Post on 21-Jul-2015
2
Note: This presentation provides information about free cash (usage) flow, EBITDA, adjusted EBITDA and adjusted EPS, which are non-GAAP financial measures. This presentation includes a reconciliation between free cash (usage) flow and GAAP cash flow from operations, a reconciliation between both adjusted EBITDA and EBITDA, on the one hand, and GAAP net income, on the other hand, a reconciliation between both adjusted EBITDA and EBITDA, on the one hand, and GAAP cash flow from operations, on the other hand, and a reconciliation between adjusted EPS and GAAP EPS. (Information reconciling such forward-looking non-GAAP financial measures is unavailable to the Company without unreasonable effort.)
Introductory Information
Unless otherwise specified, the information in this presentation, including forward looking statements related to our outlook, is as of our most recent earnings call held on January 22, 2015. We make no commitment to update any such information contained in this presentation.
Certain statements in this presentation are 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 challenges associated with past or future acquisitions, such as undiscovered liabilities, costs, integration issues and/or the inability to achieve the cost and revenue synergies expected; (2) a slowdown in the recovery of North American construction and industrial activities, which decreased during the economic downturn and significantly affected our revenues and profitability, or a slowdown in the energy sector, in general, could reduce demand for equipment and prices that we can charge; (3) 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; (4) the inability to refinance our indebtedness at terms that are favorable to us, or at all; (5) the incurrence of additional debt, which could exacerbate the risks associated with our current level of indebtedness; (6) noncompliance with covenants in our debt agreements, which could result in termination of our credit facilities and acceleration of outstanding borrowings; (7) restrictive covenants and amount of borrowings permitted under our debt agreements, which could limit our financial and operational flexibility; (8) a decrease in levels of infrastructure spending, including lower than expected government funding for stimulus-related construction projects; (9) fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated; (10) our rates and time utilization being less than anticipated; (11) our inability to manage credit risk adequately or to collect on contracts with customers; (12) our inability to access the capital that our business or growth plans may require; (13) the incurrence of impairment charges; (14) our dependence on distributions from subsidiaries as a result of our holding company structure and the fact that such distributions could be limited by contractual or legal restrictions; (15) an increase in our loss reserves to address business operations or other claims and any claims that exceed our established levels of reserves; (16) the incurrence of additional costs and expenses (including indemnification obligations) in connection with litigation, regulatory or investigatory matters; (17) the outcome or other potential consequences of litigation and other claims and regulatory matters relating to our business, including certain claims that our insurance may not cover; (18) the effect that certain provisions in our charter and certain debt agreements and our significant indebtedness may have of making more difficult or otherwise discouraging, delaying or deterring a takeover or other change of control of us; (19) management turnover and inability to attract and retain key personnel; (20) our costs being more than anticipated, and the inability to realize expected savings in the amounts or timeframes planned; (21) our dependence on key suppliers to obtain equipment and other supplies for our business on acceptable terms; (22) our inability to sell our new or used fleet in the amounts, or at the prices, we expect; (23) competition from existing and new competitors; (24) disruptions in our information technology systems; (25) the costs of complying with environmental, safety and foreign laws and regulations; (26) labor difficulties and labor-based legislation affecting labor relations and operations generally; and (27) increases in our maintenance and replacement costs, and/or decreases in the residual value of our equipment. 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, 2014, 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.
3
Table of Contents
Introduction 4
Market Overview 10
Margin Enhancement 17
Growth Through Customer Solutions 36
Fleet 42
Financial Overview 51
4
is the Industry Leader,
Creating a New Standard for
Operational Execution to
Drive Growth and Returns
Through the Cycle
5
United Rentals
12%
HERC 5%
Sunbelt 6%
Other 77%
Equipment Rental Leader
Scale Creates Distinct Competitive Advantages and Higher Quality Services for Customers
#1 U.S. Market Share
881 locations across North America
Diversified mix
– Industrial/Non Construction – 51%
– Non-Residential Construction – 45%
– Residential – 4%
Team of 12,500 employees
6
Creating a New Industry Standard
Deploying the best people, equipment and solutions to enable our customers to safely build a better and stronger future
Our Vision
Driven By These Values
Safety First Leading By Example Continuous Innovation Integrity Passion for People Community Minded
Superior
returns to our
stockholders
by achieving
strong and
consistent
financial
performance
7
Our Four Pillar Strategy for Success
Driving Growth and Returns Through the Cycle
National Account Strategy
Total Control Market Leadership Penetrating high
return markets Growing industrial
customers
Invest in related adjacencies, such as tanks or pumps – High customer
overlap – Shared capability – Attractive returns
Evaluate international opportunities
Customer Service model
Most advantaged cost position
Best execution at the branch
Significant improvements in productivity
Grow cross-sell and customer relevancy
Expand key categories – Trench – Tools – Power & HVAC
Invest in high-return M&A
Pumps
Grow the Core
New Standard
for Operational
Execution
Expand Specialty
Businesses
Fill Growth
Pipeline
8
Entering Next Phase of Strategic and Financial Evolution
2012–2013 2009–2012
2013
Operation
United
Business transformation through operational improvement and customer focus
RSC
Transformation
Became the scale industry leader; achieve benefits through “Best of Both” philosophy and successful realization of synergies
Operation
United 2
and Business Mix
Delivering on new standard of operational excellence across a more diversified customer base to drive higher, more consistent through-cycle returns
9
Safety as a Core Value
Branch Focused
Initiatives
Tracking and analyzing leading indicators and root causes to better anticipate and prevent hazardous situations
Launching comprehensive training and awareness initiatives to prevent major incident types among higher-risk job categories
United Academy® continues to gain strong momentum in
attracting customers and growing revenue opportunities following mid-2014 launch
United Academy® recognized with “Lift and Access” 2014 Innovation Award, further positioning URI as a leader in workplace safety
United Academy™
Gaining Momentum
Achieved a 0.95 Total Recordable Incident Rate (TRIR) for 2014, which leads our industry and is in the top quartile of world-class companies for all industry sectors
Recognized with “Lift and Access” 2014 Employer of the Year Award, positioning URI as an industry leader in people safety
Building a World-Class
Safety Culture
Recordable Injury Rate Below 1.0 in 2014
11
-1%
-23% -3%
+11%
+19% +6%
+5% +0% +6%
+9%
+11%
+12%
+7%
+7%
+9% +6%
+7%
+8%
+8%
+9%
0
10
20
30
40
50
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: IHS Global Insight Forecast
North American Rental Industry Expected to Grow
Broad-based Construction Activity Picking Up
+9% $Bn
12
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Down Same Up
(1) Survey of Key accounts only conducted by 3rd party.
