Good morning, and welcome to the United Rentals Second Quarter Investor Conference Call. [Operator Instructions] Before we begin, note that the company’s press release, comments made on today’s call and responses to your questions contain forward-looking statements. The company’s business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control, and consequently, actual results may differ materially from those projected. A summary of these uncertainties is included in the Safe Harbor statement contained in the release. For a more complete description of these and other possible risks, please refer to the company’s annual report on Form 10-K for the year ended December 31, 2009, as well as the subsequent filings with the SEC. You can access these filings on the company’s website at www.ur.com. Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. You should also note that today’s call will include references to free cash flow, adjusted EPS, EBITDA and adjusted EBITDA, each of which is a non-GAAP term. Speaking today for United Rentals is Michael Kneeland, Chief Executive Officer; and William Plummer, Chief Financial Officer. I will now turn the call over to Mr. Kneeland. Mr. Kneeland, you may begin.

Thank you, operator. Good morning, everyone, and welcome. On the call with me today is Bill Plummer, our Chief Financial Officer and other members of our senior management team. I want to start with a quick overview of the results we reported last night, and then focus on the metrics that indicate changes that are starting to take effect in our markets and within our company. I'll talk about the drivers of change, the seasonal, cyclical and our strategy in particular, and share some insights into what kind of demand we expect to see over the next six to 12 months. But still too early to speak in absolutes, but the second quarter did shed some light on the cycle As you saw in our press release, we had a strong quarter. The environment is better. Our strategy is taking hold. We're more optimistic than we have been for some time, and we appear to be seeing the early stages of an upturn. And while we continue to bear down on cost, our focus is now on growing the business. So let's start with the results We made money in the second quarter. Last year, revenues were slightly higher in the period but gross profit was lower and earnings per share was negative. So it's clear that we've improved the business from top to bottom. EBITDA is up. We reported a significant increase in adjusted EBITDA margin for the quarter from 24.4% last year to 32.1% this year. There's a lot of discipline behind those numbers starting with the revenue line. Our rental revenues outperformed the operating environment in the second quarter. Total non-residential construction spending, which includes both private and public construction was down 16.1% in April year-over-year and down 15.2% in May. And you compare that to our…

Thanks, Mike, and good morning to everyone. As usual, I'll give a little bit more detail on the financial results for the quarter and then I'll update our outlook for the remainder of the year. First, looking at our revenue performance, in the Rental line of business, as Mike said, this was a strong quarter for us. No revenue was down less than 1% in the quarter. And as you'd expect, it's about the interplay of fleet size, fleet utilization and rental rates. On the fleet side of things, the average size of our fleet was down by about 5% in the quarter compared to last year. But despite that smaller fleet, we were able to put more OEC on rent. OEC on rent for the quarter was actually up by 2% versus last year in the quarter So more OEC on rent, smaller fleet size, put them together and you get what was really impressive time utilization for the quarter. 65.4% is a record for the company in the second quarter. That's up 4.1 percentage points versus last year and as we look closer at that increase, we saw very nice improvement in certain key categories. Earthmoving equipment, for example, was particularly strong. The OEC on rent, dollars for earthmoving equipment for the quarter was up 11% compared to last year. So that helped drive that overall 2% improvement in OEC on rent. And we take heart from that because, as you know, earthmoving equipment tends to be earlier in the cycle when things are improving. While when we look at our rental rates, as Mike mentioned, we were down 2% year-over-year on rental rate. Although on a sequential basis, the second quarter was about flat with the first quarter of this year. As you look within that and…

[Operator Instructions] We'll take our first question from Henry Kirn with UBS.

Wondering if you could chat about rate improvement by equipment category and by geography?

Well, we don't have the specific geographies to outline it. What I would say is the way that we saw the levels of activity that I went through on in geography amount, which would be in Canada, particularly in northeast Canada, and then pockets where we saw the year-over-year improvement. That's kind of where you would land on where the rate improvements were seen. As far as categories, I don't necessarily know that we broken them down to specific categories, unless -- Bill, you got that?

We haven't talked, Henry, specifically about rate changes by categories. I think it's fair to say that the level of demand that we're seeing in some of the key categories would support higher rates. I'll stop there.

Is there any way to categorize or quantify the stimulus benefit in the quarter? And how much visibility do you have on the stimulus as we go into the back half of the year and into 2011?

