United Rentals Inc. announced financial results for the fourth quarter and full year 2014.
For the fourth quarter of 2014, total revenue was $1.564 billion and rental revenue was $1.320 billion, compared with $1.338 billion and $1.133 billion, respectively, for the same period the prior year. On a GAAP basis, the company reported fourth quarter net income of $194 million, or $1.88 per diluted share, compared with $140 million, or $1.31 per diluted share, for the same period the prior year.
Adjusted earnings per share (EPS) for the quarter was $2.19 per diluted share, compared with $1.59 per diluted share for the same period the prior year. Adjusted EBITDA was $775 million and adjusted EBITDA margin was 49.6 percent for the quarter.
For the full year 2014, total revenue was $5.685 billion and rental revenue was $4.819 billion. On a GAAP basis, full year net income was $540 million, or $5.15 per diluted share. Adjusted EPS for the full year was $6.91 per diluted share, compared with $4.91 per diluted share for 2013. Adjusted EBITDA was $2.718 billion and adjusted EBITDA margin was 47.8 percent for the full year.
In April 2014, the company acquired certain assets of the following entities: National Pump & Compressor Ltd., Canadian Pump and Compressor Ltd., GulfCo Industrial Equipment, LP and LD Services LLC (collectively “National Pump”). National Pump is included in the company's results subsequent to the acquisition date.
For the full year 2014, total revenue increased 14.7 percent year-over-year, and rental revenue (which includes owned equipment rental revenue, re-rent revenue and ancillary items) increased 14.8 percent. Within rental revenue, owned equipment rental revenue increased 14.4 percent, reflecting increases of 9.6 percent in the volume of equipment on rent and 4.5 percent in rental rates. Excluding the impact of National Pump, rental revenue for the full year 2014 increased 10.8 percent year-over-year.
For the fourth quarter of 2014, rental revenue increased 16.5 percent year-over-year. Within rental revenue, owned equipment rental revenue increased 16.3 percent, reflecting increases of 10.7 percent in the volume of equipment on rent and 4.1 percent in rental rates. Excluding the impact of National Pump, rental revenue for the fourth quarter of 2014 increased 11.1 percent year-over-year.
Flow-through, which represents the year-over-year change in adjusted EBITDA divided by the year-over-year change in total revenue, was 54.9 percent for the fourth quarter of 2014 and 58.2 percent for the full year.
Time utilization increased 130 basis points year-over-year to 70.6 percent for the fourth quarter of 2014. Full year time utilization increased 60 basis points to a record 68.8 percent.
Free cash flow in full-year 2014 was $557 million after: total rental and non-rental capital expenditures of $1.821 billion; and aggregate cash payments of $17 million related to merger and restructuring activities.
The size of the rental fleet was $8.44 billion of original equipment cost at Dec. 31, 2014, compared with $7.73 billion at Dec. 31, 2013. The age of the rental fleet was 43.0 months on an OEC-weighted basis at Dec. 31, 2014, compared with 45.2 months at Dec. 31, 2013.
In 2014, the company repurchased $491 million of common stock to complete the $500 million share repurchase program that was announced in October 2013. In December 2014, the company's board of directors authorized a new $750 million share repurchase program, which the company intends to complete within 18 months of authorization. In 2014, the company repurchased $102 million of common stock under this share repurchase program.
Return on invested capital was 8.8 percent for the year ended December 31, 2014, an increase of 130 basis points from the year ended December 31, 2013. The company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by average stockholders’ equity (deficit), debt and deferred taxes, net of average cash. To mitigate the volatility related to fluctuations in the company’s tax rate from period to period, the federal statutory tax rate of 35 percent is used to calculate after-tax operating income.6
For the fourth quarter of 2014, the company generated $156 million of proceeds from used equipment sales at a gross margin of 48.7 percent, compared with $134 million of proceeds at a gross margin of 46.3 percent the prior year. For the full year 2014, the company generated $544 million of proceeds from used equipment sales at a gross margin of 48.5 percent, compared with $490 million of proceeds at a gross margin of 44.9 percent for the prior year.
For the full year 2015, the company expects total revenue in a range of $6.0 billion to $6.2 billion and adjusted EBITDA in a range of $2.95 billion to $3.05 billion. The outlook indicates an increase in rental rates of approximately 3.5 percent year-over-year; time utilization of approximately 69 percent; net rental capital expenditures of approximately $1.2 billion, after gross purchases of approximately $1.7 billion; and free cash flow in a range of $725 million to $775 million.
"We met or exceeded every target in our outlook for 2014, ending the year with a better-than-expected quarter and our highest return yet on invested capital," said Michael Kneeland, chief executive officer of United Rentals. "Our full year increases in rates and utilization helped drive up rental revenue at almost twice the pace of industry expansion, and we're in a strong position to grow the most profitable areas of our business, including our high-margin specialty rental lines.
"For 2015, we are guiding to record highs of over $6 billion in revenue and approximately $3 billion in adjusted EBITDA. Our industry is forecast to have multiple years of growth ahead, and our customers are upbeat. While we expect to see a drag in some trade areas from the slowdown in upstream oil, our exposure is greatly limited by our size, agility and diversification. Furthermore, we believe that low oil prices will be a boon to many sectors we serve, spurring demand in manufacturing and other markets hungry for our fleet."