Approximately 170 surveys conducted each month
Survey results as of 12/31/14
Customer Confidence Index
Only 1% See Slower Growth in 2015
13
Current Pipeline of Over $370B in Construction and Industrial Projects
1) Projects with bid date in last 6 months or start date in 2015 (Bidding phase or later) 2) Active projects engineering phase or later with a start date in 2014 or 2015
Dodge Projects* - $55B Engineering and Construction
Projects** - $323B
*Source: Dodge/McGraw Hill **Source: IIR-Industrial Information Resources
14
Construction Growth Expected Across US in 2015
CA, FL, OR, NV, AZ expected to see double digit growth
Source: IHS
15
Manage risk
Control expenses and inventory
The right equipment for the job
24/7 customer care
Save on storage/warehousing
Reduce downtime
No need for maintenance
Why Rent – Total Cost of
Ownership
Rental Penetration Likely to Continue to Grow
Save disposable costs
Cost control
Equipment tracking
No licenses
Conserve capital
Reasons to Rent
16
Why Rent – Total Cost of Ownership
Needs Assessment Fleet Availability Equipment Sourcing Fleet Deployment
ROI/Performance Analysis Wrench Time Enablement Consumption Management
Eq. Logistics Operator training PM & Repair Regulatory Compliance
Demobilization Decommission/Replace Liquidation
Planning/
Procurement
Operating/
Maintenance
Reporting/
Optimization
Disposal/
Liquidation
Renting Addresses Ownership Pain Points
18
* Rouse Analytics
Expect Rental Rate Expansion to Continue
URI Pricing Strategy: 400 Basis Point Improvement, Rates Surpass 2007 Levels
URI EBITDA Margins and Rental Rate Index Cumulative Purchase Price Inflation Relative to 2007*
Environmental Factors
Equipment Cost (Tier IV)
Pricing Benchmarking Services
Continued Rental Penetration
Best in Class Tools
Profitability Model
Disciplined Processes
31.5% 32.8%
26.7%
30.9%
35.5%
42.6% 46.3% 47.8%
75
80
85
90
95
100
105
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
2007 2008 2009 2010 2011 2012 PF 2013 20140%
5%
10%
15%
20%
25%
2007 2008 2009 2010 2011 2012 2013 2014
Positive Pricing Outlook
19
Unique Operating Advantages Support Further Margin Enhancement
Lean Initiatives/
Operational Excellence
Metro Model
Scale Advantage
Business Mix
Continuous
Improvement
Best Cost
Structure
Higher Utilization
Potential
Emphasizing
Contribution Margin
20
Lean Processes Drive Real Value
Decreased Outside Hauling Costs
Increased Dispatches per Driver
Improved Branch Cycle Time
Reduced Branch Overtime Costs
Reduced Invoice Disputes
Eliminated Empty Trucks
Shop Productivity
Cost per Delivery
Credit Memos & Overrides
Time Utilization
LEAN Activity
Kaizen Improved processes in yards, shops, dispatch and sourcing
B-PRO Adopted order-entry best-practices across the network
Specialty Pilot Applying same approach to trench division
Productivity Gains Value Levers
$16 Million of Efficiencies Achieved in 2014
Run Rate of $30 Million Towards $100 Million Goal
21
Do it Right the First Time!
Lean’s Goal
To build a sustainable, scalable platform for profitable growth…
Smarter
Sustainable
Engage our people in systematically and continuously eliminating waste everywhere
Scalable
Our entire organization is focused on delivering unmatched customer service
Profitable Growth
Build a foundation for long-term success
| Faster | Safer
22
Do It Right the First Time
Eliminating Waste with Best Practices
Kaizen
A cross-functional team (Field & Ops Excellence Leaders)
1-week discovery
Identify and eliminate Waste
Apply LEAN and Kaizen techniques to identify and eliminate waste
PIT Process Improvement Team
Field and Ops Excellence Leaders
2-week implementation
Best Practices across linked processes
Initial PIT: Logistics
B-PRO Best Practice Roll-Out
Field Ownership
1 Day, 1 Process
Implementation of pre-selected standard best practices
Initial B-PRO: Order Accuracy
23
Telematics
Customer Benefits Commitment to
Telematics Internal Benefits
Targeting 87% OEC
Telematics Standard on 2015 deliveries
Initiated retrofit program
Installations Underway
Visibility into run-time & equipment utilization
Ability to locate equipment
Billing & Account access
Fuel Alerts
Performance monitoring & service alerts
Locating of off-rent equipment for pick-up
Overtime and revenue recovery
24
GPS Technology – Monitoring Equipment
Action options when viewing in map
Customers Can Quickly Find Rental Assets
25
Larger, More Stable Customers
Stronger Market, Customer & Fleet Mix
Four Levers to Help Achieve Less Cyclical Mix
Diversified End Market Exposure
Diversified Account Base Increasing Specialty Exposure
Specialty*
General Rental
Key Accounts
Unassigned Accounts
Industrial/ Non-Construction
Non- Residential
Residential
Accounts % of Revenue
Top 10 5%
Top 100 17%
Top 1000 29%
51%
45%
4%
64% 36%
18%
82%
Balanced Customer Mix Provides Growth Flexibility
* Includes Specialty items from General Rental fleet
26
Trench Safety Power & HVAC Pump Solutions Tool Solutions
*ROCA= Return on Controllable Assets; **A small amount of specialty equipment is managed by general rental business
What is Specialty Rental?