Obviously, we've always said that as the stimulus dollars came forward and that projects started to break ground, the first area that we would see the benefit would be our Trench business, and that seems to be holding through. As you know, there's 32,000 projects that are related to the American Recovery Act [American Recovery and Reinvestment Act] that value $195 billion. 72% of those have been funded. It's broken down to various buckets, transportation, utilities, water infrastructure. Actually, the Trench segment alone is tracking, in pipeline alone, around 1,100 projects. They've got about 821 non-building projects, and they also have 153 projects that are non-residential that they're tracking. So as we go through -- the 194 projects are worth about $3 billion in value, and we estimate that we would generate somewhere around $3 million of revenue on those projects alone. It's coming. It has taken a while to come online, and we expect that to continue to go up from here and peak in 2011. I hope that I answered your question.

Could you chat about if the competitive dynamic stay as where the outset of the cycle held, how the nationwide competition looks compared to either a couple of years ago or at the outset of the last cycle?

Well, I mean obviously, as you know, and this has been a very, very stressful downturn for the industry. Rates have come down and some of the regional players, as we all expected, felt the brunt of it. I would tell you that as we go forward, we're seeing the volume increase that we experienced in the second quarter. My sense is that our competitors will respond as well. I think there's an inherent need of our industry to get a better return on this capital, and we all need to focus more acutely on rates, and I think that will play out over time. Again, we went through a bad cycle. We started to get our fleets right sized across all of the players, sold off a lot in last year. Used prices were affected. Used prices seem to rebound and continue to hold, as Bill mentioned and all the reports that we're seeing from Ralph's [ph] and others plus ourselves. And then we're now seeing volume increases or time utilization improvements, which is the sequence that we said would play out is holding through. So my sense is it's still competitive out there, and there's pockets where we fight everyday. It's not easy, I understand that, and we all have to go out there and try to earn the best dollar we can.

Our next question comes from Scott Schneeberger with Oppenheimer. Scott Schneeberger - Oppenheimer & Co. Inc.: Bill, do you have a rule of thumb for incremental margin or flow through for each of additional dollar of rental revenue? Is there a way we can think about that?

So as we talk about it internally, we generally talked about something like 70% flow through on the rental line. You'll note that the flow through on the improvement in the second quarter was better than that, and that reflects some of the cost actions that we've taken and the volume leverage that we're getting with improved OEC going on, on rent. But general, 70% kind of number, maybe 65% just to hedge a little bit, would be a general rule that you might use. Scott Schneeberger - Oppenheimer & Co. Inc.: With regard to CapEx, incremental CapEx spend decisions, how do you guys look at that? Could you speak a little bit to what it takes to maintain the fleet age, where you are with the fleet age, where you're comfortable going, where you've been historically with CapEx, just some color around that topic.

So 45 months today, and what we've said about this year is that we can see it going into the high 40s. So call it between 47 and 49, 48 if you insist on a point of estimate. What we said is that we don't feel uncomfortable at that level even though it's higher than the optimum range that we talked about historically. Historically, we've talked about a 35- to 45-month optimum range. But operating in the high 40s or even low 50s, even mid-50s would not impact our ability to generate revenue. We're very convinced of that. In fact, again, if you refer to Ralph's about the industry data, Ralph's would tell you that the average rental fleet is already north of 50 months in average age. So we feel comfortable with what we've got on the plate for this year. Next year, we haven't sat down and really nailed a view of where the fleet age is going to go next year. And so we'll certainly talk about it as we get further into our planning process for next year. What I will say is that as a rule of thumb, in order to maintain the size and the age of our fleet constant through a course of a year, we would have to spend about $575 million gross rental CapEx. And obviously, the net would be less than that as you assume some reasonable amount of new sales, so $575 million gross to keep age and size constant across the year. And that will inform how we think about our spend is going forward. Scott Schneeberger - Oppenheimer & Co. Inc.: Could you update us on Industrial business, how that's developing? I think it's a 30% target mix, just how are all the dynamics are affecting mix and ratio?

Sure. This is Mike, Scott. Our industrial progress continues to march forward. If we take a look at the percentage, it's around 19%, up two percentage points on a year-over-year basis for the quarter. We continue to add more contracts. As I mentioned in our National Accounts, 40% of our signed National Accounts are industrial related. It takes a while to ramp those up, very happy with that. Our rental revenue alone is up 3.5%. So we continue to march forward, and very happy with our progress. We're earning more business everyday. And as Bill mentioned on the capital, you can imagine more some of the capitals going for these longer-term profitable deals, and we're going to react to those.

Our next question comes from Seth Weber with RBC Capital Markets.

