United Rentals Announces Fourth Quarter and Full Year 2012 Results and Provides 2013 Outlook
GREENWICH, Conn.--(BUSINESS WIRE)--
United Rentals, Inc. (NYSE: URI) today announced financial results for
the fourth quarter and full year 20121.
For the fourth quarter of 2012, total revenue was $1.249 billion and
rental revenue was $1.036 billion. On a GAAP basis, the company reported
fourth quarter net income of $41 million, or earnings of $0.40 per
diluted share. Adjusted EPS2 for the quarter was $1.27 per
diluted share.
For the full year 2012, total revenue was $4.117 billion and rental
revenue was $3.455 billion. On a GAAP basis, full year net income was
$75 million, or earnings of $0.79 per diluted share. Adjusted EPS for
the full year was $3.76 per diluted share.
For the fourth quarter of 2012, adjusted EBITDA3 was $553
million and adjusted EBITDA margin was 44.3%. For the full year 2012,
adjusted EBITDA was $1.772 billion, and adjusted EBITDA margin was 43.0%.
2012 Highlights4
On a pro-forma basis (that is, assuming the combination of United
Rentals results and RSC results for all periods in 2011 and 2012):
Full year total revenue was $4.664 billion compared with $4.133
billion for 2011.
Fourth quarter 2012 rental revenue increased 8.7% year-over-year,
reflecting an increase of 7.2% in the volume of equipment on rent and
an increase of 6.0% in rental rates year-over-year.5 Full
year rental revenue increased 13.2% year-over-year, reflecting an
increase of 11.4% in the volume of equipment on rent and an increase
of 6.9% in rental rates.
Fourth quarter adjusted EBITDA was $553 million and adjusted EBITDA
margin was 44.3%, an increase of $104 million and 580 basis points,
respectively, from the same period last year. Full year adjusted
EBITDA was $1.988 billion and adjusted EBITDA margin was 42.6%, an
increase of $494 million and 650 basis points, respectively, from 2011.
Flow-through, which represents the year-over-year change in adjusted
EBITDA divided by the year-over-year change in total revenue, was
125.3% for the fourth quarter and 93.0% for the full year.
For the fourth quarter, time utilization decreased 90 basis points
year-over-year to 68.7% and full year time utilization decreased 30
basis points to 67.5%.
For the fourth quarter, the company generated $141 million of proceeds
from used equipment sales at a gross margin of 39.7%, compared with
$134 million of proceeds at a gross margin of 31.3% the prior year.
For the full year, the company generated $463 million of proceeds from
used equipment sales at a gross margin of 39.7%, compared with $363
million of proceeds at a gross margin of 33.3% for 2011.6
The company realized cost synergies of $42 million in the fourth
quarter and $104 million for the full year, and reaffirmed its fully
developed goal of $230 million to $250 million on a run-rate basis.
2013 Outlook
The company provided the following outlook for full year 2013:
Total revenue in a range of $4.9 billion to $5.1 billion;
Adjusted EBITDA in a range of $2.25 billion to $2.35 billion;
An increase in rental rates of approximately 4.5% year-over-year;
Time utilization of approximately 68.0%;
Net rental capital expenditures of approximately $1.05 billion, after
gross purchases of approximately $1.5 billion; and
Full year free cash flow in the range of $400 million to $500 million.
CEO Comments
Michael Kneeland, chief executive officer of United Rentals, said, "Our
strong performance in 2012 continued in the fourth quarter as we
delivered solid growth, robust margins and exceptional flow-through from
our revenue streams. The integration with RSC has been very successful,
and while it's not complete, we can now shift our focus to driving
improvements across the entire business. Despite the intensity of
integration, we’ve paid consistent attention to the fundamentals of our
business and made good on our promise to drive significant returns."
Kneeland continued, "There's a lot to be excited about from the
standpoint of value creation as we look at 2013. Industrial and other
non-construction sectors have balanced our mix and now account for about
50% of our business. We also expect to benefit further from the secular
shift to rental. And non-residential construction is predicted to show
reasonable improvement, with larger upswings in 2014 and 2015. We see
opportunities to continue to grow our key accounts, reap the synergies
of the merger and expand our fleet, while further lowering our debt
leverage."
Free Cash Flow and Fleet Size
For the full year 2012, on an as-reported basis7, free cash
usage was $223 million after (i) total rental and non-rental capital
expenditures of $1.369 billion and (ii) aggregate cash payments of $150
million related to merger and restructuring activities.
The size of the rental fleet on an as reported basis was $7.23 billion
of original equipment cost at December 31, 2012, compared with $4.05
billion at December 31, 2011. The age of the rental fleet was 47.2
months on an OEC-weighted basis at December 31, 2012, compared with 50.3
months at December 31, 2011.
Return on Invested Capital (ROIC)
Return on invested capital, on an as-reported basis, was 7.4% for the 12
months ended December 31, 2012, an increase of 50 basis points from the
same period last year. The company’s ROIC metric uses after-tax
operating income for the trailing 12 months divided by the averages of
stockholders’ equity, debt and deferred taxes, net of average cash and
excludes the impact of merger and restructuring related costs. To
mitigate the volatility related to fluctuations in the company’s tax
rate from period to period, the federal statutory tax rate of 35% is
used to calculate after-tax operating income.
Conference Call
United Rentals will hold a conference call tomorrow, Thursday, January
24, 2013, at 11 a.m. Eastern Time. The conference call will be available
live by audio webcast at unitedrentals.com, where it will be archived
until the next earnings call, and by calling 703-639-1123.
