Delaware | 001-14387 | 06-1522496 | ||
Delaware | 001-13663 | 86-0933835 | ||
(State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
100 First Stamford Place, Suite 700 | ||
Stamford, Connecticut | 06902 | |
(Address of Principal Executive Offices) | (Zip Code) |
(Former name or former address if changed since last report.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter): | |
Emerging growth company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | o |
UNITED RENTALS, INC. | ||
By: | /S/ Craig A. Pintoff | |
Name: Craig A. Pintoff | ||
Title: Executive Vice President, Chief Administrative and Legal Officer | ||
UNITED RENTALS (NORTH AMERICA), INC. | ||
By: | /S/ Craig A. Pintoff | |
Name: Craig A. Pintoff | ||
Title: Executive Vice President, Chief Administrative and Legal Officer |
Exhibit No. | Description | |
99.1 | ||
• | Rental revenue3 increased 26.8% year-over-year. Within rental revenue, owned equipment rental revenue increased 26.5%, reflecting increases of 28.7% in the volume of equipment on rent and 1.1% in rental rates. |
• | Pro forma1 rental revenue increased 11.5% year-over-year, reflecting growth of 8.8% in the volume of equipment on rent and a 2.0% increase in rental rates. |
• | Time utilization increased 70 basis points year-over-year to 70.0%. On a pro forma basis, time utilization increased 100 basis points year-over-year. |
• | The company’s Trench, Power and Pump specialty segment's rental revenue increased by 38.7% year-over-year, primarily on a same store basis, while the segment’s rental gross margin improved by 230 basis points to 47.5%. |
• | The company generated $172 million of proceeds from used equipment sales at a GAAP gross margin of 39.0% and an adjusted gross margin of 57.6%, compared with $135 million of proceeds at a GAAP gross margin of 43.0% and an adjusted gross margin of 49.6% for the prior year. The year-over-year increase in adjusted gross margin primarily reflects the impact of selling NES and Neff equipment.4 |
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. | 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. |
3. | Rental revenue includes owned equipment rental revenue, re-rent revenue and ancillary revenue. |
4. | 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. |
• | Rental revenue increased 15.7% year-over-year. Within rental revenue, owned equipment rental revenue increased 15.3%, reflecting an increase of 18.2% in the volume of equipment on rent, partially offset by a 0.2% decrease in rental rates. |
• | Pro forma rental revenue increased 7.6% year-over-year, reflecting growth of 7.1% in the volume of equipment on rent and a 0.4% increase in rental rates. |
• | Time utilization increased 160 basis points year-over-year to 69.5%. On a pro forma basis, time utilization increased 150 basis points year-over-year to 69.1%. Time utilization was a full year record for the company on both an actual and a pro forma basis. |
• | The company’s Trench, Power and Pump specialty segment's rental revenue increased by 27.5% year-over-year, primarily on a same store basis, while the segment’s rental gross margin improved by 260 basis points to 49.6%. |
• | The company generated $550 million of proceeds from used equipment sales at a GAAP gross margin of 40.0% and an adjusted gross margin of 54.9%, compared with $496 million of proceeds at a GAAP gross margin of 41.1% and an adjusted gross margin of 48.2% for the prior year. The year-over-year increase in adjusted gross margin primarily reflects the impact of selling NES equipment. |
