United Rentals announces fourth-quarter and full-year 2010 results
Adjusted EBITDA and adjusted EBITDA margin were $691 million and 30.9 percent, respectively, for 2010, compared with $628 million and 26.6 percent, respectively, for 2009.
The company’s EPS, adjusted EPS, adjusted EBITDA and adjusted EBITDA margin for the fourth quarter and full year 2010 were all negatively impacted by an $18 million non-cash charge ($11 million after-tax) related to the provision for self-insurance reserves.
Free Cash Flow and Fleet Size
For full year 2010, free cash flow, a non-GAAP measure, was $227 million, compared with free cash flow of $367 million for full year 2009. The year-over-year decrease in free cash flow was largely the result of an increase in net rental capital expenditures.
The size of the rental fleet, as measured by the original equipment cost, was $3.79 billion at Dec. 31, 2010, and $3.76 billion at Dec. 31, 2009. The age of the rental fleet was 47.7 months on a unit-weighted basis at Dec. 31, 2010, compared with 42.4 months at Dec. 31, 2009.
Return on Invested Capital (ROIC)
The company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by the averages of stockholders’ equity (deficit), debt and deferred taxes, net of average cash. To mitigate the volatility related to fluctuations in our tax rate from period to period, the federal statutory tax rate of 35 percent is used to calculate after-tax operating income. The company’s ROIC was 3.7 percent for the 12 months ended Dec. 31, 2010, an increase of 1.5 percentage points from the same period last year.
United Rentals held a conference call about the results on Feb. 2, 2011. The conference call has been archived at www.unitedrentals.com, where it will be archived until the next earnings call.
Free cash flow, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, and adjusted earnings per share (adjusted EPS) are non-GAAP financial measures as defined under the rules of the SEC. Free cash flow represents net cash provided by operating activities, less purchases of rental and non-rental equipment plus proceeds from sales of rental and non-rental equipment and excess tax benefits from share-based payment arrangements, net. EBITDA represents the sum of net income (loss), loss from discontinued operation, net of taxes, provision (benefit) for income taxes, interest expense, net, interest expense-subordinated convertible debentures, net, depreciation of rental equipment and non-rental depreciation and amortization.
Adjusted EBITDA represents EBITDA plus the sum of the restructuring charge and stock compensation expense, net. Adjusted EPS represents EPS plus the sum of the restructuring charge, the gains/losses on the repurchase/redemption of debt securities and retirement of subordinated convertible debentures, and the asset impairment charge. The company believes that: (i) free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements; (ii) EBITDA and adjusted EBITDA provide useful information about operating performance and period-over-period growth; and (iii) adjusted EPS provides useful information concerning future profitability. However, none of these measures should be considered as alternatives to net income, cash flows from operating activities or earnings per share under GAAP as indicators of operating performance or liquidity. Information reconciling forward-looking free cash flow to a GAAP financial measure is unavailable to the company without unreasonable effort.
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