Reports Solid Start to 2019
United Rentals, Inc. (NYSE: URI) today announced financial
results for the first quarter of 20191.
Total revenue increased 22.1% to $2.117 billion and
rental revenue increased 23.0% to $1.795 billion. On a GAAP
basis, the company reported first quarter net income of $175
million, or $2.19 per diluted share ("EPS"), compared with
$183 million, or $2.15 per diluted share, for the same period in
2018. Adjusted EPS2 for the quarter increased 15.3%
year-over-year to $3.31 per diluted share.
Adjusted EBITDA2 increased 18.1% year-over-year to
$921 million, while adjusted EBITDA margin decreased 150 basis
points to 43.5%. On a pro forma basis, adjusted EBITDA margin
increased 30 basis points year-over-year.
Michael Kneeland, chief executive officer of United Rentals,
said, “We’re pleased with our solid start to 2019, and the
broad-based growth we realized across geographies and verticals.
We’re entering our busy season with the strongest service offering
in our history, given the strategic investments we’ve made
across our business, including acquisitions, to best support our
customers. I’m proud of our team for staying focused on our
customers through multiple integrations and the recent weather
headwinds.”
Kneeland continued, "By reaffirming our guidance, we’re
emphasizing our confidence in the cycle. The year is unfolding as
we expected - customer sentiment remains positive, and feedback
from the field points to healthy end-market activity. Given our
strong competitive advantages, we’re in an ideal position
to serve our customers and maximize shareholder value.”
First Quarter 2019 Highlights
- Rental Revenue: Rental revenue3
increased 23.0% and 7.2% year-over-year on an actual and pro forma
basis, respectively, to a first quarter record of $1.795 billion.
The company realized broad-based growth across its geographic
markets and vertical end-markets on both an actual and pro forma
basis.
- Fleet Productivity4:
Within rental revenue, fleet productivity decreased 1.3%
year-over-year, primarily due to the impact of the BakerCorp and
BlueLine acquisitions. On a pro forma basis, fleet productivity
increased 2.2%, reflecting improvements in rental rates and fleet
mix, partially offset by a decline in time utilization due largely
to the integration of recent acquisitions and adverse weather.
- Used Equipment: The company
generated $192 million of proceeds from used equipment sales at a
GAAP gross margin of 34.9% and an adjusted gross margin of 49.0%5;
this compares with $181 million at a GAAP gross margin of 40.9% and
an adjusted gross margin of 54.1% for the same period last year.
The year-over-year decrease in GAAP gross margin was primarily due
to lower-margin sales of fleet acquired with BlueLine. The
year-over-year decrease in adjusted gross margin was primarily due
to 2018 sales of more fully depreciated assets acquired in the NES
acquisition.
- Profitability: Net income
decreased 4.4% year-over-year to $175 million, primarily due to an
increase in interest expense associated with debt issued to fund
the BakerCorp and BlueLine acquisitions. Adjusted EBITDA increased
18.1% year-over-year to $921 million while adjusted EBITDA margin
decreased 150 basis points to 43.5%. The decline in adjusted EBITDA
margin primarily reflected the acquisitions of BakerCorp and
BlueLine. On a pro forma basis, adjusted EBITDA margin increased 30
basis points year-over-year.
- Specialty: Rental revenue for
the company’s specialty segment, Trench, Power and Fluid Solutions,
increased by 44.2% year-over-year, including a 9.5% increase on a
same store basis. Rental gross margin decreased by 390 basis points
to 42.2%, primarily due to the expected impact of acquisitions and,
to a lesser extent, an increase in lower-margin re-rent
revenues.
- Cash flow: Net cash from
operating activities increased 3.9% to $667 million and free cash
flow6, including aggregated merger and restructuring payments,
increased 11.4% to $575 million. Free cash flow for the first
quarter of 2019 included rental gross capital expenditures of $257
million, an 8.2% decrease from a year ago.
- Capital Allocation: During the
first quarter, the company reduced net debt by $150 million
relative to year-end 2018 levels, repurchased $210 million of
common stock and reduced its average diluted share count by 6.1%
year-over-year. As of March 31, 2019, the company has
repurchased $630 million of common stock under its current $1.25
billion repurchase program. Over the last 12 months, the company
has repurchased $798 million of its common stock.