Non-GAAP Measures
Free cash (usage) flow, earnings before interest, taxes, depreciation
and amortization (EBITDA), adjusted EBITDA, and adjusted earnings per
share (adjusted EPS) are non-GAAP financial measures as defined under
the rules of the SEC. Free cash (usage) flow represents net cash
provided by operating activities, less purchases of rental and
non-rental equipment plus proceeds from sales of rental and non-rental
equipment and excess tax benefits from share-based payment arrangements,
net. EBITDA represents the sum of net income, income from discontinued
operations, net of taxes, (benefit) provision for income taxes, interest
expense, net, interest expense-subordinated convertible debentures, net,
depreciation of rental equipment and non-rental depreciation and
amortization. Adjusted EBITDA represents EBITDA plus the sum of RSC
merger related costs, restructuring charge, stock compensation expense,
net, the impact of the fair value mark-up of acquired RSC fleet and
inventory and the gain on sale of our software subsidiary. Adjusted EPS
represents EPS plus the sum of the RSC merger related costs,
restructuring charge, asset impairment charge, pre-close RSC merger
related interest expense, the impact on interest expense related to the
fair value adjustment of acquired RSC indebtedness, the impact on
depreciation related to acquired RSC fleet and property and equipment,
the impact of the fair value mark-up of acquired RSC fleet and
inventory, RSC merger related intangible asset amortization, the gain on
sale of our software subsidiary and the loss on extinguishment of debt
securities, including subordinated convertible debentures, and ABL
amendment. The company believes that: (i) free cash (usage) flow
provides useful additional information concerning cash flow available to
meet future debt service obligations and working capital requirements;
(ii) EBITDA and adjusted EBITDA provide useful information about
operating performance and period-over-period growth; and (iii) adjusted
EPS provides useful information concerning future profitability.
However, none of these measures should be considered as alternatives to
net income, cash flows from operating activities or earnings per share
under GAAP as indicators of operating performance or liquidity.
Information reconciling forward-looking free cash flow and Adjusted
EBITDA to GAAP financial measures is unavailable to the company without
unreasonable effort.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in the
world, with an integrated network of 836 rental locations in 49 states
and 10 Canadian provinces. The company’s approximately 11,300 employees
serve construction and industrial customers, utilities, municipalities,
homeowners and others. The company offers for rent approximately 3,300
classes of equipment with a total original cost of $7.23 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
This press release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995, known
as the PSLRA.These statements can generally be identified by the
use of forward-looking terminology such as “believe,” “expect,” “may,”
“will,” “should,” “seek,” “on-track,” “plan,” “project,” “forecast,”
“intend” or “anticipate,” or the negative thereof or comparable
terminology, or by discussions of vision, strategy or outlook. These
statements are based on current plans, estimates and projections, and,
therefore, you should not place undue reliance on them. No
forward-looking statement can be guaranteed, and actual results may
differ materially from those projected. Factors that could cause actual
results to differ materially from those projected include, but are not
limited to, the following: (1) a slowdown in the recovery of North
American construction and industrial activities, which decreased during
the economic downturn and significantly affected our revenues and
profitability, may reduce demand for equipment and prices that we can
charge; (2) a decrease in levels of infrastructure spending, including
lower than expected government funding for such projects; (3) our highly
leveraged capital structure, which requires us to use a substantial
portion of our cash flow for debt service and can constrain our
flexibility in responding to unanticipated or adverse business
conditions; (4) restrictive covenants in our debt agreements, which
could limit our financial and operational flexibility; (5) noncompliance
with covenants in our debt agreements, which could result in termination
of our credit facilities and acceleration of outstanding borrowings; (6)
inability to access the capital that our business may require;
(7) inability to manage credit risk adequately or to collect on
contracts with customers; (8) incurrence of impairment charges; (9) the
outcome or other potential consequences of litigation and other claims
and regulatory matters relating to our business, including certain
claims that our insurance may not cover; (10) an increase in our loss
reserves to address business operations or other claims and any claims
that exceed our established levels of reserves; (11) incurrence of
additional costs and expenses (including indemnification obligations) in
connection with litigation, regulatory or investigatory matters; (12)
increases in our maintenance and replacement costs as we age our fleet,
and decreases in the residual value of our equipment; (13) inability to
sell our new or used fleet in the amounts, or at the prices, we expect;
(14) challenges associated with past or future acquisitions, such as
undiscovered liabilities, costs, integration issues and/or the inability
to achieve the cost and revenue synergies expected; (15) management
turnover and inability to attract and retain key personnel; (16) our
rates and time utilization being less than anticipated; (17) our costs
being more than anticipated, the inability to realize expected savings
