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United Rentals Announces Record Second Quarter Results and Raises 2022 Guidance for Revenue, Adjusted EBITDA1 and Cash Flows2

United Rentals, Inc. (NYSE: URI) today announced financial results for the second quarter of 2022 and raised its full-year guidance for total revenue, adjusted EBITDA, net cash provided by operating activities and free cash flow.2

Second Quarter 2022 Highlights

  • Total revenue of $2.771 billion, including rental revenue3 of $2.462 billion.
  • Fleet productivity4 increased 11.3% year-over-year.
  • Net income of $493 million, at a margin5 of 17.8%. GAAP diluted earnings per share of $6.90, and adjusted EPS1 of $7.86. GAAP and adjusted EPS both include $0.55 of one-time tax benefits.
  • Adjusted EBITDA of $1.311 billion, at a margin5 of 47.3%.
  • Year-to-date net cash provided by operating activities of $2.040 billion; free cash flow of $964 million, including gross rental capital spending of $1.354 billion.
  • Net leverage ratio6 of 2.0x, with total liquidity6 of $2.830 billion, at June 30, 2022.

CEO Comment

Matthew Flannery, chief executive officer of United Rentals, said, “Our record second quarter results reflect our strong execution in a robust demand environment. We've entered our busiest season with excellent momentum and the benefit of an effective capital allocation strategy, including seven bolt-on acquisitions and 24 Specialty cold-starts through June. We’re also on track to invest $3 billion in fleet this year and complete our share repurchase program this quarter, all supported by our cash generation and balance sheet.”

Flannery continued, “Our higher 2022 outlook for total revenue, adjusted EBITDA and free cash flow reflects broad-based end-market activity, contractor backlogs, customer sentiment and our visibility through the balance of the year. The flexibility of our operating model puts us in a strong position to leverage any market environment.”

Updated 2022 Outlook

The company has updated its 2022 outlook as shown below.

 

Current Outlook

 

Prior Outlook

Total revenue

$11.4 billion to $11.7 billion

 

$11.1 billion to $11.5 billion

Adjusted EBITDA7

$5.4 billion to $5.55 billion

 

$5.2 billion to $5.4 billion

Net rental capital expenditures after gross purchases

$1.85 billion to $2.05 billion, after gross purchases of $2.9 billion to $3.1 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

$3.85 billion to $4.25 billion

 

$3.7 billion to $4.1 billion

Free cash flow (excluding the impact of merger and restructuring related payments)

$1.85 billion to $2.05 billion

 

