Acquisitions

On April 30, 2012 (“the acquisition date”), we acquired 100 percent of the outstanding common shares and voting interest of RSC. The results of RSC's operations have been included in our consolidated financial statements since the acquisition date. RSC, which had total revenues of $1.5 billion in 2011, was one of the largest equipment rental providers in North America, and had a network of 440 rental locations in 43 U.S. states and three Canadian provinces as of December 31, 2011. The acquisition has created a leading North American equipment rental company with a more attractive business mix, greater scale and enhanced growth prospects, and we believe that the acquisition will provide us with financial benefits including reduced operating expenses and additional revenue opportunities going forward.

The acquisition date fair value of the consideration transferred of $2.6 billion consisted of the following:



Cash consideration	$	1,161
Stock consideration (30 million shares valued based on the URI acquisition date stock price)	1,396
Share-based compensation awards (1)	29
Total purchase consideration	$	2,586

(1) This relates to RSC stock options and restricted stock units which were outstanding as of the acquisition date. Each RSC stock option was converted into an adjusted United Rentals stock option to acquire a number of shares of United Rentals common stock, determined by multiplying the number of shares of RSC common stock subject to the RSC stock option by the option exchange ratio (rounded down, if necessary, to a whole share of United Rentals common stock). The “option exchange ratio” means the sum of (i) 0.2783 and (ii) the quotient determined by dividing $10.80 by the volume-weighted average of the closing sale prices of shares of URI common stock as reported on the NYSE composite transactions reporting system for each of the 10 consecutive trading days ending with the acquisition date. The option exchange ratio was 0.5161. The exercise price per share of United Rentals common stock subject to the adjusted United Rentals option is equal to the per share exercise price of such RSC stock option divided by the option exchange ratio (rounded up, if necessary, to the nearest whole cent). Each RSC restricted stock unit (other than an award held by a member of the RSC board who was not also an employee or officer of RSC at such time) was converted into an adjusted United Rentals restricted stock unit in an amount determined by multiplying the number of shares of RSC common stock subject to the RSC restricted stock unit by the option exchange ratio. The portion of the United Rentals replacement awards that has been included in the purchase consideration was calculated as $29 and is based on the vesting which occurred prior to the acquisition date.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date.



Accounts receivable, net of allowance for doubtful accounts (1)	$	238
Inventory	23
Deferred taxes	15
Rental equipment	2,013
Property and equipment	47
Intangibles (2)	1,224
Other assets	55
Total identifiable assets acquired	3,615
Short-term debt and current maturities of long-term debt (3)	(1,586		)
Current liabilities	(400		)
Deferred taxes	(696		)
Long-term debt (3)	(992		)
Other long-term liabilities	(13		)
Total liabilities assumed	(3,687		)
Net identifiable assets acquired	(72		)
Goodwill (4)	2,658
Net assets acquired	$	2,586

(1) The fair value of accounts receivables acquired was $238, and the gross contractual amount was $251. We estimated that $13 will be uncollectible.

(2) The following table reflects the estimated fair values and useful lives of the acquired intangible assets identified based on our purchase accounting assessments:



	Fair value		Life (years)
Customer relationships	$	1,094	15
Trade names and associated trademarks	81		5
Non-compete agreements	49		5
Total	$	1,224

(3) At the closing of the merger, URNA repaid RSC's senior ABL facility, 10 percent senior notes, and 9.5 percent senior notes. The repaid debt is reflected as short-term above as it was paid on the acquisition date. The RSC debt reflected in our consolidated balance sheet as of December 31, 2013 is discussed further in note 12 to the consolidated financial statements. The debt in the table above includes $1,555 of the repaid RSC debt, and the fair values of the following debt assumed by URNA:



10 ¹/₄ percent Senior Notes	$	(225	)
8 ¹/₄ percent Senior Notes	(699		)
Capital leases	(99		)
Total assumed debt	$	(1,023	)

(4) All of the goodwill was assigned to our general rentals segment. The level of goodwill that resulted from the merger is primarily reflective of RSC's going-concern value, the value of RSC's assembled workforce, new customer relationships expected to arise from the merger, and operational synergies that we expect to achieve that would not be available to other market participants. $39 of the goodwill is expected to be deductible for income tax purposes.

