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 revenue4 increased 25.1% year-over-year. Within rental revenue, owned equipment rental revenue increased 25.4%, reflecting increases of 26.1% in the volume of equipment on rent and 1.9% in rental rates. |
• | Pro forma1 rental revenue increased 9.9% year-over-year, reflecting growth of 6.8% in the volume of equipment on rent and a 2.7% increase in rental rates. |
• | Time utilization decreased 80 basis points year-over-year to 65.2%, largely reflecting the impact of the NES and Neff acquisitions. On a pro forma basis, time utilization decreased 20 basis points year-over-year. |
• | The company’s Trench, Power and Pump specialty segment's rental revenue increased by 36.5% year-over-year, primarily on a same store basis, while the segment’s rental gross margin improved by 170 basis points to 46.1%. |
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 $181 million of proceeds from used equipment sales at a GAAP gross margin of 40.9% and an adjusted gross margin of 54.1%, compared with $106 million at a GAAP gross margin of 43.4% and an adjusted gross margin of 50.9% for the same period last year. The year-over-year increase in used equipment sales primarily reflects i) increased volume, driven by a significantly larger fleet size, in a strong used equipment market and ii) the timing impact of earlier recognition of certain sales in 2018.5 |
Total revenue | $7.3 billion to $7.6 billion | |
Adjusted EBITDA6 | $3.60 billion to $3.75 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 | |
Net cash provided by operating activities | $2.625 billion to $2.825 billion | |
Free cash flow7 (excluding the impact of merger and restructuring related payments) | $1.3 billion to $1.4 billion |
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. As a result of the 2018 adoption of Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, used equipment sales in the first quarter of 2018 included $44 million that would have been recognized later in 2018 (with no impact on annual revenue) under the 2017 accounting rules. |
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. |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Revenues: | |||||||
Equipment rentals | $ | 1,459 | $ | 1,166 | |||
Sales of rental equipment | 181 | 106 | |||||
Sales of new equipment | 42 | 39 | |||||
Contractor supplies sales | 18 | 18 | |||||
Service and other revenues | 34 | 27 | |||||
Total revenues | 1,734 | 1,356 | |||||
Cost of revenues: | |||||||
Cost of equipment rentals, excluding depreciation | 592 | 474 | |||||
Depreciation of rental equipment | 322 | 248 | |||||
Cost of rental equipment sales | 107 | 60 | |||||
Cost of new equipment sales | 37 | 34 | |||||
Cost of contractor supplies sales | 12 | 13 | |||||
Cost of service and other revenues | 18 | 13 | |||||
Total cost of revenues | 1,088 | 842 | |||||
Gross profit | 646 | 514 | |||||
Selling, general and administrative expenses | 232 | 193 | |||||
Merger related costs | 1 | 2 | |||||
Restructuring charge | 2 | — | |||||
Non-rental depreciation and amortization | 71 | 62 | |||||
Operating income | 340 | 257 | |||||
Interest expense, net | 109 | 94 | |||||
Other (income) expense, net | (1 | ) | 2 | ||||
Income before provision for income taxes | 232 | 161 | |||||
Provision for income taxes (1) | 49 | 52 | |||||
Net income (1) | $ | 183 | $ | 109 | |||
Diluted earnings per share (1) | $ | 2.15 | $ | 1.27 |
(1) | The three months ended March 31, 2018 reflects 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 $0.37 to diluted earnings per share for the three months ended March 31, 2018. |
March 31, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 278 | $ | 352 | |||
Accounts receivable, net | 1,154 | 1,233 | |||||
Inventory | 84 | 75 | |||||
Prepaid expenses and other assets | 74 | 112 | |||||
Total current assets | 1,590 | 1,772 | |||||
Rental equipment, net | 7,678 | 7,824 | |||||
Property and equipment, net | 467 | 467 | |||||
Goodwill | 4,115 | 4,082 | |||||
Other intangible assets, net | 825 | 875 | |||||
Other long-term assets | 13 | 10 | |||||
Total assets | $ | 14,688 | $ | 15,030 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Short-term debt and current maturities of long-term debt | $ | 726 | $ | 723 | |||
Accounts payable | 513 | 409 | |||||
Accrued expenses and other liabilities | 402 | 536 | |||||
