United Rentals Posts ‘Strong' Second Quarter Results

Net income for the second quarter 2007 of $67 million, or $0.60 per diluted share, included a year-over-year reduction of $6 million after-tax, or $0.05 per diluted share, in bad debt expense reflecting improved accounts receivable collection experience, write-off trends and credit management. This improvement was offset by a non-cash increase in interest expense of $4 million after-tax, or $0.03 per diluted share, related to the mark-to-market impact of certain interest rate swaps and a $3 million after-tax charge, or $0.02 per diluted share, within the income tax provision to correct income tax benefits recognized in prior periods. By comparison, net income for the second quarter 2006 was $56 million, or $0.51 per diluted share, including the discontinued operation after-tax loss of $3 million, or $0.03 per diluted share. Net income for 2006 included charges of $0.05 per diluted share to correct previously reported depreciation expense and provide for a tax contingency. 

The size of the rental fleet, as measured by the original equipment cost, was $4.3 billion and the age of the rental fleet was 37 months at June 30, 2007, compared with $3.9 billion and 39 months at year-end 2006, and $4 billion and 38 months at June 30, 2006. Time utilization, on a larger fleet, improved 3.7 percentage points, more than offsetting a 1.2-percent decline in rental rates. Same-store rental revenue increased 3.5 percent.

"Our strong performance in the second quarter reflects the initial impact of our strategy to refocus on our core business of equipment rental and drive more profitable revenue growth,” said Michael Kneeland, CEO for United Rentals. “We achieved significantly higher time utilization on a larger fleet, offsetting a modest decline in rental rates. Our EBITDA margin and SG&A expense ratio both improved in response to a number of internal initiatives put in place in the second quarter."

For the first half 2007, the company reported continuing operations diluted earnings per share of $0.90, an increase of 15 percent compared with $0.78 for the first half 2006. Income from continuing operations increased 18 percent to $99 million for the first half 2007 compared with $84 million for the same period last year. Total continuing operations revenues of $1.8 billion for the first half 2007 increased 5 percent from the first half 2006.

Net income for the first half 2007 was $97 million, or $0.88 per diluted share, including the discontinued operation after-tax loss of $2 million or $0.02 per diluted share. Net income for the first half 2007 included a year-over-year reduction of $6 million after-tax, or $0.05 per diluted share, in bad debt expense, offset by a non-cash increase in interest expense of $3 million after-tax, or $0.02 per diluted share, related to the mark-to-market impact of certain interest rate swaps and a $3 million after-tax charge, or $0.02 per diluted share, within the income tax provision to correct income tax benefits recognized in prior periods. By comparison, net income for the first half 2006 was $76 million, or $0.71 per diluted share, including the discontinued operation after-tax loss of $8 million, or $0.07 per diluted share, as well as the second quarter 2006 charges of $.05 per diluted share. 

On July 23, 2007, the company announced that it had signed a definitive merger agreement to be acquired by affiliates of Cerberus Capital Management, L.P. The signing followed the April 10, 2007, announcement that the board of directors had authorized a process to explore a broad range of strategic alternatives to maximize shareholder value. The board of directors has approved the merger agreement and has recommended the adoption of the merger agreement by United Rentals stockholders. Stockholders will be asked to vote on the proposed transaction at a special meeting on a date to be announced. The company currently expects the transaction to close in fourth quarter 2007.