Exhibit 99.1
United Rentals, Inc.
100 First Stamford Place, Suite 700
Stamford, CT 06902
Telephone: 203 622 3131
unitedrentals.com
United Rentals Announces Record Third Quarter Results
Raises 2022 Guidance for Revenue, Adjusted EBITDA1 and Capital Spending
Announces New $1.25 Billion Share Repurchase Program
STAMFORD, Conn. – October 26, 2022 – United Rentals, Inc. (NYSE: URI) today announced financial results for the third quarter of 2022 and raised its full-year guidance for total revenue, adjusted EBITDA, and gross and net rental capital spending.
Third Quarter 2022 Highlights
•Total revenue of $3.051 billion, including rental revenue2 of $2.732 billion.
•Fleet productivity3 increased 8.9% year-over-year.
•Net income of $606 million, at a margin4 of 19.9%. GAAP diluted earnings per share of $8.66, and adjusted EPS1 of $9.27.
•Adjusted EBITDA of $1.521 billion, at a margin4 of 49.9%.
•Year-to-date net cash provided by operating activities of $3.182 billion; free cash flow1 of $1.140 billion, including gross rental capital spending of $2.456 billion.
•Net leverage ratio5 of 1.9x, with total liquidity5 of $2.843 billion, at September 30, 2022.
CEO Comment
Matthew Flannery, chief executive officer of United Rentals, said, “Our strong third quarter results reflect the momentum we’ve sustained throughout this year, and particularly in our busiest season. Once again, our team did an outstanding job meeting customer needs safely and efficiently as we continued to lean into growth. We’re guiding to higher full year revenue and adjusted EBITDA, as well as an increase in rental capex, based on the sustained demand we see in our end-markets and the strength of our core rental results.”
Flannery continued, “While there are clearly cross-currents in the economy, virtually all key non-residential construction indicators remain encouraging, including customer sentiment. In addition, we see substantial opportunities next year across federally funded infrastructure projects, industrial manufacturing, energy and power. We expect to deliver another year of profitable growth, strong cash flow, and attractive returns for our shareholders.”
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1.Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted EPS (earnings per share) and free cash flow are non-GAAP measures as defined in the tables below. See the tables below for reconciliations to the most comparable GAAP measures. Information reconciling forward-looking adjusted EBITDA to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below.
2.Rental revenue includes owned equipment rental revenue, re-rent revenue and ancillary revenue.
3.Fleet productivity reflects the combined impact of changes in rental rates, time utilization and mix on owned equipment rental revenue. See the table below for more information.
4.Net income margin and adjusted EBITDA margin represent net income or adjusted EBITDA divided by total revenue.
5.The net leverage ratio reflects net debt (total debt less cash and cash equivalents) divided by adjusted EBITDA for the trailing 12 months. Total liquidity reflects cash and cash equivalents plus availability under the asset-based revolving credit facility (“ABL facility”) and the accounts receivable securitization facility.
Updated 2022 Outlook
The company has updated its 2022 outlook as shown below.
| Current Outlook | Prior Outlook | ||||||||||
| Total revenue | $11.5 billion to $11.7 billion | $11.4 billion to $11.7 billion | |||||||||
Adjusted EBITDA6 | $5.5 billion to $5.6 billion | $5.4 billion to $5.55 billion | |||||||||
| Net rental capital expenditures after gross purchases | $2.25 billion to $2.45 billion, after gross purchases of $3.25 billion to $3.45 billion | $1.85 billion to $2.05 billion, after gross purchases of $2.9 billion to $3.1 billion | |||||||||
| Net cash provided by operating activities | $4.05 billion to $4.4 billion | $3.85 billion to $4.25 billion | |||||||||
| Free cash flow (excluding the impact of merger and restructuring related payments) | $1.6 billion to $1.8 billion | $1.85 billion to $2.05 billion | |||||||||
Summary of Third Quarter 2022 Financial Results
•Rental revenue for the quarter was $2.732 billion, reflecting an increase of 20.0% year-over-year, and establishing a third quarter record. The increase reflects the broad-based strength of demand across the end-markets served by the company. Year-over-year, fleet productivity increased 8.9% while average original equipment at cost (“OEC”) increased 10.6%.
•Used equipment sales in the quarter decreased 1.1% year-over-year. These sales generated $181 million of proceeds at a GAAP gross margin of 61.9% and an adjusted gross margin7 of 64.6%; this compares with $183 million at a GAAP gross margin of 45.9% and an adjusted gross margin of 50.3% for the same period last year. The gross margin increases were primarily due to higher pricing on used equipment sales.
•Net income for the quarter increased 48.2% year-over-year to a third quarter record of $606 million, while net income margin increased 410 basis points to 19.9%, which was also a third quarter record. The improvements primarily reflected higher gross margins from rental revenue and used equipment sales, reductions in selling, general and administrative ("SG&A") expense and non-rental depreciation and amortization as a percentage of revenue, and lower net interest expense, which included the impact of $30 million of debt redemption losses in the third quarter of 2021. While these items were partially offset by higher income tax expense as a percentage of revenue, the effective income tax rate of 25.7% was largely flat year-over-year.