The years ended December 31, 2013, 2012 and 2011include acquisition-related costs of $9, $111 and $19, respectively. The acquisition-related costs are reflected in our consolidated statements of income as “RSC merger related costs” and primarily relate to financial and legal advisory fees, and branding costs. The fees for the year ended December 31, 2012 include $31 of interim bridge financing costs. We do not expect to incur significant additional charges in connection with the merger subsequent to December 31, 2013. In addition to the acquisition-related costs reflected in our consolidated statements of income, we capitalized $67 of debt issuance costs associated with the issuance of debt to fund the acquisition, which are reflected, net of amortization subsequent to the acquisition date, in other long-term assets in our consolidated balance sheets.

Since the acquisition date, significant amounts of fleet have been moved between legacy United Rentals locations and the acquired RSC locations, and it is not practicable to reasonably estimate the amounts of revenue and earnings of RSC since the acquisition date. The impact of the RSC acquisition on our equipment rentals revenue is primarily reflected in the increases in the volume of OEC on rent of 22.1 percent and 63.2 percent for the years ended December 31, 2013 and 2012, respectively.

The pro forma information below has been prepared using the purchase method of accounting, giving effect to the RSC acquisition as if the acquisition had been completed on January 1, 2011 (“the pro forma acquisition date”). The pro forma information is not necessarily indicative of our results of operations had the merger been completed on the above date, nor is it necessarily indicative of our future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the merger, and also does not reflect additional revenue opportunities following the merger. The pro forma information includes adjustments to give effect to the financing for the acquisition and related transactions. The table below presents unaudited pro forma consolidated income statement information as if RSC had been included in our consolidated results for the entire periods reflected:



	Year Ended December 31,
	2012			2011
United Rentals historic revenues	$	4,117		$	2,611
RSC historic revenues	547			1,522
Pro forma revenues	4,664			4,133
United Rentals historic pretax income	88			164
RSC historic pretax loss	(8		)	(40		)
Combined pretax income	80			124
Pro forma adjustments to combined pretax income:
Impact of fair value mark-ups/useful life changes on depreciation (1)	—			—
Impact of the fair value mark-up of acquired RSC fleet on cost of rental equipment sales (2)	(4		)	(12		)
Intangible asset amortization (3)	(43		)	(173		)
Interest expense on merger financing notes (4)	(39		)	(207		)
Elimination of historic RSC interest (5)	38			166
RSC historic interest fair value adjustment (6)	2			7
Elimination of merger costs (7)	148			30
Restructuring charges (8)	92			(101		)
Pro forma pretax income (loss)	$	274		$	(166	)

(1) Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups of equipment acquired in the RSC acquisition, the impact of which was offset by the impact of extending the useful lives of such equipment.

(2) Cost of rental equipment sales was adjusted for the fair value mark-ups of rental equipment acquired in the RSC acquisition.

(3) The intangible assets acquired in the RSC acquisition were amortized.

(4) Interest expense was adjusted to reflect interest on the merger financing notes described in note 12 to the consolidated financial statements.

(5) RSC historic interest on debt that is not part of the combined entity was eliminated.

(6) RSC historic interest was adjusted for the fair value mark-ups of the debt acquired in the RSC acquisition.

(7) The RSC merger related costs were eliminated as they were assumed to have been recognized prior to the pro forma acquisition date.

(8) Restructuring charges comprised of severance costs and branch closure charges associated with the acquisition were recognized for 5 quarters (the period from the actual acquisition date through the end of the restructuring program) following the pro forma acquisition date. For the pro forma presentation, over 95 percent of the total charges are reflected in the first year following the pro forma acquisition date, which reflects the timing of the actual restructuring charges.

In addition to the acquisition of RSC, in February 2012, we completed the acquisition of Coble Trench Safety (”Coble”), a specialty rental company with 11 locations in the Mid-Atlantic and Southeast region. Coble had annual rental revenues of approximately $20. Additionally, in August 2013, we completed the acquisition of Rent World, an equipment rental company with two locations in Alberta, Canada. Rent World had annual rental revenues of approximately $5.