$1.7 billion to $1.9 billion

Summary of Second Quarter 2022 Financial Results

  • Rental revenue for the quarter was $2.462 billion, reflecting an increase of 26.2% year-over-year, and establishing a second 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 11.3% while average original equipment at cost (“OEC”) increased 13.6%.
  • Used equipment sales in the quarter decreased 15.5% year-over-year. These sales generated $164 million of proceeds at a GAAP gross margin of 59.1% and an adjusted gross margin8 of 62.2%; this compares with $194 million at a GAAP gross margin of 43.3% and an adjusted gross margin of 47.9% for the same period last year. The gross margin increases were primarily due to higher pricing on used equipment sales, which rose sequentially for the seventh consecutive quarter.
  • Net income for the quarter increased 68.3% year-over-year to a second quarter record of $493 million, while net income margin increased 500 basis points to 17.8%, which was also a second 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, excluding debt redemption losses. These items were partially offset by higher income tax expense as a percentage of revenue and $17 million of debt redemption losses recognized in the quarter. While income tax expense increased $31 million, or 37%, year-over-year, the effective income tax rate decreased by 340 basis points to 18.9% primarily due to a realignment of the company's operations in Australia and New Zealand, which resulted in a one-time tax benefit of approximately $39 million.
  • Adjusted EBITDA for the quarter increased 31.2% year-over-year to a second quarter record of $1.311 billion, while adjusted EBITDA margin increased 360 basis points to 47.3%. The increase in adjusted EBITDA margin primarily reflected a 110 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.
  • General rentals segment had a 21.9% year-over-year increase in rental revenue to a second quarter record of $1.787 billion. Rental gross margin increased by 280 basis points to 38.7%, primarily due to better fixed cost absorption on higher revenue.
  • Specialty rentals segment rental revenue increased 39.2% year-over-year, including the impact of the May 2021 acquisition of General Finance Corporation (“General Finance”), to a second quarter record of $675 million. On a pro forma basis, including the standalone, pre-acquisition revenues of General Finance, Specialty rental revenue increased 29% year-over-year. Rental gross margin decreased by 20 basis points to 46.2%, primarily due to a depreciation adjustment associated with the finalization of purchase accounting for the General Finance acquisition, which included a one-time impact of approximately $10 million, and a higher proportion of revenue from certain lower margin ancillary fees in 2022, partially offset by better fixed cost absorption on higher revenue.
  • Cash flow from operating activities increased 5.5% year-over-year to $2.040 billion for the first six months of 2022, and free cash flow, including aggregated merger and restructuring payments, decreased 17.0% to $964 million. 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 $232 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 2.0x at June 30, 2022, as compared to 2.2x at December 31, 2021. As of June 30, 2022, the company had repurchased $762 million of common stock under its current $1 billion repurchase program, which it expects to complete in the third quarter of 2022. In the second quarter of 2022, the company executed the following transactions intended to augment its liquidity and financial flexibility: 1) redeemed $500 million principal amount of its 5 ½ percent Senior Notes due 2027, 2) 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, 3) amended and extended its ABL facility, increasing its size by $500 million to $4.25 billion and extending its expiration to June 2027 and 4) entered into an uncommitted short-term financing facility9 pursuant to which it may borrow up to $100 million.
  • Total liquidity was $2.830 billion as of June 30, 2022, including $68 million of cash and cash equivalents.
  • Return on invested capital (ROIC)10 increased 230 basis points year-over-year, and 60 basis points sequentially, to a record 11.5% for the 12 months ended June 30, 2022. The year-over-year and sequential increases in ROIC were primarily due to increased after-tax operating income. ROIC exceeded the company’s current weighted average cost of capital of approximately 9%.

Conference Call

United Rentals will hold a conference call tomorrow, Thursday, July 28, 2022, at 11:00 a.m. Eastern Time. The conference call number is 800-459-5343 (international: 203-518-9553). The replay number for the call is 402-220-2556. The passcode for both the conference call and replay is 19728. The conference call will also be available live by audio webcast at unitedrentals.com, where it will be archived until the next earnings call.

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 1,331 rental locations in North America, 13 in Europe, 28 in Australia and 18 in New Zealand. In North America, the company operates in 49 states and every Canadian province. The company’s approximately 21,600 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers approximately 4,400 classes of equipment for rent with a total original cost of $16.57 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) uncertainty regarding the ongoing impact of existing and emerging variant strains of the coronavirus (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; (3) the impact of global economic conditions (including 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 COVID-19, on us, our customers and our suppliers, in the United States and the rest of the world; (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) 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; (10) 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; (11) the incurrence of additional debt, which could exacerbate the risks associated with our current level of indebtedness; (12) 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; (13) restrictive covenants and amount of borrowings permitted in our debt instruments, which can limit our financial and operational flexibility; (14) 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; (15) 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; (16) the incurrence of impairment charges; (17) fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated; (18) 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; (19) inability to manage credit risk adequately or to collect on contracts with a large number of customers; (20) 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); (21) 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; (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.

_______________

  1. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and adjusted EPS (earnings per share) 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. Net cash provided by operating activities and free cash flow as reflected in the company's outlook are collectively referred to as "Cash Flows" above. Free cash flow is a non-GAAP measure as defined in the table below. See the table below for a reconciliation to the most comparable GAAP measure.
  3. Rental revenue includes owned equipment rental revenue, re-rent revenue and ancillary revenue.
  4. 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.
  5. Net income margin and adjusted EBITDA margin represent net income or adjusted EBITDA divided by total revenue.
  6. 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.
  7. Information reconciling forward-looking adjusted EBITDA to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below.
  8. 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.
  9. The company’s Form 10-Q for the quarter ended June 30, 2022 filed with the SEC includes a discussion of this facility, which is referred to therein as the "Repurchase Facility."
  10. 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.