• | The company generated $2.230 billion of net cash provided by operating activities and $907 million of free cash flow5, compared with $1.953 billion and $1.182 billion, respectively, for the prior year. Net rental capital expenditures were $1.219 billion, compared with $750 million for the prior year. |
• | The company issued $2.925 billion of debt due from 2025 through 2028. The proceeds from the debt issuances were primarily used to fund the NES and Neff acquisitions, and to redeem $1.4 billion of debt that would have been due in 2022 and 2023. The company additionally increased the sizes of its ABL and AR securitization facilities by $500 million and $150 million, respectively. |
5. | Free cash flow is a non-GAAP measure. See the table below for amounts and a reconciliation to the most comparable GAAP measure. Free cash flow included aggregate merger and restructuring related payments of $76 million and $13 million for the full years 2017 and 2016, respectively. |
2018 Outlook | 2017 Actual | |||
Total revenue | $7.3 billion to $7.6 billion | $6.641 billion | ||
Adjusted EBITDA6 | $3.60 billion to $3.75 billion | $3.164 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 | $1.219 billion net, $1.769 billion gross | ||
Net cash provided by operating activities | $2.625 billion to $2.825 billion | $2.230 billion | ||
Free cash flow (excluding merger and restructuring related payments, such payments were $76 million in 2017) | $1.3 billion to $1.4 billion | $983 million |
6. | Information reconciling forward-looking adjusted EBITDA to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below. |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Equipment rentals | $ | 1,646 | $ | 1,298 | $ | 5,715 | $ | 4,941 | |||||||
Sales of rental equipment | 172 | 135 | 550 | 496 | |||||||||||
Sales of new equipment | 52 | 48 | 178 | 144 | |||||||||||
Contractor supplies sales | 20 | 19 | 80 | 79 | |||||||||||
Service and other revenues | 32 | 23 | 118 | 102 | |||||||||||
Total revenues | 1,922 | 1,523 | 6,641 | 5,762 | |||||||||||
Cost of revenues: | |||||||||||||||
Cost of equipment rentals, excluding depreciation | 595 | 471 | 2,151 | 1,862 | |||||||||||
Depreciation of rental equipment | 320 | 255 | 1,124 | 990 | |||||||||||
Cost of rental equipment sales | 105 | 77 | 330 | 292 | |||||||||||
Cost of new equipment sales | 44 | 40 | 152 | 119 | |||||||||||
Cost of contractor supplies sales | 14 | 14 | 56 | 55 | |||||||||||
Cost of service and other revenues | 17 | 9 | 59 | 41 | |||||||||||
Total cost of revenues | 1,095 | 866 | 3,872 | 3,359 | |||||||||||
Gross profit | 827 | 657 | 2,769 | 2,403 | |||||||||||
Selling, general and administrative expenses | 255 | 186 | 903 | 719 | |||||||||||
Merger related costs | 18 | — | 50 | — | |||||||||||
Restructuring charge | 22 | 6 | 50 | 14 | |||||||||||
Non-rental depreciation and amortization | 70 | 63 | 259 | 255 | |||||||||||
Operating income | 462 | 402 | 1,507 | 1,415 | |||||||||||
Interest expense, net | 126 | 162 | 464 | 511 | |||||||||||
Other income, net | — | (2 | ) | (5 | ) | (5 | ) | ||||||||
Income before (benefit) provision for income taxes | 336 | 242 | 1,048 | 909 | |||||||||||
(Benefit) provision for income taxes (1) | (561 | ) | 89 | (298 | ) | 343 | |||||||||
Net income (1) | $ | 897 | $ | 153 | $ | 1,346 | $ | 566 | |||||||
Diluted earnings per share (1) | $ | 10.45 | $ | 1.80 | $ | 15.73 | $ | 6.45 |
(1) | The three months and year ended December 31, 2017 include a substantial benefit associated with the enactment of the Tax Cuts and Jobs Act of 2017 discussed further above. |
December 31, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 352 | $ | 312 | |||
Accounts receivable, net | 1,233 | 920 | |||||
Inventory | 75 | 68 | |||||
Prepaid expenses and other assets | 112 | 61 | |||||