in the amounts or time frames planned and the inability to obtain key
equipment and supplies; (18) disruptions in our information technology
systems; (19) competition from existing and new competitors; (20) labor
difficulties and labor-based legislation affecting labor relations and
operations generally; and (21) the costs of complying with environmental
and safety regulations. For a more complete description of these and
other possible risks and uncertainties, please refer to our Annual
Report on Form 10-K for the year ended December 31, 2012, as well as to
our subsequent filings with the SEC. The 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 (UNAUDITED)
(In millions, except per share amounts)
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Revenues:
Equipment rentals
$
1,036
$
589
$
3,455
$
2,151
Sales of rental equipment
141
93
399
208
Sales of new equipment
29
24
93
84
Contractor supplies sales
23
19
87
85
Service and other revenues
20
21
83
83
Total revenues
1,249
746
4,117
2,611
Cost of revenues:
Cost of equipment rentals, excluding depreciation
401
252
1,392
992
Depreciation of rental equipment
208
111
699
423
Cost of rental equipment sales
99
69
274
142
Cost of new equipment sales
23
19
74
67
Cost of contractor supplies sales
17
13
62
58
Cost of service and other revenues
6
7
29
31
Total cost of revenues
754
471
2,530
1,713
Gross profit
495
275
1,587
898
Selling, general and administrative expenses
176
109
588
407
RSC merger related costs
13
19
111
19
Restructuring charge
6
14
99
19
Non-rental depreciation and amortization
64
18
198
57
Operating income
236
115
591
396
Interest expense, net
196
58
512
228
Interest expense—subordinated convertible debentures, net
1
2
4
7
Other income, net
—
(1
)
(13
)
(3
)
Income from continuing operations before (benefit) provision for
income taxes
39
56
88
164
(Benefit) provision for income taxes
(2
)
28
13
63
Income from continuing operations
$
41
$
28
$
75
$
101
Income from discontinued operation, net of taxes
$
—
$
1
$
—
$
—
Net income
$
41
$
29
$
75
$
101
Diluted earnings per share:
Income from continuing operations
$
0.40
$
0.39
$
0.79
$
1.38
Income from discontinued operation
$
—
$
—
$
—
$
—
Net income
$
0.40
$
0.39
$
0.79
$
1.38
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
December 31, 2012
December 31, 2011
ASSETS
Cash and cash equivalents
$
106
$
36
Accounts receivable, net
793
464
Inventory
68
44
Prepaid expenses and other assets
111
75
Deferred taxes
265
104
Total current assets
1,343
723
Rental equipment, net
4,966
2,617
Property and equipment, net
428
366
Goodwill and other intangible assets, net
4,170
372
Other long-term assets
119
65
Total assets
$
11,026
$
4,143
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt and current maturities of long-term debt
$
630
$
395
Accounts payable
286
206
Accrued expenses and other liabilities
435
263
Total current liabilities
1,351
864
Long-term debt
6,679
2,592
Subordinated convertible debentures
55
55
Deferred taxes
1,302
470
Other long-term liabilities
65
59
Total liabilities
9,452
4,040
Temporary equity
31
39
Common stock
1
1
Additional paid-in capital
1,997
487
Accumulated deficit
(424
)
(499
)
Treasury stock
(115
)
—
Accumulated other comprehensive income
84
75
Total stockholders’ equity
1,543
64
Total liabilities and stockholders’ equity
$
11,026
$
4,143
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Cash Flows From Operating Activities:
Net income
$
41
$
29
$
75
$
101
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
272
129
897
480
Amortization of deferred financing costs and original issue discounts
6
5
23
22
Gain on sales of rental equipment
(42
)
(24
)
(125
)
(66
)
Gain on sales of non-rental equipment
—
—
(2
)
(2
)
Gain on sale of software subsidiary
2
—
(8
)
—
Stock compensation expense, net
9
3
32
12
RSC merger related costs
13
19
111
19
Restructuring charge
6
14
99
19
Loss on extinguishment of debt securities and ABL amendment
72
3
72
3
Loss on retirement of subordinated convertible debentures
—
1
—
2
(Decrease) increase in deferred taxes
(21
)
23
(16
)
39
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable
8
(2
)
(86
)
(62
)
Decrease (increase) in inventory
20
14
(2
)
(3
)
Increase in prepaid expenses and other assets
(1
)
(4
)
(18
)
(15
)
(Decrease) increase in accounts payable
(121
)
(33
)
(223
)
68
Decrease in accrued expenses and other liabilities
(38
)
(18
)
(108
)
(5
)
Net cash provided by operating activities
226
159
721
612
Cash Flows From Investing Activities:
Purchases of rental equipment
(163
)
(143
)
(1,272
)
(774
)
Purchases of non-rental equipment
(21
)
(12
)
(97
)
(36
)
Proceeds from sales of rental equipment
141
93
399
208
Proceeds from sales of non-rental equipment
5
2
31
13
Purchases of other companies, net of cash acquired
—
(78
)
(1,175
)
(276
)
Proceeds from sale of software subsidiary
—
—
10
—
Net cash used in investing activities
(38
)
(138
)
(2,104
)
(865
)
Cash Flows From Financing Activities:
Proceeds from debt
1,127
430
6,013
1,892
Payments of debt, including subordinated convertible debentures
(1,268
)
(430
)
(4,370
)
(1,813
)
Payments of financing costs
(8
)
(16
)
(75
)
(16
)
Proceeds from the exercise of common stock options
4
4
21
35
Common stock repurchased
(3
)
—
(131
)
(7
)
Cash paid in connection with the 4 percent Convertible Senior Notes
and related hedge, net
—
—
—
(11
)
Excess tax benefits from share-based payment arrangements, net
(1
)
—
(5
)
—
Net cash (used in) provided by financing activities
(149
)
(12
)
1,453
80
Effect of foreign exchange rates
(1
)
1
—
6
Net increase (decrease) in cash and cash equivalents
38
10
70
(167
)
Cash and cash equivalents at beginning of period
68
26
36
203
Cash and cash equivalents at end of period
$
106
$
36
$
106
$
36
Supplemental disclosure of cash flow information:
Cash paid for interest, including subordinated convertible debentures
$
152
$
62
$
371
$
203
Cash paid for income taxes, net
9
4
40
24
UNITED RENTALS, INC.
