UNITED RENTALS 
By United Rentals, Inc. (NYSE: URI) today announced record earnings per share from continuing operations for the fourth quarter and full year 2006. For the fourth quarter, earnings per share of $0.71 increased 34% compared with $0.53 for the fourth quarter 2005. For the full year, earnings per share of $2.28 increased 18% compared with $1.93 for the full year 2005.
Fourth quarter income from continuing operations of $77 million increased 40% from $55 million for the fourth quarter 2005. Full year income from continuing operations of $249 million increased 23% from $202 million for the full year 2005.
Total revenue from continuing operations was $939 million for the fourth quarter 2006, an increase of 5.5% from the fourth quarter 2005, and $3.64 billion for the full year, an increase of 10.7% from the full year 2005.
On February 15, 2007, the company completed the previously-announced sale of its traffic control business, which is reflected as a discontinued operation.
Net income for the fourth quarter 2006, including an after-tax loss on the sale of the traffic control business of $24 million, or $0.22 per share, was $53 million, or $0.49 per share, compared with $49 million, or $0.47 per share, for the fourth quarter 2005, including an after-tax loss from discontinued operations of $6 million, or $0.06 per share. Net income for the full year 2006, including the $24 million after-tax loss on the sale of the traffic control business, was $224 million, or $2.06 per share, compared with $187 million, or $1.80 per share, for the full year 2005, including an after-tax loss from discontinued operations of $15 million, or $0.13 per share.
Free cash flow for the fourth quarter 2006 was $230 million, an increase of $19 million from the $211 million achieved for the same period last year, after total rental and non-rental capital expenditures of $114 million compared with $87 million for the fourth quarter 2005. After total 2006 rental and non-rental capital expenditures of $965 million compared with $823 million for the full year 2005, free cash flow for the full year 2006 was $249 million compared with free cash flow of $128 million for the full year 2005. The full year 2006 free cash flow results include the buy-out of $59 million of equipment operating leases. Free cash flow is a non-GAAP measure.
The size of the rental fleet, measured by the original equipment cost, was $3.9 billion, and the average age was 39 months at December 31, 2006, compared with $3.8 billion and 40 months at year-end 2005.
Fourth Quarter and Full Year 2006 Financial Highlights from Continuing Operations
- Return on invested capital at December 31, 2006, improved 1.8 percentage points to a record 14.7%.
- Total debt plus subordinated convertible debentures of $2.70 billion at December 31, 2006, decreased $450 million from December 31, 2005.
- Rental rates increased 4.2% for the fourth quarter and 5.1% for the full year.
- Operating margin of 18.5% for the fourth quarter and 17.2% for the full year improved 2.3 and 1.3 percentage points, respectively.
- Same-store rental revenue increased 0.1% for the fourth quarter and 6.2% for the full year.
- Dollar utilization decreased 0.2 percentage points to 63.6% for the fourth quarter and increased 1.9 percentage points to 61.9% for the full year.
- SG&A expenses improved 1.1 percentage points to 17.0% of revenues for the fourth quarter and were flat at 16.8% of revenues for the full year.
- Contractor supplies sales increased 21% for the fourth quarter to $97 million and 28% for the full year to $385 million.
- EBITDA of $291 million for the fourth quarter and $1.08 billion for the full year improved $38 million and $134 million, respectively. EBITDA is a non-GAAP measure.
Full Year 2007 Outlook
The company announced its full year 2007 outlook for earnings per share of $2.65 to $2.75. The company also expects to generate $3.85 billion in total revenue in 2007, $1.2 billion of EBITDA and $150 to $200 million of free cash flow after total capital expenditures of $900 to $950 million.
CEO Comments and Outlook
Wayland Hicks, chief executive officer for United Rentals, said, "Our business performed extremely well in 2006, with record earnings and strong free cash flow of $249 million. We also improved our return on invested capital by 1.8 percentage points to 14.7% and reduced our total debt plus convertible debentures by $450 million. Our fourth quarter earnings per share were particularly strong at $0.71, ahead of expectations.?
Hicks continued, "The recent sale of our traffic control business allows us to redeploy capital to our core business. In 2007, we expect to grow our earnings substantially, generate strong free cash flow and continue to improve our ROIC.?
Return on Invested Capital (ROIC)
Return on invested capital from continuing operations was 14.7% for the twelve months ended December 31, 2006, an improvement of 1.8 percentage points from the same period a year ago. 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. The company reports ROIC to provide information on the company's efficiency and effectiveness in deploying its capital and improving shareholder value.
Remediation of Material Weakness
As part of its SOX 404 processes, the company has confirmed the remediation of its sole remaining material weakness, which related to its financial statement close process.
Additional Information on 2006 Results and Status of SEC Inquiry
For additional information concerning the company's 2006 results, including segment performance for its general rentals and trench safety, pump and power businesses, as well as the status of the previously announced SEC inquiry of the company and related matters, please see the company's 2006 Form 10-K filed today with the SEC.
