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United Rentals, Inc. Q1 2010 Earnings Call Transcript

United Rentals, Inc. Q1 2010 Earnings Call Transcript

United Rentals, Inc. (URI)

Q1 2010 Earnings Call

April 22, 2010 11:00 AM ET


Michael Kneeland – Chief Executive Officer

William Plummer – Chief Financial Officer


Henry Kirn – UBS

Philip Volpicelli - Cantor Fitzgerald

Unidentified Analyst - Barclays Capital

Seth Weber - RBC Capital

Scott Schneeberger – Oppenheimer

David Wells - Thompson Research


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Good morning. And welcome to the United Rentals First Quarter 2010 Investor Conference Call. Please the advised that this call is being recorded.

Compare to:
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Before we begin, please note that the company

s press release, comments made on today

s call and responses to your questions contain forward-looking statements. The company

s business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control and consequently actual results may differ materially from those projected. A summary of these uncertainties is included in the Safe Harbor statement contained in the release.

For a more complete description of these and other possible risks, please refer to the company

s annual report on Form 10-K for the year ended December 31, 2009, as well as subsequent filings with the SEC. You can access these filings on the company

s website at

Please note that United Rentals has no obligation and makes no commitment to update or public release any revisions of forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. You should also note that today

s call will include references to free cash flow, adjusted EPS, EBITDA and adjusted EBITDA, each of which is a non-GAAP term.

Speaking today for United Rentals is Michael Kneeland, Chief Executive Officer; and William Plummer, Chief Financial Officer.

I will now turn the call over to Mr. Kneeland. Mr. Kneeland, you may begin.

Michael Kneeland

Thanks, operator, and good morning, everyone and thank you for joining us on today

s call. With me is Bill Plummer, our Chief Financial Officer and other members of our senior management team. This morning I went to spend some time on the external environment, also to share with you where we think we

re in the cycle and then update you on the actions that we

re taking for both the short-term and long-term in order to move the needle towards profitable growth.

Before I get to that, first the quarter is always -- the first quarter is always the weakest period due to seasonality and this period is no different, it

s been pushed down even further by the weather and also the economy.

However, we

re starting to see some positive indicators, the turn in the industry, as far as our cycle is concerned was always not a question of if, it was more a question of when. And from the first days of the downturn everybody involved here at United Rentals from the senior management team all the way down to our employees in our front lines have been working hard to ensure that we

re in the best position to benefit in the upturn.

Today we

re looking forward to sharing some of the specifics with you about the positive momentum that we

re seeing. The first quarter results we reported don

t reflect the strategic momentum that we

re gaining in the field.

Rental revenue was down 15%, now some of that was due to fleet being down up by 6% on a year-over-year basis. The worst of the environment happened in January through mid-February and then we saw a shift late in February continue into March and March came back stronger than we anticipated.

Time utilization in the quarter was basically flat on a year-over-year basis at 56.2%. Rates however were down 6.5%, not great, it

s not where we want to be, we put a lot of focus on this and a lot of effort and we

re managing this everyday. However, we

re still under pressure but declines are beginning to show signs of leveling off.


ve been -- seen a very clear positive change in used equipment pricing. The used margin in the first quarter was 31.4% versus 11.9% a year ago. Used equipment pricing is a leading indicator of where we

re in the cycle.

Now turning to cost cutting, obviously it

s a great story to talk about, particularly the first quarter. SG&A down $22 million, cost of rent down an additional $19 million. Bill is going to go into a lot more detail and discuss our decision to raise the financial targets for both SG&A, as well as the free cash flow target for the year.

So where are we? It

s fair to say that we

re more optimistic than we have been for a while. We see a healthy mix of conditions driving our metrics for the first three months in 2010. Some of that

s coming from the external environment, I

ll talk about that next but a lot is being driven by our own efforts. And that will be my second topic that I want to cover this morning with you.

So first, looking at the operating environment, here is a look at what we

re seeing in the field. It

s still challenging out there but as we move through the first quarter things seem to get a little better and so far in April the positive trend is continuing.

Now in terms of geographies, Bill and I spent several weeks in the field during business reviews talking to district managers, branch managers and hourly employees. The tones changed, they

re now more cautiously optimistic.

Canada, we talked about three months ago, was also going to be a bright spot and that

s holding true. In March rental revenue for Canada as a whole was basically flat on a year-over-year basis in local currency and that

s with 6% less fleet. Right now that

s being driven by the activity in Northeast Canada, but we

re also beginning to see Western Canada come back online as oil prices improve.

Southeast is also picking up in projects like infrastructure, power plants and bridges. The Gulf area, activity is increasing as industrial plants return to a more normalized maintenance schedule, which impacts the local economies.

California, if you recall was the first to see the weakness back in 2008 and had a terrible track record as it went through the recession. We

re now seeing that level off both in North and Southern California. However, the Midwest is still the weakest and it will be for a while. However, we got some good news yesterday with the ABI index for the region up over 50 for the first time in a long time.

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