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In millions, except per share amounts)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

Equipment rentals

$

2,462

 

 

$

1,951

 

 

$

4,637

 

 

$

3,618

 

Sales of rental equipment

 

164

 

 

 

194

 

 

 

375

 

 

 

461

 

Sales of new equipment

 

38

 

 

 

57

 

 

 

83

 

 

 

106

 

Contractor supplies sales

 

33

 

 

 

27

 

 

 

62

 

 

 

51

 

Service and other revenues

 

74

 

 

 

58

 

 

 

138

 

 

 

108

 

Total revenues

 

2,771

 

 

 

2,287

 

 

 

5,295

 

 

 

4,344

 

Cost of revenues:

 

 

 

 

 

 

 

Cost of equipment rentals, excluding depreciation

 

1,002

 

 

 

815

 

 

 

1,908

 

 

 

1,530

 

Depreciation of rental equipment

 

457

 

 

 

385

 

 

 

892

 

 

 

760

 

Cost of rental equipment sales

 

67

 

 

 

110

 

 

 

162

 

 

 

274

 

Cost of new equipment sales

 

31

 

 

 

48

 

 

 

68

 

 

 

90

 

Cost of contractor supplies sales

 

23

 

 

 

19

 

 

 

43

 

 

 

36

 

Cost of service and other revenues

 

41

 

 

 

35

 

 

 

80

 

 

 

65

 

Total cost of revenues

 

1,621

 

 

 

1,412

 

 

 

3,153

 

 

 

2,755

 

Gross profit

 

1,150

 

 

 

875

 

 

 

2,142

 

 

 

1,589

 

Selling, general and administrative expenses

 

343

 

 

 

301

 

 

 

666

 

 

 

551

 

Merger related costs

 

 

 

 

3

 

 

 

 

 

 

3

 

Restructuring charge

 

1

 

 

 

 

 

 

1

 

 

 

1

 

Non-rental depreciation and amortization

 

91

 

 

 

90

 

 

 

188

 

 

 

181

 

Operating income

 

715

 

 

 

481

 

 

 

1,287

 

 

 

853

 

Interest expense, net

 

113

 

 

 

100

 

 

 

207

 

 

 

199

 

Other (income) expense, net

 

(6

)

 

 

4

 

 

 

(11

)

 

 

2

 

Income before provision for income taxes

 

608

 

 

 

377

 

 

 

1,091

 

 

 

652

 

Provision for income taxes

 

115

 

 

 

84

 

 

 

231

 

 

 

156

 

Net income

$

493

 

 

$

293

 

 

$

860

 

 

$

496

 

Diluted earnings per share

$

6.90

 

 

$

4.02

 

 

$

11.93

 

 

$

6.82

 

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions)

 

June 30, 2022

 

December 31, 2021

ASSETS

 

 

 

Cash and cash equivalents

$

68

 

 

$

144

 

Accounts receivable, net

 

1,744

 

 

 

1,677

 

Inventory

 

199

 

 

 

164

 

Prepaid expenses and other assets

 

153

 

 

 

166

 

Total current assets

 

2,164

 

 

 

2,151

 

Rental equipment, net

 

11,029

 

 

 

10,560

 

Property and equipment, net

 

641

 

 

 

612

 

Goodwill

 

5,610

 

 

 

5,528

 

Other intangible assets, net

 

533

 

 

 

615

 

Operating lease right-of-use assets

 

802

 

 

 

784

 

Other long-term assets

 

41

 

 

 

42

 

Total assets

$

20,820

 

 

$

20,292

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Short-term debt and current maturities of long-term debt

$

60

 

 

$

906

 

Accounts payable

 

1,065

 

 

 

816

 

Accrued expenses and other liabilities

 

898

 

 

 

881

 

Total current liabilities

 

2,023

 

 

 

2,603

 

Long-term debt

 

9,761

 

 

 

8,779

 

Deferred taxes

 

2,204

 

 

 

2,154

 

Operating lease liabilities

 

633

 

 

 

621

 

Other long-term liabilities

 

153

 

 

 

144

 

Total liabilities

 

14,774

 

 

 

14,301

 

Common stock

 

1

 

 

 

1

 

Additional paid-in capital

 

2,570

 

 

 

2,567

 

Retained earnings

 

8,411

 

 

 

7,551

 

Treasury stock

 

(4,719

)

 

 

(3,957

)

Accumulated other comprehensive loss

 

(217

)

 

 

(171

)

Total stockholders’ equity

 

6,046

 

 

 

5,991

 

Total liabilities and stockholders’ equity

$

20,820

 

 

$

20,292

 

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

Net income

$

493

 

 

$

293

 

 

$

860

 

 

$

496

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

548

 

 

 

475

 

 

 

