United Rentals, Inc.

United Rentals, Inc.

March 14, 2005 05:01 ET

United Rentals Expects to Meet or Exceed Its 2004 Outlook; Delays Form 10-K Filing; Releases Selected Unaudited 2004 Financial Data; Announces Restatement of Pre-2004 Results to Reduce Income Tax


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: UNITED RENTALS, INC.

NYSE SYMBOL: URI

MARCH 14, 2005 - 05:01 ET

United Rentals Expects to Meet or Exceed Its 2004
Outlook; Delays Form 10-K Filing; Releases Selected
Unaudited 2004 Financial Data; Announces Restatement
of Pre-2004 Results to Reduce Income Tax

GREENWICH, Conn.--(CCNMatthews - Mar 14, 2005) -

United Rentals, Inc. (NYSE: URI) today announced that results for 2004,
while not yet finalized, are expected to meet or exceed the outlook
provided in the third quarter earnings release on October 20, 2004.

Unaudited Financial Highlights

-- Total revenues increased 12.7% for the fourth quarter and 8.4% for
the full year 2004 to a record $3.11 billion.

-- Same-store rental revenues in the general rentals segment increased
13.1% for the fourth quarter and 10.9% for the full year.

-- Rental rates increased 7.4% for the fourth quarter and 7.5% for the
full year.

-- Cash flow from operations was $761 million for the full year.

-- Free cash flow was $385 million after total rental and non-rental
capital expenditures of $635 million.

-- The total cash balance at December 31, 2004 was $302 million, an
increase of $223 million from 2003.

-- The company determined, in the course of Sarbanes-Oxley testing,
that the provision for income taxes was higher than required for periods
prior to 2004; the company will restate pre-2004 results to reduce the
provision for income taxes by a total of approximately $25 million.

Selected Business Highlights and Unaudited Financial Data

The company will delay finalizing its 2004 results and filing its Report
on Form 10-K to allow additional time to review matters relating to the
previously announced SEC fact-finding inquiry. The company believes this
delay will extend beyond the Form 10-K due date, including the 15-day
extension period. This delay will also give the company time to complete
work on the income tax restatement and its evaluation and testing of
internal controls and other items described below. The selected
financial data and 2004 outlook provided in this press release are
unaudited and subject to change based on completion of the audit or the
outcome of the SEC inquiry or internal review. This data should not be
viewed as a substitute for full financial statements or as a measure of
the company's performance.

Total revenues for the fourth quarter of 2004 were $836.4 million, an
increase of 12.7% compared with $742.2 million for the fourth quarter of
2003. Dollar utilization for the fourth quarter of 2004 was 62.9%, an
increase of 4.6 percentage points from the fourth quarter of 2003. The
size of the rental fleet, as measured by the original equipment cost,
increased to $3.7 billion at December 31, 2004 from $3.5 billion at
December 31, 2003. The age of the rental fleet was 40 months at the end
of 2004 and 2003.

Total revenues for the full year 2004 were $3.11 billion, an increase of
8.4% compared with $2.87 billion for 2003. Dollar utilization for the
full year 2004 was 60.1%, an increase of 3.0 percentage points from the
prior year.

Cash flow from operations was $761.0 million for the full year 2004 and
proceeds from rental equipment sales were $235.2 million. Total capital
expenditures were $634.6 million in 2004 compared with $377.9 million in
2003. After capital expenditures, free cash flow was $385.1 million for
the full year 2004 compared with $145.7 million for the full year 2003.

General Rentals Segment

The general rentals segment includes the rental of more than 600 types
of construction, aerial, industrial and homeowner equipment as well as
related sales and service. General rentals segment revenues were 92% of
total revenues for the full year 2004.

Fourth quarter 2004 revenues for the general rentals segment were $771.7
million, an increase of 15.7% compared with $667.3 million for the
fourth quarter of 2003. Rental rates for the fourth quarter of 2004
increased 7.4% and same-store rental revenues increased 13.1% from the
fourth quarter of 2003. Rental revenues generated by sharing equipment
among branches were 12.6% of segment rental revenues for the fourth
quarter of 2004 compared with 12.1% for the fourth quarter of 2003.

Full year 2004 revenues for the general rentals segment were $2.85
billion, an increase of 12.4% compared with $2.54 billion for 2003.
Rental rates for the full year 2004 increased 7.5% and same-store rental
revenues increased 10.9% from 2003. Rental revenues generated by sharing
equipment among branches were 11.8% of segment rental revenues for the
full year 2004 compared with 11.5% for the full year 2003.

