United Rentals, Inc. (NYSE: URI) today announced financial
results for the first quarter of 2021 and raised its full-year 2021
guidance.
First Quarter 2021 Highlights
- Total revenue of $2.057 billion, including rental revenue1 of
$1.667 billion.
- Fleet productivity2 decreased 0.5% year-over-year; fleet
productivity improved sequentially by 330 basis points, primarily
due to better fleet absorption.
- Net income of $203 million, implying a net income margin3 of
9.9%. GAAP diluted earnings per share of $2.80, and adjusted EPS3
of $3.45.
- Adjusted EBITDA3 of $873 million, implying an adjusted EBITDA
margin3 of 42.4%.
- $758 million of net cash from operating activities; free cash
flow4 of $725 million, including gross rental capital spending of
$295 million.
- Net leverage ratio of 2.3x, with total liquidity5 of $3.745
billion, at March 31, 2021.
CEO Comment
Matthew Flannery, chief executive officer of United Rentals,
said, “We were very pleased with our first quarter results and the
strong start to our year, as our key end-markets continue to
rebound from the challenges of 2020. Sentiment among our customers
continues to improve, and we are well prepared to support them as
we enter the busiest part of our season.”
Flannery continued, “The recovery that we’ve seen since the
middle of last year remains evident across our business, and
virtually all indicators point to these trends continuing. As such,
we are raising our full-year guidance to reflect our expectations
for stronger growth in our core rental business and increased used
equipment sales. Most importantly, we are leveraging our
significant competitive advantages to add value for both our
customers and our investors.”
_______________
1.
Rental revenue includes owned equipment
rental revenue, re-rent revenue and ancillary revenue.
2.
Fleet productivity reflects the combined
impact of changes in rental rates, time utilization and mix on
owned equipment rental revenue. See the table below for more
information.
3.
Adjusted EPS (earnings per share) and
adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) are non-GAAP measures as defined in the tables below.
See the tables below for reconciliations to the most comparable
GAAP measures. Net income margin and adjusted EBITDA margin
represent net income or adjusted EBITDA divided by total
revenue.
4.
Free cash flow is a non-GAAP measure. See
the table below for a reconciliation to the most comparable GAAP
measure.
5.
Reflects cash and cash equivalents plus
availability under the asset-based revolving credit facility (“ABL
facility”) and the accounts receivable securitization facility.
Updated 2021 Outlook
The company has updated its full-year outlook as shown below.
The outlook includes the contribution from the acquisition of
Franklin Equipment but does not include the impact of the pending
acquisition of General Finance Corporation (“General Finance”). For
additional detail on General Finance, please see "Proposed
Acquisition of General Finance" below.
Prior Outlook
Current Outlook
Total revenue
$8.625 billion to $9.025
billion
$9.05 billion to $9.45
billion
Adjusted EBITDA6
$3.925 billion to $4.125
billion
$4.1 billion to $4.3 billion
Net rental capital expenditures after
gross purchases
$1.15 billion to $1.45 billion,
after gross purchases of $2.0 billion to $2.3 billion
$1.25 billion to $1.45 billion,
after gross purchases of $2.2 billion to $2.4 billion
Net cash provided by operating
activities
$2.95 billion to $3.45
billion
$3.1 billion to $3.5 billion
Free cash flow (excluding the impact of
merger and restructuring related payments)
$1.65 billion to $1.85
billion
$1.7 billion to $1.9 billion
Summary of First Quarter 2021 Financial Results
- Rental revenue for the quarter was $1.667 billion,
reflecting a decrease of 6.5% year-over-year. The year-over-year
change in rental revenue improved each month in the quarter, and
March was positive year-over-year.
- Used equipment sales in the quarter increased 28%
year-over-year, reflecting a strong used equipment market. These
sales generated $267 million of proceeds at a GAAP gross margin of
38.6% and an adjusted gross margin7 of 42.7%; this compares with
$208 million at a GAAP gross margin of 39.9% and an adjusted gross
margin of 45.7% for the same period last year. The year-over-year
decrease in adjusted gross margin was primarily due to changes in
pricing. Sequentially, used equipment pricing rose for the second
consecutive quarter. Used equipment proceeds in the quarter were
49% of original equipment cost ("OEC"), compared to 53% in the
year-ago period.