1,080

 

 

 

941

 

Amortization of deferred financing costs and original issue discounts

 

3

 

 

 

3

 

 

 

6

 

 

 

6

 

Gain on sales of rental equipment

 

(97

)

 

 

(84

)

 

 

(213

)

 

 

(187

)

Gain on sales of non-rental equipment

 

(2

)

 

 

(3

)

 

 

(4

)

 

 

(4

)

Insurance proceeds from damaged equipment

 

(10

)

 

 

(7

)

 

 

(17

)

 

 

(14

)

Stock compensation expense, net

 

36

 

 

 

35

 

 

 

60

 

 

 

56

 

Merger related costs

 

 

 

 

3

 

 

 

 

 

 

3

 

Restructuring charge

 

1

 

 

 

 

 

 

1

 

 

 

1

 

Loss on repurchase/redemption of debt securities

 

17

 

 

 

 

 

 

17

 

 

 

 

Increase in deferred taxes

 

27

 

 

 

70

 

 

 

64

 

 

 

73

 

Changes in operating assets and liabilities, net of amounts acquired:

 

 

 

 

 

 

 

Increase in accounts receivable

 

(135

)

 

 

(81

)

 

 

(59

)

 

 

(18

)

(Increase) decrease in inventory

 

(23

)

 

 

(9

)

 

 

(36

)

 

 

2

 

(Increase) decrease in prepaid expenses and other assets

 

(22

)

 

 

187

 

 

 

39

 

 

 

210

 

Increase in accounts payable

 

241

 

 

 

289

 

 

 

251

 

 

 

385

 

Increase (decrease) in accrued expenses and other liabilities

 

77

 

 

 

5

 

 

 

(9

)

 

 

(16

)

Net cash provided by operating activities

 

1,154

 

 

 

1,176

 

 

 

2,040

 

 

 

1,934

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

Purchases of rental equipment

 

(872

)

 

 

(913

)

 

 

(1,354

)

 

 

(1,208

)

Purchases of non-rental equipment and intangible assets

 

(68

)

 

 

(34

)

 

 

(123

)

 

 

(53

)

Proceeds from sales of rental equipment

 

164

 

 

 

194

 

 

 

375

 

 

 

461

 

Proceeds from sales of non-rental equipment

 

4

 

 

 

7

 

 

 

9

 

 

 

14

 

Insurance proceeds from damaged equipment

 

10

 

 

 

7

 

 

 

17

 

 

 

14

 

Purchases of other companies, net of cash acquired

 

(235

)

 

 

(1,434

)

 

 

(312

)

 

 

(1,435

)

Purchases of investments

 

(1

)

 

 

(1

)

 

 

(4

)

 

 

(1

)

Net cash used in investing activities

 

(998

)

 

 

(2,174

)

 

 

(1,392

)

 

 

(2,208

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

Proceeds from debt

 

2,084

 

 

 

2,677

 

 

 

3,239

 

 

 

3,768

 

Payments of debt

 

(1,761

)

 

 

(1,628

)

 

 

(3,133

)

 

 

(3,338

)

Payments of financing costs

 

(9

)

 

 

 

 

 

(9

)

 

 

 

Common stock repurchased (1)

 

(501

)

 

 

(2

)

 

 

(819

)

 

 

(32

)

Net cash (used in) provided by financing activities

 

(187

)

 

 

1,047

 

 

 

(722

)

 

 

398

 

Effect of foreign exchange rates

 

(2

)

 

 

9

 

 

 

(2

)

 

 

10

 

Net (decrease) increase in cash and cash equivalents

 

(33

)

 

 

58

 

 

 

(76

)

 

 

134

 

Cash and cash equivalents at beginning of period

 

101

 

 

 

278

 

 

 

144

 

 

 

202

 

Cash and cash equivalents at end of period

$

68

 

 

$

336

 

 

$

68

 

 

$

336

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for income taxes, net

$

142

 

 

$

102

 

 

$

152

 

 

$

108

 

Cash paid for interest

 

39

 

 

 

28

 

 

 

188

 

 

 

195

 

(1)

We have a $1 billion share repurchase program that commenced in the first quarter of 2022 and is expected to be completed in the third quarter of 2022. The common stock repurchases include i) shares repurchased pursuant to our 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 June 30, 2022

13.6

%

 

(1.5

)%

 

11.3

%

 

2.8

%

 