SEGMENT PERFORMANCE
($ in millions)
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
Change
2012
2011
Change
General Rentals
Reportable segment equipment rentals revenue
$
961
$
534
80.0
%
$
3,188
$
1,953
63.2
%
Reportable segment equipment rentals gross profit
392
201
95.0
%
1,239
643
92.7
%
Reportable segment equipment rentals gross margin
40.8
%
37.6
%
3.2pp
38.9
%
32.9
%
6.0pp
Trench Safety, Power & HVAC
Reportable segment equipment rentals revenue
$
75
$
55
36.4
%
$
267
$
198
34.8
%
Reportable segment equipment rentals gross profit
35
25
40.0
%
125
93
34.4
%
Reportable segment equipment rentals gross margin
46.7
%
45.5
%
1.2pp
46.8
%
47.0
%
(0.2pp
)
Total United Rentals
Total equipment rentals revenue
$
1,036
$
589
75.9
%
$
3,455
$
2,151
60.6
%
Total equipment rentals gross profit
427
226
88.9
%
1,364
736
85.3
%
Total equipment rentals gross margin
41.2
%
38.4
%
2.8pp
39.5
%
34.2
%
5.3pp
UNITED RENTALS, INC.
DILUTED EARNINGS PER SHARE CALCULATION
(In millions, except per share data)
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Numerator:
Income from continuing operations
$
41
$
28
$
75
$
101
Convertible debt interest—1 7/8 percent notes
—
—
—
—
Income from continuing operations available to common stockholders
$
41
$
28
$
75
$
101
Income from discontinued operation
—
1
—
—
Net income available to common stockholders
$
41
$
29
$
75
$
101
Denominator:
Denominator for basic earnings per share—weighted-average common
shares
92.7
62.7
83.0
62.2
Effect of dilutive securities:
Employee stock options and warrants
0.8
0.7
0.7
1.0
Convertible subordinated notes—1 7/8 percent
0.2
1.0
—
1.0
Convertible subordinated notes—4 percent
10.9
8.4
10.6
8.5
Restricted stock units
0.6
0.6
0.5
0.6
Denominator for diluted earnings per share—adjusted
weighted-average common shares
105.2
73.4
94.8
73.3
Diluted earnings per share:
Income from continuing operations
$
0.40
$
0.39
$
0.79
$
1.38
Income from discontinued operation
—
—
—
—
Net income
$
0.40
$
0.39
$
0.79
$
1.38
UNITED RENTALS, INC. ADJUSTED EARNINGS PER SHARE GAAP
RECONCILIATION
We define “Earnings per share from continuing operations – adjusted” as
the sum of earnings per share from continuing operations – GAAP, as
reported plus the impact of the following special items: RSC merger
related costs, RSC merger related intangible asset amortization, impact
on depreciation related to acquired RSC fleet and property and
equipment, impact of the fair value mark-up of acquired RSC fleet and
inventory, pre-close RSC merger related interest expense, impact on
interest expense related to fair value adjustment of acquired RSC
indebtedness, restructuring charge, asset impairment charge, loss on
extinguishment of debt securities, including subordinated convertible
debentures, and ABL amendment, and gain on sale of software subsidiary.
Management believes adjusted earnings per share from continuing
operations provides useful information concerning future profitability.
However, adjusted earnings per share from continuing operations is not a
measure of financial performance under GAAP. Accordingly, adjusted
earnings per share from continuing operations should not be considered
an alternative to GAAP earnings per share from continuing operations.
The table below provides a reconciliation between earnings per share
from continuing operations – GAAP, as reported, and earnings per share
from continuing operations – adjusted.
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Earnings per share from continuing operations, GAAP, as reported
$
0.40
$
0.39
$
0.79
$
1.38
After-tax impact of:
RSC merger related costs (1)
0.08
0.25
0.72
0.25
RSC merger related intangible asset amortization (2)
0.25
—
0.74
—
Impact on depreciation related to acquired RSC fleet and property
and equipment (3)
—
—
(0.03
)
—
Impact of the fair value mark-up of acquired RSC fleet and inventory
(4)
0.09
—
0.24
—
Pre-close RSC merger related interest expense (5)
—
—
0.19
—
Impact on interest expense related to fair value adjustment of
acquired RSC indebtedness (6)
(0.01
)
—
(0.03
)
—
Restructuring charge (7)
0.03
0.12
0.64
0.16
Asset impairment charge (8)
0.01
0.03
0.10
0.04
Loss on extinguishment of debt securities, including subordinated
convertible debentures, and ABL amendment (9)
0.41
0.03
0.45
0.04
Gain on sale of software subsidiary (10)
0.01
—
(0.05
)
—
Earnings per share from continuing operations- adjusted
$
1.27
$
0.82
$
3.76
$
1.87
(1)
Reflects transaction costs associated with the RSC acquisition.
(2)
Reflects the amortization of the intangible assets acquired in the
RSC acquisition.
(3)
Reflects the impact of extending the useful lives of equipment
acquired in the RSC acquisition, net of the impact of additional
depreciation associated with the fair value mark-up of such
equipment.
(4)
Reflects additional costs recorded in cost of rental equipment
sales, cost of equipment rentals, excluding depreciation, and cost
of contractor supplies sales associated with the fair value mark-up
of rental equipment and inventory acquired in the RSC acquisition.