Total current liabilities | 1,641 | 1,668 | |||||
Long-term debt | 8,412 | 8,717 | |||||
Deferred taxes | 1,455 | 1,419 | |||||
Other long-term liabilities | 122 | 120 | |||||
Total liabilities | 11,630 | 11,924 | |||||
Common stock | 1 | 1 | |||||
Additional paid-in capital | 2,327 | 2,356 | |||||
Retained earnings | 3,188 | 3,005 | |||||
Treasury stock | (2,282 | ) | (2,105 | ) | |||
Accumulated other comprehensive loss | (176 | ) | (151 | ) | |||
Total stockholders’ equity | 3,058 | 3,106 | |||||
Total liabilities and stockholders’ equity | $ | 14,688 | $ | 15,030 |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Cash Flows From Operating Activities: | |||||||
Net income | $ | 183 | $ | 109 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 393 | 310 | |||||
Amortization of deferred financing costs and original issue discounts | 3 | 2 | |||||
Gain on sales of rental equipment | (74 | ) | (46 | ) | |||
Gain on sales of non-rental equipment | (1 | ) | (1 | ) | |||
Gain on insurance proceeds from damaged equipment | (2 | ) | (1 | ) | |||
Stock compensation expense, net | 19 | 16 | |||||
Merger related costs | 1 | 2 | |||||
Restructuring charge | 2 | — | |||||
Increase in deferred taxes | 37 | 10 | |||||
Changes in operating assets and liabilities: | |||||||
Decrease in accounts receivable | 80 | 65 | |||||
Increase in inventory | (9 | ) | (6 | ) | |||
Decrease in prepaid expenses and other assets | 42 | 9 | |||||
Increase in accounts payable | 103 | 139 | |||||
(Decrease) increase in accrued expenses and other liabilities | (135 | ) | 14 | ||||
Net cash provided by operating activities | 642 | 622 | |||||
Cash Flows From Investing Activities: | |||||||
Purchases of rental equipment | (280 | ) | (219 | ) | |||
Purchases of non-rental equipment | (33 | ) | (22 | ) | |||
Proceeds from sales of rental equipment | 181 | 106 | |||||
Proceeds from sales of non-rental equipment | 4 | 2 | |||||
Insurance proceeds from damaged equipment | 2 | 1 | |||||
Purchases of other companies, net of cash acquired | (52 | ) | — | ||||
Purchases of investments | — | (1 | ) | ||||
Net cash used in investing activities | (178 | ) | (133 | ) | |||
Cash Flows From Financing Activities: | |||||||
Proceeds from debt | 2,256 | 1,502 | |||||
Payments of debt | (2,563 | ) | (1,939 | ) | |||
Payments of financing costs | — | (7 | ) | ||||
Proceeds from the exercise of common stock options | 1 | 1 | |||||
Common stock repurchased (1) | (226 | ) | (23 | ) | |||
Net cash used in financing activities | (532 | ) | (466 | ) | |||
Effect of foreign exchange rates | (6 | ) | 2 | ||||
Net (decrease) increase in cash and cash equivalents | (74 | ) | 25 | ||||
Cash and cash equivalents at beginning of period | 352 | 312 | |||||
Cash and cash equivalents at end of period | $ | 278 | $ | 337 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for income taxes, net | $ | 10 | $ | 1 | |||
Cash paid for interest | 153 | 90 |
(1) | As discussed above, we have an open $1 billion share repurchase program, under which we have purchased $832 million as of March 31, 2018, that we intend to complete by mid-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. As discussed above, in April 2018, our Board of Directors authorized a new $1.25 billion share repurchase program which will commence upon completion of the open $1 billion program. We intend to complete the new program by the end of 2019. |
Three Months Ended | |||||
March 31, | |||||
2018 | 2017 | Change | |||
General Rentals | |||||
Reportable segment equipment rentals revenue | $1,201 | $977 | 22.9% | ||
Reportable segment equipment rentals gross profit | 426 | 360 | 18.3% | ||
Reportable segment equipment rentals gross margin | 35.5% | 36.8% | (130) bps | ||
Trench, Power and Pump | |||||
Reportable segment equipment rentals revenue | $258 | $189 | 36.5% | ||
Reportable segment equipment rentals gross profit | 119 | 84 | 41.7% | ||
Reportable segment equipment rentals gross margin | 46.1% | 44.4% | 170 bps | ||
Total United Rentals | |||||
Total equipment rentals revenue | $1,459 | $1,166 | 25.1% | ||
Total equipment rentals gross profit | 545 | 444 | 22.7% | ||
Total equipment rentals gross margin | 37.4% | 38.1% | (70) bps |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
Net income available to common stockholders (1) | $ | 183 | $ | 109 | |||