Total current assets | 1,772 | 1,361 | |||||
Rental equipment, net | 7,824 | 6,189 | |||||
Property and equipment, net | 467 | 430 | |||||
Goodwill | 4,082 | 3,260 | |||||
Other intangible assets, net | 875 | 742 | |||||
Other long-term assets | 10 | 6 | |||||
Total assets | $ | 15,030 | $ | 11,988 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Short-term debt and current maturities of long-term debt | $ | 723 | $ | 597 | |||
Accounts payable | 409 | 243 | |||||
Accrued expenses and other liabilities | 536 | 344 | |||||
Total current liabilities | 1,668 | 1,184 | |||||
Long-term debt | 8,717 | 7,193 | |||||
Deferred taxes | 1,419 | 1,896 | |||||
Other long-term liabilities | 120 | 67 | |||||
Total liabilities | 11,924 | 10,340 | |||||
Common stock | 1 | 1 | |||||
Additional paid-in capital | 2,356 | 2,288 | |||||
Retained earnings | 3,005 | 1,654 | |||||
Treasury stock | (2,105 | ) | (2,077 | ) | |||
Accumulated other comprehensive loss | (151 | ) | (218 | ) | |||
Total stockholders’ equity | 3,106 | 1,648 | |||||
Total liabilities and stockholders’ equity | $ | 15,030 | $ | 11,988 |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cash Flows From Operating Activities: | |||||||||||||||
Net income | $ | 897 | $ | 153 | $ | 1,346 | $ | 566 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 390 | 318 | 1,383 | 1,245 | |||||||||||
Amortization of deferred financing costs and original issue discounts | 3 | 2 | 9 | 9 | |||||||||||
Gain on sales of rental equipment | (67 | ) | (58 | ) | (220 | ) | (204 | ) | |||||||
Gain on sales of non-rental equipment | — | (1 | ) | (4 | ) | (4 | ) | ||||||||
Stock compensation expense, net | 23 | 12 | 87 | 45 | |||||||||||
Merger related costs | 18 | — | 50 | — | |||||||||||
Restructuring charge | 22 | 6 | 50 | 14 | |||||||||||
Loss on repurchase/redemption of debt securities and amendment of ABL facility | 11 | 65 | 54 | 101 | |||||||||||
Excess tax benefits from share-based payment arrangements (1) | — | (5 | ) | — | (58 | ) | |||||||||
(Decrease) increase in deferred taxes (2) | (630 | ) | 33 | (533 | ) | 123 | |||||||||
Changes in operating assets and liabilities: | |||||||||||||||
(Increase) decrease in accounts receivable | (12 | ) | 8 | (184 | ) | 15 | |||||||||
Decrease in inventory | 10 | 4 | 1 | 1 | |||||||||||
(Increase) decrease in prepaid expenses and other assets | (19 | ) | 2 | (20 | ) | 77 | |||||||||
(Decrease) increase in accounts payable | (209 | ) | (166 | ) | 141 | (29 | ) | ||||||||
Increase (decrease) in accrued expenses and other liabilities | 27 | (50 | ) | 70 | 52 | ||||||||||
Net cash provided by operating activities | 464 | 323 | 2,230 | 1,953 | |||||||||||
Cash Flows From Investing Activities: | |||||||||||||||
Purchases of rental equipment | (284 | ) | (101 | ) | (1,769 | ) | (1,246 | ) | |||||||
Purchases of non-rental equipment | (33 | ) | (28 | ) | (120 | ) | (93 | ) | |||||||
Proceeds from sales of rental equipment | 172 | 135 | 550 | 496 | |||||||||||
Proceeds from sales of non-rental equipment | 6 | 2 | 16 | 14 | |||||||||||
Purchases of other companies, net of cash acquired | (1,314 | ) | — | (2,377 | ) | (28 | ) | ||||||||
Purchases of investments | — | (2 | ) | (5 | ) | (2 | ) | ||||||||
Net cash (used in) provided by investing activities | (1,453 | ) | 6 | (3,705 | ) | (859 | ) | ||||||||
Cash Flows From Financing Activities: | |||||||||||||||
Proceeds from debt | 3,099 | 2,940 | 11,801 | 8,752 | |||||||||||
Payments of debt | (2,051 | ) | (3,202 | ) | (10,207 | ) | (9,223 | ) | |||||||
Payments of financing costs | — | (12 | ) | (44 | ) | (24 | ) | ||||||||
Proceeds from the exercise of common stock options | 2 | 1 | 3 | 1 | |||||||||||
