The rental industry’s largest company United Rentals posted $605 million in total revenue for the third quarter, a 2.2-percent revenue increase compared with $592 million for the same period a year ago. Rental revenue increased 6.1 percent year over year to $507 million, compared with $478 million for the same period a year ago. Operating income improved 28 percent on a year-over-year basis from $67 million in the year-ago quarter to $93 million this year.
On a GAAP EPS basis, United Rentals reported third-quarter 2010 net income of $23 million, or 33 cents per diluted share, compared with net income of zero for the year-ago quarter. Adjusted EBITDA margin, excluding special items, was 35.7 percent for the quarter, compared with 31.1 percent in the year-ago quarter.
“While the recovery is progressing slowly, business conditions have improved in all of our operating regions,” said Michael Kneeland, CEO. “Rental is a very attractive alternative to buying equipment right now, aided by tight credit markets and cautious customer behavior. As a result, we are seeing increased demand despite the weakness in construction spending. We view record time utilization and sequential quarter rate improvement as two very positive indicators of profitable growth.”
Time utilization was 71.3 percent, a 7.1-percent increase and a record high for the company. Rental rates declined 1.4 percent year over year but improved 2 percent sequentially from the second quarter. Dollar utilization increased 2.9 percent year over year to 51.6 percent.
Free cash flow was $37 million for the quarter, compared with $123 million for the same period last year. The company raised its outlook for full-year net rental capital expenditures — defined as purchase of rental equipment minus the proceeds from sales of rental equipment — to a range of $180 million to $200 million, from its previous estimate of $160 million to $180 million, to service key accounts and meet increased demand. The company also reaffirmed its outlook for full-year free cash flow at a range of $200 million to $225 million.
“Our results also show that we are clearly delivering on our strategic priorities,” added Kneeland. “Because of the operating leverage we’ve built into the business, our growth in operating income and adjusted EBITDA surpassed our rental revenue growth. We increased our fleet investment to better meet demand and to further strengthen relationships with our key customers. This is exactly where we want to take the company — towards better earnings in our core business, with stronger margins and sustainable fixed-cost savings. Current trends suggest that our year-over-year rate performance should be flat to slightly positive in the fourth quarter with further improvement in 2011."
For the first nine months of 2010, the company reported total revenue of $1.64 billion and rental revenue of $1.337 billion, compared with $1.8 billion and $1.38 billion, respectively, for the first nine months of 2009. However, operating income was $150 million for the first nine months of 2010, compared with $90 million for the year-ago period, a 66.7-percent jump.
On a GAAP EPS basis, United reported a net loss of $5 million or 9 cents per diluted share for the first nine months of 2010, compared with a net loss of $36 million or 60 cents per diluted share, for the same period in 2009. Adjusted EBITDA, excluding special items, was 31.1 percent for the first nine months of 2010, compared with 26.6 percent a year ago.
Average age of the rental fleet was 46.2 months at the end of the third quarter, compared with 42.4 months at the end of 2009.
Based in Greenwich, Conn., United Rentals is No. 1 on the RER 100.