Actually, just to clarify what you just said Mike, did you say that the industrial rental revenues were up 3.5% for the quarter?

Yes, year-over-year, from Q2 '09 to Q2 '10.

And is that the same, or the National Accounts up as well?

Our National Accounts, collectively, are up 6%.

On the pricing, I think last quarter, you gave some monthly visibility to how the numbers trended through the quarter. I'm wondering if you'd be willing to do that this quarter for April, May, June. Really, what I'm trying to understand is, did June turned positive? I think March ended up -- it was kind of down 4% or so, 4.5%.

So last quarter, we gave the monthly year-over-year changes, so I'll just repeat that. For April, year-over-year, April was down 2.6%. May was down 1.8%. June was down 1.1%.

And you said trends have continued into July then?

My comment was about the sequential trends in July, but I think it's fair to say that July is doing well. The problem with July on a year-over-year comparison is last year, July was a blowout month in terms of year-over-year positive. It was up last year, so the comp is covered [ph]. So tune in three months from now, you can ask me about the three months and the third quarter, and we can talk about July then, especially since it'll be done then instead of 2/3 from now.

But just directionally, I assume you'd expect to see the same sequential margin improvement that you usually see in the Rental business from the second quarter to the third quarter. Is that fair?

I don't see anything that would keep us from having a normal sequential margin improvement in the third quarter.

Just switching over, your aerial utilization is actually up, I think up to 70% or so this quarter. How high can you really push that? I mean, it sound like you're not drawing a lot of CapEx at that space, but your time utilization is over 70% for Booms and Lifts. So what's the kind of the trigger point there?

I mean, obviously, Seth, we can run aerial at a higher time utilization. Yes, it's up and it's expected, what you see in the seasonal aspect of the business. Also keep in mind that we have also had de-fleeting, and we're changing our mix. And if you see the investor presentation, it's down a couple of points. The capital that we're spending year-to-date, as Bill mentioned, year-to-date, we've only spent 21% of our CapEx towards aerial. The rest is going to our other product lines. Our time utilization, to answer your question specifically, I find it unusual to get it into the 80s. It's challenging, but it's not unusual. It'll peak out over the course of the third quarter. So I wouldn't be surprised to see that go up a little bit as we went through into the third quarter. Having said that, there are pockets. As Bill mentioned, bigger booms, higher demand, then some of the other products that are related towards commercial construction, small scissor lifts and bigger scissor lifts towards big box. So it's a balancing act.

Last quarter, you gave us, I think you called out $10 million of the CapEx was dedicated to strategic opportunities. Is it possible to clarify how much of this extra $60 million is going towards the strategics?

Yes, I think it's fair to say -- well, first, the extra $60 million is across the entire year. But at least half, let's just say at least half of the incremental spend is against specific strategic customers or projects that we've identified.

Our next question comes from David Wells with Thompson Research.

First off, just looking at the expectations that you've outlined previously for kind of a cyclical peak number of a 40% EBITDA margin, given the performance that you've seen out of the business in the quarter and the recovery in margins, how are you thinking about that number now, relative to where you were thinking about it two, three months ago?

We still feel very comfortable that we can achieve a 40% EBITDA margin. After this quarter, I guess I'd say, there's some uncertainty around some of the assumptions underneath that 40% cyclical number. We feel less uncertain about some of those assumptions. For example, remember, we said that number assumes a 67% utilization across the whole year. Well, we just delivered a great second quarter, and that gives us more confidence in our ability to hit a full year 67%. So we feel very comfortable with the 40%, and we feel more comfortable today than we did when we first put it out.

And then just coming back to an earlier question about stimulus-related projects, given the number of projects that you're tracking, and I believe it's something around $100 billion of construction spend that's not tied to highway specifically, do you feel like those projects alone could offset any continued increases in your kind of more traditional commercial forms of non-res [non-residential] construction as we go into the 2011 time period?

It's really hard to pinpoint that, David. The question of timing, the timing of when these projects start, how they start. Certainly, it's value-added, and we'll take it to offset any of the declines that we've seen in the primary end market but it's really hard to quantify it in that form.

And then on the National Account front within the new accounts that you're signing, any sense -- are these National Accounts signing a national agreement for the first time with United Rentals, or are you picking up shares from other competitors that maybe have faltered here in the downturn? Any sense of where the business is coming from?

It's coming from both. We're taking some people have faltered, some people are looking at more streamlined and larger players versus the smaller players. We have capital to go after some of these projects with them, and the consistency levels of service that we're providing for them. And I will also say the success we're having with a single point of contact, so it's both.