Common stock repurchased (3) | (30 | ) | (40 | ) | (56 | ) | (528 | ) | |||||||
Excess tax benefits from share-based payment arrangements (1) | — | 5 | — | 58 | |||||||||||
Net cash provided by (used in) financing activities | 1,020 | (308 | ) | 1,497 | (964 | ) | |||||||||
Effect of foreign exchange rates | (3 | ) | (6 | ) | 18 | 3 | |||||||||
Net increase in cash and cash equivalents | 28 | 15 | 40 | 133 | |||||||||||
Cash and cash equivalents at beginning of period | 324 | 297 | 312 | 179 | |||||||||||
Cash and cash equivalents at end of period | $ | 352 | $ | 312 | $ | 352 | $ | 312 | |||||||
Supplemental disclosure of cash flow information: | |||||||||||||||
Cash paid for income taxes, net | $ | 91 | $ | 85 | $ | 205 | $ | 99 | |||||||
Cash paid for interest | 52 | 121 | 357 | 415 |
(1) | In 2017, we adopted accounting guidance on share-based payments, as a result of which the excess tax benefits from share-based payment arrangements for 2017 are presented as a component of net cash provided by operating activities (within net income), while, for 2016, they are presented as a component of net cash used in financing activities. |
(2) | The decreases in deferred taxes for the three months and year ended December 31, 2017 include the impact of the enactment of the Tax Cuts and Jobs Act of 2017 discussed further above. |
(3) | We have an open $1 billion share repurchase program, under which we have purchased $655 million as of December 31, 2017, that we paused in October 2016 as we evaluated potential acquisition opportunities. We completed the NES and Neff acquisitions in April 2017 and October 2017, respectively. In October 2017, we resumed the share repurchase program, and we intend to complete the program in 2018. 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. |
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||
General Rentals | |||||||||||||||||||
Reportable segment equipment rentals revenue | $ | 1,370 | $ | 1,099 | 24.7% | $ | 4,727 | $ | 4,166 | 13.5% | |||||||||
Reportable segment equipment rentals gross profit | 600 | 482 | 24.5% | 1,950 | 1,725 | 13.0% | |||||||||||||
Reportable segment equipment rentals gross margin | 43.8 | % | 43.9 | % | (10) bps | 41.3 | % | 41.4 | % | (10) bps | |||||||||
Trench, Power and Pump | |||||||||||||||||||
Reportable segment equipment rentals revenue | $ | 276 | $ | 199 | 38.7% | $ | 988 | $ | 775 | 27.5% | |||||||||
Reportable segment equipment rentals gross profit | 131 | 90 | 45.6% | 490 | 364 | 34.6% | |||||||||||||
Reportable segment equipment rentals gross margin | 47.5 | % | 45.2 | % | 230 bps | 49.6 | % | 47.0 | % | 260 bps | |||||||||
Total United Rentals | |||||||||||||||||||
Total equipment rentals revenue | $ | 1,646 | $ | 1,298 | 26.8% | $ | 5,715 | $ | 4,941 | 15.7% | |||||||||
Total equipment rentals gross profit | 731 | 572 | 27.8% | 2,440 | 2,089 | 16.8% | |||||||||||||
Total equipment rentals gross margin | 44.4 | % | 44.1 | % | 30 bps | 42.7 | % | 42.3 | % | 40 bps |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator: | |||||||||||||||
Net income available to common stockholders (1) | $ | 897 | $ | 153 | $ | 1,346 | $ | 566 | |||||||
Denominator: | |||||||||||||||
Denominator for basic earnings per share—weighted-average common shares | 84.6 | 84.4 | 84.6 | 87.2 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Employee stock options | 0.4 | 0.3 | 0.4 | 0.3 | |||||||||||
Restricted stock units | 0.8 | 0.4 | 0.6 | 0.3 | |||||||||||
Denominator for diluted earnings per share—adjusted weighted-average common shares | 85.8 | 85.1 | 85.6 | 87.8 | |||||||||||
Diluted earnings per share (1) | $ | 10.45 | $ | 1.80 | $ | 15.73 | $ | 6.45 |
