Acquisitions (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of Business Acquisitions Purchase Consideration

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



Cash consideration (1)	$	777
Contingent consideration (2)	76
Total purchase consideration (3)	$	853

(1) Consists of cash paid of $718 and a ‘hold back’ of $59, which is subject to a final working capital true-up.

(2) Reflects the acquisition date fair value of the following additional cash consideration to be paid based on the achievement of the following financial targets:

1.A maximum payout of $75 if National Pump's trailing twelve months adjusted EBITDA (as defined below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Financial Overview”) reaches $134 twelve months post-closing; and

2.An additional maximum payout of $50 if National Pump's trailing twelve months adjusted EBITDA reaches $161 eighteen months post-closing.

(3) Total purchase consideration excludes $15 of stock which was issued in connection with the acquisition and will be treated as compensation for book purposes but primarily represents deductible goodwill for income tax purposes.

Schedule of Business Acquisitions, by Acquisition

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date. The purchase price allocations for these assets and liabilities are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period.



Accounts receivable, net of allowance for doubtful accounts (1)	$	46
Inventory	18
Deferred taxes	11
Rental equipment	178
Property and equipment	10
Intangibles (2)	289
Other assets	1
Total identifiable assets acquired	553
Current liabilities	(24		)
Total liabilities assumed	(24		)
Net identifiable assets acquired	529
Goodwill (3)	324
Net assets acquired	$	853

(1) The fair value of accounts receivables acquired was $46, and the gross contractual amount was $47. We estimated that $1 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	$	274	10
Non-compete agreements	15		6
Total	$	289

(3) $312 of the goodwill was assigned to our trench safety, power and HVAC (“heating, ventilating and air conditioning”), and pump solutions segment and $12 of the goodwill was assigned to our general rentals segment. The level of goodwill that resulted from the merger is primarily reflective of National Pump's going-concern value, the value of National Pump'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. $342 of goodwill is expected to be deductible for income tax purposes.

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination

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	$	274	10
Non-compete agreements	15		6
Total	$	289

Business Acquisition, Pro Forma Information

The table below presents unaudited pro forma consolidated income statement information as if National Pump had been included in our consolidated results for the entire periods reflected:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014		2013			2014			2013
United Rentals historic revenues	$	1,399	$	1,206		$	2,577		$	2,306
National Pump historic revenues	—		52			62			94
Pro forma revenues	1,399		1,258			2,639			2,400
United Rentals historic pretax income	142		131			236			161
National Pump historic pretax income	—		15			20			26
Combined pretax income	142		146			256			187
Pro forma adjustments to combined pretax income:
Impact of fair value mark-ups/useful life changes on depreciation (1)	—		(1		)	(1		)	(2		)
Intangible asset amortization (2)	1		(13		)	(11		)	(26		)
Interest expense (3)	68		(7		)	62			(79		)
Elimination of historic National Pump interest (4)	—		1			—			1
Elimination of merger costs (5)	8		—			9			—
Pro forma pretax income (loss)	$	219	$	126		$	315		$	81

(1) Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups of equipment acquired in the National Pump acquisition. The useful lives assigned to such equipment didn’t change significantly from the lives historically used by National Pump.

(2) The intangible assets acquired in the National Pump acquisition were amortized.

(3) In connection with the National Pump acquisition, URNA issued $525 principal amount of 6 ¹/₈ percent Senior Notes (as an add on to our existing 6 ¹/₈ percent Senior Notes) and $850 principal amount of 5 ³/₄ percent Senior Notes, and all our outstanding 9 ¹/₄ percent Senior Notes were redeemed, as discussed in note 8 to the condensed consolidated financial statements. Interest expense was adjusted to reflect these changes in our debt portfolio. For the pro forma presentation, the $64 loss recognized upon redemption of the 9 ¹/₄ percent Senior Notes discussed in note 8 to the condensed consolidated financial statements was moved from the three and six months ended June 30, 2014 to the six months ended June 30, 2013.

(4) Interest on National Pump historic debt was eliminated.

(5) Merger related costs associated with the National Pump acquisition were eliminated as they were assumed to have been recognized prior to the pro forma acquisition date.