United Rentals Announces First Quarter 2008 Results and Revises Full Year Outlook

United Rentals, Inc. (NYSE: URI) today announced first quarter 2008 continuing operations diluted earnings per share of $0.34, an increase of 13.3% compared with $0.30 for the first quarter 2007. Income from continuing operations for the first quarter 2008 increased 18.8% to $38 million from $32 million for the first quarter 2007, reflecting the beneficial impact of the company’s renewed focus on its core rental business and ongoing initiatives to reduce operating costs. Rental revenue was $571 million and total revenue was $772 million for the first quarter 2008, compared with $567 million and $838 million, respectively, for the same period last year. The increase in rental revenue and decrease in total revenue are consistent with the company’s previously announced plan to refocus on its core business of equipment rental. First Quarter 2008 Financial Highlights Compared with First Quarter 2007 EBITDA improved $11 million to $224 million and EBITDA margin improved 3.6 percentage points to 29.0%. EBITDA is a non-GAAP measure. SG&A expense as a percent of revenue improved 0.5 percentage points to 17.0% of revenue. Operating income margin improved 1.4 percentage points to 13.2% of revenue. Time utilization, on a larger fleet, increased 0.7 percentage points, offsetting a rental rate decline of 0.6%. Free cash flow for the first quarter 2008 improved significantly to $143 million after total rental and non-rental capital expenditures of $151 million, compared with negative free cash flow of $83 million after total rental and non-rental capital expenditures of $296 million for the same period last year. The year-over-year change in free cash flow was largely the result of a decrease in rental and non-rental capital expenditures and reduced working capital employed in 2008 compared with 2007. Free cash flow is a non-GAAP measure. The size of the rental fleet, measured by the original equipment cost, was $4.2 billion and the average age of the fleet was 39 months at March 31, 2008, compared with $4.2 billion and 38 months at year-end 2007 and $4.0 billion and 38 months at March 31, 2007. Full Year 2008 Outlook Based on current utilization trends and considering recent industry forecasts for spending in its primary end markets, the company revised its full year 2008 outlook for earnings per share to a range of $2.65 to $2.85. The revised outlook anticipates total revenue of $3.4 billion to $3.5 billion, EBITDA of $1.15 billion to $1.19 billion, and $400 million to $450 million of free cash flow after total capital expenditures of approximately $715 million. CEO Comments Michael Kneeland, chief executive officer for United Rentals, said, "Our increased emphasis on equipment rental and cost containment is directly responsible for the record first quarter earnings and EBITDA that we reported today. We are committed to pursuing profitable rental volume, with the result that our employees were successful in increasing both rental revenue and time utilization for the quarter despite the challenges faced in some of our end markets. In addition, we continued to target excess costs and reduced our SG&A expense by $16 million compared with last year. Our focus remains on making systemic improvements that will enable us to generate value in any external environment.” Mr. Kneeland continued, "We expect that the disciplined execution of our strategy will continue to benefit our 2008 results. Nevertheless, we concur with many construction industry experts and the experience of our own customers who see a slowdown in construction starts. This will constrain the demand for equipment as the year progresses. In light of the current operating environment, we have made a modest revision to our outlook. The board continues to review alternatives for enhancing shareholder value, taking account of the environment, our cash flow, capital structure and covenants.” Return on Invested Capital (ROIC) Return on invested capital was 14.3% for the twelve months ended March 31, 2008, flat as compared with the same period last year. 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. The company reports ROIC to provide information on its efficiency and effectiveness in deploying capital and improving shareholder value. Additional Information on First Quarter 2008 Results and Status of SEC Inquiry For additional information concerning the company’s first quarter 2008 results, including segment performance for its general rentals and trench safety, pump and power businesses, as well as the status of the previously announced SEC inquiry of the company and related matters, please see the company’s first quarter 2008 Form 10-Q filed today with the SEC. Conference Call United Rentals will hold a conference call tomorrow, Wednesday, April 30th, at 11 a.m. Eastern Time. The conference will be available live by audio webcast at unitedrentals.com, where it will be archived. The conference call is available by calling (703) 639-1365. About United Rentals United Rentals, Inc. is the largest equipment rental company in the world, with an integrated network of over 670 rental locations in 48 states, 10 Canadian provinces and Mexico. The company’s approximately 10,400 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 2,900 classes of rental equipment with a total original cost of $4.2 billion. United Rentals is a member of the Standard & Poor’s MidCap 400 Index and the Russell 2000 Index® and is headquartered in Greenwich, Conn. Additional information about United Rentals is available at