_______________ 1. The company completed the acquisitions of
BakerCorp International Holdings, Inc. (“BakerCorp”) and Vander
Holding Corporation and its subsidiaries (“BlueLine”) in July 2018
and October 2018, respectively. BakerCorp and BlueLine are included
in the company's results subsequent to the acquisition dates. Pro
forma results reflect the combination of United Rentals, BakerCorp
and BlueLine for all periods presented. The acquired BakerCorp
locations are reflected in the Trench, Power and Fluid Solutions
specialty segment. 2. 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 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.
Fleet productivity reflects the combined
impact of changes in rental rates, time utilization and mix on
owned equipment rental revenue. See “Fleet Productivity Operating
Metric” below for more information.
5.
Used equipment sales adjusted gross margin
excludes the impact of the fair value mark-up of acquired RSC, NES,
Neff and BlueLine fleet that was sold.
6.
Free cash flow is a non-GAAP measure. See
the table below for amounts and a reconciliation to the most
comparable GAAP measure.
2019 Outlook
The company has reaffirmed the following full-year
outlook:
Current Outlook Total revenue $9.15 billion to
$9.55 billion Adjusted EBITDA7 $4.35 billion to $4.55 billion Net
rental capital expenditures after gross purchases
$1.4 billion to $1.55 billion, aftergross
purchases of $2.15 billionto $2.3 billion
Net cash provided by operating activities $2.85 billion to $3.2
billion Free cash flow (excluding the impact of merger and
restructuring related payments) $1.3 billion to $1.5 billion
_______________ 7. Information reconciling forward-looking
adjusted EBITDA to the comparable GAAP financial measures is
unavailable to the company without unreasonable effort, as
discussed below.
Return on Invested Capital (ROIC)
ROIC was 10.9% for the 12 months ended March 31, 2019,
exceeding both the 9.4% ROIC for the 12 months ended March 31,
2018 and the company’s current weighted average cost of capital of
less than 8.0%. 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
rates of 21% for 2019 and 2018 and 35% for 2017 were used to
calculate after-tax operating income (because of the trailing 12
month measurement period, the 2017 tax rate impacts ROIC for the 12
months ended March 31, 2018).
ROIC materially increased due to the reduced tax rates following
the enactment of the Tax Cuts and Jobs Act of 2017 (the "Tax Act").
The Tax Act decreased the U.S. federal tax rate from 35% to 21%. If
the 21% U.S. federal corporate statutory tax rate following the
enactment of the Tax Act was applied to ROIC for all historic
periods, the company estimates that ROIC would have been 10.7% and
10.8% for the 12 months ended March 31, 2019 and 2018,
respectively. The slight decline in tax-adjusted ROIC primarily
reflects the impact of recent acquisitions.
Fleet Productivity Operating Metric
In January 2019, the company introduced fleet productivity as a
comprehensive metric that provides greater insight into the
decisions made by its managers in support of growth and returns.
Specifically, the company seeks 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.
The company believes that this metric is useful in assessing the
effectiveness of its decisions on rates, time utilization and mix,
particularly as they support the creation of shareholder value.
Additional information about fleet productivity can be found in the
First Quarter 2019 Investor Presentation on unitedrentals.com. The
company plans to continue providing quarterly information on rental
rates and time utilization in its quarterly Investor Presentation
through the second quarter of 2019, after which it plans to cease
such reporting.
The table below shows the components of the year-over-year
change in rental revenue using the fleet productivity methodology,
presented on an actual and pro forma basis:
Year-over-yearchange
inaverageOEC
Assumedyear-over-yearinflationimpact
(1)
Fleetproductivity(2)
Contributionfromancillary
andre-rentrevenue (3)
Totalchange
inrentalrevenue
First Quarter 2019 Actual 23.7% (1.5)% (1.3)% 2.1% 23.0% Pro
forma 5.7% (1.5)% 2.2% 0.8% 7.2%
Please refer to our first quarter Investor Presentation for
additional perspective on the components of 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).
Conference Call
United Rentals will hold a conference call tomorrow, Thursday,
April 18, 2019, 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 4497306.