•Adjusted EBITDA for the quarter increased 23.4% year-over-year to a third quarter record of $1.521 billion, while adjusted EBITDA margin increased 240 basis points to 49.9%. The increase in adjusted EBITDA margin primarily reflected a 40 basis point increase in rental margin (excluding depreciation), a 14.3 percentage point increase in adjusted gross margin from used equipment sales, reduced SG&A expense as a percentage of revenue and revenue mix benefits.
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6.Information reconciling forward-looking adjusted EBITDA to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below.
7.Used equipment sales adjusted gross margin excludes the impact of the fair value mark-up of fleet acquired in certain major acquisitions that was subsequently sold, as explained further in the tables below.
•General rentals segment had an 18.7% year-over-year increase in rental revenue to a third quarter record of $1.942 billion. Rental gross margin increased by 130 basis points to 41.0%, primarily due to better fixed cost absorption on higher revenue.
•Specialty rentals segment rental revenue increased 23.2% year-over-year to a third quarter record of $790 million. Rental gross margin increased by 70 basis points to 52.2%, primarily due to better fixed cost absorption on higher revenue, partially offset by a higher proportion of revenue from certain lower margin ancillary fees in 2022 versus the prior year.
•Cash flow from operating activities increased 5.3% year-over-year to $3.182 billion for the first nine months of 2022, and free cash flow, including aggregated merger and restructuring payments, decreased 9.1% to $1.140 billion. The decrease in free cash flow was mainly due to higher net rental capital expenditures (purchases of rental equipment less proceeds from sales of rental equipment), which increased $236 million, and increased purchases of non-rental equipment, partially offset by higher net cash from operating activities.
•Capital management. The company's net leverage ratio was 1.9x at September 30, 2022, as compared to 2.2x at December 31, 2021. Year-to-date through September 30, 2022, the company has executed the following capital management transactions: 1) repurchased $1 billion of common stock, completing the repurchase program that commenced in the first quarter of 2022, 2) redeemed $500 million principal amount of its 5 1/2 percent Senior Notes due 2027, 3) amended and extended its ABL facility, increasing its size by $500 million to $4.25 billion and extending its expiration to June 2027, 4) amended and extended its accounts receivable securitization facility, increasing its size by $200 million to $1.1 billion and extending its expiration to June 2024 and 5) entered into an uncommitted short-term financing facility8 pursuant to which it may borrow up to $100 million.
•Total liquidity was $2.843 billion as of September 30, 2022, including $76 million of cash and cash equivalents.
•Return on invested capital (ROIC)9 increased 270 basis points year-over-year, and 70 basis points sequentially, to a record 12.2% for the 12 months ended September 30, 2022. The year-over-year and sequential increases in ROIC were primarily due to increased after-tax operating income.
Share Repurchase Program
On October 24, 2022, the company's Board of Directors authorized a new $1.25 billion share repurchase program which is expected to commence in the fourth quarter of 2022 and be completed by the end of 2023. The new program follows the company’s prior $1.0 billion program that was completed during the third quarter of 2022.
Conference Call
United Rentals will hold a conference call tomorrow, Thursday, October 27, 2022, at 11:00 a.m. Eastern Time. The conference call number is 800-343-1703 (international: 203-518-9859). The replay number for the call is 402-220-6093. The passcode for both the conference call and replay is 37954. The conference call will also be available live by audio webcast at unitedrentals.com, where it will be archived until the next earnings call.
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8.The company’s Form 10-Q for the quarter ended September 30, 2022 filed with the SEC includes a discussion of this facility, which is referred to therein as the "Repurchase Facility."
9.The company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by average stockholders’ equity, debt and deferred taxes, net of average cash. To mitigate the volatility related to fluctuations in the company’s tax rate from period to period, the U.S. federal corporate statutory tax rate of 21% was used to calculate after-tax operating income.
Non-GAAP Measures
Free cash flow, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, and adjusted earnings per share (adjusted EPS) are non-GAAP financial measures as defined under the rules of the SEC. Free cash flow represents net cash provided by operating activities less purchases of, and plus proceeds from, equipment and intangible assets. The equipment and intangible asset purchases and proceeds represent cash flows from investing activities. EBITDA represents the sum of net income, provision for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the merger related costs, restructuring charges, stock compensation expense, net, and the impact of the fair value mark-up of acquired fleet. Adjusted EPS represents EPS plus the sum of the merger related costs, restructuring charges, the impact on depreciation related to acquired fleet and property and equipment, the impact of the fair value mark-up of acquired fleet, merger related intangible asset amortization, asset impairment charge and loss on repurchase/redemption of debt securities. The company believes that: (i) free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements; (ii) EBITDA and adjusted EBITDA provide useful information about operating performance and period-over-period growth, and help investors gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced; and (iii) adjusted EPS provides useful information concerning future profitability. However, none of these measures should be considered as alternatives to net income, cash flows from operating activities or earnings per share under GAAP as indicators of operating performance or liquidity.