unitedrentals.com. Forward Looking Statements Certain statements in this press release are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements can generally be identified by words such as "believes," "expects," "plans," "intends," "projects," "forecasts," "may," "will," "should," "on track" or "anticipates," or the negative thereof or comparable terminology, or by discussions of vision, strategy or outlook. Our businesses and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) weaker or unfavorable economic or industry conditions can reduce demand and prices for our products and services, (2) non-residential construction spending, or governmental funding for infrastructure and other construction projects, may not reach expected levels, (3) we may not always have access to capital that our businesses or growth plans may require, (4) any companies we acquire could have undiscovered liabilities, may strain our management capabilities or may be difficult to integrate, (5) rates we can charge and time utilization we can achieve may be less than anticipated, (6) costs we incur may be more than anticipated, including by having expected savings not be realized in the amounts or time frames we have planned, (7) competition in our industry for talented employees is intense, which can affect our employee costs and retention rates, (8) we have (and the ability to incur additional) significant leverage, which leverage requires us to use a substantial portion of our cash flow for debt service and will constrain our flexibility in responding to unanticipated or adverse business conditions, (9) we are subject to an ongoing inquiry by the SEC, and there can be no assurance as to its outcome, or any other potential consequences thereof for us, (10) we are subject to purported class action lawsuits and derivative actions filed in light of the SEC inquiry and additional purported class action lawsuits relating to the terminated merger transaction with Cerberus affiliates, and there can be no assurance as to their outcome or any other potential consequences thereof for us, and (11) we may incur additional significant costs and expenses (including indemnification obligations) in connection with the SEC inquiry, the purported class action lawsuits and derivative actions referenced above, the U.S. Attorney’s office inquiry, or other litigation, regulatory or investigatory matters, related to the foregoing or otherwise. For a fuller description of these and other possible uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2007, as well as to our subsequent filings with the SEC. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. UNITED RENTALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data)     Three Months Ended March 31, 2008   2007   % Change   Revenues: Equipment rentals $ 571 $ 567 0.7 % Sales of rental equipment 66 82 (19.5 %) New equipment sales 42 54 (22.2 %) Contractor supplies sales 56 94 (40.4 %) Service and other revenues   37   41   (9.8 %)   Total revenues   772   838   (7.9 %)   Cost of revenues: Cost of equipment rentals, excluding depreciation 275 281 (2.1 %) Depreciation of rental equipment 107 102 4.9 % Cost of rental equipment sales 49 58 (15.5 %) Cost of new equipment sales 34 44 (22.7 %) Cost of contractor supplies sales 44 78 (43.6 %) Cost of service and other revenue   15   17   (11.8 %)   Total cost of revenues   524   580   (9.7 %)   Gross profit 248 258 (3.9 %)   Selling, general and administrative expenses 131 147 (10.9 %) Non-rental depreciation and amortization   15   12   25.0 %   Operating income 102 99 3.0 % Interest expense, net 41 47 Interest expense - subordinated convertible debentures   2   2     Income from continuing operations before provision for income taxes 59 50 18.0 %   Provision for income taxes   21   18     Income from continuing operations 38 32 18.8 %   Loss from discontinued operation, net of taxes   -   (2 )   Net income $ 38 $ 30   26.7 %   Diluted earnings per share: Income from continuing operations $ 0.34 $ 0.30 13.3 % Loss from discontinued operation   -   (0.02 ) Net income $ 0.34 $ 0.28   21.4 % UNITED RENTALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions)     March 31,   December 31, 2008   2007 2007 ASSETS   Cash and cash equivalents $ 515 $ 104 $ 381 Accounts receivable, net 452 500 519 Inventory 95 169 91 Prepaid expenses and other assets 54 70 57 Deferred taxes   74   51   72 Total current assets 1,190 894 1,120   Rental equipment, net 2,796 2,688 2,826 Property and equipment, net 440 381 440 Goodwill and other intangible assets, net 1,396 1,385 1,404 Other long-term assets   50   62   52   Total assets $ 5,872 $ 5,410 $ 5,842     LIABILITIES AND STOCKHOLDERS' EQUITY Current maturities of long-term debt $ 157 $ 61 $ 15 Accounts payable 275 344 195 Accrued expenses and other liabilities   216   224   310 Total current liabilities 648 629 520   Long-term debt 2,413 2,509 2,555 Subordinated convertible debentures 146 146 146 Deferred taxes 559 439 539 Other long-term liabilities   64   106   64   Total liabilities   3,830   3,829   3,824   Common stock 1 1 1 Additional paid-in capital 1,495 1,430 1,494 Retained earnings 469 99 431 Accumulated other comprehensive income   77   51   92   Total stockholders' equity   2,042   1,581   2,018   Total liabilities and stockholders' equity $ 5,872 $ 5,410 $ 5,842 UNITED RENTALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)     Three Months Ended March 31,   2008     2007   Cash Flows From Operating Activities: Income from continuing operations $ 38 $ 32 Adjustments to reconcile income from continuing operations to netcash provided