United Rentals, Greenwich, Conn., announced second quarter revenue of $557 million and rental revenue of $450 million, compared with $615 million and $454 million, respectively, for the same period last year. Operating income was $59 million, compared with $5 million for the same period last year.

The company reported second quarter net income of $12 million, compared with a net loss of $17 million for the same period last year. In the second quarter 2010, the company revised its estimate of full-year projected income and the resulting effective tax rate. As a result, the company’s net income for the quarter reflects an income tax benefit of $9 million.

Michael Kneeland, United Rentals’ CEO, said, “This was a strong quarter with a number of positive trends in the underlying metrics. Our same-store rental revenues increased 2.7 percent, with year-over-year growth in six of our nine operating regions. We reported the highest time utilization of any second quarter in our company’s history. Rental rates, while down year over year, improved sequentially each month. We are also running the business much more efficiently and spending CapEx where it counts, purchasing fleet that we are confident will be in demand by our target accounts.” 

For the quarter, time utilization increased 4.1 percentage points compared with last year to a second quarter record of 65.4 percent, reflecting an increase in demand and more effective management of a smaller fleet. Rental rates declined 2.0 percent compared with last year. Dollar utilization, which reflects the impact of time utilization and rental rates, increased 1.8 percentage points to 46.7 percent.

Free cash flow was $8 million, compared with $70 million last year. To meet increased demand, the company raised its outlook for net rental capital expenditures — defined as purchases of rental equipment less the proceeds from sales of rental equipment — to a range of $160 million to $180 million, from its previous estimate of $100 million to $120 million. The company also reaffirmed its outlook for full year free cash flow of a range of $200 million to $225 million.

Cost of equipment rentals, excluding depreciation, decreased by $4 million compared with last year. The company has updated its outlook for full year expense reduction to a range of $30 million to $50 million, from its previous estimate of $70 million to $90 million.

The company sold $80 million of used fleet on an original equipment cost basis and generated a positive gross margin of 24.3 percent, compared with $271 million of used fleet sold at a negative gross margin of 9.5 percent for the same period last year.

“While we continue to expect a choppy recovery, we believe that we are seeing the early stages of a cyclical upturn on top of the normal seasonal benefit. As contractors take on work with limited access to capital, they are choosing to rent rather than buy equipment. We find it encouraging that demand is coming from more than one source as we move into a recovery. Our branches are meeting these opportunities head-on with a powerful strategy focused on larger construction and industrial accounts, pricing discipline and customer service excellence,” Kneeland said. 

During a call with investors, Kneeland also said, “Our rental revenues outperformed the operating environment in the second quarter. Total nonresidential construction spending, which includes both private and public construction, was down 16.1 percent in April year-over-year and down 15.2 percent in May. And you compare that to our rental revenues, which were down less than 1 percent for the quarter. At the same time, our same-store rental revenues were actually up 2.7 percent.”