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 merger related costs, 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 merger related costs, 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 1,165 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 18,600 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 $14.09 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 challenges associated with past or future
acquisitions, including BakerCorp and BlueLine, such as
undiscovered liabilities, costs, integration issues and/or the
inability to achieve the cost and revenue synergies expected; (2) a
slowdown in North American construction and industrial activities,
which could reduce our revenues and profitability; (3) 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; (4) the inability to refinance our indebtedness at
terms that are favorable to us, or at all; (5) the incurrence of
additional debt, which could exacerbate the risks associated with
our current level of indebtedness; (6) noncompliance with covenants
in our debt agreements, which could result in termination of our
credit facilities and acceleration of outstanding borrowings; (7)
restrictive covenants and amount of borrowings permitted under our
debt agreements, which could limit our financial and operational
flexibility; (8) an overcapacity of fleet in the equipment rental
industry; (9) a decrease in levels of infrastructure spending,
including lower than expected government funding for construction
projects; (10) fluctuations in the price of our common stock and
inability to complete stock repurchases in the time frame and/or on
the terms anticipated; (11) our rates and time utilization being
less than anticipated; (12) our inability to manage credit risk
adequately or to collect on contracts with customers; (13) our
inability to access the capital that our business or growth plans
may require; (14) the incurrence of impairment charges; (15) trends
in oil and natural gas could adversely affect demand for our
services and products; (16) our dependence on distributions from
subsidiaries as a result of our holding company structure and the
fact that such distributions could be limited by contractual or
legal restrictions; (17) an increase in our loss reserves to
address business operations or other claims and any claims that
exceed our established levels of reserves; (18) the incurrence of
additional costs and expenses (including indemnification
obligations) in connection with litigation, regulatory or
investigatory matters; (19) the outcome or other potential
consequences of litigation and other claims and regulatory matters
relating to our business, including certain claims that our
insurance may not cover; (20) the effect that certain provisions in
our charter and certain debt agreements and our significant
indebtedness may have of making more difficult or otherwise
discouraging, delaying or deterring a takeover or other change of
control of us; (21) management turnover and inability to attract
and retain key personnel; (22) our costs being more than
anticipated and/or the inability to realize expected savings in the
amounts or time frames planned; (23) our dependence on key
suppliers to obtain equipment and other supplies for our business
on acceptable terms; (24) our inability to sell our new or used
fleet in the amounts, or at the prices, we expect; (25) competition
from existing and new competitors; (26) security breaches,
cybersecurity attacks, failure to protect personal information,
compliance with data protection laws and other significant
disruptions in our information technology systems; (27) 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; (28) labor difficulties and labor-based
legislation affecting our labor relations and operations generally;
(29) increases in our maintenance and replacement costs and/or
decreases in the residual value of our equipment; and (30) 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,
2018, 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, 2019
2018 Revenues: Equipment rentals $ 1,795 $ 1,459
Sales of rental equipment 192 181 Sales of new equipment 62 42
Contractor supplies sales 24 18 Service and other revenues 44
34
Total revenues 2,117
1,734 Cost of revenues: Cost of equipment rentals,
excluding depreciation 742 592 Depreciation of rental equipment 395
322 Cost of rental equipment sales 125 107 Cost of new equipment
sales 54 37 Cost of contractor supplies sales 17 12 Cost of service
and other revenues 23 18
Total cost of
revenues 1,356 1,088 Gross
profit 761 646 Selling, general and
administrative expenses 280 232 Merger related costs 1 1
Restructuring charge 8 2 Non-rental depreciation and amortization
104 71 Operating income 368 340 Interest expense, net
151 109 Other income, net (3 ) (1 ) Income before provision for
income taxes 220 232 Provision for income taxes 45 49
Net income $ 175 $ 183
Diluted earnings per share $ 2.19
$ 2.15
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions)
March 31, 2019 December 31,
2018 ASSETS Cash and cash equivalents $ 52 $ 43 Accounts
receivable, net 1,487 1,545 Inventory 123 109 Prepaid expenses and
other assets 58 64 Total current assets 1,720 1,761
Rental equipment, net 9,438 9,600 Property and equipment, net 580
614 Goodwill 5,121 5,058 Other intangible assets, net 1,089 1,084
Operating lease right-of-use assets (1) 622 — Other long-term
assets 16 16
Total assets $
18,586 $ 18,133 LIABILITIES
AND STOCKHOLDERS’ EQUITY Short-term debt and current maturities
of long-term debt $ 930 $ 903 Accounts payable 557 536 Accrued
expenses and other liabilities (1) 751 677 Total
current liabilities 2,238 2,116 Long-term debt 10,676 10,844
Deferred taxes 1,714 1,687 Operating lease liabilities (1) 497 —
Other long-term liabilities 86 83
Total
liabilities 15,211 14,730 Common
stock 1 1 Additional paid-in capital 2,394 2,408 Retained earnings
4,276 4,101 Treasury stock (3,080 ) (2,870 ) Accumulated other
comprehensive loss (216 ) (237 )
Total stockholders’ equity
3,375 3,403 Total liabilities and
stockholders’ equity $ 18,586 $
18,133 (1) In 2019, we adopted an
updated lease accounting standard that resulted in the recognition
of operating lease right-of-use assets and lease liabilities.