Fleet and Customers That Require a Different Business Model to Serve Effectively
Excavation support solutions, confined space entry equipment and customer training
Used for construction, utility installs, manhole work, and other underground applications
Complete solutions for mobile power and air flow
Used for disaster response, plant shut downs, commercial renovations, and seasonal climate control
Full range of pumps, hose, & fittings for fluid transfer
Used by municipalities, industrial plants, mining, construction, and agribusiness
Tool trailers stocked with hoisting, torqueing, pipe fitting, & air tools
Used during refinery and other industrial shut downs, and also at large construction sites
Specialty Business Represents 18% of Total Revenue**
ROCA*=43% ROCA=30% ROCA=44% ROCA=35%
27
Trench Safety Power & HVAC Pump Solutions Tool Solutions
Strategy by Business
Strategy
Lead in product innovation.
Increase compliance and rental penetration.
Expand footprint and drive local market penetration.
Focus on Industrial, O&G (on/offshore), and Entertainment verticals.
Utilize Gen Rent sales force to gain share in Industrial and Commercial.
Increase managed tools solutions.
Expand footprint. Diversify end markets
into industrial, municipal, mining, and commercial.
Footprint (cold starts)
Cross-sell
Talent Acquisition and Development
Bolt-on M&A
2014/15 Strategic Workstreams
28
Share of Business by Customer Specialty Has a Diversified Customer Base
Trench Safety
Pump Solutions
Power & HVAC
Tool Solutions
10% 5%
20%
15%
40%
35%
5% 5%
60% 30%
10%
10%
14%
24%
48%
2%
45%
8%
33%
4%
20%
55%
8%
4% 13%
60% 30%
10%
2%
4% 3%
2%
29
High Returns High ROCA and longer asset lives on Specialty
equipment
Why is Specialty Rental an Attractive Business?
Customer Loyalty
Specialty improves relationships with high-value industrial and key accounts
Competitive Advantage
Offer customized solutions to customer verticals requiring deep expertise
Growth Platform for growth in rapidly expanding
markets
30
Economics of Specialty: High Returns on Initial OEC Investment
Multiple of Cash Flows Earned Over Asset Life / OEC
Asset Life: 10-15 yrs ~7 yrs 7-10 yrs ~10 yrs
EBITDA/OEC: 62% 56% 48% 35%
8.8x
4.6x 4.5x 3.9x
Trench Tools Pumps Power & HVAC
Specialty is Accretive to Overall ROIC
31
Cross Selling Specialty with our National Accounts
Significant runway ahead to grow cross sell in our Specialty segments
Cross Sell Delivers Customer Value
32
Trench Safety Continues Strong Growth
Trench Safety Annual Rental Revenue Growth
31%
36%
21%
18%
FY 2011 FY 2012 FY 2013 FY 2014
Largest trench safety rental company in North America
Trench is first on the job and supports cross-selling opportunities for all other URI categories
2 Trench branches opened in 2014
Extend Market Leadership Through Expertise and Product Innovation
33
Power & HVAC Offers Attractive Growth Opportunity
Strong Year over Year Performance
High returns & longer asset life
Blue Stream acquisition closed in May 2014
Business specializes in turn-key services and solutions
8 branches opened in 2014
Power & HVAC Annual Rental Revenue Growth
63%
34%
26%
62%
FY 2011 FY 2012 FY 2013 FY 2014
34
Pump Solutions provides customers a full range of pumps, hose, and fittings for fluid transfer
National Pump acquired in Q2 2014; integration complete
Quickly capturing cross-sell opportunities for Pumps with our strong National Account network
4 new Pump branches opened in 2014
Pump Solutions Yields Strong Cross Sell Opportunities
Q4 2014 Rental Revenue up 42%*
*Pro forma as if the National Pump acquisition took place on January 1, 2013.
