United Rentals Announces Second Quarter 2006 Results
August 7, 2006 • United Rentals, Inc.,
Second quarter net income of $56 million, which includes an after-tax $6 million impact from the charges noted above, increased 12% from $50 million for the second quarter 2005. Total revenues of $995 million for the second quarter increased 12% from the second quarter 2005. Free cash flow for the second quarter was negative $163 million after total capital expenditures of $395 million, including $44 million for the buy-out of equipment under operating leases.
After recognizing the impact of the $.05 per diluted share related to the items noted above, the company revised its full year 2006 outlook for diluted earnings per share to a range of $2.15 to $2.25. The outlook reflects continued strong performance in the company's core business, partially offset by a softer outlook for traffic control. The company expects to generate $4.0 billion in total revenues in 2006, and approximately $145 million of free cash flow after total capital expenditures of approximately $930 million.
Second Quarter 2006 Financial Highlights
For the second quarter 2006 compared with last year's second quarter:
- Total revenues increased 12% to $995 million.
- Same-store rental revenues increased 8.6%.
- Rental rates increased 5.6%.
- Contractor supplies sales increased 28% to $109 million.
- Dollar utilization was 65.3%, an increase of 1.3 percentage points.
- Return on invested capital improved 1.7 percentage points to 12.5%.
Purchases of rental equipment were $369 million for the second quarter 2006 compared with $332 million for the same period last year. The size of the rental fleet, as measured by the original equipment cost, was $4.2 billion and the age of the rental fleet was 38 months at
Cash flow from operations was $143 million for the second quarter 2006 compared with $193 million for the same period last year. The decrease in cash flow from operations was largely the result of working capital items. After total rental and non-rental capital expenditures of $395 million, free cash flow for the second quarter 2006 was negative $163 million compared with free cash flow of negative $65 million for the same period last year.
For the first half 2006, including the second quarter charges of $.05 per diluted share, the company reported diluted earnings per share of $0.71, an increase of 18% compared with $0.60 for the first half 2005. Net income, including the second quarter charges of $6 million, increased 23% to $76 million for the first half 2006 from $62 million for the first half 2005. Total revenues of $1.84 billion for the first half 2006 increased 13.6% from the first half 2005. After total rental and non-rental capital expenditures of $659 million compared with $516 million for the first half 2005, free cash flow for the first half 2006 was negative $116 million compared with free cash flow of negative $21 million for the same period last year.
The company's total cash balance was $208 million at
CEO Comments and Outlook
“We are continuing to make significant strategic investments to take advantage of the growth opportunities in our market. We remain focused on driving revenue growth, improving our margins and increasing our return on capital.”
Hicks also said, “For the full year 2006, after recognizing the impact of the two second quarter items, we are revising our outlook for diluted earnings per share to a range of $2.15 to $2.25 on total revenues of $4.0 billion. This outlook reflects our expectations for continued strong performance in our core business partially offset by a softer outlook for traffic control.”
Return on Invested Capital (ROIC)
Return on invested capital was 12.5% for the twelve months that ended June 30, 2006, an improvement of 1.7 percentage points from 2005. The company's ROIC metric uses operating income for the trailing twelve months divided by the averages of shareholders' equity, debt and deferred taxes, net of average cash. The company reports ROIC to provide information on the company's efficiency and effectiveness in deploying its capital and improving shareholder value.
Segment Performance
The company's financial reporting segments are general rentals; trench safety, pump and power; and traffic control.
General Rentals
The general rentals segment includes rental of construction, aerial, industrial and homeowner equipment as well as related services and activities.
Second quarter 2006 revenues for general rentals were $865 million, an increase of 12.2% compared with $771 million for the second quarter 2005. Rental rates for the second quarter increased 5.7% and same-store rental revenues increased 8.6% from the same period last year. Operating income for general rentals was $142 million for the second quarter, an increase of 15.4% compared with $123 million for the same period last year.
First half 2006 revenues for general rentals were $1.62 billion, an increase of 13.3% compared with $1.43 billion for the first half 2005. Operating income for general rentals was $224 million for the first half, an increase of 15.5% compared with $194 million for the same period last year.
General rentals segment revenues represented 88% of total revenues for the first half 2006.
Trench Safety, Pump and Power
The trench safety, pump and power segment includes rental of steel trench shields and shoring, pumps, temporary power and climate control equipment, as well as related services and activities.
Second quarter 2006 revenues for trench safety, pump and power were $55 million, an increase of 25.0% compared with $44 million for the second quarter 2005. The acquisition of Sandvick Equipment and Supply Company in December 2005 contributed $5 million to second quarter 2006 revenue growth. Rental rates for the second quarter increased 3.9% and same-store rental revenues increased 13.5% from the same period last year. Operating income for trench safety, pump and power was $13 million for the second quarter, an increase of $2 million from the same period last year.
First half 2006 revenues for trench safety, pump and power were $104 million, an increase of 33.3% compared with $78 million for the first half 2005. Operating income for trench safety, pump and power was $26 million for the first half, an increase of $9 million from the same period last year.
Trench safety, pump and power segment revenues represented 5% of total revenues for the first half 2006.
Traffic Control
The traffic control segment includes rental of equipment used for traffic management, as well as related services and activities.
Second quarter 2006 revenues for traffic control were $75 million, an increase of $2 million from the second quarter 2005. Same-store rental revenues for the second quarter increased 6.2% from the same period last year. The operating loss for traffic control was $5 million for the second quarter compared with an operating loss of $2 million for the same period last year.
First half 2006 revenues for traffic control were $122 million, an increase of 4.3% compared with $117 million for the first half 2005. The operating loss for traffic control was $12 million for the first half 2006 and $13 million for the first half 2005.
Traffic control segment revenues represented 7% of total revenues for the first half 2006.
Second Quarter 2006 Charges
The second quarter 2006 results include a pre-tax charge of $5 million, or $.03 per diluted share, to correct depreciation expense recorded since the fourth quarter 2002 for certain vehicles on capital leases which had been depreciated over a period that exceeded the related contractual lease terms, as well as a net $3 million charge, or $.02 per diluted share, primarily related to an identified tax contingency item.
Update on the SEC Inquiry
