United Rentals, Inc. (NYSE: URI) today announced financial
results for the second quarter 20181. Total revenue was $1.891
billion and rental revenue was $1.631 billion for the second
quarter, compared with $1.597 billion and $1.367 billion,
respectively, for the same period last year. On a GAAP basis, the
company reported second quarter net income of $270 million, or
$3.20 per diluted share, compared with $141 million, or $1.65 per
diluted share, for the same period last year. The second quarter
2018 includes a net income benefit associated with the Tax Cuts and
Jobs Act (the “Tax Act”) that was enacted in December 2017. The Tax
Act reduced the U.S. federal corporate statutory tax rate from 35%
to 21%, which contributed an estimated $0.58 to earnings per
diluted share for the second quarter 20182.
Adjusted EPS3 for the quarter was $3.85 per diluted share,
compared with $2.37 per diluted share for the same period last
year. The reduction in the tax rate discussed above contributed an
estimated $0.70 to adjusted EPS for the second quarter 20182.
Adjusted EBITDA3 was $907 million and adjusted EBITDA margin3 was
48.0%, reflecting increases of $160 million and 120 basis points,
respectively, from the same period last year.
Second Quarter 2018 Highlights
- Rental revenue4 increased 19.3%
year-over-year. Within rental revenue, owned equipment rental
revenue increased 19.3%, reflecting increases of 15.9% in the
volume of equipment on rent and 2.8% in rental rates.
- Pro forma1 rental revenue increased
11.4% year-over-year, reflecting growth of 7.1% in the volume of
equipment on rent and a 2.8% increase in rental rates.
- Time utilization decreased 20 basis
points year-over-year to 69.2%, primarily reflecting the impact of
the Neff acquisition. On a pro forma basis, time utilization was
flat year-over-year.
- The company’s Trench, Power and
Pump specialty segment's rental revenue increased by 33.5%
year-over-year, including a 21.9% increase on a same store basis.
The segment’s rental gross margin decreased by 110 basis points to
48.5%.
_______________ 1. The company completed the
acquisitions of NES Rentals Holdings II, Inc. (“NES”) and Neff
Corporation ("Neff") in April 2017 and October 2017, respectively.
NES and Neff are included in the company's results subsequent to
the acquisition dates. Pro forma results reflect the combination of
United Rentals, NES and Neff for all periods presented. 2. The
estimated contribution of the Tax Act was calculated by applying
the percentage point tax rate reduction to U.S. pretax income and
the pretax adjustments reflected in adjusted EPS. 3. Adjusted EPS
(earnings per share) and adjusted EBITDA (earnings before interest,
taxes, depreciation and amortization) are non-GAAP measures that
exclude the impact of the items noted in the tables below. See the
tables below for amounts and reconciliations to the most comparable
GAAP measures. Adjusted EBITDA margin represents adjusted EBITDA
divided by total revenue. 4. Rental revenue includes owned
equipment rental revenue, re-rent revenue and ancillary revenue.
- The company generated $157 million of
proceeds from used equipment sales at a GAAP gross margin of 41.4%
and an adjusted gross margin of 51.6%, compared with $133 million
at a GAAP gross margin of 39.1% and an adjusted gross margin of
52.6% for the same period last year. The year-over-year increase in
used equipment sales primarily reflects increased volume, driven by
a significantly larger fleet size, in a strong used equipment
market.5
BakerCorp Acquisition
On July 2, 2018, the company announced that it has entered into
a definitive agreement to acquire BakerCorp International Holdings,
Inc. (“BakerCorp”) for approximately $715 million in cash.
BakerCorp is a leading provider of rental solutions for fluid
storage, transfer and treatment, with approximately $295 million in
annual revenue and 950 employees. BakerCorp’s operations are
primarily concentrated in the United States and Canada, where it
has 46 locations, with another 11 locations in France, Germany, the
United Kingdom and the Netherlands. The transaction is expected to
close early in the third quarter and contribute approximately $140
million of revenue and $40 million of adjusted EBITDA to full-year
2018 results, while adding approximately $50 million to the 2018
capital spending plan.
CEO Comments
Michael Kneeland, chief executive officer of United Rentals,
said, "We were very pleased with the momentum of our business in
the second quarter, as strong gains in volume and rates helped
drive better than 11% growth in pro forma rental revenue.
