|United Rental is the world's largest equipment rental company. (Photo courtesy of United Rentals Inc.)|
A top executive at United Rentals Inc., the worlds largest equipment rental company, has less than one month to answer to alleged accounting errors. The ultimatum came almost a year after the company announced that it was "cooperating" with a U.S. Securities and Exchange Commission probe.
John N. Milne, president and CFO of the Greenwich, Conn.-based equipment supplier, "failed to perform his duties" after refusing to answer recent boardroom questions related to the pending SEC inquiry. A special board committee recently found evidence that equipment "sale-leaseback" transactions were wrongfully posted as profit, the company said on July 14.
United board members say the newfound clues "suggest" that the accounting "for at least some of these transactions" was incorrect. Directors gave Milne 30 days to discuss the alleged errors or face termination. The company filed a report with the SEC on July 15, reiterating the ultimatum.
In addition, United says it plans to restate its finances from 2000 to 2004. The rental firm's self-insurance reserves were reported as "too high in 2003 and 2004" and "too low" in prior years. The changes are expected to raise pre-tax income for 2003 and 2004, but lower income for earlier years.
The massive rental company operates in the U.S., Canada and Mexico. It owns a fleet of construction equipment costing $3.7 billion. Unlike other firms, United does not report its fleet replacement value.
SEC launched an inquiry into Uniteds accounting methods last summer (ENR 10/18/04 p. 16). Shareholders filed lawsuits against the company, alleging that its executives overvalued company assets to pump up its stock price. Milne, who also is the firm's chief acquisition officer, founded United Rentals in 1997 with Chairman Bradley S. Jacobs.
In the midst of the accounting troubles, United remains optimistic about the equipment business. CEO Wayland R. Hicks says he expects the company to top $3.4 billion in revenue by year-end. "We are working to resolve outstanding issues and file our financial statements as soon as possible," he says.
United estimates last year's revenue at $3.11 billion. The company reports selling $732 million in equipment rentals during the first quarter of this year, a 13.5% annual increase. Higher rental rates, up 9.7% since last year, helped push up sales.