The costs relate to equipment and inventory acquired in the RSC
acquisition and subsequently sold.
(5)
In March 2012, we issued $2,825 million of debt in connection with
the RSC acquisition. The pre-close RSC merger related interest
expense reflects the interest expense recorded on this debt prior to
the acquisition date.
(6)
Reflects a reduction of interest expense associated with the fair
value mark-up of debt acquired in the RSC acquisition.
(7)
Reflects severance costs and branch closure charges associated with
the RSC acquisition and our closed restructuring program.
(8)
Primarily reflects write-offs of leasehold improvements and other
fixed assets in connection with the RSC acquisition and our closed
restructuring program.
(9)
Reflects losses on the extinguishment of certain debt securities,
including subordinated convertible debentures, and write-offs of
debt issuance costs associated with the October 2011 amendment of
our ABL facility.
(10)
Reflects a gain recognized upon the sale of a former subsidiary that
developed and marketed software.
UNITED RENTALS, INC. EBITDA AND ADJUSTED EBITDA GAAP
RECONCILIATION (In millions)
EBITDA represents the sum of net income, income from discontinued
operation, net of taxes, (benefit) provision for income taxes, interest
expense, net, interest expense-subordinated convertible debentures, net,
depreciation of rental equipment, and non-rental depreciation and
amortization. Adjusted EBITDA represents EBITDA plus the sum of the RSC
merger related costs, restructuring charge, stock compensation expense,
net, the impact of the fair value mark-up of acquired RSC fleet and
inventory and the gain on sale of software subsidiary. These items are
excluded from adjusted EBITDA internally when evaluating our operating
performance and allow investors to make a more meaningful comparison
between our core business operating results over different periods of
time, as well as with those of other similar companies. Management
believes that EBITDA and adjusted EBITDA, when viewed with the Company’s
results under GAAP and the accompanying reconciliation, provide useful
information about operating performance and period-over-period growth,
and provide additional information that is useful for evaluating the
operating performance of our core business without regard to potential
distortions. Additionally, management believes that EBITDA and adjusted
EBITDA permit investors to gain an understanding of the factors and
trends affecting our ongoing cash earnings, from which capital
investments are made and debt is serviced. However, EBITDA and adjusted
EBITDA are not measures of financial performance or liquidity under GAAP
and, accordingly, should not be considered as alternatives to net income
or cash flow from operating activities as indicators of operating
performance or liquidity. The table below provides a reconciliation
between net income and EBITDA and adjusted EBITDA.
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Net income
$
41
$
29
$
75
$
101
Income from discontinued operation, net of taxes
—
(1
)
—
—
(Benefit) provision for income taxes
(2
)
28
13
63
Interest expense, net
196
58
512
228
Interest expense – subordinated convertible debentures, net
1
2
4
7
Depreciation of rental equipment
208
111
699
423
Non-rental depreciation and amortization
64
18
198
57
EBITDA (A)
$
508
$
245
$
1,501
$
879
RSC merger related costs (1)
13
19
111
19
Restructuring charge (2)
6
14
99
19
Stock compensation expense, net (3)
9
3
32
12
Impact of the fair value mark-up of acquired RSC fleet and inventory
(4)
15
—
37
—
Gain on sale of software subsidiary (5)
2
—
(8
)
—
Adjusted EBITDA (B)
$
553
$
281
$
1,772
$
929
A)
Our EBITDA margin was 40.7% and 32.8% for the three months ended
December 31, 2012 and 2011, respectively, and 36.5% and 33.7% for
the year ended December 31, 2012 and 2011, respectively.
B)
Our adjusted EBITDA margin was 44.3% and 37.7% for the three months
ended December 31, 2012 and 2011, respectively, and 43.0% and 35.6%
for the year ended December 31, 2012 and 2011, respectively.
(1)
Reflects transaction costs associated with the RSC acquisition.
(2)
Reflects severance costs and branch closure charges associated with
the RSC acquisition and our closed restructuring program.
(3)
Represents non-cash, share-based payments associated with the
granting of equity instruments.
(4)
Reflects additional costs recorded in cost of rental equipment
sales, cost of equipment rentals, excluding depreciation, and cost
of contractor supplies sales associated with the fair value mark-up
of rental equipment and inventory acquired in the RSC acquisition.
The costs relate to equipment and inventory acquired in the RSC
acquisition and subsequently sold.
(5)
Reflects a gain recognized upon the sale of a former subsidiary that
developed and marketed software.
UNITED RENTALS, INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO
EBITDA AND ADJUSTED EBITDA
(In millions)
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Net cash provided by operating activities
$
226
$
159
$
721
$
612
Adjustments for items included in net cash provided by operating
activities but excluded from the calculation of EBITDA:
Income from discontinued operation, net of taxes
—
(1
)
—
—
Amortization of deferred financing costs and original issue discounts
(6
)
(5
)
(23
)
(22
)
Gain on sales of rental equipment
42
24
125
66
Gain on sales of non-rental equipment
—
—
2
2
Gain on sale of software subsidiary (5)
(2
)
—
8
—
RSC merger related costs (1)
(13
)
(19
)
(111
)
(19
)
Restructuring charge (2)
(6
)
(14
)
(99
)
(19
)
Stock compensation expense, net (3)
(9
)
(3
)
(32
)
(12
)
Loss on extinguishment of debt securities and ABL amendment (6)
(72
)
(3
)
(72
)
(3
)
Loss on retirement of subordinated convertible debentures
—
(1
)
—
(2
)
Changes in assets and liabilities
187
42
571
49
Cash paid for interest, including subordinated convertible debentures
152
62
371
203
Cash paid for income taxes, net
9
4
40
24
EBITDA
$
508
$
245
$
1,501
$
879
Add back:
RSC merger related costs (1)
13
19
111
19
Restructuring charge (2)
6
14
99
19
Stock compensation expense, net (3)
9
3
32
12
Impact of the fair value mark-up of acquired RSC fleet and inventory
(4)
15
—
37
—
Gain on sale of software subsidiary (5)
2
—
(8
)
—
Adjusted EBITDA
$
553
$
281
$
1,772
$
929
(1)
Reflects transaction costs associated with the acquisition of RSC.