Denominator: | |||||||
Denominator for basic earnings per share—weighted-average common shares | 84.3 | 84.5 | |||||
Effect of dilutive securities: | |||||||
Employee stock options | 0.4 | 0.4 | |||||
Restricted stock units | 0.5 | 0.5 | |||||
Denominator for diluted earnings per share—adjusted weighted-average common shares | 85.2 | 85.4 | |||||
Diluted earnings per share (1) | $ | 2.15 | $ | 1.27 |
(1) | The three months ended March 31, 2018 reflects 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 $0.37 to diluted earnings per share for the three months ended March 31, 2018. |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Earnings per share - GAAP, as reported (1) | $ | 2.15 | $ | 1.27 | |||
After-tax impact of: | |||||||
Merger related costs (2) | 0.01 | 0.02 | |||||
Merger related intangible asset amortization (3) | 0.39 | 0.28 | |||||
Impact on depreciation related to acquired fleet and property and equipment (4) | 0.09 | — | |||||
Impact of the fair value mark-up of acquired fleet (5) | 0.21 | 0.06 | |||||
Restructuring charge (6) | 0.02 | — | |||||
Earnings per share - adjusted (1) | $ | 2.87 | $ | 1.63 | |||
Tax rate applied to above adjustments (1) | 25.3 | % | 38.5 | % |
(1) | The three months ended March 31, 2018 reflects 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 $0.37 to earnings per share-GAAP, and $0.50 to earnings per share-adjusted, for the three months ended March 31, 2018. The tax rates applied to the adjustments reflect the statutory rates in the applicable entities. |
(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) | 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 $286 million under our restructuring programs. |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Net income | $ | 183 | $ | 109 | |||
Provision for income taxes | 49 | 52 | |||||
Interest expense, net | 109 | 94 | |||||
Depreciation of rental equipment | 322 | 248 | |||||
Non-rental depreciation and amortization | 71 | 62 | |||||
EBITDA (A) | $ | 734 | $ | 565 | |||
Merger related costs (1) | 1 | 2 | |||||
Restructuring charge (2) | 2 | — | |||||
Stock compensation expense, net (3) | 19 | 16 | |||||
Impact of the fair value mark-up of acquired fleet (4) | 24 | 8 | |||||
Adjusted EBITDA (B) | $ | 780 | $ | 591 |
(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 $286 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 | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Net cash provided by operating activities | $ | 642 | $ | 622 | |||
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 | ) | |||
Gain on sales of rental equipment | 74 | 46 | |||||
Gain on sales of non-rental equipment | 1 | 1 | |||||
Gain on insurance proceeds from damaged equipment | 2 | 1 | |||||
Merger related costs (1) | (1 | ) | (2 | ) | |||
Restructuring charge (2) | (2 | ) | — | ||||
Stock compensation expense, net (3) | (19 | ) | (16 | ) | |||
Changes in assets and liabilities | (123 | ) | (176 | ) | |||
Cash paid for interest | 153 | 90 | |||||
Cash paid for income taxes, net | 10 | 1 | |||||
EBITDA | $ | 734 | $ | 565 | |||
Add back: | |||||||
Merger related costs (1) | 1 | 2 | |||||
Restructuring charge (2) | 2 | — | |||||
Stock compensation expense, net (3) | 19 | 16 | |||||
Impact of the fair value mark-up of acquired fleet (4) | 24 | 8 | |||||
Adjusted EBITDA | $ | 780 | $ | 591 |
(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 $286 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 | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Net cash provided by operating activities | $ | 642 | $ | 622 | |||
Purchases of rental equipment | (280 | ) | (219 | ) | |||
Purchases of non-rental equipment | (33 | ) | (22 | ) | |||
Proceeds from sales of rental equipment | 181 | 106 | |||||
Proceeds from sales of non-rental equipment | 4 | 2 | |||||
Insurance proceeds from damaged equipment | 2 | 1 | |||||
Free cash flow (1) | $ | 516 | $ | 490 |
(1) | Free cash flow included aggregate merger and restructuring related payments of $10 million and $2 million for the three months ended March 31, 2018 and 2017, 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 and insurance proceeds from damaged equipment | $(75)-$(125) | |
Free cash flow (excluding the impact of merger and restructuring related payments) | $1,300- $1,400 |
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