- Net income for the quarter increased 17.3%
year-over-year to $203 million, while net income margin increased
180 basis points to 9.9%. The first quarter of 2020 included a $26
million non-cash asset impairment charge, which was not related to
the coronavirus ("COVID-19") pandemic. Excluding the impact of
asset impairment charges, net income margin increased 50 basis
points year-over-year, primarily reflecting a reduction in interest
expense, partially offset by higher income tax expense. Net
interest expense decreased $37 million, or 27%, year-over-year
primarily due to decreases in both average debt and the average
cost of debt. Year-over-year, income tax expense increased $19
million, or 35.8%, and the effective income tax rate increased by
270 basis points, primarily reflecting the impact of state
apportionment changes.
- Adjusted EBITDA for the quarter decreased 4.6%
year-over-year to $873 million, while adjusted EBITDA margin
decreased 70 basis points to 42.4%. The decrease in adjusted EBITDA
margin included a 100 basis point reduction in rental margin
(excluding depreciation), largely reflecting a higher bonus accrual
and increases in certain operating expenses as a percentage of
revenue. Adjusted EBITDA margin also reflected decreased adjusted
gross margins from used equipment sales, as explained above, and
benefited from a decrease in selling, general and administrative
expense as a percentage of revenue. Revenue mix, in particular an
increase in the proportion of revenue from used equipment sales,
also contributed to the adjusted EBITDA margin decline.
_______________
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.
Used equipment sales adjusted gross margin
excludes the impact of the fair value mark-up of fleet acquired in
certain major acquisitions that was subsequently sold, as explained
further in the tables below.
- General rentals segment had an 8.7% year-over-year
decrease in rental revenue to $1.273 billion for the quarter.
Rental gross margin increased by 20 basis points to 32.3%.
Excluding the impact of a $24 million asset impairment charge in
the first quarter of 2020, which was not related to COVID-19,
rental gross margin decreased 160 basis points year-over-year,
primarily due to higher bonus expense, as noted above, and
increases in certain other operating expenses as a percentage of
revenue.
- Specialty rentals segment, or Trench, Power and Fluid
Solutions, rental revenue increased 1.3% year-over-year to $394
million for the quarter. Rental gross margin increased by 50 basis
points to 42.1%, mainly due to decreases in temporary labor and
fleet repair costs, partially offset by a higher proportion of
revenue from certain lower margin ancillary fees in 2021.
- Cash flow from operating activities increased 17.7% to
$758 million for the first three months of 2021, and free cash
flow, including aggregated merger and restructuring payments,
increased 19.6% to $725 million. The increase in free cash flow was
predominantly due to increased net cash from operating activities.
Net rental capital expenditures increased $28 million
year-over-year.
- Capital management. The company's net leverage ratio was
2.3x at March 31, 2021, as compared to 2.4x at December 31, 2020.
Year-to-date, the company has reduced net debt by $676 million. On
January 28, 2020, the company's Board of Directors authorized a
$500 million share repurchase program. Through March 18, 2020, when
the program was paused due to the COVID-19 pandemic, the company
repurchased $257 million of common stock. While the company is
currently unable to estimate if, or when, the program will be
restarted, it may restart the program at any time.
- Total liquidity was $3.745 billion as of March 31, 2021,
including $278 million of cash and cash equivalents, an increase of
$672 million from December 31, 2020.
- Return on invested capital (ROIC)8 was 8.9% for the 12
months ended March 31, 2021, compared with 10.3% for the 12 months
ended March 31, 2020. The year-over-year decrease was primarily due
to a decline in after-tax operating income. ROIC exceeded the
company’s current weighted average cost of capital of approximately
8.0%.
Proposed Acquisition of General Finance
Subsequent to the first quarter, on April 15, 2021, the company
entered into an Agreement and Plan of Merger (the “GFN Merger
Agreement”) that provides for its acquisition of General Finance.
Pursuant to the GFN Merger Agreement, the company will acquire
General Finance for $19 per share in cash, representing a total
enterprise value of approximately $996 million, including the
assumption of $400 million of net debt. The acquisition and related
fees and expenses will be funded through available cash and
drawings on the company's senior secured asset-based revolving
credit facility (“ABL facility”). General Finance, which operates
as Pac-Van and Container King in the U.S. and Canada, and as Royal
Wolf in Australia and New Zealand, is a leading provider of mobile
storage and modular office space. Its network serves diverse
end-markets, including construction, commercial, industrial,
retail, transportation, petrochemical, consumer, natural resources,
governmental and education. As of March 31, 2021, General Finance’s
rental fleet consisted of approximately 100,000 units at an
original cost of approximately $639 million. For the 12 months
ending December 31, 2020, General Finance had revenues of $346
million. The transaction is subject to customary closing
conditions, and is expected to close in the second quarter of
2021.