Information reconciling forward-looking adjusted EBITDA to GAAP financial measures is unavailable to the company without unreasonable effort. The company is not able to provide reconciliations of adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of the company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Preparation of such reconciliations would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to the company without unreasonable effort. The company provides a range for its adjusted EBITDA forecast that it believes will be achieved, however it cannot accurately predict all the components of the adjusted EBITDA calculation. The company provides an adjusted EBITDA forecast because it believes that adjusted EBITDA, when viewed with the company’s results under GAAP, provides useful information for the reasons noted above. However, adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in the world. The company has an integrated network of 1,343 rental locations in North America, 13 in Europe, 27 in Australia and 19 in New Zealand. In North America, the company operates in 49 states and every Canadian province. The company’s approximately 22,100 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers approximately 4,500 classes of equipment for rent with a total original cost of $17.43 billion. United Rentals is a member of the Standard & Poor’s 500 Index, the Barron’s 400 Index and the Russell 3000 Index® and is headquartered in Stamford, Conn. Additional information about United Rentals is available at unitedrentals.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. These statements can generally be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,” “plan,” “project,” “forecast,” “intend” or “anticipate,” or the negative thereof or comparable terminology, or by discussions of vision, strategy or outlook. These statements are based on current plans, estimates and projections, and, therefore, you should not place undue reliance on them. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Factors that could cause actual results to differ materially from those projected include, but are not limited to, the following: (1) the cyclical nature of our business, which is highly sensitive to North American construction and industrial activities; if construction or industrial activity decline, our revenues and, because many of our costs are fixed, our profitability may be adversely affected; (2) the impact of global economic conditions (including inflation, increased interest rates, supply chain constraints, potential trade wars and sanctions and other measures imposed in response to the ongoing conflict in Ukraine) and public health crises and epidemics, such as the coronavirus (COVID-19), on us, our customers and our suppliers, in the United States and the rest of the world; (3) uncertainty regarding the ongoing impact of existing and emerging variant strains of COVID-19 on global economic conditions, and regarding the length of time it will take for the COVID-19 pandemic to ultimately subside or become viewed as endemic. Uncertainty remains regarding the effectiveness of vaccines against COVID-19 (including against emerging variant strains), and the time it will take for the pandemic to subside will also be impacted by measures that may in the future be implemented to protect public health; (4) rates we charge and time utilization we achieve being less than anticipated; (5) excess fleet in the equipment rental industry; (6) inability to benefit from government spending, including spending associated with infrastructure projects; (7) trends in oil and natural gas, including significant increases in the prices of oil or natural gas, could adversely affect the demand for our services and products; (8) competition from existing and new competitors; (9) costs we incur being more than anticipated, including as a result of inflation, and the inability to realize expected savings in the amounts or time frames planned; (10) our significant indebtedness, which requires us to use a substantial portion of our cash flow for debt service and can constrain our flexibility in responding to unanticipated or adverse business conditions; (11) the inability to refinance our indebtedness on terms that are favorable to us, including as a result of volatility and uncertainty in capital markets or increases in interest rates, or at all; (12) the incurrence of additional debt, which could exacerbate the risks associated with our current level of indebtedness; (13) noncompliance with financial or other covenants in our debt agreements, which could result in our lenders terminating the agreements and requiring us to repay outstanding borrowings; (14) restrictive covenants and amount of borrowings permitted in our debt instruments, which can limit our financial and operational flexibility; (15) inability to access the capital that our businesses or growth plans may require, including as a result of uncertainty in capital or other financial markets; (16) the possibility that companies that we have acquired or may acquire could have undiscovered liabilities or involve other unexpected costs, may strain our management capabilities or may be difficult to integrate; (17) the incurrence of impairment charges; (18) fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated; (19) our charter provisions as well as provisions of certain debt agreements and our significant indebtedness may have the effect of making more difficult or otherwise discouraging, delaying or deterring a takeover or other change of control of us; (20) inability to manage credit risk adequately or to collect on contracts with a large number of customers; (21) turnover in our management team and inability to attract and retain key personnel, as well as loss, absenteeism or the inability of employees to work or perform key functions in light of public health crises or epidemics (including COVID-19); (22) inability to obtain equipment and other supplies for our business from our key suppliers on acceptable terms or at all, as a result of supply chain disruptions, insolvency, financial difficulties or other factors; (23) increases in our maintenance and replacement costs and/or decreases in the residual value of our equipment; (24) inability to sell our new or used fleet in the amounts, or at the prices, we expect; (25) risks related to security breaches, cybersecurity attacks, failure to protect personal information, compliance with data protection laws and other significant disruptions in our information technology systems; (26) risks related to climate change and climate change regulation; (27) risks related to our ability to meet our environmental and social goals, including our greenhouse gas intensity reduction goal; (28) the fact that our holding company structure requires us to depend in part on distributions from subsidiaries and such distributions could be limited by contractual or legal restrictions; (29) shortfalls in our insurance coverage; (30) increases in our loss reserves to address business operations or other claims and any claims that exceed our established levels of reserves; (31) incurrence of additional expenses (including indemnification obligations) and other costs in connection with litigation, regulatory and investigatory matters; (32) the costs of complying with environmental, safety and foreign laws and regulations, as well as other risks associated with non-U.S. operations, including currency exchange risk, and tariffs; (33) the outcome or other potential consequences of regulatory matters and commercial litigation; (34) labor shortages and/or disputes, work stoppages or other labor difficulties, which may impact our productivity, and potential enactment of new legislation or other changes in law affecting our labor relations or operations generally; and (35) the effect of changes in tax law.