Traffic Control Segment

The traffic control segment includes the rental of equipment for
controlling traffic as well as related services and activities. Traffic
control segment revenues were 8% of total revenues for the full year
2004.

Fourth quarter 2004 revenues for the traffic control segment were $64.7
million compared with $74.9 million for the fourth quarter of 2003, a
decline of $10.2 million or 13.6%.

Full year 2004 revenues for the traffic control segment were $254.9
million compared with $330.2 million for 2003, a decline of $75.3
million or 22.8%.

CEO Comments on Performance and Outlook

Wayland Hicks, chief executive officer said, "2004 was an important year
for United Rentals. We surpassed $3 billion of revenues for the first
time and our free cash flow of $385 million was the highest in our
company's history. Our intense efforts to improve rental rates resulted
in a 7.5% rate improvement in 2004, our highest annual increase.

"Our revenue growth of 8.4% continues to outpace our primary end market,
private non-residential construction, which recovered 4% in 2004
according to Department of Commerce data. This achievement reflects
strong revenue growth of 12.4% in our general rentals segment, partially
offset by continued weakness in our traffic control segment.

"Our 2005 outlook is for total revenues of $3.4 billion. This outlook
assumes 11% revenue growth in the general rentals segment, partially
offset by a continued decline in our traffic control segment. Growth in
general rentals is expected to be driven by continuing our rate
initiatives, targeted for at least a 5% increase in rental rates;
expanding our rental fleet; the planned opening of 30 to 35 new
locations; and increasing contractor supplies revenues 25%. Our outlook
assumes continued modest growth in non-residential construction which,
despite growth in 2004, is still about 20% below peak historical levels.

"We'll finalize our results as soon as possible. However, it's important
to take the extra time needed to review matters related to the SEC
inquiry. In the interim, we have provided selected unaudited financial
data that highlights our progress over the past year.

"We continue to feel positive about industry fundamentals and the
direction of our business. We remain focused on our goals of driving
revenue growth, improving our margins and increasing our return on
capital. We plan to achieve these goals primarily through strong organic
growth and new branch openings."

SEC Non-Public Fact-Finding Inquiry

As previously announced, the SEC is conducting a non-public fact-finding
inquiry of the company. The company is cooperating with the SEC,
continues to provide information to the SEC and has formed a special
committee of independent directors with separate counsel to review
matters relating to the SEC inquiry. The inquiry appears to relate to a
broad range of the company's accounting practices and does not seem to
be confined to a specific time period.

Restatement of Financial Results for Prior Periods to Reduce Income Tax
Expense and Other Items

During testing of the company's internal controls, as required by
Section 404 of the Sarbanes-Oxley Act, the company determined that the
provision for income taxes was higher than required for periods prior to
2004. The company has not finally determined the impact this will have
on specific periods, but estimates the correction of this will result in
a decrease in the provision for income taxes for prior years by a total
of approximately $25 million, with a corresponding increase in net
income.

The company expects that it will restate its financial statements for
the years 1999 through 2003 to correct the income tax provision.
Accordingly, investors are cautioned not to rely on the company's
historical financial statements. For additional information, please
refer to the company's Current Report on Form 8-K filed with the SEC on
March 14, 2005.

The company has determined that the control deficiencies that resulted
in the income tax provision being higher than required represented a
material weakness in the company's internal controls over financial
reporting at December 31, 2004. The company believes that it has taken
adequate measures to remedy this weakness.

As previously reported, the company identified a material weakness in
the third quarter partially relating to its self-insurance reserve
estimation and evaluation process. The company is conducting additional
testing of the process and reserve levels in 2004 and prior periods.

The company is also evaluating whether a material weakness exists
relating to a deficiency in reconciling physical inventory quantities to
accounting records for certain types of bulk rental equipment inventory,
which had an unreconciled difference of approximately $4 million.

The company does not believe that any deficiency that has been
identified, including the ones noted above, would adversely impact the
2004 outlook or the selected unaudited financial data provided in this
press release. However, the company's evaluation and testing of internal
controls, including testing of any remediation of deficiencies, has not
yet been completed. There can be no assurance as to the outcome of this
testing or that additional material weaknesses will not be identified or
adjustments required.

