United Rentals (URI)

Industry Overview

We serve four principal end-markets in the U.S. equipment rental industry: commercial construction; infrastructure; industrial; and homeowner or residential. Commercial construction, which represents approximately 60 percent of our business as measured by revenues, provides equipment rentals to support office, retail, lodging and healthcare-related projects. Infrastructure, which represents about 15 percent of our business as measured by revenues, supports the development of bridges, highways, power plants and airports. The industrial business, which also represents about 15 percent of our business as measured by revenues, provides equipment rentals to serve manufacturers, chemical companies, paper mills, railroads, ship builders and utilities. Our residential business, which represents about 10 percent of our business as measured by revenues, provides equipment rentals to support the construction and renovation of homes.

Given the relative significance of commercial construction to our overall revenues, our business is particularly sensitive to changes in activity in this end-market. According to the National Bureau of Economic Research, a recession in the United States began in December 2007 and, as a consequence, private non-residential (or commercial) construction weakened throughout 2008, especially in the latter half of the year as the credit markets tightened. Based on a consensus of leading national non-residential construction forecasts,

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we expect commercial construction spending to decline by between 15 and 20 percent over the next one to two years, with hotel and retail construction (a significant component of commercial construction) down approximately 20 percent. Although President Obama’s economic stimulus package (or the American Recovery and Reinvestment Act) may provide funds for non-residential construction projects, we believe those funds are not likely to become available before the latter part of 2009, and any such amounts would only partially offset the overall expected decline in our end-markets.

Although there are significant near-term challenges–including cyclical pressure and the lack of availability of credit–that will suppress construction activity in 2009 and perhaps beyond, we believe the long-term growth prospects of our industry are strong. We believe that long-term U.S. equipment rental growth, in addition to reflecting eventual general economic expansion, is driven by an end-market that increasingly recognizes the many advantages of renting equipment rather than owning. Customers recognize that by renting they can:

Industry Overview

Based on industry sources, we estimate that the U.S. equipment rental industry had total revenues of approximately $37 billion in 2007. This represents a compound annual growth rate of approximately 10 percent since 1990.

Our principal end-market for rental equipment is private non-residential construction, and our business is particularly sensitive to changes in activity in this end-market. According to U.S. Department of Commerce data (which has not been adjusted for inflation), private non-residential construction activity increased 5.0 percent in 2005 compared to 2004, increased 16.2 percent in 2006 compared with 2005 and increased 16.7 percent in 2007 compared with 2006. Reflecting current economic conditions, we and other forecasters expect this growth to slow significantly in 2008—most likely flat as compared to 2007 or low single digit growth.

Approximately 10 percent of our revenues have historically been derived from private residential construction, where activity decreased 18.3 percent in 2007 compared with 2006 (based on the same Department of Commerce data), with further decreases expected in 2008. This market primarily impacts our southwest and southeast regions.

We believe that long-term industry growth, in addition to reflecting general economic expansion, is driven by an end-user market that increasingly recognizes the many advantages of renting equipment rather than owning. Customers recognize that by renting they can:

While the construction industry has to date been the principal user of rental equipment, industrial companies, utilities and others are increasingly using rental equipment for plant maintenance, plant changeovers and other operations requiring the periodic use of equipment. We believe that over the long-term, increasing rentals by governmental entities and the industrial sector could become a more significant factor in driving our industry’s growth.

Industry Overview

FACE="Times New Roman" SIZE="2">Based on industry sources, we estimate that the U.S. equipment rental industry had total revenues of approximately $37 billion in 2007. This represents a compound annual growth rate of approximately 10 percent since
1990.

Our principal end-market for rental equipment is private non-residential construction, and our business is particularly sensitive to
changes in activity in this end-market. According to U.S. Department of Commerce data (which has not been adjusted for inflation), private non-residential construction activity increased 5.0 percent in 2005 compared to 2004, increased 16.2 percent
in 2006 compared with 2005 and increased 16.7 percent in 2007 compared with 2006. Reflecting current economic conditions, we and other forecasters expect this growth to slow significantly in 2008—most likely flat as compared to 2007 or low
single digit growth.

