United Rentals’ Revenues, Profits Decrease in Second Quarter

United Rentals last week announced second-quarter 2008 income from continuing operations of $47 million, compared with $67 million for the second quarter of 2007, a 44.8-percent drop. The decrease is primarily the result of lower gross profit in a softening rental environment as well as a $14 million after-tax provision relating to the Securities and Exchange Commission inquiry. The loss was partially offset by United’s cost-cutting initiatives, including reductions in SG&A expense of $21 million and $39 million for the first quarter and first half of 2008, respectively.

Income from continuing operations for the first six months of 2008 was $75 million, compared with $99 million in the first half of 2008, a 24.2-percent plunge.

Rental revenue for the second quarter was $621 million, a 5.8-percent decrease compared with the second quarter of 2007. Total revenue plunged 13.6 percent, from $962 million in the second quarter of 2007 to $831 million for the same period in 2008. Rental revenue for first six months of 2008 was $1.19 billion, compared to $1.23 billion for the first half of 2007, a 2.8-percent slide. Total revenue for the six month period was $1.6 billion, a 10.9-percent decrease from the first half of 2007’s total of $1.8 billion.

EBITDA was $252 million for the second quarter, and $476 for the first half of 2008, compared with EBITDA of $295 million and $508 million for the same periods of 2007, decreases of 14.5 percent for the second quarter and 6.3 percent for the six-month period.

“Our second-quarter performance reflects the impact of expected market weakness on our core rental business, counteracted in part by the proactive implementation of our profit improvement strategy” said United Rentals CEO Michael Kneeland. “Although our rental revenue declined, we drove our EBITDA margin higher through rigorous reductions of workforce and facility costs. By the time the construction economy softened in the quarter, we had already adjusted our fleet plan to slow rental capex spending by $80 million.”

“With the share repurchases complete, we expect the company’s 2009 fully diluted share count to decrease by approximately 39 percent to 70 million shares. As we stated in June, these repurchases have given us the opportunity to achieve significantly more EPS accretion, and to capture it more quickly, than through other means.”

United Rentals recently recalculated its full-year 2008 outlook for pro-forma earnings per share to a range of $3.15 to $3.25, anticipating total revenue of $3.3 billion to $3.4 billion and pro-forma EBITDA of $1.15 billion to $1.17 billion. The company expects $350 million to $400 million of free cash flow after total capital expenditures of about $715 million.

“Our full-year outlook continues to balance our assessment of what we believe will be an increasingly challenging environment against the dramatic actions we have already taken,” added Kneeland. “Our strategy is now well-established, and we will continue to use the many operating levers at our disposal, such as capex and labor adjustments, to optimize our performance and generate free cash flow.”

Based in Greenwich, Conn., United Rentals is No. 1 on the RER 100.

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