(1) | Net income for the three months and year ended December 31, 2017 includes a benefit associated with the enacted tax reform discussed above estimated at $689 million, or $8.03 and $8.05 per diluted share for the three months and year ended December 31, 2017, respectively. |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Earnings per share - GAAP, as reported (1) | $ | 10.45 | $ | 1.80 | $ | 15.73 | $ | 6.45 | |||||||
After-tax impact of: | |||||||||||||||
Merger related costs (2) | 0.13 | — | 0.36 | — | |||||||||||
Merger related intangible asset amortization (3) | 0.32 | 0.29 | 1.15 | 1.12 | |||||||||||
Impact on depreciation related to acquired fleet and property and equipment (4) | 0.01 | — | 0.05 | — | |||||||||||
Impact of the fair value mark-up of acquired fleet (5) | 0.23 | 0.06 | 0.59 | 0.25 | |||||||||||
Impact on interest expense related to fair value adjustment of acquired RSC indebtedness (6) | — | — | — | (0.01 | ) | ||||||||||
Restructuring charge (7) | 0.15 | 0.05 | 0.36 | 0.11 | |||||||||||
Asset impairment charge (8) | — | — | 0.01 | 0.03 | |||||||||||
Loss on repurchase/redemption of debt securities and amendment of ABL facility | 0.08 | 0.47 | 0.39 | 0.70 | |||||||||||
Earnings per share - adjusted (1) | $ | 11.37 | $ | 2.67 | $ | 18.64 | $ | 8.65 | |||||||
Tax rate applied to above adjustments (9) | 38.6 | % | 37.9 | % | 38.5 | % | 38.2 | % |
(1) | Earnings per share – GAAP, as reported and earnings per share – adjusted include estimated benefits of $8.03 and $8.05 for the three months and year ended December 31, 2017, respectively, associated with the enacted tax reform discussed above. |
(2) | Reflects transaction costs associated with the NES and Neff acquisitions discussed above. 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, and Neff had annual revenues of approximately $413 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) | Reflects a reduction of interest expense associated with the fair value mark-up of debt acquired in the RSC acquisition. |
(7) | 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 $284 million under our restructuring programs. |
(8) | Reflects write-offs of leasehold improvements and other fixed assets in connection with our restructuring programs. |
(9) | The tax rates applied to the adjustments reflect the statutory rates in the applicable entity. |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 897 | $ | 153 | $ | 1,346 | $ | 566 | |||||||
(Benefit) provision for income taxes | (561 | ) | 89 | (298 | ) | 343 | |||||||||
Interest expense, net | 126 | 162 | 464 | 511 | |||||||||||
Depreciation of rental equipment | 320 | 255 | 1,124 | 990 | |||||||||||
Non-rental depreciation and amortization | 70 | 63 | 259 | 255 | |||||||||||
EBITDA (A) | $ | 852 | $ | 722 | $ | 2,895 | $ | 2,665 | |||||||
Merger related costs (1) | 18 | — | 50 | — | |||||||||||
Restructuring charge (2) | 22 | 6 | 50 | 14 | |||||||||||
Stock compensation expense, net (3) | 23 | 12 | 87 | 45 | |||||||||||
Impact of the fair value mark-up of acquired fleet (4) | 32 | 9 | 82 | 35 | |||||||||||
Adjusted EBITDA (B) | $ | 947 | $ | 749 | $ | 3,164 | $ | 2,759 |
(1) | Reflects transaction costs associated with the NES and Neff acquisitions discussed above. 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, and Neff had annual revenues of approximately $413 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 $284 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. |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net cash provided by operating activities | $ | 464 | $ | 323 | $ | 2,230 | $ | 1,953 | |||||||