For a more complete description of these and other possible risks and uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2021, as well as to our subsequent filings with the SEC. The forward-looking statements contained herein speak only as of the date hereof, and we make 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.
# # #
Contact:
Ted Grace
(203) 618-7122
Cell: (203) 399-8951
tgrace@ur.com
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In millions, except per share amounts)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Equipment rentals | $ | 2,732 | $ | 2,277 | $ | 7,369 | $ | 5,895 | |||||||||||||||
| Sales of rental equipment | 181 | 183 | 556 | 644 | |||||||||||||||||||
| Sales of new equipment | 32 | 47 | 115 | 153 | |||||||||||||||||||
| Contractor supplies sales | 32 | 29 | 94 | 80 | |||||||||||||||||||
| Service and other revenues | 74 | 60 | 212 | 168 | |||||||||||||||||||
| Total revenues | 3,051 | 2,596 | 8,346 | 6,940 | |||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Cost of equipment rentals, excluding depreciation | 1,053 | 886 | 2,961 | 2,416 | |||||||||||||||||||
| Depreciation of rental equipment | 470 | 412 | 1,362 | 1,172 | |||||||||||||||||||
| Cost of rental equipment sales | 69 | 99 | 231 | 373 | |||||||||||||||||||
| Cost of new equipment sales | 25 | 38 | 93 | 128 | |||||||||||||||||||
| Cost of contractor supplies sales | 23 | 21 | 66 | 57 | |||||||||||||||||||
| Cost of service and other revenues | 45 | 37 | 125 | 102 | |||||||||||||||||||
| Total cost of revenues | 1,685 | 1,493 | 4,838 | 4,248 | |||||||||||||||||||
| Gross profit | 1,366 | 1,103 | 3,508 | 2,692 | |||||||||||||||||||
| Selling, general and administrative expenses | 356 | 326 | 1,022 | 877 | |||||||||||||||||||
| Merger related costs | — | — | — | 3 | |||||||||||||||||||
| Restructuring charge | (1) | — | — | 1 | |||||||||||||||||||
| Non-rental depreciation and amortization | 90 | 98 | 278 | 279 | |||||||||||||||||||
| Operating income | 921 | 679 | 2,208 | 1,532 | |||||||||||||||||||
| Interest expense, net | 106 | 132 | 313 | 331 | |||||||||||||||||||
| Other income, net | (1) | (3) | (12) | (1) | |||||||||||||||||||
| Income before provision for income taxes | 816 | 550 | 1,907 | 1,202 | |||||||||||||||||||
| Provision for income taxes | 210 | 141 | 441 | 297 | |||||||||||||||||||
| Net income | $ | 606 | $ | 409 | $ | 1,466 | $ | 905 | |||||||||||||||
| Diluted earnings per share | $ | 8.66 | $ | 5.63 | $ | 20.56 | $ | 12.45 | |||||||||||||||
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions)
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 76 | $ | 144 | |||||||
| Accounts receivable, net | 1,934 | 1,677 | |||||||||
| Inventory | 193 | 164 | |||||||||
| Prepaid expenses and other assets | 124 | 166 | |||||||||
| Total current assets | 2,327 | 2,151 | |||||||||
| Rental equipment, net | 11,553 | 10,560 | |||||||||
| Property and equipment, net | 648 | 612 | |||||||||
| Goodwill | 5,543 | 5,528 | |||||||||
| Other intangible assets, net | 500 | 615 | |||||||||
| Operating lease right-of-use assets | 801 | 784 | |||||||||
| Other long-term assets | 47 | 42 | |||||||||
| Total assets | $ | 21,419 | $ | 20,292 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Short-term debt and current maturities of long-term debt | $ | 156 | $ | 906 | |||||||
| Accounts payable | 1,136 | 816 | |||||||||
| Accrued expenses and other liabilities | 972 | 881 | |||||||||
| Total current liabilities | 2,264 | 2,603 | |||||||||
| Long-term debt | 9,754 | 8,779 | |||||||||
| Deferred taxes | 2,263 | 2,154 | |||||||||
| Operating lease liabilities | 630 | 621 | |||||||||
| Other long-term liabilities | 155 | 144 | |||||||||
| Total liabilities | 15,066 | 14,301 | |||||||||
| Common stock | 1 | 1 | |||||||||
| Additional paid-in capital | 2,604 | 2,567 | |||||||||
| Retained earnings | 9,017 | 7,551 | |||||||||
| Treasury stock | (4,957) | (3,957) | |||||||||
| Accumulated other comprehensive loss | (312) | (171) | |||||||||
| Total stockholders’ equity | 6,353 | 5,991 | |||||||||
| Total liabilities and stockholders’ equity | $ | 21,419 | $ | 20,292 | |||||||
