightly below the low end of its previous range of $350 million to $400 million. Both of these changes reflect a further deterioration in the company’s end markets since the previous guidance was issued. In addition, excluding any impact associated with the non-cash goodwill impairment charge and the gain related to the repurchases of the notes, the company expects actual results for 2008 to be below its most recent guidance for earnings per share and EBITDA, although it is not in a position to provide more precise guidance as it is still finalizing its 2008 financial results. The company expects to report these financial results at the end of February, consistent with past years.

“Our revised full year guidance reflects external factors such as the current construction cycle and the macro-economy, as well as our decision to accelerate branch closures into the fourth quarter of 2008,” said Michael Kneeland, United Rentals CEO. “While we see 2009 as undoubtedly challenging, we are confident that with our ample liquidity, as well as our continued focus on cost reduction and other ongoing initiatives, we are well positioned to manage through this downturn and benefit from the eventual recovery.”

After revising its full-year guidance downward, Moody’s Investors Service downgraded ratings of United Rentals’ corporate family and probability of default rating from B1 to B2, a junk bond rating five notches below investment-grade status. It downgraded its senior secured revolving credit facility from Baa3 to Ba1, also moving it from investment-grade to junk bond status.

Shares of United Rentals closed Friday at $5.72 on the New York Stock Exchange.

Greenwich, Conn.-based United Rentals is No. 1 on the RER 100.