United Rentals Announces Record Q4 Earnings Per Share
February 27, 2007 • United Rentals, Inc.,
Fourth quarter income from continuing operations of $77 million increased 40% from $55 million for the fourth quarter 2005, and full year income from continuing operations of $249 million increased 23% from $202 million for the full year 2005.
Total revenue from continuing operations was $939 million for the fourth quarter 2006, an increase of 5.5% from the fourth quarter 2005, and $3.64 billion for the full year, an increase of 10.7% from the full year 2005.
On February 15, the company completed the sale of its traffic control business, which is reflected as a discontinued operation.
Net income for the fourth quarter 2006, including an after-tax loss on the sale of the traffic control business of $24 million, or $0.22 per share, was $53 million, or $0.49 per share, compared with $49 million, or $0.47 per share, for the fourth quarter 2005, including an after-tax loss from discontinued operations of $6 million, or $0.06 per share. Net income for the full year 2006, including the $24 million after-tax loss on the sale of the traffic control business, was $224 million, or $2.06 per share, compared with $187 million, or $1.80 per share, for the full year 2005, including an after-tax loss from discontinued operations of $15 million, or $0.13 per share.
Free cash flow for fourth quarter 2006 was $230 million, an increase of $19 million from the $211 million achieved for the same period last year, after total rental and non-rental capital expenditures of $114 million, compared with $87 million for the fourth quarter 2005. After total 2006 rental and non-rental capital expenditures of $965 million compared with $823 million for the full year 2005, free cash flow for the full year 2006 was $249 million compared with free cash flow of $128 million for the full year 2005. The full year 2006 free cash flow results include the buy-out of $59 million of equipment operating leases. Free cash flow is a non-GAAP measure.
The size of the rental fleet, measured by the original equipment cost, was $3.9 billion, and the average age was 39 months at December 31, 2006, compared with $3.8 billion and 40 months at year-end 2005.
Financial Highlights from Continuing Operations
Highlights of United Rentals fourth quarter and full year 2006 from continuing operations include:
- A return on invested capital at December 31, 2006, improved 1.8 percentage points to a record 14.7%;
- Total debt plus subordinated convertible debentures of $2.70 billion at December 31, 2006, decreased $450 million from December 31, 2005;
- Rental rates increased 4.2% for the fourth quarter and 5.1% for the full year;
- Operating margin of 18.5% for the fourth quarter and 17.2% for the full year improved 2.3 and 1.3 percentage points, respectively;
- Same-store rental revenue increased 0.1% for the fourth quarter and 6.2% for the full year;
- Dollar utilization decreased 0.2 percentage points to 63.6% for the fourth quarter and increased 1.9 percentage points to 61.9% for the full year;
- SG&A expenses improved 1.1 percentage points to 17.0% of revenues for the fourth quarter and were flat at 16.8% of revenues for the full year;
United Rentals announced its full year 2007 outlook for earnings per share of $2.65 to $2.75. The company also expects to generate $3.85 billion in total revenue in 2007, $1.2 billion of EBITDA, and $150 to $200 million of free cash flow after total capital expenditures of $900 to $950 million.
According to Wayland Hicks, chief executive officer for United Rentals, "In 2007, we expect to grow our earnings substantially, generate strong free cash flow and continue to improve our return on invested capital." The ROIC from continuing operations was 14.7% for the 12 months that ended December 31, 2006, an improvement of 1.8 percentage points from the same period a year ago. The company's ROIC metric uses operating income for the trailing twelve months divided by the averages of stockholders' equity, debt, and deferred taxes, net of average cash.