_______________
8.
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 rate of 21% was used to calculate after-tax operating
income.
Conference Call
United Rentals will hold a conference call tomorrow, Thursday,
April 29, 2021, 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 8483226.
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 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
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, merger related intangible asset
amortization and asset impairment charge. 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 1,156 rental
locations in North America and 11 in Europe. In North America, the
company operates in 49 states and every Canadian province. The
company’s approximately 18,250 employees serve construction and
industrial customers, utilities, municipalities, homeowners and
others. The company offers approximately 4,000 classes of equipment
for rent with a total original cost of $13.49 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 cyclical nature of our business, which is
highly sensitive to North American construction and industrial
activities; if construction or industrial activity decline, our
revenues and, because many of our costs are fixed, our
profitability may be adversely affected; (2) uncertainty regarding
the length of time it will take for the coronavirus (COVID-19)
pandemic to subside, including the time it will take for vaccines
to be broadly distributed and accepted in the United States and the
rest of the world, and the effectiveness of such vaccines in
slowing or stopping the spread of COVID-19 and mitigating the
economic effects of the pandemic; (3) the impact of the COVID-19
pandemic on global economic conditions, including the impact of the
various measures that have been implemented to protect public
health, many of which have reduced demand for equipment rentals;
(4) the impact of global economic conditions (including potential
trade wars) and public health crises and epidemics, such as
COVID-19, on us, our customers and our suppliers, in the United
States and the rest of the world; (5) rates we charge and time
utilization we achieve being less than anticipated (including as a
result of COVID-19); (6) excess fleet in the equipment rental
industry, including as a result of reduced demand for fleet due to
the impacts of COVID-19 on our customers; (7) inability to benefit
from government spending, including spending associated with
infrastructure projects; (8) trends in oil and natural gas could
adversely affect the demand for our services and products; (9)
competition from existing and new competitors; (10) 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; (11)
the inability to refinance our indebtedness on terms that are
favorable to us (including as a result of volatility and
uncertainty in capital markets due to COVID-19), or at all; (12)
the incurrence of additional debt, which could exacerbate the risks
associated with our current level of indebtedness; (13)
noncompliance with financial or other covenants in our debt
agreements, which could result in our lenders terminating the
agreements and requiring us to repay outstanding borrowings; (14)
restrictive covenants and amount of borrowings permitted in our
debt instruments, which can limit our financial and operational
flexibility; (15) inability to access the capital that our
businesses or growth plans may require (including as a result of
uncertainty in capital or other financial markets due to COVID-19);
(16) the possibility that companies that we have acquired or may
acquire could have undiscovered liabilities or involve other
unexpected costs, may strain our management capabilities or may be
difficult to integrate; (17) the incurrence of impairment charges;
(18) fluctuations in the price of our common stock and inability to
complete stock repurchases in the time frame and/or on the terms
anticipated (for example, due to COVID-19); (19) our charter
provisions as well as provisions of certain debt agreements and our
significant indebtedness may have the effect of making more
difficult or otherwise discouraging, delaying or deterring a
takeover or other change of control of us; (20) inability to manage
credit risk adequately or to collect on contracts with a large
number of customers; (21) turnover in our management team and
inability to attract and retain key personnel, as well as loss,
absenteeism or the inability of employees to work or perform key
functions in light of public health crises or epidemics (including
COVID-19); (22) costs we incur being more than anticipated and the
inability to realize expected savings in the amounts or time frames
planned; (23) inability to obtain equipment and other supplies for
our business from our key suppliers on acceptable terms or at all,
as a result of supply chain disruptions, insolvency, financial
difficulties or other factors; (24) increases in our maintenance
and replacement costs and/or decreases in the residual value of our
equipment; (25) inability to sell our new or used fleet in the
amounts, or at the prices, we expect; (26) risks related to
security breaches, cybersecurity attacks, failure to protect
personal information, compliance with data protection laws and
other significant disruptions in our information technology
systems; (27) risks related to climate change and climate change
regulation; (28) the fact that our holding company structure
requires us to depend in part on distributions from subsidiaries
and such distributions could be limited by contractual or legal
restrictions; (29) shortfalls in our insurance coverage; (30)
increases in our loss reserves to address business operations or
other claims and any claims that exceed our established levels of
reserves; (31) incurrence of additional expenses (including
indemnification obligations) and other costs in connection with
litigation, regulatory and investigatory matters; (32) 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 (including as a result
of Brexit), and tariffs; (33) the outcome or other potential
consequences of regulatory matters and commercial litigation; (34)
labor disputes, work stoppages or other labor difficulties, which
may impact our productivity, and potential enactment of new
legislation or other changes in law affecting our labor relations
or operations generally; and (35) the effect of changes in tax
law.