26.2

%

Six Months Ended June 30, 2022

15.0

%

(1.5

)%

12.0

%

2.7

%

28.2

%

Please refer to our Second 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

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

Change

 

2022

 

2021

 

Change

General Rentals

 

 

 

 

 

 

 

 

 

 

 

Reportable segment equipment rentals revenue

$1,787

 

$1,466

 

21.9%

 

$3,380

 

$2,739

 

23.4%

Reportable segment equipment rentals gross profit

691

 

526

 

31.4%

 

1,266

 

937

 

35.1%

Reportable segment equipment rentals gross margin

38.7%

 

35.9%

 

280 bps

 

37.5%

 

34.2%

 

330 bps

Specialty

 

 

 

 

 

 

 

 

 

 

 

Reportable segment equipment rentals revenue

$675

 

$485

 

39.2%

 

$1,257

 

$879

 

43.0%

Reportable segment equipment rentals gross profit

312

 

225

 

38.7%

 

571

 

391

 

46.0%

Reportable segment equipment rentals gross margin

46.2%

 

46.4%

 

(20) bps

 

45.4%

 

44.5%

 

90 bps

Total United Rentals

 

 

 

 

 

 

 

 

 

 

 

Total equipment rentals revenue

$2,462

 

$1,951

 

26.2%

 

$4,637

 

$3,618

 

28.2%

Total equipment rentals gross profit

1,003

 

751

 

33.6%

 

1,837

 

1,328

 

38.3%

Total equipment rentals gross margin

40.7%

 

38.5%

 

220 bps

 

39.6%

 

36.7%

 

290 bps

UNITED RENTALS, INC.

DILUTED EARNINGS PER SHARE CALCULATION

(In millions, except per share data)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

Numerator:

 

 

 

 

 

 

 

Net income available to common stockholders

$

493

 

$

293

 

$

860

 

$

496

Denominator:

 

 

 

 

 

 

 

Denominator for basic earnings per share—weighted-average common shares

 

71.2

 

 

 

72.5

 

 

 

71.8

 

 

 

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

 

71.4

 

 

 

72.7

 

 

 

72.0

 

 

 

72.7

 

Diluted earnings per share

$

6.90

 

 

$

4.02

 

 

$

11.93

 

 

$

6.82

 

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

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

Earnings per share - GAAP, as-reported

$

6.90

 

 

$

4.02

 

 

$

11.93

 

 

$

6.82

 

After-tax impact of:

 

 

 

 

 

 

 

Merger related costs (2)

 

 

 

 

0.03

 

 

 

 

 

 

0.03

 

Merger related intangible asset amortization (3)

 

0.45

 

 

 

0.48

 

 

 

0.96

 

 

 

0.97

 

Impact on depreciation related to acquired fleet and property and equipment (4)

 

0.26

 

 

 

0.01

 

 

 

0.36

 

 

 

0.03

 

Impact of the fair value mark-up of acquired fleet (5)

 

0.05

 

 

 

0.08

 

 

 

0.12

 

 

 

0.20

 

Restructuring charge (6)

 

 

 

 

 

 

 

0.01

 

 

 

0.01

 

Asset impairment charge (7)

 

0.02

 

 

 

0.04

 

 

 

0.02

 

 

 

0.04

 

Loss on repurchase/redemption of debt securities (8)

 

0.18

 

 

 

 

 

 

0.18

 

 

 

 

Earnings per share - adjusted

$

7.86

 

 

$

4.66

 

 

$

13.58

 

 

$

8.10

 

Tax rate applied to above adjustments (1)

 

25.3

%

 

 

25.4

%

 

 

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 $353 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)

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

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

Net income

$

493

 

 

$

293

 

 

$

860

 

 

$

496

 

Provision for income taxes

 

115

 

 

 

84

 

 

 

231

 

 

 

156

 

Interest expense, net

 

113

 

 

 

100

 

 

 

207

 

 

 

199

 

Depreciation of rental equipment

 

457

 

 

 

385

 

 

 

892

 

 

 

760

 

Non-rental depreciation and amortization

 

91

 

 

 

90

 

 

 

188

 

 

 

181

 

EBITDA

$

1,269

 

 

$

952

 

 

$

2,378

 

 

$

1,792

 

Merger related costs (1)

 

 

 

 

3

 

 

 

 

 

 

3

 

Restructuring charge (2)

 