35
Provide Tool Management Solutions to Industrial Customers in Hoisting, Welding, Torqueing, Pipe Fitting, & Other Tools
High margins and attractive return assets
Drive customer entanglement with industrial and commercial accounts
National Account represents ~70% of total revenue
Offers total managed project solutions & software to improve productivity and wrench time
Tool Solutions Improves Productivity
Q4 2014 Rental Revenue Up 44%
37
Customer Solutions Drive Revenue Growth and Capital Efficiency
Engagement
Strategy
Total Control®
On-Sites
Deliver Technology-Enabled, Innovative Solutions to Improve Customer Productivity
Tailored engagement strategies to meet the specific needs of different customers – from large enterprises to small, local businesses
Focus dialogue on solutions to increase productive “wrench time” for customers’ business
Software solution developed to help customers more effectively manage rental equipment
Total Control® users gain business advantages – focuses relationship on utilization, not rate
Right tools at the right time guaranteed with onsite personnel to reduce downtime and ensure high-quality, tailored service
38
Customer Engagement Strategy
Large Industrial
Enterprise Agreements
“Company-wide Solutions”
Consumption Management
“Wrench Time”
“Wrench Time”
24/7 After Hours
Breadth & Depth
Large Commercial
Job Site Management
“Reliable Partner”
Availability
Reliability
Accessibility
Locals
“Ease of Doing Business”
Value Proposition Tailored to Meet Specific Customer Needs
39
Embeds United as Rental Company of Choice
Software eliminates waste with enhanced visibility/accountability – Increase equipment utilization – Less duplication – Conserve capital
through rental – Eliminate equipment
maintenance cost
Equipment Utilization
6.0%
20.5%
43.0%
Self Owned
Fleet
Self Managed
Rental
Total
Control®
Helping Customers Manage Fleet
Total Control® Provides Competitive Edge
40
A Meaningful Competitive Edge
$ Millions
Attractive Added Value for Customers
Installs began late Q2 with Roll-Out of
Total Control®
Revenue Grew 41.6% YOY
Customers Embrace Total Control®
$146.1
$206.9
Q4 2013 Q4 2014
60 84
194
409
Q1 2014 Q2 2014 Q3 2014 Q4 2014
41
“On Sites” = Up Time
“Inside the Fence” Sites
Increased Utilization – Leniency for Shared Equipment – Lower Equipment Cost
On-Time Delivery “Guaranteed”
On Site Mechanic = No Downtime
Reduction of Traffic = Safety
Better meeting customer’s equipment needs
High Volume, High Utilization, Lower Cost to Serve
43
39%
2%
3% 13% 3%
16%
10%
4% 5%
Note: Percentages based on ending balance as of 12/31/2014
Fleet Mix
$8.4 Billion of Fleet Comprised of
Approximately 430,000 Units
Aerial
Compaction
Earth Moving
Forks – Reach
Forks – Rough <1%
Other
Compressors
Forks – Industrial
Light 2%
Power Trench 1%
Trucks Welders 1%
Serves Diverse Customer Base
Customers Know We Have the Fleet They Need
44
* All serialized assets regardless of equipment value (non bulk) included in time utilization ** Calculated using ARA metrics *** Fleet age is calculated on an OEC-weighted basis. Total fleet age is 43.0 months at 12/31/2014
3,300 Equipment Classes with Original Cost of $8.4B
Booms and Lifts
Earth Moving Forklifts Trench and Other
Total (Average)
% of Q4 2014 Rental Revenue
35.4% 12.3% 17.1% 35.1%
Time Utilization*
76.0% 64.2% 81.1% 58.4% 70.6%
Dollar Utilization**
44.7% 46.3% 42.8% 63.8% 49.8%
Average Fleet Age*** (in months)
54.2 33.7 36.1 36.4 43.0
Q4 Dollar Utilization 49.8%
45
Managing Fleet with a Life Cycle Approach
Selling Oldest Fleet
Rental Capex and Used Sales ($MM)*
2010 2011 2012 2013 Q4 2013Q4 2014
72 83 83 85 88 89
Ag
e o
f U
sed
Sale
s i
n M
on
ths
2010 2011 2012 2013 2014 YTD
673
1,390 1,321 1,580 1,701
($269) ($363) ($463) ($490) ($544)
Time Utilization
2010 2011 2012 2013 Q4 2013 Q4 2014
63.7%
67.8% 67.5% 68.2%
69.3% 70.6%
$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000
≤ 1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 >9 Total
Years
Age Composition ($MM)
*On a pro-forma basis
46
0
5000
10000
15000
20000
25000
30000
Today Tier IV Future (6 years)
Rent Buy
Rent vs. Buy Impact Of Tier IV
+9.7%
+25.2% +14.8%
Compelling Economic Benefits of Renting
48 months term
10% finance charge
50% time utilization
3% rate increase yearly for 6 years for future calculation
2% inflation on new equipment price
47
Attractive Asset Economics
(15,000)
0
15,000
Y0 Y1 Y2 Y3 Y4 Y5
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Purchase Price (6,500)
Rental Revenue 5,187 5,503 5,668 5,838 6,013
Ancillary Revenue 447 474 488 503 518
Operational Costs (2,061) (2,130) (2,184) (2,240) (2,298)
Selling Price $3,233
Total Cash Flow (6,500) 2,709 3,176 2,937 2,827 6,142
Cumulative Cash Flow
(6,500)
(3,791) (615) 2,322 5,179 11,291
Incremental Asset Generates 40% Return, Helping Drive ROIC Higher
Sample Asset
Cumulative Cash Flow
48
$ Thousands
* Sample data only
Total Cost of Ownership
Total Cost of Ownership
Resale value after 7 years (retail)
Maintenance cost over life (labor)
Maintenance cost over life (parts)
Acquisition cost
Brand C
89
55
8
10
(52)
Brand B
95
60
9
9
(53)
Brand A
93
59.5
7.5
9
(50)
Gap vs. Best of Best +8% +9%
Brand C Has a 8%–9% Total Cost Advantage
49
Rental Useful Life Evaluation
0%
20%
40%
60%
80%
100%
120%
1 2 3 4 5 6 7 8 9 10 11 12