Accrued expenses and other liabilities as of March 31, 2019
includes $169 million of current operating lease liabilities. We
adopted this standard using a transition method that does not
require application to periods prior to adoption.
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
(In millions)
Three Months Ended March 31,
2019 2018 Cash Flows From Operating
Activities: Net income $ 175 $ 183 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 499 393 Amortization of deferred financing costs
and original issue discounts 4 3 Gain on sales of rental equipment
(67 ) (74 ) Gain on sales of non-rental equipment (2 ) (1 ) Gain on
insurance proceeds from damaged equipment (7 ) (2 ) Stock
compensation expense, net 15 19 Merger related costs 1 1
Restructuring charge 8 2 Increase in deferred taxes 21 37 Changes
in operating assets and liabilities: Decrease in accounts
receivable 73 80 Increase in inventory (9 ) (9 ) Decrease in
prepaid expenses and other assets 12 42 Increase in accounts
payable 18 103 Decrease in accrued expenses and other liabilities
(74 ) (135 )
Net cash provided by operating activities
667 642 Cash Flows From Investing Activities:
Purchases of rental equipment (257 ) (280 ) Purchases of non-rental
equipment (42 ) (33 ) Proceeds from sales of rental equipment 192
181 Proceeds from sales of non-rental equipment 8 4 Insurance
proceeds from damaged equipment 7 2 Purchases of other companies,
net of cash acquired (173 ) (52 )
Net cash used in investing
activities (265 ) (178 ) Cash
Flows From Financing Activities: Proceeds from debt 1,427 2,256
Payments of debt (1,572 ) (2,563 ) Payments of financing costs (9 )
— Proceeds from the exercise of common stock options 4 1 Common
stock repurchased (1) (243 ) (226 )
Net cash used in financing
activities (393 ) (532 ) Effect of
foreign exchange rates — (6 )
Net increase (decrease) in
cash and cash equivalents 9 (74 ) Cash and
cash equivalents at beginning of period 43 352
Cash and cash equivalents at end of period $
52 $ 278 Supplemental
disclosure of cash flow information: Cash paid for income
taxes, net $ 4 $ 10 Cash paid for interest 179 153 (1)
We have an open $1.25 billion share repurchase program that
commenced in July 2018. We intend to complete the program in 2019.
The common stock repurchases include i) shares repurchased pursuant
to our share repurchase programs and ii) shares withheld to satisfy
tax withholding obligations upon the vesting of restricted stock
unit awards.
UNITED RENTALS, INC.
SEGMENT PERFORMANCE
($ in millions)
Three Months Ended March 31,
2019 2018
Change General Rentals Reportable segment
equipment rentals revenue $ 1,423 $ 1,201 18.5 % Reportable segment
equipment rentals gross profit 501 426 17.6 % Reportable segment
equipment rentals gross margin 35.2 % 35.5 % (30) bps
Trench,
Power and Fluid Solutions Reportable segment equipment rentals
revenue $ 372 $ 258 44.2 % Reportable segment equipment rentals
gross profit 157 119 31.9 % Reportable segment equipment rentals
gross margin 42.2 % 46.1 % (390) bps
Total United Rentals
Total equipment rentals revenue $ 1,795 $ 1,459 23.0 % Total
equipment rentals gross profit 658 545 20.7 % Total equipment
rentals gross margin 36.7 % 37.4 % (70) bps
UNITED RENTALS, INC.