1

 

 

 

 

 

 

1

 

 

 

1

 

Stock compensation expense, net (3)

 

36

 

 

 

35

 

 

 

60

 

 

 

56

 

Impact of the fair value mark-up of acquired fleet (4)

 

5

 

 

 

9

 

 

 

11

 

 

 

20

 

Adjusted EBITDA

$

1,311

 

 

$

999

 

 

$

2,450

 

 

$

1,872

 

Net income margin

 

17.8

%

 

 

12.8

%

 

 

16.2

%

 

 

11.4

%

Adjusted EBITDA margin

 

47.3

%

 

 

43.7

%

 

 

46.3

%

 

 

43.1

%

(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 $353 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)

The table below provides a reconciliation between net cash provided by operating activities and EBITDA and adjusted EBITDA.

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

Net cash provided by operating activities

$

1,154

 

 

$

1,176

 

 

$

2,040

 

 

$

1,934

 

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

)

 

 

(6

)

 

 

(6

)

Gain on sales of rental equipment

 

97

 

 

 

84

 

 

 

213

 

 

 

187

 

Gain on sales of non-rental equipment

 

2

 

 

 

3

 

 

 

4

 

 

 

4

 

Insurance proceeds from damaged equipment

 

10

 

 

 

7

 

 

 

17

 

 

 

14

 

Merger related costs (1)

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Restructuring charge (2)

 

(1

)

 

 

 

 

 

(1

)

 

 

(1

)

Stock compensation expense, net (3)

 

(36

)

 

 

(35

)

 

 

(60

)

 

 

(56

)

Loss on repurchase/redemption of debt securities (5)

 

(17

)

 

 

 

 

 

(17

)

 

 

 

Changes in assets and liabilities

 

(118

)

 

 

(407

)

 

 

(152

)

 

 

(584

)

Cash paid for interest

 

39

 

 

 

28

 

 

 

188

 

 

 

195

 

Cash paid for income taxes, net

 

142

 

 

 

102

 

 

 

152

 

 

 

108

 

EBITDA

$

1,269

 

 

$

952

 

 

$

2,378

 

 

$

1,792

 

Add back:

 

 

 

 

 

 

 

Merger related costs (1)

 

 

 

 

3

 

 

 

 

 

 

3

 

Restructuring charge (2)

 

1

 

 

 

 

 

 

1

 

 

 

1

 

Stock compensation expense, net (3)

 

36

 

 

 

35

 

 

 

60

 

 

 

56

 

Impact of the fair value mark-up of acquired fleet (4)

 

5

 

 

 

9

 

 

 

11

 

 

 

20

 

Adjusted EBITDA

$

1,311

 

 

$

999

 

 

$

2,450

 

 

$

1,872

 

(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 $353 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)

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

 

Six Months Ended

 

June 30,

 

June 30,

 

2022

 

2021

 

2022

 

2021

Net cash provided by operating activities

$

1,154

 

 

$

1,176

 

 

$

   2,040

 

 

$

    1,934

 

Purchases of rental equipment

 

     (872

)

 

 

     (913

)

 

 

    (1,354

)

 

 

     (1,208

)

Purchases of non-rental equipment and intangible assets

 

       (68

)

 

 

       (34

)

 

 

        (123

)

 

 

          (53

)

Proceeds from sales of rental equipment

 

      164

 

 

 

      194

 

 

 

         375

 

 

 

         461

 

Proceeds from sales of non-rental equipment

 

           4

 

 

 

          7

 

 

 

             9

 

 

 

            14

 

Insurance proceeds from damaged equipment

 

         10

 

 

 

          7

 

 

 

           17

 

 

 

            14

 

Free cash flow (1)

$

    392

 

 

$

    437

 

 

$

       964

 

 

$

    1,162

 

(1)

Free cash flow included aggregate merger and restructuring related payments of $2 million and $6 million for the three months ended June 30, 2022 and 2021, respectively, and $3 million and $9 million for the six months ended June 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

$3,850-$4,250

 

Purchases of rental equipment

$(2,900)-$(3,100)

 

Proceeds from sales of rental equipment

$1,000-$1,100

 

Purchases of non-rental equipment and intangible assets, net of proceeds from sales and insurance proceeds from damaged equipment

$(100)-$(200)

 

Free cash flow (excluding the impact of merger and restructuring related payments)

$1,850- $2,050

 

 

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