Importantly, demand remained robust across our construction and
industrial verticals in both the U.S. and Canada. The Neff
integration is largely complete, and we look forward to getting the
process started with Baker this quarter."
Kneeland continued, "Everything we see internally and externally
points to a durable cycle and continued industry discipline in
managing fleet growth. Given this backdrop, we’ve raised our 2018
guidance for total revenue, adjusted EBITDA and capex. We remain
focused on executing a balanced strategy of growth and returns to
maximize long-term value."
Six Months 2018 Highlights
- Rental revenue increased 22.0%
year-over-year. Within rental revenue, owned equipment rental
revenue increased 22.1%, reflecting increases of 20.6% in the
volume of equipment on rent and 2.4% in rental rates.
- Pro forma rental revenue increased
10.7% year-over-year, reflecting growth of 7.0% in the volume of
equipment on rent and a 2.8% increase in rental rates.
- Time utilization decreased 60 basis
points year-over-year to 67.2%, primarily reflecting the impact of
the NES and Neff acquisitions. On a pro forma basis, time
utilization decreased 10 basis points year-over-year.
- The company’s Trench, Power and
Pump specialty segment's rental revenue increased by 34.9%
year-over-year, including a 23.7% increase on a same store basis.
The segment’s rental gross margin increased by 20 basis points to
47.4%.
- The company generated $338 million of
proceeds from used equipment sales at a GAAP gross margin of 41.1%
and an adjusted gross margin of 53.0%, compared with $239 million
at a GAAP gross margin of 41.0% and an adjusted gross margin of
51.9% for the same period last year. The year-over-year increase in
used equipment sales primarily reflects increased volume, driven by
a significantly larger fleet size, in a strong used equipment
market.5
_______________ 5. Used equipment sales adjusted
gross margin excludes the impact of the fair value mark-up of
acquired RSC, NES and Neff fleet that was sold. In 2018, we adopted
Accounting Standards Codification (“ASC”) Topic 606, “Revenue from
Contracts with Customers”. Used equipment sales in the second
quarter of 2017 would have been reduced by $12 under Topic 606
because such sales would have been recognized prior to the second
quarter. Under Topic 606, we would have recognized an additional
$12 of sales of rental equipment during the first six months of
2017. While the adoption of Topic 606 impacted the timing of
revenue recognition, it has no impact on annual revenue.
2018 Outlook
The following revised full-year guidance does not include the
impact of the pending acquisition of BakerCorp. For additional
detail on BakerCorp, please see the section above, as well as the
investor presentations that are currently accessible on
www.unitedrentals.com.
Prior Outlook Current
Outlook Total revenue $7.3 billion to $7.6 billion $7.5 billion
to $7.7 billion Adjusted EBITDA6 $3.6 billion to $3.75 billion
$3.675 billion to $3.775 billion Net rental capital expenditures
after gross purchases
$1.2 billion to $1.35 billion,after gross
purchases of$1.8 billion to $1.95 billion
$1.25 billion to $1.35 billion,after gross
purchases of $1.9billion to $2.0 billion
Net cash provided by operating activities $2.625 billion to $2.825
billion $2.675 billion to $2.825 billion Free cash flow7 (excluding
the impact of merger and restructuring related payments) $1.3
billion to $1.4 billion $1.3 billion to $1.4 billion
Free Cash Flow and Fleet Size
For the first six months of 2018, net cash provided by operating
activities was $1.649 billion, and free cash flow was $703 million
after total rental and non-rental gross capital expenditures of
$1.306 billion. For the first six months of 2017, net cash provided
by operating activities was $1.329 billion, and free cash flow was
$614 million after total rental and non-rental gross capital
expenditures of $968 million. Free cash flow for the first six
months of 2018 and 2017 included aggregate merger and restructuring
related payments of $16 million and $31 million, respectively.
The size of the rental fleet was $11.98 billion of OEC at
June 30, 2018, compared with $11.51 billion at December 31,
2017. The age of the rental fleet was 46.0 months on an
OEC-weighted basis at June 30, 2018, compared with 47.0 months
at December 31, 2017.
