Atlas Copco Plans Sale of RSC After Achieving Record Results in 2005
February 2, 2006 — In its fourth quarter financial report, Atlas Copco, parent company of RSC Equipment Rental, Scottsdale, Ariz., announced that RSC grew revenue, achieved record operating profits, and improved the return on operating capital to record levels in the fourth quarter of 2005. RSC's quarterly and full-year financial results were reportedly the best in the company's history. Atlas Copco also made the announcement that it intends to explore exit alternatives of its equipment rental business, which can include a possible trade sale, IPO, or spin-off.
According to RSC, Atlas Copco has a global business model in which it plans growth internationally. As its investors viewed Atlas Copco's entire portfolio, exiting the rental business, which currently only serves North America, is profitable, and stable, made the most sense for the company. No potential buyers have been reported.
RSC's fourth quarter operating profit of $111 million represents an increase of nearly 60 percent over the same quarter last year and was not only the highest quarter of 2005, but also the highest quarter ever. This improvement marks the company's 11th consecutive quarter-over-quarter increase in operating profit. The operating profit for the full year was $357.6 million, an increase of 53.3 percent from 2004.
Total revenue was $424 million for the fourth quarter compared to $371 million in 2004, and $1.6 billion for the full year compared to $1.4 billion in 2004. Rental fleet utilization, an important measure of efficiency, improved to 73 percent in the fourth quarter from 69 percent in the same quarter last year, and averaged 70 percent for the full year compared to 67 percent in 2004.
EBITDA (earnings before interest, taxes, depreciation and amortization) improved to 43 percent for the fourth quarter from 35 percent in fourth quarter 2004, and 40 percent for the full-year 2005 from 33 percent in 2004. Likewise, return on operating capital employed increased in the quarter to 26 percent from 19 percent in 2004, significantly outperforming the cost of capital for the company and thereby continuing to generate positive economic value.
Increased rental volumes, ongoing capital, cost-efficiency improvements, and continued positive development of rental rates all contributed to these strong results.