I noticed in the presentation posted that you had upped your expectation for the permanency of your cost savings from 50%-ish, kind of a 50% range to 55%. What changed as you looked at those costs that you have taken out? Is it kind of the systems that you put into place that you feel like you can keep some of those cost out of the business? Any color there would be helpful.

You're catching me at a little bit of a disadvantage. Did we change the timeframe over the phase?

No, it's 55%, David. It's the same number we had before. It's 55%, and it was still holding through.

I think at one point, we were saying about 50% and as we sharpened the precision around some of the numbers, I think we settled around 55%.

Our next question comes from Chris Doherty with Oppenheimer.

Just a question in terms of the fleet size and your expectations for value. You upped the CapEx guidance, but in terms of talking about target utilization, you're still quite below that 67% plus, is the expectation that you're going to maintain the fleet size and focus more on driving rental rates at this point?

Well, I think it's a combination of both, one of which is accounts that we're signing, which will provide us with longer-term duration, we want to make sure that we have the fleet in order to achieve their expectations, that's one. But obviously, yes, we want to get rates up. I mean, the rates is first and foremost on my mind, and anyone of my senior managers, the first thing on their mind as well. Are they looking for more capital? Absolutely. Are we giving it to them? No. We're going to be very selective and have a lot of discipline around where we spend our capital and how we spend our capital. So everyday, we're fighting on rate, and we're going to continue to march towards that number.

Chris, just to put it, your question kind of framed in the context of the 67% utilization goal, if you will. And I think it's fair to say that in the context of that analysis we did for the peak EBITDA margin performance, we did remember -- assume that the fleet size will increase over that time horizon, whatever it is. But we assume that it would do so in context with rates going up as well. And so that was the exercise that we went through then. As we look at what we're doing today and in the near term, it's everything that Mike just said. We want to make sure that we're making decisions about the fleet size that support our ability to drive rate, to drive utilization, to drive return, and we're going to be looking at that everywhere.

And then so in terms of the operating leverage in the business, when do you think you have or have you achieved sort of the run rate cost savings? And I think you sort of brought this up, but I mean, one of the things I was impressed with this quarter was if you look quarter-over-quarter, implied volume was up about 16%, but yet your rental cost only increased by $3 million or 1% quarter-over-quarter which I think is a pretty good operating leverage metric when things are improving. Was there some additional cost cuts quarter-over-quarter?

Yes, I mean, we continue to look at opportunities. And so quarter-over-quarter, we had more headcount reductions, and we had a greater focus on making sure that we're optimizing around our delivery processes. We just continue to challenge ourselves everywhere possible. I think we'll continue to do that, and I think there's opportunity on the cost to rent areas to do more of that as we go forward. Obviously, I always caveat the volume component as to how it impacts our total cost dollars. But in terms of the impact on margin, better volume is going to flow through to better margin for us as long as we're sensible about managing the cost structure. So we're doing the normal things that we do. It had a very nice impact in the second quarter. We're looking for opportunities to keep driving it going forward.

And then just one last question and it relates to sort of the guidance where you increased the net CapEx of rental by $60 million but you maintained free cash flow. Are you getting terms on that, or is there some working capital that benefits there, given that you've now increased the usage of cash by $60 million? Or is that just an improvement in EBITDA, your expectations for EBITDA, Bill?

I guess I have to say the words, it's certainly mostly an improvement in EBITDA. Some of that gets eaten up with the additional working capital, but there's an improvement in EBITDA, implicit in what we said.

Our next question comes from Emily Shanks with Barclays Capital.

Just if I could start with a quick housekeeping item, for the affirmed guidance of $200 million to $225 million of free cash flow, that includes the $55 million federal tax refund, right?

Yes, it does.

Yes.

And then Mike, in some of your opening comments, you had commented how the tight credit markets are helping demand for your business. I was curious what your view was around tight credit market potential impact on residual values going forward.

I haven't looked at it from that perspective, to be quite honest with you. What we look at is there is still a viable used market out there. I don't know where it's impacted. We've gone through tight credit market before, and I haven't seen it where it is impacted. The residual values, I think that if the contractor doesn't have the credit and you see an expansion in the secular side of the business, there's going to be an inherent demand for rental companies to probably add more fleet. Not everyone adds new fleet. A lot of the smaller localized will go to the used market. So I think it will still be a very robust market. Keep in mind that 60% of everything that manufactured still went into ownership. So we're just getting a bigger slice of that pie.

