United Rentals Announces Record Fourth Quarter and Full-Year1 2022 Results, Introduces 2023 Outlook, Dividend Program and Restart of Share Repurchase Program

STAMFORD, Conn.--()--United Rentals, Inc. (NYSE: URI) today announced financial results for the fourth quarter of 2022 and reported its full-year results on Form 10-K. The company also announced its full-year 2023 guidance, the initiation of a quarterly dividend of $1.48 per share, equating to an initial annualized yield of approximately 1.5%, and its plan to restart its share repurchase program, with the intent to buyback $1.0 billion of common stock in 2023.

Fourth Quarter 2022 Highlights

  • Total revenue of $3.296 billion, including rental revenue2 of $2.747 billion.
  • Fleet productivity3 increased 5.9% year-over-year, including the impact of the acquisition of Ahern Rentals, Inc. ("Ahern Rentals") in the quarter.
  • Net income of $639 million, at a margin4 of 19.4%. GAAP diluted earnings per share of $9.15, and adjusted EPS5 of $9.74.
  • Adjusted EBITDA5 of $1.647 billion, at a margin4 of 50.0%.
  • Full-year net cash provided by operating activities of $4.433 billion; free cash flow5 of $1.764 billion, including gross rental capital spending of $3.436 billion.
  • Year-end net leverage ratio6 of 2.0x, with total liquidity6 of $2.896 billion.

CEO Comment

Matthew Flannery, chief executive officer of United Rentals, said, “Our fourth quarter results capped an outstanding year, during which we set records for revenue, profitability, margins and returns. These achievements are a testament to our team’s commitment to our customers. With the Ahern integration on track, and a world-class combination of people, process and technology, we’re positioned to raise the bar again in 2023.”

Flannery continued, “Our guidance reflects our expectations for another year of strong growth, and our ability to convert this growth into compelling returns. The introduction of our dividend program reflects the strength and resiliency of our operating model and our ability to generate cash across the cycle, while continuing to invest in growth. Combined with the restart of our share repurchase program, we expect to return approximately $1.4 billion of cash to our shareholders this year as we continue to drive long-term value creation.”

2023 Outlook

The company provided the following outlook for 2023.

 

2023 Outlook

 

2022 Actual

Total revenue

$13.7 billion to $14.2 billion

 

$11.642 billion

Adjusted EBITDA7

$6.6 billion to $6.85 billion

 

$5.618 billion

Net rental capital expenditures after gross purchases

$2.0 billion to $2.25 billion, after gross
purchases of $3.3 billion to $3.55 billion

 

$2.471 billion net, $3.436 billion gross

Net cash provided by operating activities

$4.4 billion to $4.8 billion

 

$4.433 billion

Free cash flow (excluding merger and restructuring related payments, which were $4 million in 2022)

$2.1 billion to $2.35 billion

 

$1.768 billion

Summary of Fourth Quarter 2022 Financial Results

  • Rental revenue for the quarter was a record $2.747 billion, reflecting an increase of 18.8% year-over-year. The increase reflects the broad-based strength of demand across the end-markets served by the company. Year-over-year, fleet productivity increased 5.9% while average original equipment at cost (“OEC”) increased 14.2%. The increases in rental revenue, fleet productivity and average OEC include the impact of the December 2022 Ahern Rentals acquisition.
  • Used equipment sales in the quarter increased 26.2% year-over-year. These sales generated $409 million of proceeds at a GAAP gross margin of 58.9% and an adjusted gross margin8 of 61.6%; this compares with $324 million at a GAAP gross margin of 49.4% and an adjusted gross margin of 52.2% for the same period last year. The gross margin increases were primarily due to strong pricing on used equipment sales and improved channel mix.
  • Net income for the quarter increased 32.8% year-over-year to $639 million, while net income margin increased 210 basis points to 19.4%. Both net income and net income margin were fourth quarter records excluding the fourth quarter of 2017, which included a one-time net income benefit of $689 million associated with the enactment of the Tax Cuts and Jobs Act of 2017. The year-over-year improvements primarily reflected higher gross margins from rental revenue and used equipment sales, and a reduction in non-rental depreciation and amortization as a percentage of revenue, partially offset by higher interest and income tax expenses. Interest expense increased $39 million, or 42%, primarily due to increased average debt, including the debt issued to partially fund the Ahern Rentals acquisition as discussed below, and higher variable debt interest rates. Income tax expense increased $93 million, or 57%. While the effective income tax rate of 28.6% for the quarter reflects a year-over-year increase of 330 basis points, primarily due to the settlement in the quarter of non-recurring prior year tax adjustments, the full-year effective income tax rate was flat year-over-year at 24.9%.
  • Adjusted EBITDA for the quarter increased 25.8% year-over-year to a fourth quarter record of $1.647 billion, while adjusted EBITDA margin increased 280 basis points to 50.0%. The increase in adjusted EBITDA margin primarily reflected a 100 basis point increase in rental margin (excluding depreciation), a 940 basis point increase in adjusted gross margin from used equipment sales and revenue mix benefits.
  • General rentals segment had an increase of 19.1% year-over-year in rental revenue to a fourth quarter record of $2.023 billion. Rental gross margin increased by 140 basis points to 41.6%, primarily due to better fixed cost absorption on higher revenue.
  • Specialty rentals segment rental revenue increased 18.1% year-over-year to a fourth quarter record of $724 million. Rental gross margin increased by 410 basis points to 49.3%, primarily due to better cost performance and fixed cost absorption on higher revenue.
  • Cash flow from operating activities increased 20.2% year-over-year to $4.433 billion for the full-year, and free cash flow, including merger and restructuring related payments, increased 16.5% to $1.764 billion. The increase in free cash flow was mainly due to higher net cash from operating activities, partially offset by higher net rental capital expenditures (purchases of rental equipment less proceeds from sales of rental equipment), which increased $441 million, and increased purchases of non-rental equipment.
  • Capital management. The company's net leverage ratio was 2.0x at December 31, 2022, as compared to 2.2x at December 31, 2021. In 2022, net debt increased by $1.723 billion, primarily reflecting the use of borrowings to fund the Ahern Rentals acquisition. In 2022, the company executed the following capital management transactions: 1) repurchased $1 billion of common stock, completing the repurchase program that commenced in the first quarter of 2022, 2) redeemed $500 million principal amount of its 5 1/2 percent Senior Notes due 2027, 3) amended and extended its ABL facility, increasing its size by $500 million to $4.25 billion and extending its expiration to June 2027, 4) amended and extended its accounts receivable securitization facility, increasing its size by $200 million to $1.1 billion and extending its expiration to June 2024, 5) entered into an uncommitted short-term financing facility9 pursuant to which it may borrow up to $100 million and 6) issued $1.5 billion principal amount of 6 percent Senior Secured Notes due 2029 (this issuance, together with drawings under the ABL facility, was used to fund the Ahern Rentals acquisition).
  • Total liquidity was $2.896 billion as of December 31, 2022, including $106 million of cash and cash equivalents.
  • Return on invested capital (ROIC)10 increased 240 basis points year-over-year, and 50 basis points sequentially, to a record 12.7% for the 12 months ended December 31, 2022. The year-over-year and sequential increases in ROIC were primarily due to increased after-tax operating income.

