United Rentals' CEO Discusses Q1 2012 Results - Earnings Call Transcript

United Rentals, Inc. (URI)

Q1 2012 Earnings Conference Call

April 18, 2012 11:00 AM ET


Michael Kneeland - Chief Executive Officer

William Plummer - Chief Financial Officer

Matt Flannery - Executive Vice President of Operations and Sales.


Jerry Revich – Goldman Sachs

Ted Grace – Susquehanna

Manish Somaiya -- Citi

Scott Schneeberger – Oppenheimer

David Raso – ISI Group

Henry Kirn – UBS



Good morning and welcome to United Rentals First Quarter 2012 Investor Conference Call. Please be advised that this call is being recorded.

Before we begin, 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 risk 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, 2011, as well as subsequent filings with the SEC. You can access these filings on the company’s website at www.ur.com.

Please note that United Rentals has no obligation and makes 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.

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 and Matt Flannery, Executive Vice President - Operations and Sales.

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

Michael Kneeland

Thanks operator. Good morning, everyone and welcome. With me today, is our CFO, Bill Plummer, Matt Flannery, our Executive Vice President of Operations and Sales and other members of our senior management team.

Matt has been leading the integration planning for our merger with RSC and I have asked him to share some details about that process, so I have three speakers this morning. But first I want to spend a few minutes on the quarter and the closing of the transaction. So I’ll start with the results.

You saw the numbers we reported last night. We had a very good quarter, we showed 21% growth in rental revenues and realized $231 million of adjusted EBITDA in our slowest seasonal quarter. In fact our performance surpassed all prior first quarters with record time utilization, record fleet growth and record adjusted EBITDA and a record margin. Once again we drove the profitable growth faster than the construction recovery and this time we got some modest help, from the environment. Spending our non-residential construction appears to be running year over year. Now, I have to wait for the March numbers to see of that holds true.

And the architecture billing index, which has remained above 50 for the commercial and industrial sector for 7 straight months and this morning the ABI reported that the March index for our sector was 56. So, as you know we felt good about 2012 going into this year and we are just as bullish now and even more confident about our outlook.

We put $300 million of gross CapEx into the market in the first three months, because we saw demand and as a result show we didn’t just grow our fleet, we put it on at rent, at good margins.

Our rates improved more than 6% year-over-year, and time utilization was our first quarter record for us at 62.3%. Now, both of these metrics are in line with our expectations. These results speak volumes about the effectiveness of our strategy and the ongoing secular shift towards renting.

We’re managing the business to a new kind of construction cycle, one that benefits from both the upswing in activity and a change in customer behavior. Now, we’re making the right decisions at the top, more important our branch teams and our sales organizations are doing a stellar job of acting on those decisions, by living up to our promise of exceptional customer service, as the heart of our value proposition and are conducting business more safely than ever. We cut our [ph]reportable rate for more than half in the first quarter, so a lot of credit goes to this field and I commend them for the progress that they are making.

Now, as a quick overview, I can tell you that all of our operating regions show double digit rental revenue improvement in the quarter compared to last year. But our strategy doesn’t focus just on the top line. We’re pushing hard for profitable growth, in the Southwest for example where the environment has been challenging over the past two years. We showed 20% rental revenue growth in the quarter. And we also had a 5.7% rate improvement, as well as the strongest utilization improvement of any region, up 7.6 percentage points.

In the Gulf, with demand drove rates up 8.6%, our time utilization also improved. Now that being said, some areas are more robust than others. In Eastern Canada, although we are up year-over-year, we don’t expect the same vigorous market conditions that we saw last year. We still anticipate that rental revenue growths will be in the double digits, but it maybe they’re at slower pace. Now, the balance of rates and utilization is top of mind for all of our branches in every sales person. Our people know that when we compete for business, particularly big projects, the revenue dollars could be exiting, if the margins have to be protected.

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