Return on Invested Capital (ROIC)
ROIC was 10.0% for the 12 months ended June 30, 2018,
compared with 8.4% for the 12 months ended June 30, 2017. 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 rates of 21% and
35% for 2018 and 2017, respectively, were used to calculate
after-tax operating income.
The company expects ROIC to materially increase due to the
reduced tax rates following the enactment of the Tax Act, but,
because the trailing 12 months are used for the ROIC calculation,
the full impact will not be reflected until one year after the
lower tax rate became effective. If the 21% U.S. federal corporate
statutory tax rate following the enactment of the Tax Act was
applied to ROIC for all historic periods, the company estimates
that ROIC would have been 10.9% and 10.0% for the 12 months ended
June 30, 2018 and 2017, respectively.
Share Repurchase Program
The company completed its $1 billion program to repurchase
shares of its common stock in the second quarter 2018. Following
its completion, in July 2018, the company commenced a new $1.25
billion share repurchase program, which the company intends to
complete by the end of 2019.
_______________ 6. Information reconciling
forward-looking adjusted EBITDA to the comparable GAAP financial
measures is unavailable to the company without unreasonable effort,
as discussed below. 7. Free cash flow is a non-GAAP measure. See
the table below for amounts and a reconciliation to the most
comparable GAAP measure.
Conference Call
United Rentals will hold a conference call tomorrow, Thursday,
July 19, 2018, at 11:00 a.m. Eastern Time. The conference call
number is 855-458-4217 (international: 574-990-3618). The
conference call will also be available live by audio webcast at
unitedrentals.com, where it will be archived until the next
earnings call. The replay number for the call is 404-537-3406,
passcode is 2978447.
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. The equipment 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 charge,
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 charge, the impact on
depreciation related to acquired fleet and property and equipment,
the impact of the fair value mark-up of acquired fleet, the loss on
repurchase/redemption of debt securities and amendment of ABL
facility, and merger related intangible asset amortization. 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 1,008 rental
locations in 49 states and every Canadian province. The company’s
approximately 15,500 employees serve construction and industrial
customers, utilities, municipalities, homeowners and others. The
company offers approximately 3,400 classes of equipment for rent
with a total original cost of $11.98 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 challenges associated with past or future
acquisitions, including NES, Neff and BakerCorp, such as
undiscovered liabilities, costs, integration issues and/or the
inability to achieve the cost and revenue synergies expected; (2) a
slowdown in North American construction and industrial activities,
which could reduce our revenues and profitability; (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) an overcapacity of fleet in the equipment rental
industry; (9) a decrease in levels of infrastructure spending,
including lower than expected government funding for construction
projects; (10) fluctuations in the price of our common stock and
inability to complete stock repurchases in the time frame and/or on
the terms anticipated; (11) our rates and time utilization being
less than anticipated; (12) our inability to manage credit risk
adequately or to collect on contracts with customers; (13) our
inability to access the capital that our business or growth plans
may require; (14) the incurrence of impairment charges; (15) trends
in oil and natural gas could adversely affect demand for our
services and products; (16) 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; (17) an increase in our loss reserves to
address business operations or other claims and any claims that
exceed our established levels of reserves; (18) the incurrence of
additional costs and expenses (including indemnification
obligations) in connection with litigation, regulatory or
investigatory matters; (19) 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; (20) 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; (21) management turnover and inability to attract
and retain key personnel; (22) our costs being more than
anticipated and/or the inability to realize expected savings in the
amounts or time frames planned; (23) our dependence on key
suppliers to obtain equipment and other supplies for our business
on acceptable terms; (24) our inability to sell our new or used
fleet in the amounts, or at the prices, we expect; (25) competition
from existing and new competitors; (26) security breaches,
cybersecurity attacks and other significant disruptions in our
information technology systems; (27) 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; (28) labor difficulties and labor-based legislation
affecting our labor relations and operations generally; (29)
increases in our maintenance and replacement costs and/or decreases
in the residual value of our equipment; and (30) the effect of
changes in tax law, such as the effect of the Tax Cuts and Jobs Act
that was enacted on December 22, 2017. 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, 2017, 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.