Rental Revenue % of Average
0%
20%
40%
60%
80%
100%
120%
140%
1 2 3 4 5 6 7 8 9 10 11 12
Resale Value % of Replacement Cost
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
1 2 3 4 5 6 7 8 9 10 11 12
R&M Cost % of Replacement Cost (est)
Rental useful life evaluated to set optimal age to sell an asset
Extending the life of our booms by 2 to 3 years can increase our IRR by 33%
50
Maintenance and Growth CapEx
$ Millions
* Reflects estimated 2% annual inflation factor compounded over average life of OEC sold ** Excludes bulk equipment
2011 Combined
Pro-forma
2012 Combined Pro-forma
2013 2014
2015
Forecast
OEC Sold** $752 $933 $941 $1,016 $1,000
Inflation Factor* 13.8% 13.8% 14.2% 14% 14%
Inflation Uplift 104 129 133 142 140
Total Maintenance CapEx
$856 $1,062 $1,074 $1,158 $1,140
Growth CapEx $534 $432 $506 $543 $560
Total Rental CapEx $1,390 $1,485 $1,580 $1,701 $1,700
A Balanced and Disciplined Approach to Fleet Growth
52
Adjusted EBITDA of 49.6%, a Quarterly Record
Q4 2014 Results
Rates +4.1%
Time Utilization 70.6% +130bps
Adjusted EBITDA $775M or 49.6% +$124M or 90 bps
Adjusted EBITDA Flow-Through 54.9%
LTM ROIC 8.8%, increase of 1.3 pp
53
2015 Outlook
Total Revenue $6.0B to $6.2B
Adjusted EBITDA $2.95B to $3.05B
Increase in Rental Rates (year-over-year)
Approximately 3.5%
Time Utilization Approximately 69%
Net Rental Capital Expenditures after Gross Purchases
Approximately $1.2B, after gross purchases of approximately $1.7B
Full Year Free Cash Flow $725M to $775M
54
Our Principles: Maximizing Financial Flexibility
Valuable asset base supports reasonable amount of debt – High operating margins generate significant cash flow/dollar of revenue – Asset base can be monetized to support cash flow requirements
Debt maturities timed to avoid excessive refinancing needs in single year
Maintain diversified funding sources: – Secured, unsecured, hybrids – Access to alternative investor base – No reliance on one investor base
No single maturity of a funding source should be too large
Preserves a margin of safety vs. covenants
Supports Organic Growth, M&A and Return to Stockholders
55
Note: As of December 31, 2014. Principal amounts only, no OID or premium included. *Includes $50M in Letters of Credit.
Ample Liquidity and No Significant Near-Term Maturities
$ Millions
Monitor Markets to Opportunistically Refinance Debt
$1,392*
ABL Used
$750 7.375% Senior
Unsecured Notes
$750 8.375% Senior
Sub Notes
7.625% Senior
Unsecured Notes
5.75% Senior
Unsecured Notes
5.75% Senior
Secured Notes
Approximately $1B in
ABL capacity and
cash creating ample
liquidity to grow the
business
Senior Subordinated
Note callable in
September 2015
Senior Note callable
in February 2016
$582 $750
$1,500
$650
$1,325
$925 $850
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
$548 A/R Securitization
Used
$34 4.00% Convert.
Notes
$946 ABL
Unused
$1,354*
ABL Used
5.75% Senior
Secured Notes $750
7.375% Senior
Unsecured Notes
$750 8.375% Senior
Sub Notes
8.25% Senior
Unsecured Notes
7.625% Senior
Unsecured Notes 6.125%
Senior Unsecured
Notes
5.75% Senior
Unsecured Notes
$2,300
5.75% Senior
Secured Notes
Senior Secured
Note callable
in July 2015
$2 A/R Unused
56
*Excludes merger and restructuring expenses. Merger and restructuring expenses were $38M in 2013 and $17M for 2014.
Expect to Generate about $2.5B in Free Cash Flow*
End Market Strength and Fleet Discipline Contributing to Powerful FCF
$ Millions
$421
$725 - $775
$800+
$1,000+
Actual Forecast
2016 2017 2015 2013 2014
$574
57
Assumptions Driving FCF Outlook
Gross rental CapEx spend of about $1.7B; net rental CapEx spend of $1.2B for the next 3 years
About 3.5% rental rate growth in 2015 and 3% thereafter
Cash Taxes – Remaining Federal NOLs utilized in 2015 – About $125M cash taxes in 2015 – About $475M cash taxes in 2016 – About $650M cash taxes in 2017
Cash Interest – Range of $450M-$475M in 2015, 2016 and 2017
Disciplined Fleet Growth With Continued Rate Progression
58
*Leverage ratio calculated as total debt, net of cash, excluding original issuance discounts and premiums divided by adjusted EBITDA.
Capital Allocation Strategy New $750M Share Repurchase Program
Investing in Growth While Managing Leverage and Returning Cash to Stockholders
Managing Leverage
Return Cash to
Stockholders
Invest in Growth
M&A Organic
Target leverage range over the cycle of 2.5x–3.5x
Net leverage* of 2.9x at December 31, 2014
Credit ratings of BB- by S&P and Ba3 by Moody’s
Completed $500M share repurchase program
Initiated new $750M share repurchase program in December to be completed over an 18 month period
Balanced strategy creates flexibility to pursue strategic assets as opportunities arise
Expanded role in specialty with completion of National Pump acquisition in April 2014
Continued organic investments to support growth and boost productivity
Opened 18 specialty branches in 2014 with plans of approximately 16 additional openings in 2015
59
(1) Leverage Ratio calculated as total debt and QUIPs, net of cash, excluding original issuance discounts and premiums divided by adjusted EBITDA. Assumes no M&A. (2) Pro Forma assumes RSC acquisition occurred on January 1, 2011 and excludes cost synergies. (3) Pro Forma 2012 leverage assumes RSC acquisition occurred on January 1, 2012.
