United Revenues Rise While Net Income Drops

Sept. 1, 2001
GREENWICH, Conn. With net income falling as a result of charges, and total revenues rising, United Rentals met the expectations of financial analysts

GREENWICH, Conn. — With net income falling as a result of charges, and total revenues rising, United Rentals met the expectations of financial analysts as it announced its second quarter financial results last month. Total revenue rose 5.2 percent year over year, from $729.9 million in last year's second quarter to $768 million this year, an increase based primarily on a 7.9 percent jump in same-store rental revenue. Rental revenue rose to $582.3 million this year from $511.5 in Q2'00, a 7.2 percent jump.

Sharing equipment among branches in the field accounted for 10.7 percent of rental revenue, up from 10.3 percent in last year's second quarter.

United incurred two second quarter pre-tax charges: a non-cash, $25.9 million, 18 cents per share charge related to its refinancing of its senior debt, and a $28.9 million, 20 cents per share charge, related to restructuring activities in the second quarter. As a result, net income dropped to $13.6 million, 14 cents a share, down 71 percent from $47.2 million, 51 cents a share, in the second quarter of 2000.

United's restructuring efforts will result in the closing of 31 under-performing stores, 18 of which have already been closed, and five administrative offices. The company will lay off 489 employees, which amounts to 3 percent of its total work force.

“Utilization was up 110 basis points, even though rental rates were down 90 basis points and we're operating in a very challenging and uncertain environment,” CEO Brad Jacobs said. “That's a testament to the operating skills of our field managers. All the positive results in the second quarter confirmed the basic underlying trend of more and more customers deciding to rent more and more of their equipment needs instead of going out and purchasing more equipment.”

Chief operations officer Wayland Hicks said demand for equipment during the quarter remained consistent with United's expectations. “During the quarter, we saw strong demand in the Northeast, Southeast regions and in our aerial business,” Hicks said. “We saw softness in demand in the Midwest and Rocky Mountain regions. The order book in our highway technology business is up from $197 million at the end of the second quarter last year, to $234 million this year, so TEA-21 funding is beginning to be let at an increased pace in most of the states we're operating in.”

Hicks added that United added 133 more national accounts customers, bringing the company's total to 1,541. “During the quarter, we began shifting our emphasis from acquiring new customers to getting more revenue out of existing accounts,” Hicks added. “Revenues from national account customers continued to track close to our expectations.”

United is continuing to conserve capital by decreasing its capital expenditures. Hicks said the company spent $204 million on equipment in the second quarter, and was sticking to its capital expenditure budget of about $350 million for 2001.

Greenwich, Conn.-based United Rentals is No. 1 on the RER 100 and has about 740 locations in 47 states, seven Canadian provinces and Mexico.