(2)
Reflects severance costs and branch closure charges associated with
the RSC acquisition and our closed restructuring program.
(3)
Represents non-cash, share-based payments associated with the
granting of equity instruments.
(4)
Reflects additional costs recorded in cost of rental equipment
sales, cost of equipment rentals, excluding depreciation, and cost
of contractor supplies sales associated with the fair value mark-up
of rental equipment and inventory acquired in the RSC acquisition.
The costs relate to equipment and inventory acquired in the RSC
acquisition and subsequently sold.
(5)
Reflects a gain recognized upon the sale of a former subsidiary that
developed and marketed software.
(6)
Reflects losses on the extinguishment of certain debt securities and
write-offs of debt issuance costs associated with the October 2011
amendment of our ABL facility.
UNITED RENTALS, INC. FREE CASH FLOW GAAP RECONCILIATION (In
millions)
We define free cash flow (usage) as (i) net cash provided by operating
activities 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, net. Management
believes that 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 (usage) is not
a measure of financial performance or liquidity under GAAP. Accordingly,
free cash flow (usage) 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 net cash provided by operating activities and
free cash flow (usage).
Three Months Ended
Year Ended
December 31,
December 31,
2012
2011
2012
2011
Net cash provided by operating activities
$
226
$
159
$
721
$
612
Purchases of rental equipment
(163
)
(143
)
(1,272
)
(774
)
Purchases of non-rental equipment
(21
)
(12
)
(97
)
(36
)
Proceeds from sales of rental equipment
141
93
399
208
Proceeds from sales of non-rental equipment
5
2
31
13
Excess tax benefits from share-based payment arrangements, net
$
(1
)
$
—
$
(5
)
$
—
Free cash flow (usage)
$
187
$
99
$
(223
)
$
23
1 On April 30, 2012, the company completed the acquisition of
RSC Holdings, Inc. (“RSC”). The results of RSC’s operations have been
combined with the Company’s results since that date.
2 Adjusted EPS is a non-GAAP measure that excludes the impact
of the following special items: (i) RSC merger related costs; (ii)
restructuring charge; (iii) asset impairment charge; (iv) pre-close RSC
merger related interest expense; (v) impact on interest expense related
to fair value adjustment of acquired RSC indebtedness; (vi) impact on
depreciation related to acquired RSC fleet and property and equipment;
(vii) impact of the fair value mark-up of acquired RSC fleet and
inventory; (viii) RSC merger related intangible asset amortization; (ix)
the gain on sale of our software subsidiary; and (x) the loss on
extinguishment of debt securities, including subordinated convertible
debentures, and ABL amendment. See table below for amounts.
3 Adjusted EBITDA is a non-GAAP measure that excludes the
impact of the following special items: (i) RSC merger related costs;
(ii) restructuring charge; (iii) stock compensation expense, net; (iv)
the impact of the fair value mark-up of acquired RSC fleet and
inventory; and (v) the gain on sale of our software subsidiary. See
tables below for amounts.
4 Rental rate, time utilization and OEC calculations are
based on the American Rental Association metrics criteria; comparisons
to 2011 are based on a recast of these metrics on the same basis.
5 The favorable impact of volume increases and rental rate
increases were partially offset by the impact of rental mix in both the
fourth quarter and the full year. Consistent with the company’s
strategic focus on larger accounts, there has been a mix shift towards
monthly rentals in 2012.
6 Used equipment margins for the 2012 fourth quarter and full
year exclude the impact of the fair value mark-up of acquired RSC fleet
that was sold.
7 As-reported basis includes the results of RSC’s operations
only from April 30, 2012 forward.
United Rentals, Inc. Fred Bratman, 203-618-7318 Cell:
917-847-4507 fbratman@ur.com
Source: United Rentals, Inc.
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About
United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It offers approximately 3,000 classes of equipment for rent to customers comprising construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. The company
Press Release $URI United Rentals, Inc.
GREENWICH, Conn.--(BUSINESS WIRE)-- United Rentals, Inc. (NYSE: URI) today announced financial results for the fourth quarter and full year 20121.
For the fourth quarter of 2012, total revenue was $1.249 billion and rental revenue was $1.036 billion. On a GAAP basis, the company reported fourth quarter net income of $41 million, or earnings of $0.40 per diluted share. Adjusted EPS2 for the quarter was $1.27 per diluted share.
For the full year 2012, total revenue was $4.117 billion and rental revenue was $3.455 billion. On a GAAP basis, full year net income was $75 million, or earnings of $0.79 per diluted share. Adjusted EPS for the full year was $3.76 per diluted share.
