United Rentals posted fourth quarter of 2019 rental revenue of $2.062 billion compared to $1.989 billion in the fourth quarter of 2018, a 3.7-percent increase. Total fourth quarter revenue was $2.456 billion compared to $2.306 billion a year ago, a 6.5-percent hike.
Full year increases were more impressive. For the full year of 2019, rental revenue was $7.964 billion compared to $6.940 billion a year ago, a 14.7-percent leap. Total revenue for the full year totaled $9.351 billion compared to total 2018 revenue of $8.047 billion, a 16.2-percent leap.
Net income for the fourth quarter was $338 million compared to $310 million a year ago, a 9-percent lift. Net income for the full year was $1.174 billion compared to $1.096 billion in 2018, a 7.1-percent increase.
Diluted EPS for the quarter increased 18.2 percent year over year. Adjusted EPS for the quarter increased 15.5 percent year over year. Adjusted EBITDA increased 3.3 percent year over year to $1.154 billion, while adjusted EBITDA margin decreased 140 basis points to 47 percent.
On a pro forma basis, year-over-year, net income excluding merger costs recognized by BlueLine prior to acquisition increased 9.4 percent, adjusted EBITDA increased 0.8 percent and adjusted EBITDA margin decreased 130 basis points.
“Our fourth quarter contributed to a solid year of profitable growth and returns,” said CEO Matthew Flannery. “Results were driven by growth in our core construction end-markets, while challenges in our industrial verticals impacted both revenue and margins in the quarter. For the year, we grew pro forma rental revenue and adjusted EBITDA by over 4 percent, while integrating our acquisitions, and generated free cash flow of almost $1.6 billion.
“Our 2020 outlook reflects the profitable growth we expect to deliver in what is forecasted to be a slower growth phase of this continuing upcycle. We are well positioned to support our customers across the end-markets we serve, while remaining disciplined in our approach to capex. We expect to generate higher free cash flow this year, which is earmarked to pay down debt and buy back shares.”
The company completed the acquisitions of BakerCorp International Holdings, and Vander Holding Corp. and its subsidiaries (BlueLine) in July 2018 and October 2018, respectively. BakerCorp and BlueLine are included in the company's results subsequent to the acquisition dates. Pro forma results reflect the combination of United Rentals, BakerCorp and BlueLine for all periods presented. The acquired BakerCorp locations are reflected in the Trench, Power and Fluid Solutions specialty segment.
On an as reported basis, fourth quarter fleet productivity decreased 2.4 percent year over year. On a pro forma basis, fleet productivity decreased 1.8 percent, as the combined benefit from rental rates and mix did not offset the impact of lower time utilization.
The company generated $244 million of proceeds from used equipment sales in the fourth quarter at a GAAP gross margin of 36.5 percent and an adjusted gross margin of 43.4 percent; this compares with $186 million at a GAAP gross margin of 44.1 percent and an adjusted gross margin of 51.1 percent for the same period last year. The year-over-year decrease in adjusted gross margin was primarily due to changes in the mix of equipment sold, channel mix and pricing.
The decline in both as reported and pro forma adjusted EBITDA margin primarily reflects the impact of the absorption of higher rental operating costs in a slower-growth environment, including costs related to repair and maintenance of fleet in upstream oil and gas markets, and the increase in lower-margin used equipment sales, partially offset by lower SG&A costs.
Year-over-year, fourth quarter rental revenue for the company’s general rentals segment increased by 2.4 percent and decreased by 1.3 percent on an actual and pro forma basis, respectively. Rental gross margin decreased by 430 basis points to 39.9 percent, primarily because of the impact of the absorption of higher rental operating including higher repair and maintenance expenses, as well as increased depreciation of rental equipment as a result of the BlueLine acquisition.
Fourth quarter rental revenue for the company’s specialty segment, Trench, Power and Fluid Solutions, increased by 8.7 percent year-over-year, including an organic increase of 4.6 percent. Rental gross margin decreased by 140 basis points to 43.8 percent, primarily because of the impact of acquisitions.
For the full year, the rental revenue of $7.964 billion reflects increases of 14.8 percent and 4.1 percent year-over-year on an as-reported and pro forma basis, respectively. The as-reported increase is primarily due to the impact of the BakerCorp and BlueLine acquisitions.
On an as-reported basis, fleet productivity decreased 2.2 percent year-over-year. On a pro forma basis, fleet productivity increased 0.6 percent, as the combined benefit of rental rates and mix was partially offset by lower time utilization. On a pro forma basis, year-over-year, net income excluding merger costs recognized by BakerCorp and BlueLine prior to acquisition increased 8.7 percente, adjusted EBITDA increased 4.4 percent and adjusted EBITDA margin decreased 30 basis points.
Rental revenue for the company’s general rentals segment increased by 11.7 percent and 1.8 percent year-over-year on an actual and pro forma basis, respectively. Rental gross margin decreased by 250 basis points to 38.8 percent, due primarily to the impact of acquisitions, notably higher depreciation of rental equipment from the acquisition of BlueLine, and higher operating costs, primarily higher repair and maintenance expenses.
Rental revenue for the company’s specialty segment, Trench, Power and Fluid Solutions, increased by 26.8 percent year over year, including an organic increase of 9.6 percent. Rental gross margin decreased by 280 basis points to 45.4 percent, primarily because of the impact of acquisitions.
United Rentals, based in Stamford, Conn., is No. 1 on the RER 100.