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, 2018 2017
2018 2017 Revenues: Equipment rentals $
1,631 $ 1,367 $ 3,090 $ 2,533 Sales of rental equipment 157 133 338
239 Sales of new equipment 44 47 86 86 Contractor supplies sales 24
21 42 39 Service and other revenues 35 29 69
56
Total revenues 1,891 1,597
3,625 2,953 Cost of revenues: Cost of
equipment rentals, excluding depreciation 620 525 1,212 999
Depreciation of rental equipment 323 266 645 514 Cost of rental
equipment sales 92 81 199 141 Cost of new equipment sales 38 40 75
74 Cost of contractor supplies sales 16 15 28 28 Cost of service
and other revenues 20 15 38 28
Total cost
of revenues 1,109 942 2,197
1,784 Gross profit 782 655
1,428 1,169 Selling, general and administrative
expenses 239 218 471 411 Merger related costs 2 14 3 16
Restructuring charge 4 19 6 19 Non-rental depreciation and
amortization 67 64 138 126 Operating income
470 340 810 597 Interest expense, net 112 113 221 207 Other income,
net (1 ) (2 ) (2 ) — Income before provision for income taxes 359
229 591 390 Provision for income taxes (1) 89 88 138
140
Net income (1) $ 270
$ 141 $ 453 $
250 Diluted earnings per share (1) $
3.20 $ 1.65 $ 5.34
$ 2.92 (1) The three and
six months ended June 30, 2018 reflect a reduction in the U.S.
federal corporate statutory tax rate from 35% to 21% following the
enactment of the Tax Cuts and Jobs Act in December 2017, which
contributed an estimated $0.58 and $0.95 to diluted earnings per
share for the three and six months ended June 30, 2018,
respectively.
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions)
June 30, 2018 December 31, 2017 ASSETS
Cash and cash equivalents $ 117 $ 352 Accounts receivable, net
1,203 1,233 Inventory 94 75 Prepaid expenses and other assets 92
112 Total current assets 1,506 1,772 Rental
equipment, net 8,213 7,824 Property and equipment, net 480 467
Goodwill 4,096 4,082 Other intangible assets, net 798 875 Other
long-term assets 15 10
Total assets $
15,108 $ 15,030 LIABILITIES
AND STOCKHOLDERS’ EQUITY Short-term debt and current maturities
of long-term debt $ 900 $ 723 Accounts payable 859 409 Accrued
expenses and other liabilities 470 536 Total current
liabilities 2,229 1,668 Long-term debt 8,086 8,717 Deferred taxes
1,509 1,419 Other long-term liabilities 120 120
Total liabilities 11,944 11,924
Common stock 1 1 Additional paid-in capital 2,351 2,356 Retained
earnings 3,458 3,005 Treasury stock (2,450 ) (2,105 ) Accumulated
other comprehensive loss (196 ) (151 )
Total stockholders’
equity 3,164 3,106 Total
liabilities and stockholders’ equity $ 15,108
$ 15,030
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
(In millions)
Three Months Ended Six Months Ended June
30, June 30, 2018 2017
2018 2017 Cash Flows From Operating
Activities: Net income $ 270 $ 141 $ 453 $ 250 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 390 330 783 640 Amortization of
deferred financing costs and original issue discounts 3 2 6 4 Gain
on sales of rental equipment (65 ) (52 ) (139 ) (98 ) Gain on sales
of non-rental equipment (2 ) (2 ) (3 ) (3 ) Gain on insurance
proceeds from damaged equipment (12 ) (7 ) (14 ) (8 ) Stock
compensation expense, net 24 24 43 40 Merger related costs 2 14 3
16 Restructuring charge 4 19 6 19 Loss on repurchase/redemption of
debt securities and amendment of ABL facility — 12 — 12 Increase in
deferred taxes 56 30 93 40 Changes in operating assets and
liabilities: (Increase) decrease in accounts receivable (51 ) (81 )
29 (16 ) (Increase) decrease in inventory (10 ) 1 (19 ) (5 )
(Increase) decrease in prepaid expenses and other assets (17 ) (16
) 25 (7 ) Increase in accounts payable 348 290 451 429 Increase
