United Rentals Earnings Call Nuggets: Utilization Trends, Free Cash Flow
On Wednesday, United Rentals Inc (NYSE:URI) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Scott Schneeberger – Oppenheimer & Co.: If I can make my one question two, a two parter. The first part would be, could you discuss the utilization trends, months to months to months sequentially as you progress through third quarter into fourth quarter and my second question is with regard to this CapEx guidance for this year, could you give us an idea of what you’re thinking for next year, how CapEx would compare to this year and perhaps how free cash flow will compare to this year?
Michael J. Kneeland – President and CEO: Yeah, sure. I’ll give you the time and then I’ll shift it over to Bill, on the capital. If you look at July, we were at 68.6%. For August, we were at 69.7%. For September, we were at 71%. As I mentioned in my opening comments as we stand for the month of October we’re slightly above 72%.
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William B. Plummer – EVP and CFO: Scott on CapEx I’ll start with just an additional comment about 2012. We’re maintaining the range of $1.5 billion to $1.6 million, but we’re focused more on the lower rate of that range for 2012 and we think that that’s an appropriate way to think about it right here and now. As we look at 2013 we haven’t definitively set a plan, but out general thought is that our capital plan will look pretty similar next year to what it does this year. About flat, it could be a touch lower and by a touch $50 million is sort of where I define a touch. If we do what we think we’re going to do next year in terms of operational results with that kind of a capital plan our free cash flow is probably going to be in the range of $400 million to $500 million. That’s consistent with the forecast that we’ve put in the S-4 that we released earlier this year and it’s still consistent with how we’re thinking about the next year or so.
Free Cash Flow
Vance Edelson – Morgan Stanley: So just following up on the last question. The free cash flow will continue to improve over the next year. You’ve up the guide and you’re starting to build out your fleet early in the cycle may be ahead of the cycle and you’re going to see the benefit. So you’ve laid out some targets for reducing leverage over the next 12 months, any update to the specific leverage ratio you are looking at Bill say a year from now and then beyond that what you see happening with free cash flow beyond 2013 and what’s your ultimate thought on where the leverage is going to go, other uses of cash and so forth?
William B. Plummer – EVP and CFO: So, we’ve spent some time recently with our Board talking about this very topic and we’ve aligned around a view that we will be targeting a lower level of leverage to sustain over the next number of years. So, if you look at leverage just as total debt-to-EBITDA, and I know that’s overly simplistic, but just to keep it simple we’re now targeting a range of between 2.5 and 3.5 times, total debt-to-EBITDA and we feel comfortable that we can maintain that range over the next number of years and it reflects the cash flow profile that we expect to see over the next few years, starting with that $400 million to $500 million range next year; 2.5 to 3.5 will be a normal operating range, so in good times, we’ll trend down towards the lower end of that range. Right now, we expect by the end of next year if you look in our investor deck we gave you some very broad brush forecast. We expect that by the end of the next year, we’ll be solidly in the middle of that range, right at about t3 times from being just below 4 times on a trailing 12 basis right here and now. So, nice robust de-levering over the next year to two and we think that it makes sense for us to maintain those leverage levels as we go forward. What do we with the cash flow beyond 2013. Can I answer that question next year? I think we want to think very carefully about where we reinvest the free cash flow that we have. We are certainly going to be bringing down debt consistently over the next several years, but we also want to make sure that we’re looking for the opportunities that makes sense for our investors.
Vance Edelson – Morgan Stanley: Then maybe just a clarification on something earlier. You talk about the shift toward the monthly renting and the impact that that has, which makes perfect sense, but I might’ve missed it, but what’s driving the shift itself? I would have thought in this uncertain environment with the elections coming up and so forth, that if anything, rental periods would get even shorter. So, what do you think the driver is there?
William B. Plummer – EVP and CFO: I think it’s the strategy. We’ve been targeting the key account groups that historically have rented equipment for longer periods of time. As we grow the share of revenue from those accounts, it’s a natural outgrowth of being with those accounts. It’s playing very well it’s playing very much according to the strategy. As you grow with those folks, you give yourself a better margin opportunity because the costs fall away and it’s driving to that result as we speak.