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Cash Flows From Operating Activities: | |||||||||||||||||||||||
| Net income | $ | 606 | $ | 409 | $ | 1,466 | $ | 905 | |||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | 560 | 510 | 1,640 | 1,451 | |||||||||||||||||||
| Amortization of deferred financing costs and original issue discounts | 3 | 3 | 9 | 9 | |||||||||||||||||||
| Gain on sales of rental equipment | (112) | (84) | (325) | (271) | |||||||||||||||||||
| Gain on sales of non-rental equipment | (2) | (2) | (6) | (6) | |||||||||||||||||||
| Insurance proceeds from damaged equipment | (8) | (5) | (25) | (19) | |||||||||||||||||||
| Stock compensation expense, net | 35 | 33 | 95 | 89 | |||||||||||||||||||
| Merger related costs | — | — | — | 3 | |||||||||||||||||||
| Restructuring charge | (1) | — | — | 1 | |||||||||||||||||||
| Loss on repurchase/redemption of debt securities | — | 30 | 17 | 30 | |||||||||||||||||||
| Increase in deferred taxes | 66 | 84 | 130 | 157 | |||||||||||||||||||
| Changes in operating assets and liabilities, net of amounts acquired: | |||||||||||||||||||||||
| Increase in accounts receivable | (202) | (206) | (261) | (224) | |||||||||||||||||||
| Decrease (increase) in inventory | 3 | 6 | (33) | 8 | |||||||||||||||||||
| Decrease in prepaid expenses and other assets | 31 | 96 | 70 | 306 | |||||||||||||||||||
| Increase in accounts payable | 81 | 163 | 332 | 548 | |||||||||||||||||||
| Increase in accrued expenses and other liabilities | 82 | 50 | 73 | 34 | |||||||||||||||||||
| Net cash provided by operating activities | 1,142 | 1,087 | 3,182 | 3,021 | |||||||||||||||||||
| Cash Flows From Investing Activities: | |||||||||||||||||||||||
| Purchases of rental equipment | (1,102) | (1,100) | (2,456) | (2,308) | |||||||||||||||||||
| Purchases of non-rental equipment and intangible assets | (59) | (89) | (182) | (142) | |||||||||||||||||||
| Proceeds from sales of rental equipment | 181 | 183 | 556 | 644 | |||||||||||||||||||
| Proceeds from sales of non-rental equipment | 6 | 6 | 15 | 20 | |||||||||||||||||||
| Insurance proceeds from damaged equipment | 8 | 5 | 25 | 19 | |||||||||||||||||||
| Purchases of other companies, net of cash acquired | (11) | — | (323) | (1,435) | |||||||||||||||||||
| Purchases of investments | (1) | — | (5) | (1) | |||||||||||||||||||
| Net cash used in investing activities | (978) | (995) | (2,370) | (3,203) | |||||||||||||||||||
| Cash Flows From Financing Activities: | |||||||||||||||||||||||
| Proceeds from debt | 1,980 | 3,262 | 5,219 | 7,030 | |||||||||||||||||||
| Payments of debt | (1,893) | (3,356) | (5,026) | (6,694) | |||||||||||||||||||
| Payments of financing costs | — | (8) | (9) | (8) | |||||||||||||||||||
| Common stock repurchased, including tax withholdings for share based compensation (1) | (239) | (1) | (1,058) | (33) | |||||||||||||||||||
| Net cash (used in) provided by financing activities | (152) | (103) | (874) | 295 | |||||||||||||||||||
| Effect of foreign exchange rates | (4) | (5) | (6) | 5 | |||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 8 | (16) | (68) | 118 | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 68 | 336 | 144 | 202 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 76 | $ | 320 | $ | 76 | $ | 320 | |||||||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||||||||||||||
| Cash paid for income taxes, net | $ | 143 | $ | 43 | $ | 295 | $ | 151 | |||||||||||||||
| Cash paid for interest | 151 | 167 | 339 | 362 | |||||||||||||||||||
(1)See above for a discussion of our share repurchase program. The common stock repurchases include i) shares repurchased pursuant to the share repurchase program and ii) shares withheld to satisfy tax withholding obligations upon the vesting of restricted stock unit awards.
UNITED RENTALS, INC.
RENTAL REVENUE
Fleet productivity is a comprehensive metric that provides greater insight into the decisions made by our managers in support of growth and returns. Specifically, we seek to optimize the interplay of rental rates, time utilization and mix in driving rental revenue. Fleet productivity aggregates, in one metric, the impact of changes in rates, utilization and mix on owned equipment rental revenue.