by operating activities: Depreciation and amortization 124 117 Gain on sales of rental equipment (17 ) (24 ) Gain on sales of non-rental equipment - (1 ) Non-cash adjustments to equipment 2 (2 ) Stock compensation expense 1 4 Increase in deferred taxes 18 8 Changes in operating assets and liabilities: Decrease in accounts receivable 65 3 Increase in inventory (4 ) (30 ) Decrease (increase) in prepaid expenses and other assets 2 (16 ) Increase in accounts payable 81 126 Decrease in accrued expenses and other liabilities   (84 )   (90 ) Net cash provided by operating activities - continuing operations 226 127 Net cash provided by operating activities - discontinued operation   -     6   Net cash provided by operating activities   226     133     Cash Flows From Investing Activities: Purchases of rental equipment (136 ) (265 ) Purchases of non-rental equipment (15 ) (31 ) Proceeds from sales of rental equipment 66 82 Proceeds from sales of non-rental equipment 2 2 Purchases of other companies   -     (21 ) Net cash used in investing activities - continuing operations (83 ) (233 ) Net cash provided by investing activities - discontinued operation   -     69   Net cash used in investing activities   (83 )   (164 )   Cash Flows From Financing Activities: Proceeds from debt - 41 Payments on debt (7 ) (32 ) Proceeds from the exercise of common stock options - 4 Shares repurchased and retired - (1 ) Excess tax benefits from share-based payment arrangements   -     2     Net cash (used in) provided by financing activities (7 ) 14   Effect of foreign exchange rates   (2 )   2     Net increase (decrease) in cash and cash equivalents 134 (15 ) Cash and cash equivalents at beginning of period   381     119     Cash and cash equivalents at end of period $ 515   $ 104   UNITED RENTALS, INC. SEGMENT PERFORMANCE ($ in millions)     Three Months Ended March 31,   2008       2007     % Change   General Rentals Total revenues $ 727 $ 789 (7.9 %) Operating income 93 89 4.5 % Operating margin 12.8 % 11.3 % 1.5pp   Trench Safety, Pump and Power Total revenues 45 49 (8.2 %) Operating income 9 10 (10.0 %) Operating margin 20.0 % 20.4 % (0.4pp )   Total United Rentals Total revenues $ 772 $ 838 (7.9 %) Operating income 102 99 3.0 % Operating margin 13.2 % 11.8 % 1.4pp     DILUTED EARNINGS PER SHARE CALCULATION (In millions, except per share data)   Three Months Ended March 31,   2008     2007   % Change   Income from continuing operations $ 38 $ 32 18.8 % Loss from discontinued operation, net of taxes   -     (2 ) Net income 38 30 26.7 % Convertible debt interest   -     1   Net income available to common stockholders $ 38 $ 31 22.6 %     Weighted average common shares 86.3 81.2 6.3 % Series C and D preferred shares 17.0 17.0 - Convertible shares 6.5 6.5 - Employee stock options and warrants 0.6 5.0 (88.0 %) Restricted stock units and other   0.4     0.5   (20.0 %) Total weighted average diluted shares 110.8 110.2 0.5 %   Diluted earnings available to common stockholders: Income from continuing operations $ 0.34 $ 0.30 13.3 % Loss from discontinued operation   -     (0.02 ) Net income $ 0.34   $ 0.28   21.4 % UNITED RENTALS, INC. FREE CASH FLOW GAAP RECONCILIATION (In millions) We define "free cash flow” as (i) net cash provided by operating activities – continuing operations less (ii) purchases of rental and non-rental equipment plus (iii) proceeds from sales of rental and non-rental equipment and excess tax benefits from share-based payment arrangements. Management believes free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. However, free cash flow is not a measure of financial performance or liquidity under Generally Accepted Accounting Principles ("GAAP”). Accordingly, free cash flow should not be considered an alternative to net income or cash flow from operating activities as indicators of operating performance or liquidity. Information reconciling forward-looking free cash flow expectations to a GAAP financial measure is unavailable to the company without unreasonable effort. The table below provides a reconciliation between net cash provided by operating activities – continuing operations and free cash flow.   Three Months Ended March 31, 2008   2007   Net cash provided by operating activities - continuing operations $ 226 $ 127 Purchases of rental equipment (136 ) (265 ) Purchases of non-rental equipment (15 ) (31 ) Proceeds from sales of rental equipment 66 82 Proceeds from sales of non-rental equipment 2 2 Excess tax benefits from share-based payment arrangements   -     2   Free Cash Flow $ 143   $ (83 ) UNITED RENTALS, INC. EBITDA GAAP RECONCILIATION (In millions) "EBITDA” represents the sum of income from continuing operations before provision for income taxes, interest expense, net, interest expense-subordinated convertible debentures, depreciation-rental equipment and non-rental depreciation and amortization. Management believes EBITDA provides useful information about operating performance and period over period growth. However, EBITDA is not a measure of financial performance or liquidity under GAAP and accordingly should not be considered an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. The table below provides a reconciliation between income from continuing operations before provision for income taxes and EBITDA.   Three Months Ended March 31, 2008   2007   Income from continuing operations before provision forincome taxes $ 59 $ 50 Interest expense, net 41 47 Interest expense - subordinated convertible debentures 2 2 Depreciation - rental equipment 107 102 Non-rental depreciation and amortization   15   12 EBITDA $ 224 $ 213