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, 2020, 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
March 31,
2021
2020
Revenues:
Equipment rentals
$
1,667
$
1,783
Sales of rental equipment
267
208
Sales of new equipment
49
62
Contractor supplies sales
24
25
Service and other revenues
50
47
Total revenues
2,057
2,125
Cost of revenues:
Cost of equipment rentals, excluding
depreciation
715
747
Depreciation of rental equipment
375
426
Cost of rental equipment sales
164
125
Cost of new equipment sales
42
54
Cost of contractor supplies sales
17
18
Cost of service and other revenues
30
28
Total cost of revenues
1,343
1,398
Gross profit
714
727
Selling, general and administrative
expenses
250
267
Restructuring charge
1
2
Non-rental depreciation and
amortization
91
100
Operating income
372
358
Interest expense, net
99
136
Other income, net
(2)
(4)
Income before provision for income
taxes
275
226
Provision for income taxes
72
53
Net income
$
203
$
173
Diluted earnings per share
$
2.80
$
2.33
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(In millions)
March 31, 2021
December 31, 2020
ASSETS
Cash and cash equivalents
$
278
$
202
Accounts receivable, net
1,254
1,315
Inventory
114
125
Prepaid expenses and other assets
358
375
Total current assets
2,004
2,017
Rental equipment, net
8,476
8,705
Property and equipment, net
584
604
Goodwill
5,167
5,168
Other intangible assets, net
592
648
Operating lease right-of-use assets
681
688
Other long-term assets
38
38
Total assets
$
17,542
$
17,868
LIABILITIES AND STOCKHOLDERS’
EQUITY
Short-term debt and current maturities of
long-term debt
$
585
$
704
Accounts payable
562
466
Accrued expenses and other liabilities
694
720
Total current liabilities
1,841
1,890
Long-term debt
8,497
8,978
Deferred taxes
1,773
1,768
Operating lease liabilities
541
549
Other long-term liabilities
145
138
Total liabilities
12,797
13,323
Common stock
1
1
Additional paid-in capital
2,473
2,482
Retained earnings
6,368
6,165
Treasury stock
(3,957
)
(3,957
)
Accumulated other comprehensive loss
(140
)
(146
)
Total stockholders’ equity
4,745
4,545
Total liabilities and stockholders’
equity
$
17,542
$
17,868
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
Three Months Ended
March 31,
2021
2020
Cash Flows From Operating
Activities:
Net income
$
203
$
173
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
466
526
Amortization of deferred financing costs
and original issue discounts
3
4
Gain on sales of rental equipment
(103
)
(83
)
Gain on sales of non-rental equipment
(1
)
(1
)
Insurance proceeds from damaged
equipment
(7
)
(6
)
Stock compensation expense, net
21
13
Restructuring charge
1
2
Increase in deferred taxes
3
1
Changes in operating assets and
liabilities:
Decrease in accounts receivable
63
105
Decrease in inventory
11
5
Decrease (increase) in prepaid expenses
and other assets
23
(30
)
Increase in accounts payable
96
33
Decrease in accrued expenses and other
liabilities
(21
)
(98
)
Net cash provided by operating
activities
758
644
Cash Flows From Investing
Activities:
Purchases of rental equipment
(295
)
(208
)
Purchases of non-rental equipment
(19
)
(53
)
Proceeds from sales of rental
equipment
267
208
Proceeds from sales of non-rental
equipment
7
9
Insurance proceeds from damaged
equipment
7
6
Purchases of other companies, net of cash
acquired
(1
)
—
Purchases of investments
—
(1
)
Net cash used in investing
activities
(34
)
(39
)
Cash Flows From Financing
Activities:
Proceeds from debt
1,091
2,517
Payments of debt
(1,710
)
(2,375
)
Payments of financing costs
—
(9
)
Proceeds from the exercise of common stock
options
—
1
Common stock repurchased (1)
(30
)
(276
)
Net cash used in financing
activities
(649
)
(142
)
Effect of foreign exchange rates
1
(2
)
Net increase in cash and cash
equivalents
76
461
Cash and cash equivalents at beginning of
period
202
52
Cash and cash equivalents at end of
period
$
278
$
513
Supplemental disclosure of cash flow
information:
Cash paid for income taxes, net
$
6
$
3
Cash paid for interest
167
174
(1)
We have a $500 million share repurchase
program that commenced in the first quarter of 2020 and was
intended to run for 12 months. As discussed above, we have decided
to pause repurchases under the program due to the COVID-19
pandemic. At this time, we are unable to estimate if, or when, the
program will be restarted, and repurchases under the program could
resume at any time. The common stock repurchases include i) shares
repurchased pursuant to our share repurchase program and ii) shares
withheld to satisfy tax withholding obligations upon the vesting of
restricted stock unit awards.