We believe that this metric is useful in assessing the effectiveness of our decisions on rates, time utilization and mix, particularly as they support the creation of shareholder value. The table below shows the components of the year-over-year change in rental revenue using the fleet productivity methodology:
| Year-over-year change in average OEC | Assumed year-over-year inflation impact (1) | Fleet productivity (2) | Contribution from ancillary and re-rent revenue (3) | Total change in rental revenue | |||||||||||||||||||||||||
| Three Months Ended September 30, 2022 | 10.6% | (1.5)% | 8.9% | 2.0% | 20.0% | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | 13.4% | (1.5)% | 10.7% | 2.4% | 25.0% | ||||||||||||||||||||||||
Please refer to our Third Quarter 2022 Investor Presentation for additional detail on fleet productivity.
(1)Reflects the estimated impact of inflation on the revenue productivity of fleet based on OEC, which is recorded at cost.
(2)Reflects the combined impact of changes in rental rates, time utilization and mix on owned equipment rental revenue. Changes in customers, fleet, geographies and segments all contribute to changes in mix.
(3)Reflects the combined impact of changes in other types of equipment rental revenue: ancillary and re-rent (excludes owned equipment rental revenue).
UNITED RENTALS, INC.
SEGMENT PERFORMANCE
($ in millions)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||
| General Rentals | |||||||||||||||||||||||||||||||||||
| Reportable segment equipment rentals revenue | $1,942 | $1,636 | 18.7% | $5,322 | $4,375 | 21.6% | |||||||||||||||||||||||||||||
| Reportable segment equipment rentals gross profit | 797 | 649 | 22.8% | 2,063 | 1,586 | 30.1% | |||||||||||||||||||||||||||||
| Reportable segment equipment rentals gross margin | 41.0% | 39.7% | 130 bps | 38.8% | 36.3% | 250 bps | |||||||||||||||||||||||||||||
| Specialty | |||||||||||||||||||||||||||||||||||
| Reportable segment equipment rentals revenue | $790 | $641 | 23.2% | $2,047 | $1,520 | 34.7% | |||||||||||||||||||||||||||||
| Reportable segment equipment rentals gross profit | 412 | 330 | 24.8% | 983 | 721 | 36.3% | |||||||||||||||||||||||||||||
| Reportable segment equipment rentals gross margin | 52.2% | 51.5% | 70 bps | 48.0% | 47.4% | 60 bps | |||||||||||||||||||||||||||||
| Total United Rentals | |||||||||||||||||||||||||||||||||||
| Total equipment rentals revenue | $2,732 | $2,277 | 20.0% | $7,369 | $5,895 | 25.0% | |||||||||||||||||||||||||||||
| Total equipment rentals gross profit | 1,209 | 979 | 23.5% | 3,046 | 2,307 | 32.0% | |||||||||||||||||||||||||||||
| Total equipment rentals gross margin | 44.3% | 43.0% | 130 bps | 41.3% | 39.1% | 220 bps | |||||||||||||||||||||||||||||
UNITED RENTALS, INC.
DILUTED EARNINGS PER SHARE CALCULATION
(In millions, except per share data)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income available to common stockholders | $ | 606 | $ | 409 | $ | 1,466 | $ | 905 | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Denominator for basic earnings per share—weighted-average common shares | 69.9 | 72.5 | 71.1 | 72.4 | |||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Employee stock options | — | — | — | — | |||||||||||||||||||
| Restricted stock units | 0.2 | 0.2 | 0.2 | 0.3 | |||||||||||||||||||
| Denominator for diluted earnings per share—adjusted weighted-average common shares | 70.1 | 72.7 | 71.3 | 72.7 | |||||||||||||||||||
| Diluted earnings per share | $ | 8.66 | $ | 5.63 | $ | 20.56 | $ | 12.45 | |||||||||||||||
UNITED RENTALS, INC.
ADJUSTED EARNINGS PER SHARE GAAP RECONCILIATION
We define “earnings per share – adjusted” as the sum of earnings per share – GAAP, as-reported plus the impact of the following special items: merger related costs, merger related intangible asset amortization, impact on depreciation related to acquired fleet and property and equipment, impact of the fair value mark-up of acquired fleet, restructuring charge, asset impairment charge and loss on repurchase/redemption of debt securities. Management believes that earnings per share - adjusted provides useful information concerning future profitability. However, earnings per share - adjusted is not a measure of financial performance under GAAP. Accordingly, earnings per share - adjusted should not be considered an alternative to GAAP earnings per share. The table below provides a reconciliation between earnings per share – GAAP, as-reported, and earnings per share – adjusted.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Earnings per share - GAAP, as-reported | $ | 8.66 | $ | 5.63 | $ | 20.56 | $ | 12.45 | |||||||||||||||
| After-tax (1) impact of: | |||||||||||||||||||||||
| Merger related costs (2) | — | — | — | 0.03 | |||||||||||||||||||
| Merger related intangible asset amortization (3) | 0.44 | 0.53 | 1.39 | 1.50 | |||||||||||||||||||
| Impact on depreciation related to acquired fleet and property and equipment (4) | 0.12 | 0.01 | 0.48 | 0.04 | |||||||||||||||||||
| Impact of the fair value mark-up of acquired fleet (5) | 0.05 | 0.08 | 0.17 | 0.28 | |||||||||||||||||||
| Restructuring charge (6) | (0.01) | — | — | 0.02 | |||||||||||||||||||
| Asset impairment charge (7) | 0.01 | 0.02 | 0.03 | 0.06 | |||||||||||||||||||
| Loss on repurchase/redemption of debt securities (8) | — | 0.31 | 0.18 | 0.31 | |||||||||||||||||||
| Earnings per share - adjusted | $ | 9.27 | $ | 6.58 | $ | 22.81 | $ | 14.69 | |||||||||||||||
| Tax rate applied to above adjustments (1) | 25.4 | % | 25.2 | % | 25.3 | % | 25.3 | % | |||||||||||||||
(1)The tax rates applied to the adjustments reflect the statutory rates in the applicable entities.