For the fourth quarter of 2012, adjusted EBITDA3 was $553 million and adjusted EBITDA margin was 44.3%. For the full year 2012, adjusted EBITDA was $1.772 billion, and adjusted EBITDA margin was 43.0%.
2012 Highlights4
On a pro-forma basis (that is, assuming the combination of United Rentals results and RSC results for all periods in 2011 and 2012):
2013 Outlook
The company provided the following outlook for full year 2013:
CEO Comments
Michael Kneeland, chief executive officer of United Rentals, said, "Our strong performance in 2012 continued in the fourth quarter as we delivered solid growth, robust margins and exceptional flow-through from our revenue streams. The integration with RSC has been very successful, and while it's not complete, we can now shift our focus to driving improvements across the entire business. Despite the intensity of integration, we’ve paid consistent attention to the fundamentals of our business and made good on our promise to drive significant returns."
Kneeland continued, "There's a lot to be excited about from the standpoint of value creation as we look at 2013. Industrial and other non-construction sectors have balanced our mix and now account for about 50% of our business. We also expect to benefit further from the secular shift to rental. And non-residential construction is predicted to show reasonable improvement, with larger upswings in 2014 and 2015. We see opportunities to continue to grow our key accounts, reap the synergies of the merger and expand our fleet, while further lowering our debt leverage."
Free Cash Flow and Fleet Size
For the full year 2012, on an as-reported basis7, free cash usage was $223 million after (i) total rental and non-rental capital expenditures of $1.369 billion and (ii) aggregate cash payments of $150 million related to merger and restructuring activities.
The size of the rental fleet on an as reported basis was $7.23 billion of original equipment cost at December 31, 2012, compared with $4.05 billion at December 31, 2011. The age of the rental fleet was 47.2 months on an OEC-weighted basis at December 31, 2012, compared with 50.3 months at December 31, 2011.
Return on Invested Capital (ROIC)
Return on invested capital, on an as-reported basis, was 7.4% for the 12 months ended December 31, 2012, an increase of 50 basis points from the same period last year. The company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by the averages of stockholders’ equity, debt and deferred taxes, net of average cash and excludes the impact of merger and restructuring related costs. To mitigate the volatility related to fluctuations in the company’s tax rate from period to period, the federal statutory tax rate of 35% is used to calculate after-tax operating income.
Conference Call
United Rentals will hold a conference call tomorrow, Thursday, January 24, 2013, at 11 a.m. Eastern Time. The conference call will be available live by audio webcast at unitedrentals.com, where it will be archived until the next earnings call, and by calling 703-639-1123.
Non-GAAP Measures
Free cash (usage) flow, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, and adjusted earnings per share (adjusted EPS) are non-GAAP financial measures as defined under the rules of the SEC. Free cash (usage) flow represents net cash provided by operating activities, less purchases of rental and non-rental equipment plus proceeds from sales of rental and non-rental equipment and excess tax benefits from share-based payment arrangements, net. EBITDA represents the sum of net income, income from discontinued operations, net of taxes, (benefit) provision for income taxes, interest expense, net, interest expense-subordinated convertible debentures, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of RSC merger related costs, restructuring charge, stock compensation expense, net, the impact of the fair value mark-up of acquired RSC fleet and inventory and the gain on sale of our software subsidiary. Adjusted EPS represents EPS plus the sum of the RSC merger related costs, restructuring charge, asset impairment charge, pre-close RSC merger related interest expense, the impact on interest expense related to the fair value adjustment of acquired RSC indebtedness, the impact on depreciation related to acquired RSC fleet and property and equipment, the impact of the fair value mark-up of acquired RSC fleet and inventory, RSC merger related intangible asset amortization, the gain on sale of our software subsidiary and the loss on extinguishment of debt securities, including subordinated convertible debentures, and ABL amendment. The company believes that: (i) free cash (usage) flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements; (ii) EBITDA and adjusted EBITDA provide useful information about operating performance and period-over-period growth; and (iii) adjusted EPS provides useful information concerning future profitability. However, none of these measures should be considered as alternatives to net income, cash flows from operating activities or earnings per share under GAAP as indicators of operating performance or liquidity. Information reconciling forward-looking free cash flow and Adjusted EBITDA to GAAP financial measures is unavailable to the company without unreasonable effort.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in the world, with an integrated network of 836 rental locations in 49 states and 10 Canadian provinces. The company’s approximately 11,300 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent approximately 3,300 classes of equipment with a total original cost of $7.23 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
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. These statements can generally be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,” “plan,” “project,” “forecast,” “intend” or “anticipate,” or the negative thereof or comparable terminology, or by discussions of vision, strategy or outlook. These statements are based on current plans, estimates and projections, and, therefore, you should not place undue reliance on them. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Factors that could cause actual results to differ materially from those projected include, but are not limited to, the following: (1) a slowdown in the recovery of North American construction and industrial activities, which decreased during the economic downturn and significantly affected our revenues and profitability, may reduce demand for equipment and prices that we can charge; (2) a decrease in levels of infrastructure spending, including lower than expected government funding for such projects; (3) our highly leveraged capital structure, which requires us to use a substantial portion of our cash flow for debt service and can constrain our flexibility in responding to unanticipated or adverse business conditions; (4) restrictive covenants in our debt agreements, which could limit our financial and operational flexibility; (5) noncompliance with covenants in our debt agreements, which could result in termination of our credit facilities and acceleration of outstanding borrowings; (6) inability to access the capital that our business may require; (7) inability to manage credit risk adequately or to collect on contracts with customers; (8) incurrence of impairment charges; (9) the outcome or other potential consequences of litigation and other claims and regulatory matters relating to our business, including certain claims that our insurance may not cover; (10) an increase in our loss reserves to address business operations or other claims and any claims that exceed our established levels of reserves; (11) incurrence of additional costs and expenses (including indemnification obligations) in connection with litigation, regulatory or investigatory matters; (12) increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual value of our equipment; (13) inability to sell our new or used fleet in the amounts, or at the prices, we expect; (14) challenges associated with past or future acquisitions, such as undiscovered liabilities, costs, integration issues and/or the inability to achieve the cost and revenue synergies expected; (15) management turnover and inability to attract and retain key personnel; (16) our rates and time utilization being less than anticipated; (17) our costs being more than anticipated, the inability to realize expected savings in the amounts or time frames planned and the inability to obtain key equipment and supplies; (18) disruptions in our information technology systems; (19) competition from existing and new competitors; (20) labor difficulties and labor-based legislation affecting labor relations and operations generally; and (21) the costs of complying with environmental and safety regulations. For a more complete description of these and other possible risks and uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2012, as well as to our subsequent filings with the SEC. The 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.