Approximately 10 percent of our revenues have historically been derived from private residential construction, where
activity decreased 18.3 percent in 2007 compared with 2006 (based on the same Department of Commerce data), with further decreases expected in 2008. This market primarily impacts our southwest and southeast regions.

Industry Overview

Based on industry sources, we estimate that the U.S. equipment rental industry had total revenues of approximately $33 billion in 2006. This represents a compound annual growth rate of over 10 percent since 1990.

In 2002 and 2003, industry rental revenues decreased by over $1.0 billion from the level reached in 2001. This decrease reflected significant weakness in private non-residential construction activity, which declined by 13.2 percent in 2002 and by an additional 5.1 percent in 2003 according to U.S. Department of Commerce data. (Department of Commerce data has not been adjusted for inflation.) According to this data, private non-residential construction activity increased 4.2 percent in 2004 compared with 2003, increased 5.0 percent in 2005 compared to 2004 and increased 16.2 percent in 2006 compared with 2005. Our industry is particularly sensitive to changes in non-residential construction activity because, to date, this has been our principal end market for rental equipment.

We believe that long-term industry growth, in addition to reflecting general economic expansion, is driven by an end-user market that increasingly recognizes the many advantages of renting equipment rather than owning. Customers recognize that by renting they can:

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While the construction industry has to date been the principal user of rental equipment, industrial companies, utilities and others are increasingly using rental equipment for plant maintenance, plant turnarounds and other operations requiring the periodic use of equipment. We believe that over the long-term, increasing rentals by governmental entities and the industrial sector could become a more significant factor in driving our industry’s growth.

Industry Overview

Based on industry sources, we estimate that the U.S. equipment rental industry had total revenues of approximately $31 billion in 2005. This represents a compound annual growth rate of over 9 percent since 1990.

In 2002 and 2003, industry rental revenues decreased by over $1.0 billion from the level reached in 2001. This decrease reflected significant weakness in private non-residential construction activity, which declined by 13.2 percent in 2002 and by an additional 5.1 percent in 2003 according to U.S. Department of Commerce data. According to U.S. Department of Commerce data, private non-residential construction activity increased 4.2 percent in 2004 compared with 2003 and increased 5.0 percent in 2005 compared to 2004. Our industry is particularly sensitive to changes in non-residential construction activity because, to date, this has been our principal end market for rental equipment. We expect that with a sustained rebound in private non-residential construction, our industry will continue its long-term growth trend.

We believe that long-term industry growth, in addition to reflecting general economic expansion, is driven by an end-user market that increasingly recognizes the many advantages of renting equipment rather than owning. Customers recognize that by renting they can:

While the construction industry has to date been the principal user of rental equipment, industrial companies, utilities and others are increasingly using rental equipment for plant maintenance, plant turnarounds

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and other operations requiring the periodic use of equipment. We believe that over the long-term, increasing rentals by the industrial sector could become a more significant factor in driving our industry’s growth.

Industry Overview

Based on industry sources, we estimate that the U.S. equipment rental industry had total revenues of approximately $31 billion in 2005. This represents a compound annual growth rate of over 9 percent since 1990.

In 2002 and 2003, industry rental revenues decreased by over $1.0 billion from the level reached in 2001. This decrease reflected significant weakness in private non-residential construction activity, which declined by 13.2 percent in 2002 and by an additional 5.1 percent in 2003 according to U.S. Department of Commerce data. According to U.S. Department of Commerce data, private non-residential construction activity increased 4.2 percent in 2004 compared with 2003 and increased 5.0 percent in 2005 compared to 2004. Our industry is particularly sensitive to changes in non-residential construction activity because, to date, this has been our principal end market for rental equipment. We expect that with a sustained rebound in private non-residential construction, our industry will continue its long-term growth trend.

We believe that long-term industry growth, in addition to reflecting general economic expansion, is driven by an end-user market that increasingly recognizes the many advantages of renting equipment rather than owning. Customers recognize that by renting they can:

While the construction industry has to date been the principal user of rental equipment, industrial companies, utilities and others are increasingly using rental equipment for plant maintenance, plant turnarounds

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and other operations requiring the periodic use of equipment. We believe that over the long-term, increasing rentals by the industrial sector could become a more significant factor in driving our industry’s growth.