Summary
United Rentals, Inc. (URI) filed an 8-K on June 2, 2009, primarily to disclose information related to a new offering of unsecured senior notes by its subsidiary, United Rentals (North America), Inc. (URNA). The filing provides a candid assessment of the ongoing impact of the economic downturn on the company's operations, noting continued decreases in construction and industrial activity, which have negatively affected revenues and rental demand. While rental rates are expected to decline more significantly in Q2 2009 compared to Q2 2008 than the Q1 2008 decline, the company highlighted a slowing sequential rate of decline in rental rates as of May 2009, offering a potential sign of stabilization. Despite the challenging market conditions, United Rentals reiterated its expectation to generate approximately $300 million in free cash flow for 2009. The company also plans to achieve significant reductions in selling, general, and administrative (SG&A) expenses and expects net rental capital expenditures to approximate zero for the year. The filing also clarifies a reclassification of foreign non-guarantor subsidiary debt within its consolidating financial statements, noting it does not impact consolidated results but provides a more accurate presentation of guarantor subsidiary debt and related interest expense.
Key Highlights
- 1United Rentals (North America), Inc. is offering approximately $300 million in unsecured senior notes.
- 2The company acknowledges the severe adverse impact of the economic downturn on revenues and rental demand due to decreased construction and industrial activity.
- 3Average rental rates are expected to decline year-over-year in Q2 2009 by more than the 11.5% seen in Q1 2009.
- 4However, the sequential monthly rate of decline in rental rates has slowed down through May 2009.
- 5The company reaffirms its 2009 free cash flow generation target of approximately $300 million.
- 6Significant reductions in SG&A expenses ($50-$60 million) and zero net rental capital expenditures are expected for 2009.
- 7A reclassification of foreign non-guarantor subsidiary debt is disclosed, clarifying its presentation within consolidating balance sheets without affecting consolidated financials.