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United Operating Earnings Double

GREENWICH, Conn. — United Rentals said first quarter earnings before unusual items doubled as it cut costs, but the largest North American equipment rental company posted a net loss after an accounting charge.

The company reduced selling, general and administrative expenses by $10.4 million in the quarter, the third consecutive decline. It has cut about 1,000 people, or 6.6 percent, from its workforce in the past year.

The company reported earnings of $7.6 million, or 8 cents a share, before the accounting charge, compared with $3.4 million, or 4 cents, a year earlier. Comparable year-ago earnings would have been $12.7 million, or 14 cents a share, without amortization of goodwill.

In the most recent quarter, including an accounting-related charge, United posted a net loss of $280.8 million or $2.88 per share.

Total revenues dropped to $599 million from $619 million from renting equipment to construction and industrial customers, manufacturers, municipalities and homeowners. Rental revenue was also off slightly, from $461.4 million in last year's first quarter to $446.3 million this year.

EBITDA for the quarter was $159 million. Equipment utilization for the quarter was $49.6 percent, compared to $53.3 in first quarter 2001, but sharing of equipment among branches accounted for 10.2 percent, up from 9.8 percent for the same period last year. Rental rates were down 3.5 percent compared to the same period last year, United said.

Results were in line with analysts' estimates, which ranged from 8 cents to 9 cents, according to Thomson Financial/First Call, which tracks this data.

“We don't see any uptick in our customers' business other than normal seasonal developments,” said United CEO Brad Jacobs. “That's not surprising as nonresidential construction lags the rest of the economy by anywhere from six to 12 months.”

Jacobs said he was comfortable with analysts' earnings estimates of $1.90 to $1.95 a share in 2002 before one-time items, mostly from new accounting standards for goodwill. He said that should set the stage for better 2003 results, as the business is highly leveraged.

“We continue to forecast an improved second half as the anticipated economic recovery comes into place, and a return to strong revenue growth in 2003 once the full impact of the economic recovery is felt,” Jacobs added. “About three-quarters of our cost of rentals is either fixed or semi-variable,” said Jacobs. “That gives us significant operating leverage, which works against us in a downturn but works for us in an upturn.”

United Rentals is No. 1 on the RER 100.

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