(decrease) in accrued expenses and other liabilities 67 2
(68 ) 16
Net cash provided by operating
activities 1,007 707 1,649 1,329
Cash Flows From Investing Activities: Purchases of rental
equipment (946 ) (694 ) (1,226 ) (913 ) Purchases of non-rental
equipment (47 ) (33 ) (80 ) (55 ) Proceeds from sales of rental
equipment 157 133 338 239 Proceeds from sales of non-rental
equipment 4 4 8 6 Insurance proceeds from damaged equipment 12 7 14
8 Purchases of other companies, net of cash acquired (6 ) (965 )
(58 ) (965 ) Purchases of investments (1 ) (3 ) (1 ) (4 )
Net
cash used in investing activities (827 )
(1,551 ) (1,005 ) (1,684
) Cash Flows From Financing Activities: Proceeds from
debt 2,074 2,441 4,330 3,943 Payments of debt (2,243 ) (1,604 )
(4,806 ) (3,543 ) Payments of financing costs (1 ) — (1 ) (7 )
Proceeds from the exercise of common stock options 1 — 2 1 Common
stock repurchased (1) (169 ) (1 ) (395 ) (24 )
Net cash (used
in) provided by financing activities (338 )
836 (870 ) 370 Effect of foreign
exchange rates (3 ) 9 (9 ) 11
Net (decrease)
increase in cash and cash equivalents (161 )
1 (235 ) 26 Cash and cash equivalents
at beginning of period 278 337 352 312
Cash and cash equivalents at end of period $
117 $ 338 $ 117
$ 338 Supplemental disclosure of
cash flow information: Cash paid for income taxes, net $ 29 $
58 $ 39 $ 59 Cash paid for interest 60 87 213 177
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED) (continued)
(1) As discussed above, we have an open $1.25 billion share
repurchase program that we intend to complete by the end of 2019.
This program commenced in July 2018 following the completion of our
$1 billion share repurchase program. The common stock repurchases
include i) shares repurchased pursuant to the $1 billion share
repurchase program and ii) shares withheld to satisfy tax
withholding obligations upon the vesting of restricted stock unit
awards.
UNITED RENTALS, INC.
SEGMENT PERFORMANCE
($ in millions)
Three Months Ended Six Months Ended June
30, June 30, 2018 2017
Change 2018 2017
Change General Rentals Reportable
segment equipment rentals revenue $1,332 $1,143 16.5% $2,533 $2,120
19.5% Reportable segment equipment rentals gross profit 543 465
16.8% 969 825 17.5% Reportable segment equipment rentals gross
margin 40.8% 40.7% 10 bps 38.3% 38.9% (60) bps
Trench, Power and
Pump Reportable segment equipment rentals revenue $299 $224
33.5% $557 $413 34.9% Reportable segment equipment rentals gross
profit 145 111 30.6% 264 195 35.4% Reportable segment equipment
rentals gross margin 48.5% 49.6% (110) bps 47.4% 47.2% 20 bps
Total United Rentals Total equipment rentals revenue $1,631
$1,367 19.3% $3,090 $2,533 22.0% Total equipment rentals gross
profit 688 576 19.4% 1,233 1,020 20.9% Total equipment rentals
gross margin 42.2% 42.1% 10 bps 39.9% 40.3% (40) 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, 2018 2017
2018 2017 Numerator: Net income
available to common stockholders (1) $ 270 $ 141 $ 453 $ 250
Denominator: Denominator for basic earnings per
share—weighted-average common shares 83.5 84.6 83.9 84.5 Effect of
dilutive securities: Employee stock options 0.4 0.4 0.4 0.4
Restricted stock units 0.3 0.4 0.4 0.5
Denominator for diluted earnings per
share—adjusted weighted-averagecommon shares
84.2 85.4 84.7 85.4 Diluted earnings
per share (1) $ 3.20 $ 1.65
$ 5.34 $ 2.92 (1)
The three and six months ended June 30, 2018 reflect a reduction in
the U.S. federal corporate statutory tax rate from 35% to 21%
following the enactment of the Tax Cuts and Jobs Act in December
2017, which contributed an estimated $0.58 and $0.95 to diluted
earnings per share for the three and six months ended June 30,
2018, respectively.