I think about it very simply. If credits' tight and people can't find financing to buy their own equipment, then that means that they're going to be demanding our equipment and there's going to be less used on the market, and that should support residual values overall. So I hadn't thought about it. I'm like Mike, I haven't thought about it from a prospective of residual values, but I could very quickly convince myself that that's not something I'd be concerned about.

I just wanted to ask, and this is maybe a question for Bill, around the Canadian inter-loan cash movement. I just wanted to understand the 160-ish million that moved, was that the cash that was used for the open-market repurchases of the bond? And then secondarily, can we still look at that $55 million intercompany receivable between URNA and URI as the amount that you can use towards future bond repurchases, or should we be looking at another bucket? I wasn't sure how the two are related.

The intercompany loan, Canada to U.S., I think you should think about it separately, then the intercompany loan, URI to URNA. The intercompany loan from Canada to the U.S. is strictly a cash management move where we bring the money back into the U.S. temporarily to keep the average balance of our ABL down and certainly, that continues. We'll continue to manage that within the rules set out by the tax authorities. In terms of thinking, and we did not use any of that cash directly from the intercompany Canadian U.S. loan to repurchase the subnotes that we repurchased in the second quarter. On the subnote repurchases, that was done out of URI. It used part of the cash capacity at URI to execute those, and we had to because of the limitations on our restricted payments basket that arises out of various debt facilities. We used roughly $24 million, $25 million of that cash capacity. At the end of the quarter, if you look in the Q and the guarantor statements, you'll see that, that cash capacity stood at about $55 million at the end of the quarter, and so that's what we have available to make further repurchases. A very confusing topic, I hope I cleared it up for you.

Our next question comes from Philip Volpicelli with Deutsche Bank.

My question is with regard to acquisitions. Clearly, some of the smaller competitors out there are probably facing Chapter 11 or Chapter 7. Are there any fleets out there available for sale that you can pick up at a discount and maybe refurbish? And then I guess as a corollary to that would be in terms of the OEMs, do they have any equipment they've purchased in the open market and have refurbished that might be available to you?

The answer is yes. We go out and we buy used equipment on the open market, and we're not partial to [ph] whether its vendors or going to auction, picking things up. So yes, we've taken opportunities to go out there and buy assets. We continue to do that. Our fleet management team is always looking at what's available out there. So yes, we do take a look at it from an acquisition standpoint. Keep in mind, that usually when companies get distressed, the first thing that they fault around is their services. So we're very cautious to make sure if it's the right asset.

And in terms with, I guess, your outlook brightening a little bit and still some free cash flow are strong for your cash flow generation, are you looking to make in tuck-in acquisitions or would you consider a larger acquisition?

I think that we always get that question. So the caution is around -- this is a company that as you know, was founded on acquisitions, and grew up in that era. It has to be strategic, whether it's large or small or medium. It has to be strategic with our long-term vision, and that is expanding our geographic -- our diversity around our customer mix. We just don't need to add more physical locations. We don't need to add it to every market. We're in 99 in the 100 markets with the exception of Hawaii. It has to be strategic. Are we open to it? Yes, we'll always look at it. But again, the discipline around is making sure it is our longer term strategy.

With regard to maintenance expenses, is there kind of like a cliff where if equipment gets above a certain average age that, that maintenance goes up dramatically? Or maybe as a different way, can you give us a sense of as month, the fleet gets older, whether that equates to in more maintenance cost?

To your first question, there's not a cliff. It is not a point where it dramatically rises. What we think about is, as a rule of thumb, something like an incremental $2 million to $3 million a year for an extra month of age on the fleet. So a month maintained over a year will cost you another $2 million to $3 million of incremental R&M. That number does arise a little bit as you get older, but it's not like it goes to 10 to 12, as you go from 45 to 50 months, say.

Thank you. This concludes today's Q&A session. I'd like to turn it back to our speakers for any closing remarks.

Thanks, operator. First of all, I want to thank everybody for joining us today. I also go back to wanting to thank all of the employees who are on the call listening to us today as well for their hard work and the production of numbers that we produced on the second quarter. Our investor presentation has been updated on our website and it reflects our latest numbers. So please visit and download. And as always, you're welcome giving us a call, get a hold Fred, so if any additional questions or comments you'd like to share with us. Thank you very much and have a great day.

This concludes today's conference call. You may disconnect at anytime. Thank you for joining us, and enjoy the rest of your day.