Leverage Ratio Continues Decline1
4.6
3.6 3.0 2.9 2.6
2011 2012 2013 2014 2015 2016 2017
Actual Forecast
2.5x – 3.5x Target Leverage Range of the Cycle Lower End of Target Range in 2015
“Dry Powder”
2
3
60
WACC Range 8.4%
11.0%
(2.4%)
2.3%
2.1% 0.3%
0.3%
0%
2%
4%
6%
8%
10%
12%
14%
Sep-14 Rate FleetGrowth and
Utilization
Lean Fleet and CostInflation
BusinessMix/Other
Approx 20171 4 5
6 2
3
10% Internal Hurdle
Rate
Building a Bridge to Higher Returns*
*Illustrative – After tax and including goodwill (1)Assumes average rate of 3.25% over next 3 years; (2)Assumes 7% annual growth in average fleet size; (3) Assumes 20 basis points improvement per year; (4)Assumes $100M run rate EBITDA impact from Lean; (5) Assumes 2% annual inflation in average fleet purchase prices; (6) Assumes 3% annual inflation in all operating costs.
8.8% December 2014
61
2008 2009 20101 2011 20122 20133
20144
EBITDA ($117) $589 $649 $879 $1,772 $2,181 $2,599
Cash Interest (218) (34) (229) (203) (371) (461) (457)
Cash Taxes (46) (3) 49 (24) (40) (48) (100)
Gain on Sale of Equipment (69) (6) (41) (68) (127) (182) (240)
Goodwill Impairment Charge 1,147 — — — — — —
Working Capital/Other 67 92 24 28 (513) 61 (1)
Cash from Operations 764 438 452 612 721 1,551 1,801
Rental Capex (624) (260) (346) (774) (1,272) (1,580) (1,701)
Non-Rental Capex (80) (51) (28) (36) (97) (104) (120)
Proceeds on Sale of Rental 264 229 144 208 399 490 544
Proceeds from Sale of Non-Rental
Equipment 11 13 7 13 31 26 33
Cash Invested (429) (69) (223) (589) (939) (1,168) (1,244)
Excess Tax Benefits from Share Based
Payment Arrangements, Net — (2) (2) — (5) — —
Free Cash Flow (Usage) $335 $367 $227 $23 ($223) $383 $557
Cash Flow 2008–2014 ($M)
Consistent Free Cash Flow Generation Over Cycle
12010 includes a $55M federal tax refund. 22012 EBITDA is presented on an adjusted basis. 2012 includes $150M of aggregate cash payments related to merger and restructuring activities. 3Includes aggregate cash payments of $38M related to merger and restructuring activities. 4Includes aggregate cash payments of $17M related to merger and restructuring activities.
62
Net Usesof Capital
58%
31%
Net Sourcesof Capital
72%
28%
Historical Capital Allocation 2010–2014
Note: Net Debt Issuance includes cash from balance sheet and other items.
Organic Investment
Strategic M&A
Return to
Stockholders
Manage Leverage
Targets
(2.5x–3.5x)
Priorities
Cash from
Operations
Debt Issuance
CapEx
Cash
Acquisitions
11%
Share
Repurchases
100% Equals $7.2bn
64
Timeline
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Founded
Achieves Industry
Leadership in First Year
Launch of E-Rental Store
Establishes E-Commerce
Platform
Expansion of Trench Safety Business Captures Niche
Leadership
$3 Billion in Revenues
Marks a Company and Industry Milestone
Customer Training Expands with Launch
of National Program
Enters Its Second Decade as Industry
Leader
Launch of Sustainability
Program Advances
Environmental Stewardship
Combines with RSC
Branch Network Grows to 500 Locations in North America National Accounts
Program Grows by 50% as Footprint Expands
Forbes Names One of “400 Best Big Companies”
Company’s First Centralized Customer Care Center Opens
New Strategy Refocuses Company on Core Equipment Rental Business
Earns National Recognitions for Support of Veterans
Expands Industrial Power & HVAC Footprint with Acquisition and Cold-starts
“What a Strange Trip it has Been”
2014
Acquires National Pump
65
Performance Goals for Senior Executives Align with Creating Stockholder Value
Short Term Incentive Plan Measures: EBITDA Dollar Growth
Economic Profit Improvement
2014 Performance Measures Focus on Profitable Growth
Over 60% of senior executives compensation is at risk and subject to
these profitable growth measures
Long Term Incentive Plan Measures: Revenue Growth
Economic Profit
Improvement
ROIC Multiplier
Field Bonus Performance Measures Align with Senior
Management Goals
66
Adjusted Earnings Per Share
GAAP Reconciliation
(1) Reflects transaction costs associated with the 2012 RSC acquisition and
the April 2014 National Pump acquisition.
(2) Reflects the amortization of the intangible assets acquired in the RSC and
National Pump acquisitions.
(3) Reflects the impact of extending the useful lives of equipment acquired in
the RSC acquisition, net of the impact of additional depreciation associated
with the fair value mark-up of such equipment.
(4 ) Reflects additional costs recorded in cost of rental equipment sales associated
with the fair value mark-up of rental equipment acquired in the RSC acquisition
and subsequently sold.
(5) Reflects a reduction of interest expense associated with the fair value mark-up
of debt acquired in the RSC acquisition.