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 | ) | (9 | ) | (9 | ) | |||||||
Gain on sales of rental equipment | 67 | 58 | 220 | 204 | |||||||||||
Gain on sales of non-rental equipment | — | 1 | 4 | 4 | |||||||||||
Merger related costs (1) | (18 | ) | — | (50 | ) | — | |||||||||
Restructuring charge (2) | (22 | ) | (6 | ) | (50 | ) | (14 | ) | |||||||
Stock compensation expense, net (3) | (23 | ) | (12 | ) | (87 | ) | (45 | ) | |||||||
Loss on repurchase/redemption of debt securities and amendment of ABL facility | (11 | ) | (65 | ) | (54 | ) | (101 | ) | |||||||
Excess tax benefits from share-based payment arrangements | — | 5 | — | 58 | |||||||||||
Changes in assets and liabilities | 255 | 214 | 129 | 101 | |||||||||||
Cash paid for interest | 52 | 121 | 357 | 415 | |||||||||||
Cash paid for income taxes, net | 91 | 85 | 205 | 99 | |||||||||||
EBITDA | $ | 852 | $ | 722 | $ | 2,895 | $ | 2,665 | |||||||
Add back: | |||||||||||||||
Merger related costs (1) | 18 | — | 50 | — | |||||||||||
Restructuring charge (2) | 22 | 6 | 50 | 14 | |||||||||||
Stock compensation expense, net (3) | 23 | 12 | 87 | 45 | |||||||||||
Impact of the fair value mark-up of acquired fleet (4) | 32 | 9 | 82 | 35 | |||||||||||
Adjusted EBITDA | $ | 947 | $ | 749 | $ | 3,164 | $ | 2,759 |
(1) | Reflects transaction costs associated with the NES and Neff acquisitions discussed above. 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, and Neff had annual revenues of approximately $413 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 $284 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. |
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net cash provided by operating activities | $ | 464 | $ | 323 | $ | 2,230 | $ | 1,953 | |||||||
Purchases of rental equipment | (284 | ) | (101 | ) | (1,769 | ) | (1,246 | ) | |||||||
Purchases of non-rental equipment | (33 | ) | (28 | ) | (120 | ) | (93 | ) | |||||||
Proceeds from sales of rental equipment | 172 | 135 | 550 | 496 | |||||||||||
Proceeds from sales of non-rental equipment | 6 | 2 | 16 | 14 | |||||||||||
Excess tax benefits from share-based payment arrangements (1) | — | 5 | — | 58 | |||||||||||
Free cash flow (2) | $ | 325 | $ | 336 | $ | 907 | $ | 1,182 |
(1) | The excess tax benefits from share-based payment arrangements result from stock-based compensation windfall deductions in excess of the amounts reported for financial reporting purposes. We adopted accounting guidance in 2017 that changed the cash flow presentation of excess tax benefits from share-based payment arrangements. In the table above, the excess tax benefits from share-based payment arrangements for 2017 are presented as a component of net cash provided by operating activities, while, for 2016, they are presented as a separate line item. Because we historically included the excess tax benefits from share-based payment arrangements in the free cash flow calculation, the adoption of this guidance did not change the calculation of free cash flow. |
(2) | Free cash flow included aggregate merger and restructuring related payments of $24 million and $2 million for the three months ended December 31, 2017 and 2016, respectively, and $76 million and $13 million for the years ended December 31, 2017 and 2016, respectively. |
Net cash provided by operating activities | $2,625- $2,825 | |
Purchases of rental equipment | $(1,800)-$(1,950) | |
Proceeds from sales of rental equipment | $550-$650 | |
Purchases of non-rental equipment, net of proceeds from sales | $(75)-$(125) | |
Free cash flow (excluding the impact of merger and restructuring related payments) | $1,300- $1,400 |
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