UNITED RENTALS, INC. RENTAL
REVENUE
Fleet productivity is a comprehensive metric that provides
greater insight into the decisions made by our managers in support
of growth and returns. Specifically, we seek to optimize the
interplay of rental rates, time utilization and mix in driving
rental revenue. Fleet productivity aggregates, in one metric, the
impact of changes in rates, utilization and mix on owned equipment
rental revenue.
We believe that this metric is useful in assessing the
effectiveness of our decisions on rates, time utilization and mix,
particularly as they support the creation of shareholder value. The
table below shows the components of the year-over-year change in
rental revenue using the fleet productivity methodology:
Year-over-year
change in
average OEC
Assumed
year-over-year
inflation
impact (1)
Fleet
productivity (2)
Contribution
from ancillary
and re-rent
revenue (3)
Total
change in
rental revenue
Three Months Ended March 31, 2021
(5.7)%
(1.5)%
(0.5)%
1.2%
(6.5)%
Please refer to our First Quarter 2021 Investor Presentation for
additional detail on fleet productivity.
(1)
Reflects the estimated impact of inflation
on the revenue productivity of fleet based on OEC, which is
recorded at cost.
(2)
Reflects the combined impact of changes in
rental rates, time utilization and mix on owned equipment rental
revenue. Changes in customers, fleet, geographies and segments all
contribute to changes in mix.
(3)
Reflects the combined impact of changes in
other types of equipment rental revenue: ancillary and re-rent
(excludes owned equipment rental revenue).
UNITED RENTALS, INC.
SEGMENT PERFORMANCE
($ in millions)
Three Months Ended
March 31,
2021
2020
Change
General Rentals
Reportable segment equipment rentals
revenue
$1,273
$1,394
(8.7)%
Reportable segment equipment rentals gross
profit
411
448
(8.3)%
Reportable segment equipment rentals gross
margin
32.3%
32.1%
20 bps
Trench, Power and Fluid
Solutions
Reportable segment equipment rentals
revenue
$394
$389
1.3%
Reportable segment equipment rentals gross
profit
166
162
2.5%
Reportable segment equipment rentals gross
margin
42.1%
41.6%
50 bps
Total United Rentals
Total equipment rentals revenue
$1,667
$1,783
(6.5)%
Total equipment rentals gross profit
577
610
(5.4)%
Total equipment rentals gross margin
34.6%
34.2%
40 bps
UNITED RENTALS, INC.
DILUTED EARNINGS PER SHARE
CALCULATION
(In millions, except per share
data)
Three Months Ended
March 31,
2021
2020
Numerator:
Net income available to common
stockholders
$
203
$
173
Denominator:
Denominator for basic earnings per
share—weighted-average common shares
72.3
74.0
Effect of dilutive securities:
Employee stock options
—
—
Restricted stock units
0.4
0.3
Denominator for diluted earnings per
share—adjusted weighted-average common shares
72.7
74.3
Diluted earnings per share
$
2.80
$
2.33
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 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 asset impairment charge. 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
March 31,
2021
2020
Earnings per share - GAAP,
as-reported
$
2.80
$
2.33
After-tax impact of:
Merger related intangible asset
amortization (2)
0.50
0.59
Impact on depreciation related to acquired
fleet and property and equipment (3)
0.02
0.03
Impact of the fair value mark-up of
acquired fleet (4)
0.12
0.12
Restructuring charge (5)
0.01
0.02
Asset impairment charge (6)
—
0.26
Earnings per share - adjusted
$
3.45
$
3.35
Tax rate applied to above adjustments
(1)
25.3
%
25.2
%
(1)
The tax rates applied to the adjustments
reflect the statutory rates in the applicable entities.