(2)Reflects transaction costs associated with the General Finance acquisition that was completed in May 2021. Merger related costs only include costs associated with major acquisitions completed since 2012 that significantly impact our operations (the "major acquisitions," each of which had annual revenues of over $200 million prior to acquisition).
(3)Reflects the amortization of the intangible assets acquired in the major acquisitions.
(4)Reflects the impact of extending the useful lives of equipment acquired in certain major acquisitions, net of the impact of additional depreciation associated with the fair value mark-up of such equipment.
(5)Reflects additional costs recorded in cost of rental equipment sales associated with the fair value mark-up of rental equipment acquired in certain major acquisitions and subsequently sold.
(6)Primarily reflects severance and branch closure charges associated with our closed restructuring programs. We only include such costs that are part of a restructuring program as restructuring charges. Since the first such restructuring program was initiated in 2008, we have completed six restructuring programs. We have cumulatively incurred total restructuring charges of $352 million under our restructuring programs.
(7)Reflects write-offs of leasehold improvements and other fixed assets.
(8)Primarily reflects the difference between the net carrying amount and the total purchase price of the redeemed notes.
UNITED RENTALS, INC.
EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATIONS
($ in millions, except footnotes)
EBITDA represents the sum of net income, provision for income taxes, interest expense, net, depreciation of rental equipment, and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the merger related costs, restructuring charges, stock compensation expense, net, and the impact of the fair value mark-up of acquired fleet. These items are excluded from adjusted EBITDA internally when evaluating our operating performance and for strategic planning and forecasting purposes, and allow investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies. The net income and adjusted EBITDA margins represent net income or adjusted EBITDA divided by total revenue. Management believes that EBITDA and adjusted EBITDA, when viewed with the company’s results under GAAP and the accompanying reconciliation, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that EBITDA and adjusted EBITDA help investors gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.
The table below provides a reconciliation between net income and EBITDA and adjusted EBITDA.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net income | $ | 606 | $ | 409 | $ | 1,466 | $ | 905 | |||||||||||||||
| Provision for income taxes | 210 | 141 | 441 | 297 | |||||||||||||||||||
| Interest expense, net | 106 | 132 | 313 | 331 | |||||||||||||||||||
| Depreciation of rental equipment | 470 | 412 | 1,362 | 1,172 | |||||||||||||||||||
| Non-rental depreciation and amortization | 90 | 98 | 278 | 279 | |||||||||||||||||||
| EBITDA | $ | 1,482 | $ | 1,192 | $ | 3,860 | $ | 2,984 | |||||||||||||||
| Merger related costs (1) | — | — | — | 3 | |||||||||||||||||||
| Restructuring charge (2) | (1) | — | — | 1 | |||||||||||||||||||
| Stock compensation expense, net (3) | 35 | 33 | 95 | 89 | |||||||||||||||||||
| Impact of the fair value mark-up of acquired fleet (4) | 5 | 8 | 16 | 28 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,521 | $ | 1,233 | $ | 3,971 | $ | 3,105 | |||||||||||||||
| Net income margin | 19.9 | % | 15.8 | % | 17.6 | % | 13.0 | % | |||||||||||||||
| Adjusted EBITDA margin | 49.9 | % | 47.5 | % | 47.6 | % | 44.7 | % | |||||||||||||||
(1)Reflects transaction costs associated with the General Finance acquisition that was completed in May 2021. Merger related costs only include costs associated with major acquisitions.
(2)Primarily reflects severance and branch closure charges associated with our closed restructuring programs. We only include such costs that are part of a restructuring program as restructuring charges. Since the first such restructuring program was initiated in 2008, we have completed six restructuring programs. We have cumulatively incurred total restructuring charges of $352 million under our restructuring programs.
(3)Represents non-cash, share-based payments associated with the granting of equity instruments.
(4)Reflects additional costs recorded in cost of rental equipment sales associated with the fair value mark-up of rental equipment acquired in certain major acquisitions and subsequently sold.
UNITED RENTALS, INC.
EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATIONS (continued)
(In millions, except footnotes)
The table below provides a reconciliation between net cash provided by operating activities and EBITDA and adjusted EBITDA.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net cash provided by operating activities | $ | 1,142 | $ | 1,087 | $ | 3,182 | $ | 3,021 | |||||||||||||||
| Adjustments for items included in net cash provided by operating activities but excluded from the calculation of EBITDA: | |||||||||||||||||||||||
| Amortization of deferred financing costs and original issue discounts | (3) | (3) | (9) | (9) | |||||||||||||||||||
| Gain on sales of rental equipment | 112 | 84 | 325 | 271 | |||||||||||||||||||
| Gain on sales of non-rental equipment | 2 | 2 | 6 | 6 | |||||||||||||||||||
| Insurance proceeds from damaged equipment | 8 | 5 | 25 | 19 | |||||||||||||||||||
| Merger related costs (1) | — | — | — | (3) | |||||||||||||||||||
| Restructuring charge (2) | 1 | — | — | (1) | |||||||||||||||||||
| Stock compensation expense, net (3) | (35) | (33) | (95) | (89) | |||||||||||||||||||
| Loss on repurchase/redemption of debt securities (5) | — | (30) | (17) | (30) | |||||||||||||||||||
| Changes in assets and liabilities | (39) | (130) | (191) | (714) | |||||||||||||||||||
| Cash paid for interest | 151 | 167 | 339 | 362 | |||||||||||||||||||
| Cash paid for income taxes, net | 143 | 43 | 295 | 151 | |||||||||||||||||||
| EBITDA | $ | 1,482 | $ | 1,192 | $ | 3,860 | $ | 2,984 | |||||||||||||||
| Add back: | |||||||||||||||||||||||
| Merger related costs (1) | — | — | — | 3 | |||||||||||||||||||
| Restructuring charge (2) | (1) | — | — | 1 | |||||||||||||||||||
| Stock compensation expense, net (3) | 35 | 33 | 95 | 89 | |||||||||||||||||||
| Impact of the fair value mark-up of acquired fleet (4) | 5 | 8 | 16 | 28 | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,521 | $ | 1,233 | $ | 3,971 | $ | 3,105 | |||||||||||||||
(1)Reflects transaction costs associated with the General Finance acquisition that was completed in May 2021. Merger related costs only include costs associated with major acquisitions.
(2)Primarily reflects severance and branch closure charges associated with our closed restructuring programs. We only include such costs that are part of a restructuring program as restructuring charges. Since the first such restructuring program was initiated in 2008, we have completed six restructuring programs. We have cumulatively incurred total restructuring charges of $352 million under our restructuring programs.
(3)Represents non-cash, share-based payments associated with the granting of equity instruments.
(4)Reflects additional costs recorded in cost of rental equipment sales associated with the fair value mark-up of rental equipment acquired in certain major acquisitions and subsequently sold.
(5)Primarily reflects the difference between the net carrying amount and the total purchase price of the redeemed notes.
UNITED RENTALS, INC.
FREE CASH FLOW GAAP RECONCILIATION
(In millions, except footnotes)
We define “free cash flow” as net cash provided by operating activities less purchases of, and plus proceeds from, equipment and intangible assets. The equipment and intangible asset purchases and proceeds are included in cash flows from investing activities. Management believes that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. However, free cash flow is not a measure of financial performance or liquidity under GAAP. Accordingly, free cash flow should not be considered an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. The table below provides a reconciliation between net cash provided by operating activities and free cash flow.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net cash provided by operating activities | $ | 1,142 | $ | 1,087 | $ | 3,182 | $ | 3,021 | |||||||||||||||
| Purchases of rental equipment | (1,102) | (1,100) | (2,456) | (2,308) | |||||||||||||||||||
| Purchases of non-rental equipment and intangible assets | (59) | (89) | (182) | (142) | |||||||||||||||||||
| Proceeds from sales of rental equipment | 181 | 183 | 556 | 644 | |||||||||||||||||||
| Proceeds from sales of non-rental equipment | 6 | 6 | 15 | 20 | |||||||||||||||||||
| Insurance proceeds from damaged equipment | 8 | 5 | 25 | 19 | |||||||||||||||||||
| Free cash flow (1) | $ | 176 | $ | 92 | $ | 1,140 | $ | 1,254 | |||||||||||||||
(1)Free cash flow included aggregate merger and restructuring related payments of $2 million for the three months ended September 30, 2021, and $3 million and $11 million for the nine months ended September 30, 2022 and 2021, respectively.
The table below provides a reconciliation between 2022 forecasted net cash provided by operating activities and free cash flow.
| Net cash provided by operating activities | $4,050-$4,400 | |||||||
| Purchases of rental equipment | $(3,250)-$(3,450) | |||||||
| Proceeds from sales of rental equipment | $950-$1,050 | |||||||
| Purchases of non-rental equipment and intangible assets, net of proceeds from sales and insurance proceeds from damaged equipment | $(150)-$(200) | |||||||
| Free cash flow (excluding the impact of merger and restructuring related payments) | $1,600- $1,800 | |||||||