United Rentals Inc. Reports Operating Results (10-Q)
United Rentals Inc. is one of North America's largest equipment rental companies with over branches in the majority of states several Canadian provinces and Mexico. The company offers for rent different types of equipment to customers that include construction and industrial companies manufacturers utilities municipalities homeowners and others. United Rentals Inc. has a market cap of $366.6 million; its shares were traded at around $6.11 with a P/E ratio of 2.3 and P/S ratio of 0.1. United Rentals Inc. had an annual average earning growth of 4.9% over the past 10 years. Highlight of Business Operations: The first quarter of 2009 net loss of $19, or $(0.32) per diluted share, compares with net income of $38, or $0.34 per diluted share, in the first quarter of 2008. Our results for the three months ended March 31, 2009 and 2008 include after-tax restructuring charges of $3, or $0.04 per diluted share, and $2, or $0.02 per diluted share, respectively, related to branch closure and severance costs. The decline in profitability reflects lower equipment rental revenue and gross profit in a very challenging construction environment, partially offset by savings realized from our ongoing initiatives to reduce operating costs.
Second Quarter 2009 Restructuring and Asset Impairment Charge. In the second quarter of 2009, we expect to record a charge of between $25 and $30 principally related to the planned closure of 39 branches. The charge is expected to include a non-cash component of approximately $14 related to the aggregate impact of impairing certain rental assets and writing off leasehold improvements. The balance of the charge will relate to lease termination and severance costs.
Our principal existing sources of cash are cash generated from operations, including from the sale of rental equipment, and borrowings available under our ABL facility and accounts receivable securitization facility. As of March 31, 2009, we had (i) $561 of borrowing capacity available under our ABL facility and (ii) cash and cash equivalents of $96. Cash equivalents at March 31, 2009 consist of high quality, low risk investments. We believe that our existing sources of cash will be sufficient to support our existing operations over the next 12 months.
Retirement of Senior Notes. As discussed above, in the first quarter of 2009, we repurchased and retired an aggregate of $22 principal amount of our outstanding 6 1/2 percent Senior Notes. Interest expense for the three months ended March 31, 2009 includes a gain of $4, representing the difference between the net carrying amount of the securities and the purchase price of $18.
Sources and Uses of CashContinuing Operations. During the three months ended March 31, 2009, we (i) generated cash from operating activities of $124 and (ii) generated cash from the sale of rental and non-rental equipment of $70. We used cash during this period principally to (i) fund payments on debt, net of proceeds, of $106 and (ii) purchase rental and non-rental equipment of $64. During the three months ended March 31, 2008, we (i) generated cash from operating activities of $226 and (ii) generated cash from the sale of rental and non-rental equipment of $68. We used cash during this period principally to purchase rental and non-rental equipment of $151.
Interest Rate Risk. As of March 31, 2009, we had an aggregate of $861 of indebtedness that bears interest at variable rates. As of March 31, 2009, the variable rate debt included $634 of borrowings under our ABL facility and $227 of borrowings under our accounts receivable securitization facility. The interest rates applicable to our variable rate debt on March 31, 2009 were (i) 3.3 percent for the ABL facility and (ii) 1.7 percent for the accounts receivable securitization fa
Read the The complete ReportURI is in the portfolios of Bruce Berkowitz of Fairholme Capital Managment, Bruce Berkowitz of Fairholme Capital Managment, David Williams of Columbia Value and Restructuring Fund, John Keeley of Keeley Fund Management, Chris Davis of Davis Selected Advisers.