(2)
Reflects the amortization of the
intangible assets acquired in major acquisitions completed since
2012 (the "major acquisitions," each of which had annual revenues
of over $200 million prior to acquisition).
(3)
Reflects the impact of extending the
useful lives of equipment acquired in certain major acquisitions,
net of the impact of additional depreciation associated with the
fair value mark-up of such equipment.
(4)
Reflects additional costs recorded in cost
of rental equipment sales associated with the fair value mark-up of
rental equipment acquired in certain major acquisitions and
subsequently sold.
(5)
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 five restructuring programs. We have cumulatively
incurred total restructuring charges of $351 million under our
restructuring programs.
(6)
Reflects write-offs of leasehold
improvements and other fixed assets. The 2020 charges primarily
reflect the discontinuation of certain equipment programs, and were
not related to COVID-19.
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 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 net income and adjusted
EBITDA margins represent net income 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
March 31,
2021
2020
Net income
$
203
$
173
Provision for income taxes
72
53
Interest expense, net
99
136
Depreciation of rental equipment
375
426
Non-rental depreciation and
amortization
91
100
EBITDA
$
840
$
888
Restructuring charge (1)
1
2
Stock compensation expense, net (2)
21
13
Impact of the fair value mark-up of
acquired fleet (3)
11
12
Adjusted EBITDA
$
873
$
915
Net income margin
9.9
%
8.1
%
Adjusted EBITDA margin
42.4
%
43.1
%
(1)
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 five restructuring programs. We have cumulatively
incurred total restructuring charges of $351 million under our
restructuring programs.
(2)
Represents non-cash, share-based payments
associated with the granting of equity instruments.
(3)
Reflects additional costs recorded in cost
of rental equipment sales associated with the fair value mark-up of
rental equipment acquired in certain major 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
March 31,
2021
2020
Net cash provided by operating
activities
$
758
$
644
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
)
(4
)
Gain on sales of rental equipment
103
83
Gain on sales of non-rental equipment
1
1
Insurance proceeds from damaged
equipment
7
6
Restructuring charge (1)
(1
)
(2
)
Stock compensation expense, net (2)
(21
)
(13
)
Changes in assets and liabilities
(177
)
(4
)
Cash paid for interest
167
174
Cash paid for income taxes, net
6
3
EBITDA
$
840
$
888
Add back:
Restructuring charge (1)
1
2
Stock compensation expense, net (2)
21
13
Impact of the fair value mark-up of
acquired fleet (3)
11
12
Adjusted EBITDA
$
873
$
915
(1)
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 five restructuring programs. We have cumulatively
incurred total restructuring charges of $351 million under our
restructuring programs.
(2)
Represents non-cash, share-based payments
associated with the granting of equity instruments.
(3)
Reflects additional costs recorded in cost
of rental equipment sales associated with the fair value mark-up of
rental equipment acquired in certain major 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
March 31,
2021
2020
Net cash provided by operating
activities
$
758
$
644
Purchases of rental equipment
(295
)
(208
)
Purchases of non-rental equipment
(19
)
(53
)
Proceeds from sales of rental
equipment
267
208
Proceeds from sales of non-rental
equipment
7
9
Insurance proceeds from damaged
equipment
7
6
Free cash flow (1)
$
725
$
606
(1)
Free cash flow included aggregate merger
and restructuring related payments of $3 million and $2 million for
the three months ended March 31, 2021 and 2020, respectively.
The table below provides a reconciliation between 2021
forecasted net cash provided by operating activities and free cash
flow.
Net cash provided by operating
activities
$3,100- $3,500
Purchases of rental equipment
$(2,200)-$(2,400)
Proceeds from sales of rental
equipment
$900-$1,000
Purchases of non-rental equipment, net of
proceeds from sales and insurance proceeds from damaged
equipment
$(100)-$(200)
Free cash flow (excluding the impact of
merger and restructuring related payments)
$1,700- $1,900
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210428006058/en/
Ted Grace (203) 618-7122 Cell: (203) 399-8951 tgrace@ur.com
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