Conference Call
United Rentals will hold a conference call tomorrow, Tuesday, February 27th, at 9:30 a.m. Eastern Time. The conference will be available live by audio webcast at unitedrentals.com, where it will be archived.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in the world, with an integrated network of nearly 700 rental locations in 48 states, 10 Canadian provinces and Mexico. The company's 12,000 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 20,000 classes of rental equipment with a total original cost of $3.9 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.
Certain statements in this press release are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements can generally be identified by words such as "believes," "expects," "plans," "intends," "projects," "forecasts," "may," "will," "should," "on track" or "anticipates," or the negative thereof or comparable terminology, or by discussions of vision, strategy or outlook. Our businesses and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) weaker or unfavorable economic or industry conditions can reduce demand and prices for our products and services, (2) non-residential construction spending, or governmental funding for infrastructure and other construction projects, may not reach expected levels, (3) we may not have access to capital that our businesses or growth plans may require, (4) any companies we acquire could have undiscovered liabilities, may strain our management capabilities or may be difficult to integrate, (5) rates we can charge may increase less than anticipated, or costs we incur may increase more than anticipated, (6) we have significant leverage, 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, (7) we are subject to an ongoing inquiry by the SEC, and there can be no assurance as to its outcome, or any other potential consequences thereof for us, and (8) we may incur additional significant costs and expenses in connection with the SEC inquiry, our related internal reviews, the class action lawsuits and derivative actions that were filed in light of the SEC inquiry, the U.S. Attorney's office request for information, or other litigation, regulatory or investigatory matters, related to the SEC inquiry or otherwise. For a fuller description of these and other possible uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2006, as well as to our subsequent filings with the SEC. Our 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 STATEMENT OF OPERATIONS | ||||||||||||||||
| (In millions, except per share data) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | % Change | 2006 | 2005 | % Change | |||||||||||
| Revenues: | ||||||||||||||||
| Equipment rentals | $ | 656 | $ | 639 | 2.7% | $ | 2,530 | $ | 2,338 | 8.2% | ||||||
| Sales of rental equipment | 87 | 79 | 10.1% | 335 | 304 | 10.2% | ||||||||||
| New equipment sales | 60 | 56 | 7.1% | 232 | 205 | 13.2% | ||||||||||
| Contractor supplies sales | 97 | 80 | 21.3% | 385 | 301 | 27.9% | ||||||||||
| Service and other revenues | 39 | 36 | 8.3% | 158 | 140 | 12.9% | ||||||||||
| Total revenues | 939 | 890 | 5.5% | 3,640 | 3,288 | 10.7% | ||||||||||
| Cost of revenues: | ||||||||||||||||
| Cost of equipment rentals, excluding | ||||||||||||||||
| depreciation | 287 | 290 | 1,137 | 1,094 | ||||||||||||
| Depreciation of rental equipment | 104 | 100 | 408 | 386 | ||||||||||||
| Cost of rental equipment sales | 65 | 58 | 237 | 223 | ||||||||||||
| Cost of new equipment sales | 50 | 46 | 191 | 168 | ||||||||||||
| Cost of contractor supplies sales | 68 | 62 | 302 | 231 | ||||||||||||
| Cost of service and other revenue | 18 | 19 | 76 | 71 | ||||||||||||
| Total cost of revenues | 592 | 575 | 3.0% | 2,351 | 2,173 | 8.2% | ||||||||||
| Gross profit | 347 | 315 | 10.2% | 1,289 | 1,115 | 15.6% | ||||||||||
| Selling, general and administrative expenses | 160 | 161 | (0.6%) | 613 | 553 | 10.8% | ||||||||||
| Non-rental depreciation and amortization | 13 | 10 | 30.0% | 50 | 38 | 31.6% | ||||||||||
| Operating income | 174 | 144 | 20.8% | 626 | 524 | 19.5% | ||||||||||
| Interest expense, net | 51 | 50 | 208 | 181 | ||||||||||||
| Interest expense - subordinated convertible | ||||||||||||||||
| debentures | 2 | 2 | 13 | 14 | ||||||||||||
| Other (income) expense, net | - | 1 | - | (2) | ||||||||||||
| Income from continuing operations before | ||||||||||||||||
| provision for income taxes | 121 | 91 | 33.0% | 405 | 331 | 22.4% | ||||||||||
| Provision for income taxes | 44 | 36 | 156 | 129 | ||||||||||||
| Income from continuing operations | 77 | 55 | 40.0% | 249 | 202 | 23.3% | ||||||||||
| Loss from discontinued operations, | ||||||||||||||||
| net of income taxes | (24) | (6) | (25) | (15) | ||||||||||||
| Net income | $ | 53 | $ | 49 | 8.2% | $ | 224 | $ | 187 | 19.8% | ||||||
| Diluted earnings per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.71 | $ | 0.53 | 34.0% | $ | 2.28 | $ | 1.93 | 18.1% | ||||||
| Loss from discontinued operations | (0.22) | (0.06) | (0.22) | (0.13) | ||||||||||||
| Net income | $ | 0.49 | $ | 0.47 | 4.3% | $ | 2.06 | $ | 1.80 | 14.4% | ||||||