(6) Primarily reflects severance costs and branch closure charges associated with
the RSC acquisition.
(7) Primarily reflects write-offs of leasehold improvements and other fixed assets
in connection with the RSC acquisition.
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 rental depreciation related to acquired RSC fleet and property and equipment, impact of the fair value mark-up of acquired RSC fleet, impact on interest expense related to fair value adjustment of acquired RSC indebtedness, restructuring charge, asset impairment charge and loss on repurchase/redemption of debt securities and retirement of subordinated convertible debentures. 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 Year Ended
December 31, December 31,
2014 2013 2014 2013
Earnings per share - GAAP, as reported $ 1.88 $ 1.31 $ 5.15 $ 3.64
After-tax impact of:
Merger related costs (1) (0.02 ) — 0.06 0.05
Merger related intangible asset amortization (2) 0.30 0.24 1.10 0.94
Impact on depreciation related to acquired RSC fleet and property and
equipment (3) (0.01 ) (0.01 ) (0.03 ) (0.04 )
Impact of the fair value mark-up of acquired RSC fleet (4) 0.05 0.06 0.21 0.25
Impact on interest expense related to fair value adjustment of acquired
RSC indebtedness (5) (0.01 ) (0.01 ) (0.03 ) (0.04 )
Restructuring charge (6) — — (0.01 ) 0.07
Asset impairment charge (7) — — — 0.02
Loss on repurchase/redemption of debt securities and retirement of
subordinated convertible debentures —
—
0.46
0.02
Earnings per share - adjusted $ 2.19 $ 1.59 $ 6.91 $ 4.91
67
EBITDA and Adjusted EBITDA GAAP
Reconciliation
A) Our EBITDA margin was 47.4% and 46.9% for the three months ended December 31, 2014 and 2013, respectively, and 45.7% and 44.0% for the year ended December 31, 2014 and 2013, respectively. B) Our adjusted EBITDA margin was 49.6% and 48.7% for the three months ended December 31, 2014 and 2013, respectively, and 47.8% and 46.3% for the year ended December 31, 2014 and 2013, respectively.
(1) Reflects transaction costs associated with the April 2012 RSC acquisition and the April 2014
National Pump acquisition.
(2) Primarily reflects severance costs and branch closure charges associated with the RSC acquisition.
(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 the RSC acquisition and subsequently sold.
(5) Reflects a gain/loss recognized upon the sale of a former subsidiary that developed and marketed
software.
EBITDA represents the sum of net income, provision for income taxes, interest expense, net, interest expense-subordinated convertible debentures, depreciation of rental equipment, and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the merger related costs, restructuring charge, stock compensation expense, net, the impact of the fair value mark-up of acquired RSC fleet and the gain/loss on sale of the software subsidiary. These items are excluded from adjusted EBITDA internally when evaluating our operating performance 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. 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 tgain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced. However, EBITDA and adjusted EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. The table below provides a reconciliation between net income and EBITDA and adjusted EBITDA.
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
Net income $ 194 $ 140 $ 540 $ 387
Provision for income taxes 117 86 310 218
Interest expense, net 119 118 555 475
Interest expense – subordinated convertible debentures — — — 3
Depreciation of rental equipment 239 223 921 852
Non-rental depreciation and amortization 73 61 273 246
EBITDA (A) $ 742 $ 628 $ 2,599 $ 2,181
Merger related costs (1) (2 ) 1 11 9
Restructuring charge (2) 1 — (1 ) 12
Stock compensation expense, net (3) 26 12 74 46
Impact of the fair value mark-up of acquired RSC fleet (4) 8 10 35 44
(Gain) loss on sale of software subsidiary (5) — — — 1
Adjusted EBITDA (B) $ 775 $ 651 $ 2,718 $ 2,293
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Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
(1) Reflects transaction costs associated with the April 2012 RSC acquisition and the April 2014 National Pump acquisition.
(2) Primarily reflects severance costs and branch closure charges associated with the RSC acquisition.
(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
the RSC acquisition and subsequently sold.
(5) Reflects a gain/loss recognized upon the sale of a former subsidiary that developed and marketed software.