DILUTED EARNINGS PER SHARE
CALCULATION
(In millions, except per share
data)
Three Months Ended March 31,
2019 2018 Numerator: Net income available to
common stockholders $ 175 $ 183 Denominator: Denominator for basic
earnings per share—weighted-average common shares 79.4 84.3 Effect
of dilutive securities: Employee stock options 0.3 0.4 Restricted
stock units 0.3 0.5
Denominator for diluted
earnings per share—adjusted weighted-average common shares
80.0 85.2 Diluted earnings per share $
2.19 $ 2.15
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 costs, 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,
2019 2018 Earnings per
share - GAAP, as reported $ 2.19 $
2.15 After-tax impact of: Merger related costs (2) 0.01 0.01
Merger related intangible asset amortization (3) 0.64 0.39 Impact
on depreciation related to acquired fleet and property and
equipment (4) 0.14 0.09 Impact of the fair value mark-up of
acquired fleet (5) 0.25 0.21 Restructuring charge (6) 0.07 0.02
Asset impairment charge (7) 0.01 —
Earnings per
share - adjusted $ 3.31 $
2.87 Tax rate applied to above adjustments (1) 25.4 %
25.3 % (1) The tax rates applied to the adjustments
reflect the statutory rates in the applicable entities. (2)
Reflects transaction costs associated with the NES, Neff, BakerCorp
and BlueLine acquisitions. 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, Neff had annual revenues of
approximately $413 million, BakerCorp had annual revenues of
approximately $295 million and BlueLine had annual revenues of
approximately $786 million. (3) Reflects the amortization of the
intangible assets acquired in the RSC, National Pump, NES, Neff,
BakerCorp and BlueLine acquisitions. (4) Reflects the impact of
extending the useful lives of equipment acquired in the RSC, NES,
Neff, BakerCorp and BlueLine 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, Neff and BlueLine
acquisitions and subsequently sold. (6) Primarily reflects
severance and branch closure charges associated with our closed
restructuring programs and our current restructuring programs. 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 four restructuring
programs. We have cumulatively incurred total restructuring charges
of $323 million under our restructuring programs. (7) Reflects
write-offs of leasehold improvements and other fixed assets.
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 merger related costs,
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
EBITDA and adjusted EBITDA margins represent EBITDA 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,
2019 2018 Net income $
175 $ 183 Provision for income taxes 45 49
Interest expense, net 151 109 Depreciation of rental equipment 395
322 Non-rental depreciation and amortization 104 71
EBITDA (A) $ 870 $ 734 Merger
related costs (1) 1 1 Restructuring charge (2) 8 2 Stock
compensation expense, net (3) 15 19 Impact of the fair value
mark-up of acquired fleet (4) 27 24
Adjusted EBITDA
(B) $ 921 $ 780
A) Our EBITDA margin was 41.1% and 42.3% for the three months
ended March 31, 2019 and 2018, respectively.B) Our adjusted
EBITDA margin was 43.5% and 45.0% for the three months ended
March 31, 2019 and 2018, respectively.
(1) Reflects transaction costs associated with the NES,
Neff, BakerCorp and BlueLine acquisitions. 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, Neff had annual revenues of
approximately $413 million, BakerCorp had annual revenues of
approximately $295 million and BlueLine had annual revenues of
approximately $786 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 four restructuring
programs. We have cumulatively incurred total restructuring charges
of $323 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, Neff and BlueLine
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,
2019 2018 Net cash provided by
operating activities $ 667 $ 642
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 (4 ) (3 ) Gain on sales of rental equipment 67 74 Gain on
sales of non-rental equipment 2 1 Gain on insurance proceeds from
damaged equipment 7 2 Merger related costs (1) (1 ) (1 )
Restructuring charge (2) (8 ) (2 ) Stock compensation expense, net
(3) (15 ) (19 ) Changes in assets and liabilities (28 ) (123 ) Cash
paid for interest 179 153 Cash paid for income taxes, net 4
10
EBITDA $ 870 $ 734 Add
back: Merger related costs (1) 1 1 Restructuring charge (2) 8 2
Stock compensation expense, net (3) 15 19 Impact of the fair value
mark-up of acquired fleet (4) 27 24
Adjusted
EBITDA $ 921 $ 780
(1) Reflects transaction costs associated with the
NES, Neff, BakerCorp and BlueLine acquisitions. 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, Neff had annual
revenues of approximately $413 million, BakerCorp had annual
revenues of approximately $295 million and BlueLine had annual
revenues of approximately $786 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 four restructuring
programs. We have cumulatively incurred total restructuring charges
of $323 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, Neff and BlueLine
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,
2019 2018 Net cash provided by
operating activities $ 667 $ 642
Purchases of rental equipment (257 ) (280 ) Purchases of non-rental
equipment (42 ) (33 ) Proceeds from sales of rental equipment 192
181 Proceeds from sales of non-rental equipment 8 4 Insurance
proceeds from damaged equipment 7 2
Free cash flow
(1) $ 575 $ 516
(1) Free cash flow included aggregate merger and
restructuring related payments of $8 million and $10 million for
the three months ended March 31, 2019 and 2018, respectively.
The table below provides a reconciliation between 2019
forecasted net cash provided by operating activities and free cash
flow.
Net cash provided by operating activities
$2,850- $3,200 Purchases of rental equipment
$(2,150)-$(2,350) Proceeds from sales of rental equipment $700-$800
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) $1,300- $1,500
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190417005906/en/
Ted Grace(203) 618-7122Cell: (203) 399-8951tgrace@ur.com
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