ADJUSTED EARNINGS PER SHARE GAAP RECONCILIATION
We define “Earnings per share from continuing operations – adjusted” as the sum of earnings per share from continuing operations – GAAP, as reported plus the impact of the following special items: RSC merger related costs, RSC merger related intangible asset amortization, impact on depreciation related to acquired RSC fleet and property and equipment, impact of the fair value mark-up of acquired RSC fleet and inventory, pre-close RSC merger related interest expense, impact on interest expense related to fair value adjustment of acquired RSC indebtedness, restructuring charge, asset impairment charge, loss on extinguishment of debt securities, including subordinated convertible debentures, and ABL amendment, and gain on sale of software subsidiary. Management believes adjusted earnings per share from continuing operations provides useful information concerning future profitability. However, adjusted earnings per share from continuing operations is not a measure of financial performance under GAAP. Accordingly, adjusted earnings per share from continuing operations should not be considered an alternative to GAAP earnings per share from continuing operations. The table below provides a reconciliation between earnings per share from continuing operations – GAAP, as reported, and earnings per share from continuing operations – adjusted.
UNITED RENTALS, INC.
EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATION
(In millions)
EBITDA represents the sum of net income, income from discontinued operation, net of taxes, (benefit) provision for income taxes, interest expense, net, interest expense-subordinated convertible debentures, net, depreciation of rental equipment, and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the RSC merger related costs, restructuring charge, stock compensation expense, net, the impact of the fair value mark-up of acquired RSC fleet and inventory and the gain on sale of software subsidiary. These items are excluded from adjusted EBITDA internally when evaluating our operating performance and allow investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies. Management believes that EBITDA and adjusted EBITDA, when viewed with the Company’s results under GAAP and the accompanying reconciliation, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that EBITDA and adjusted EBITDA permit investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced. However, EBITDA and adjusted EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. The table below provides a reconciliation between net income and EBITDA and adjusted EBITDA.
UNITED RENTALS, INC.
FREE CASH FLOW GAAP RECONCILIATION
(In millions)
We define free cash flow (usage) as (i) net cash provided by operating activities 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, net. Management believes that 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 (usage) is not a measure of financial performance or liquidity under GAAP. Accordingly, free cash flow (usage) 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 net cash provided by operating activities and free cash flow (usage).
1 On April 30, 2012, the company completed the acquisition of RSC Holdings, Inc. (“RSC”). The results of RSC’s operations have been combined with the Company’s results since that date.
2 Adjusted EPS is a non-GAAP measure that excludes the impact of the following special items: (i) RSC merger related costs; (ii) restructuring charge; (iii) asset impairment charge; (iv) pre-close RSC merger related interest expense; (v) impact on interest expense related to fair value adjustment of acquired RSC indebtedness; (vi) impact on depreciation related to acquired RSC fleet and property and equipment; (vii) impact of the fair value mark-up of acquired RSC fleet and inventory; (viii) RSC merger related intangible asset amortization; (ix) the gain on sale of our software subsidiary; and (x) the loss on extinguishment of debt securities, including subordinated convertible debentures, and ABL amendment. See table below for amounts.
3 Adjusted EBITDA is a non-GAAP measure that excludes the impact of the following special items: (i) RSC merger related costs; (ii) restructuring charge; (iii) stock compensation expense, net; (iv) the impact of the fair value mark-up of acquired RSC fleet and inventory; and (v) the gain on sale of our software subsidiary. See tables below for amounts.
4 Rental rate, time utilization and OEC calculations are based on the American Rental Association metrics criteria; comparisons to 2011 are based on a recast of these metrics on the same basis.
5 The favorable impact of volume increases and rental rate increases were partially offset by the impact of rental mix in both the fourth quarter and the full year. Consistent with the company’s strategic focus on larger accounts, there has been a mix shift towards monthly rentals in 2012.
6 Used equipment margins for the 2012 fourth quarter and full year exclude the impact of the fair value mark-up of acquired RSC fleet that was sold.
7 As-reported basis includes the results of RSC’s operations only from April 30, 2012 forward.
United Rentals, Inc.
Fred Bratman, 203-618-7318
Cell: 917-847-4507
fbratman@ur.com
Source: United Rentals, Inc.