United Rentals Announces Second Quarter and First Half 2008 Results

Business Wire, July 30, 2008

Company Calls $125 Million of New 14% HoldCo Notes

The company has recently given notice for the repayment of $125 million of the principal amount of its new 14% HoldCo notes. The company expects to retire this amount by the end of the 2008 third quarter.

CEO Comments

Michael Kneeland, chief executive officer of United Rentals, said, "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. 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% 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."

Mr. Kneeland continued, "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. 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."

Free Cash Flow and Fleet Size

For the first half 2008, free cash flow was $117 million after total rental and non-rental capital expenditures of $469 million, compared with free cash usage of $152 million after total rental and non-rental capital expenditures of $657 million for the same period last year. The year-over-year improvement in free cash flow was largely the result of a $188 million reduction in capital expenditures, as well as improved working capital generation in 2008.

The size of the rental fleet, as measured by the original equipment cost, was $4.3 billion and the age of the rental fleet was 38 months at June 30, 2008, compared with $4.2 billion and 38 months at year-end 2007, and $4.2 billion and 37 months at June 30, 2007. The modest increase in OEC versus 2007 year-end reflects the impact of purchasing new equipment at current prices while selling older fleet. The number of units in the fleet is essentially flat as compared to year-end 2007.

Return on Invested Capital (ROIC)

Return on invested capital was 12.9% for the twelve months ended June 30, 2008, a decrease of 1.1 percentage points from 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.

Additional Information on 2Q 2008 Results, Share Repurchases and Status of SEC Inquiry

For additional information concerning the company's second quarter 2008 results, including segment performance for its general rentals and trench safety, pump and power businesses, the share repurchases as well as the status of the previously announced SEC inquiry of the company and related matters, please see the company's second quarter 2008 Form 10-Q filed today with the SEC.