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 and loss on
repurchase/redemption of debt securities and amendment of ABL
facility. 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, 2018
2017 2018 2017 Earnings per
share - GAAP, as reported (1) $ 3.20 $
1.65 $ 5.34 $ 2.92 After-tax
impact of: Merger related costs (2) 0.02 0.09 0.03 0.11 Merger
related intangible asset amortization (3) 0.37 0.30 0.76 0.57
Impact on depreciation related to acquired fleet and property and
equipment (4) 0.08 (0.03 ) 0.17 (0.02 ) Impact of the fair value
mark-up of acquired fleet (5) 0.15 0.13 0.36 0.19 Restructuring
charge (6) 0.03 0.14 0.05 0.14 Loss on repurchase/redemption of
debt securities and amendment of ABL facility — 0.09
— 0.09
Earnings per share - adjusted (1)
$ 3.85 $ 2.37 $
6.71 $ 4.00 Tax rate applied to
above adjustments (1) 25.3 % 38.5 % 25.3 % 38.5 % (1)
The three and six months ended June 30, 2018 reflect a
reduction in the U.S. federal corporate statutory tax rate from 35%
to 21% following the enactment of the Tax Cuts and Jobs Act in
December 2017, which contributed an estimated $0.58 and $0.95,
respectively, to earnings per share-GAAP, and $0.70 and $1.20,
respectively, to earnings per share-adjusted, for the three and six
months ended June 30, 2018. The tax rates applied to the
adjustments reflect the statutory rates in the applicable entities.
(2) Reflects transaction costs associated with the NES, Neff and
BakerCorp acquisitions discussed above. As discussed above, the
BakerCorp acquisition is expected to close early in the third
quarter of 2018. We have made a number of acquisitions in the past
and may continue to make acquisitions in the future. Merger related
costs only include costs associated with major acquisitions that
significantly impact our operations. The historic acquisitions that
have included merger related costs are RSC, which had annual
revenues of approximately $1.5 billion prior to the acquisition,
and National Pump, which had annual revenues of over $200 million
prior to the acquisition. NES had annual revenues of approximately
$369 million, Neff had annual revenues of approximately $413
million and BakerCorp had annual revenues of approximately $295
million. (3) Reflects the amortization of the intangible assets
acquired in the RSC, National Pump, NES and Neff acquisitions. (4)
Reflects the impact of extending the useful lives of equipment
acquired in the RSC, NES and Neff 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 the RSC, NES and Neff acquisitions and
subsequently sold. (6) Primarily reflects severance and branch
closure charges associated with our closed restructuring programs
and our current restructuring program. 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 three restructuring programs. We have
cumulatively incurred total restructuring charges of $290 million
under our restructuring programs.
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 charge, 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
EBITDA and adjusted EBITDA margins represent EBITDA 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, 2018
2017 2018 2017 Net income
$ 270 $ 141 $ 453
$ 250 Provision for income taxes 89 88 138 140
Interest expense, net 112 113 221 207 Depreciation of rental
equipment 323 266 645 514 Non-rental depreciation and amortization
67 64 138 126
EBITDA (A) $
861 $ 672 $ 1,595 $
1,237 Merger related costs (1) 2 14 3 16 Restructuring
charge (2) 4 19 6 19 Stock compensation expense, net (3) 24 24 43
40 Impact of the fair value mark-up of acquired fleet (4) 16
18 40 26
Adjusted EBITDA (B) $
907 $ 747 $ 1,687
$ 1,338 A) Our EBITDA margin was
45.5% and 42.1% for the three months ended June 30, 2018 and 2017,
respectively, and 44.0% and 41.9% for the six months ended June 30,
2018 and 2017, respectively. B) Our adjusted EBITDA margin was
48.0% and 46.8% for the three months ended June 30, 2018 and 2017,
respectively, and 46.5% and 45.3% for the six months ended June 30,
2018 and 2017, respectively. (1) Reflects transaction
costs associated with the NES, Neff and BakerCorp acquisitions
discussed above. As discussed above, the BakerCorp acquisition is
expected to close early in the third quarter of 2018. We have made
a number of acquisitions in the past and may continue to make
acquisitions in the future. Merger related costs only include costs
associated with major acquisitions that significantly impact our
operations. The historic acquisitions that have included merger