Three Months Ended Year Ended
December 31, December 31,
2014 2013 2014 2013
Net cash provided by operating activities $ 335 $ 436 $ 1,801 $ 1,551
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 ) (5 ) (17 ) (21 )
Gain on sales of rental equipment 68 52 229 176
Gain on sales of non-rental equipment 4 3 11 6
Gain (loss) on sale of software subsidiary (5) — — — (1 )
Merger related costs (1) 2 (1 ) (11 ) (9 )
Restructuring charge (2) (1 ) — 1 (12 )
Stock compensation expense, net (3) (26 ) (12 ) (74 ) (46 )
Loss on extinguishment of debt securities — — (80 ) (1 )
Loss on retirement of subordinated convertible debentures — — — (2 )
Changes in assets and liabilities 181 12 182 31
Cash paid for interest, including subordinated convertible debentures 142 139 457 461
Cash paid for income taxes, net 40 4 100 48
EBITDA $ 742 $ 628 $ 2,599 $ 2,181
Add back:
Merger related costs (1) (2 ) 1 11 9
Restructuring charge (2) 1 — (1 ) 12
Stock compensation expense, net (3) 26 12 74 46
Impact of the fair value mark-up of acquired RSC fleet (4) 8 10 35 44
(Gain) loss on sale of software subsidiary (5) — — — 1
Adjusted EBITDA $ 775 $ 651 $ 2,718 $ 2,293
69
Free Cash Flow GAAP Reconciliation
We define free cash flow as (i) net cash provided by operating activities less (ii) purchases of rental and non-rental equipment plus (iii)
proceeds from sales of rental and non-rental equipment. 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 Year Ended
December 31, December 31,
2014 2013 2014 2013
Net cash provided by operating activities $ 335 $ 436 $ 1,801 $ 1,551
Purchases of rental equipment (217 ) (81 ) (1,701 ) (1,580 )
Purchases of non-rental equipment (36 ) (33 ) (120 ) (104 )
Proceeds from sales of rental equipment 156 134 544 490
Proceeds from sales of non-rental equipment 7 11 33 26
Free cash flow $ 245 $ 467 $ 557 $ 383
70
In September 2011, the American Rental Association (ARA) released Rental Market Metrics whitepaper
– Standardization of metrics provides consistent way for calculating and reporting critical performance metrics
– Publication provides definitions and calculations for original equipment cost (OEC), time (physical) utilization, financial (dollar) utilization, fleet age and period-over-period rental rate changes
– URI adopted new ARA standards beginning with the release of our first quarter 2012 results Standard set of metrics is a sign of growth and maturity of industry
Key differences between old URI (“old basis”) methodology and ARA (“new basis”) methodology are as follows:
– OEC – New basis calculation is based on GAAP gross book value. In old basis calculation, OEC is not reduced by volume rebates. In new basis calculation (consistent with GAAP), OEC is reduced by value of volume rebates. For acquisitions, OEC is not reset; OEC values are carried-over from acquired company
– Time utilization – In old basis calculation, OEC excluded serialized assets less than $SK. In new basis calculation, these assets are included. Calculation also changes for new definition of OEC
– Fleet Age – Moving from unit-weighted measure of fleet age (old basis) to DEC-weighted measure (new basis)
– Rental Rate – In new basis calculation, period-over-period rental rate changes are weighted by prior period revenue mix, as opposed to current period revenue mix (old basis). In new basis calculation, impact of currency is excluded from rental rate change calculation
ARA Metrics
71
Corporate Governance
Amended Company charter to eliminate Board classes
Roles of Chairman and CEO are separated and the Chairman is an independent director
12 of 13 directors are independent
Board and each committee have express authority to retain outside advisors
Board and each committee perform an annual self-assessment
All directors attended at least 75% of the meetings of the Board and committees of which they were a member during the past year
Board has adopted stock ownership guidelines for officers and directors
Each of the Compensation, Audit and Nominating & Corporate Governance Committees is comprised solely of independent directors
Board elected not to renew or extend the stockholder rights plan
Four members of the Audit Committee are financial experts
Focus on Best Practices
72
Convertible Senior Notes
In 2014, 6.4M shares were included in the diluted share count
Assumed Stock Price Net Shares Issued Upon Conversion Potential Accounting EPS Dilution
$11.11 or below None None $15.56 None 26K shares $50.00 62K shares 70K shares $100.00 76K shares 80K shares $150.00 81K shares 83K shares
How the Convertible Works
In November 2009, URI issued $172.5M of convertible senior notes due 2015. Notes carry a 4.0% coupon and are convertible at an initial conversion price of $11.11 per share – Net share settlement election means par amount paid in cash, in-the-money portion settled in stock or cash – The outstanding balance of the 4.00% notes at December 31, 2014 was $34M
The company separately entered into hedge transactions which significantly reduce potential dilution associated with the convertible senior notes – Hedge transactions effectively increase conversion price to $15.56 per share, subject to change in certain
circumstances
Hypothetical conversion of $1M:
73
Mechanics of Convert and Hedge
Assumed Stock Price
Hedge Counterparties
United Rentals
Net 0 New Shares Issued
Investors
Hedge Counterparties
United Rentals
Net 71K New Shares Issued
Investors
Hedge Counterparties
United Rentals
Net 81K New Shares Issued
Investors
$10
$75
$150
0 Shares
5K Shares
3K Shares
0 Shares
77K Shares
83K Shares
Share Delivery at Conversion of $1M
74
1. Capex: Capital expenditures represent the amount reported in our statements of cash flows for the purchase of rental and non-rental equipment.
2. Dollar Utilization: Annualized rental revenue, excluding re-rent and ancillary revenue, divided by the average original equipment cost. (ARA methodology)
3. EBITDA: Is a measure of operating performance and is calculated as the sum of net income (loss), income (loss) from discontinued operation, net of taxes, provision (benefit) for income taxes, interest expense, net, interest expense-subordinated convertible debentures, net, depreciation of rental equipment and non-rental depreciation and amortization.
4. Free Cash (Usage) Flow: Free cash (usage) flow is a measure of cash flow available to satisfy debt obligations and working capital requirements, and is calculated as net cash provided by operating activities, less purchases of rental and non-rental equipment plus proceeds from sales of rental and nonrental equipment and excess tax benefits from share-based payment arrangements, net.
Glossary of Terms
75
5. Fleet Age: The OEC weighted age of the entire fleet, excluding the benefit of refurbishments.
6. OEC: Original Equipment Cost; the cost of an asset at the time it was originally purchased.
7. Rental Rate: The percentage change in the rate/price that is charged for equipment on rent. Overall company rental rates change based on a combination of pricing, fleet composition and term of rental. This metric is used to evaluate rate changes both year-over-year and sequentially (typically quarter-over-quarter). Rental rate changes are calculated based on the year-over-year or sequential variance in average contract rates, weighted by the prior period revenue mix.
8. Time Utilization: Amount of time an asset is on rent divided by the amount of time the asset has been owned. Also known as physical utilization.
Glossary of Terms