Additional Information Related to the Delay in Filing Form 10-K

The company anticipates obtaining a waiver from the lenders under its
secured credit facility of certain defaults arising from the delay in
filing its Form 10-K. However, there can be no assurance of this and, if
the waiver is not obtained, the lenders may require immediate repayment
of all outstanding borrowings. Furthermore, the requisite percentage of
holders of various other securities issued by the company, or the
trustee under the applicable indenture, could elect to declare an event
of default based on the delay in filing the Form 10-K. In this event, if
the company were unable to obtain a waiver or effect a cure within the
applicable grace period, these holders or the trustee could accelerate
the maturity of the debt. For additional information, please refer to
the company's Current Report on Form 8-K filed with the SEC on March 14,
2005.

Conference Call

United Rentals will hold a conference call with Wayland Hicks, chief
executive officer, and John Milne, president and chief financial
officer, today, Monday, March 14, at 11:00 am Eastern Time. The
conference will be available live by audio webcast at
www.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 730 rental locations in 47 states,
ten Canadian provinces and Mexico. The company's 12,700 employees serve
construction and industrial customers, utilities, municipalities,
homeowners and others. The company offers for rent over 600 different
types of equipment with a total original cost of $3.7 billion. United
Rentals is a member of the Standard & Poor's MidCap 400 Index and the
Russell 2000 Index® and is headquartered in Greenwich, Connecticut.
Additional information about United Rentals is available at
www.unitedrentals.com.

Certain statements contained in this press release are forward-looking
in nature. These statements can be identified by the use of
forward-looking terminology 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 strategy or outlook. The company's business and
operations are subject to a variety of risks and uncertainties and,
consequently, actual results may materially differ 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) unfavorable economic and industry conditions can
reduce demand and prices for the company's products and services, (2)
governmental funding for highway and other construction projects may not
reach expected levels, (3) the company may not have access to capital
that it may require, (4) any companies that United Rentals acquires
could have undiscovered liabilities and may be difficult to integrate,
(5) costs may increase more than anticipated, (6) the audit of the
company's 2004 results has not been completed and additional adjustments
may be identified and, consequently, the 2004 data and outlook for 2004
results are subject to change, (7) the evaluation and testing of the
company's internal controls over financial reporting have not yet been
completed and additional material weaknesses may be identified, (8) the
company may incur significant expenses in connection with the SEC
inquiry of the company and the class action lawsuits and derivative
actions that were filed in light of the SEC inquiry, (9) there can be no
assurance that the outcome of the SEC inquiry or internal review will
not require changes in the company's accounting policies and practices,
restatement of financial statements, revisions of preliminary results or
guidance, and/or otherwise be adverse to the company, and (10)
anticipated consents or waivers from lenders may not be obtained or
security holders may elect to declare an event of default under various
indentures based on the delay in filing the Form 10-K. Certain of these
risks and uncertainties, as well as others, are discussed in greater
detail in the company's filings with the SEC. The company makes no
commitment to revise or update any forward-looking statements in order
to reflect events or circumstances after the date any such statement is
made.

GAAP Reconciliation

We define "free cash flow" as (i) net cash provided by operating
activities plus (ii) proceeds from sales of rental equipment and, during
2004 proceeds from the sale of real estate less (iii) aggregate
expenditures for purchase of rental equipment and other property and
equipment. Our free cash flow was $385.1 million and $145.7 million
during 2004 and 2003, respectively. Free cash flow is presented to
provide additional information concerning cash flow available to meet
future debt service obligations and working capital requirements.
However, free cash flow is not a measure of financial performance or
liquidity under Generally Accepted Accounting Principles ("GAAP").
Accordingly, free cash flow should not be considered an alternative to
net income or cash flow from operating activities as indicators of
operating performance or liquidity. The table below provides a
reconciliation between unaudited net cash provided by operating
activities and free cash flow for the periods indicated (in millions):



Year Ended
------------------
2004 2003
------------------

Net cash provided by operating activities $761.0 $342.3
Purchases of rental equipment (577.2) (335.9)
Purchases of property and equipment (57.4) (42.0)
Proceeds from sales of rental equipment 235.2 181.3
Proceeds from real estate sale-leaseback 23.5 -
------------------
Free cash flow $385.1 $145.7
==================



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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    United Rentals, Inc.
    Chuck Wessendorf, 203-618-7318
    cwessendorf@ur.com