related costs are RSC, which had annual revenues of approximately
$1.5 billion prior to the acquisition, and National Pump, which had
annual revenues of over $200 million prior to the acquisition. NES
had annual revenues of approximately $369 million, Neff had annual
revenues of approximately $413 million and BakerCorp had annual
revenues of approximately $295 million. (2) Primarily reflects
severance and branch closure charges associated with our closed
restructuring programs and our current restructuring program. 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 three restructuring
programs. We have cumulatively incurred total restructuring charges
of $290 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 the RSC, NES and Neff 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, 2018
2017 2018 2017 Net cash
provided by operating activities $ 1,007 $
707 $ 1,649 $ 1,329 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 ) (2 ) (6 ) (4 )
Gain on sales of rental equipment 65 52 139 98 Gain on sales of
non-rental equipment 2 2 3 3 Gain on insurance proceeds from
damaged equipment 12 7 14 8 Merger related costs (1) (2 ) (14 ) (3
) (16 ) Restructuring charge (2) (4 ) (19 ) (6 ) (19 ) Stock
compensation expense, net (3) (24 ) (24 ) (43 ) (40 ) Loss on
repurchase/redemption of debt securities and amendment of ABL
facility — (12 ) — (12 ) Changes in assets and liabilities (281 )
(170 ) (404 ) (346 ) Cash paid for interest 60 87 213 177 Cash paid
for income taxes, net 29 58 39 59
EBITDA $ 861 $ 672 $
1,595 $ 1,237 Add back: Merger related costs
(1) 2 14 3 16 Restructuring charge (2) 4 19 6 19 Stock compensation
expense, net (3) 24 24 43 40 Impact of the fair value mark-up of
acquired fleet (4) 16 18 40 26
Adjusted EBITDA $ 907 $
747 $ 1,687 $
1,338 (1) Reflects transaction
costs associated with the NES, Neff and BakerCorp acquisitions
discussed above. As discussed above, the BakerCorp acquisition is
expected to close early in the third quarter of 2018. We have made
a number of acquisitions in the past and may continue to make
acquisitions in the future. Merger related costs only include costs
associated with major acquisitions that significantly impact our
operations. The historic acquisitions that have included merger
related costs are RSC, which had annual revenues of approximately
$1.5 billion prior to the acquisition, and National Pump, which had
annual revenues of over $200 million prior to the acquisition. NES
had annual revenues of approximately $369 million, Neff had annual
revenues of approximately $413 million and BakerCorp had annual
revenues of approximately $295 million. (2) Primarily reflects
severance and branch closure charges associated with our closed
restructuring programs and our current restructuring program. 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 three restructuring
programs. We have cumulatively incurred total restructuring charges
of $290 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 the RSC, NES and Neff acquisitions and
subsequently sold.
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.
The equipment 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, 2018
2017 2018 2017 Net cash
provided by operating activities $ 1,007 $
707 $ 1,649 $ 1,329 Purchases of
rental equipment (946 ) (694 ) (1,226 ) (913 ) Purchases of
non-rental equipment (47 ) (33 ) (80 ) (55 ) Proceeds from sales of
rental equipment 157 133 338 239 Proceeds from sales of non-rental
equipment 4 4 8 6 Insurance proceeds from damaged equipment 12
7 14 8
Free cash flow (1)
$ 187 $ 124 $
703 $ 614 (1)
Free cash flow included aggregate merger and restructuring
related payments of $6 million and $29 million for the three months
ended June 30, 2018 and 2017, respectively, and $16 million and $31
million for the six months ended June 30, 2018 and 2017,
respectively.
The table below provides a reconciliation between 2018
forecasted net cash provided by operating activities and free cash
flow.
Net cash provided by operating activities
$2,675- $2,825 Purchases of rental equipment
$(1,900)-$(2,000) Proceeds from sales of rental equipment $600-$700
Purchases of non-rental equipment, net of proceeds from sales and
insurance proceeds from damaged equipment $(75)-$(125)
Free cash
flow (excluding the impact of merger and restructuring related
payments) $1,300- $1,400
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180718005751/en/
United Rentals, Inc.Ted Grace, 203-618-7122Cell:
203-399-8951tgrace@ur.com
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