Share Repurchase Program

On October 24, 2022, the company's Board of Directors authorized a new $1.25 billion share repurchase program. The program was subsequently paused through the initial phase of the integration of the $2.0 billion Ahern Rentals acquisition, which closed in December 2022. The company plans to begin repurchases under the program in the first quarter of 2023, and intends to repurchase $1.0 billion of common stock during 2023.

Quarterly Dividend Program

As part of United Rentals' commitment to a balanced and effective capital allocation strategy intended to enhance long-term shareholder value, the company’s Board of Directors approved a quarterly dividend program on January 25, 2023. Under the program, subject to quarterly approval and declaration by the Board of Directors, the dividends will be payable on the fourth Wednesday of the second month of each calendar quarter to stockholders of record as of the second Wednesday of that same month. The company’s Board of Directors has declared a quarterly dividend of $1.48 per share, payable on February 22, 2023 to stockholders of record as of the close of business on February 8, 2023.

Conference Call

United Rentals will hold a conference call tomorrow, Thursday, January 26, 2023, at 11:00 a.m. Eastern Time. The conference call number is 800-343-1703 (international: 785-424-1226). The replay number for the call is 402-220-2972. The passcode for both the conference call and replay is 34187. The conference call will also be available live by audio webcast at unitedrentals.com, where it will be archived until the next earnings call.

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 and intangible assets. The equipment and intangible asset 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 charges, 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 charges, 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, asset impairment charge and loss on repurchase/redemption of debt securities. 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 (as specified in the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K). 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 1,462 rental locations in North America, 13 in Europe, 27 in Australia and 19 in New Zealand. In North America, the company operates in 49 states and every Canadian province. The company’s approximately 24,600 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers approximately 4,600 classes of equipment for rent with a total original cost of $19.61 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 impact of global economic conditions (including inflation, increased interest rates, supply chain constraints, potential trade wars and sanctions and other measures imposed in response to the ongoing conflict in Ukraine) and public health crises and epidemics on us, our customers and our suppliers, in the United States and the rest of the world; (2) declines in construction or industrial activity, which could adversely impact our revenues and, because many of our costs are fixed, our profitability; (3) rates we charge and time utilization we achieve being less than anticipated; (4) changes in customer, fleet, geographic and segment mix; (5) excess fleet in the equipment rental industry; (6) inability to benefit from government spending, including spending associated with infrastructure projects; (7) trends in oil and natural gas, including significant increases in the prices of oil or natural gas, could adversely affect the demand for our services and products; (8) competition from existing and new competitors; (9) the cyclical nature of the industry in which we operate and the industries of our customers, such as those in the construction industry; (10) costs we incur being more than anticipated, including as a result of inflation, and the inability to realize expected savings in the amounts or time frames planned; (11) 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; (12) inability to refinance our indebtedness on terms that are favorable to us, including as a result of volatility and uncertainty in capital markets or increases in interest rates, or at all; (13) incurrence of additional debt, which could exacerbate the risks associated with our current level of indebtedness; (14) 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; (15) restrictive covenants and the amount of borrowings permitted under our debt instruments, which can limit our financial and operational flexibility; (16) 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; (17) the possibility that companies that we have acquired or may acquire could have undiscovered liabilities, or that companies or assets that we have acquired or may acquire could involve other unexpected costs, may strain our management capabilities, or may be difficult to integrate, and that we may not realize the expected benefits from an acquisition over the timeframe we expect, or at all; (18) incurrence of impairment charges; (19) fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated; (20) 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; (21) inability to manage credit risk adequately or to collect on contracts with a large number of customers; (22) 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; (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) risks related to our ability to meet our environmental and social goals, including our greenhouse gas intensity reduction goal; (29) 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; (30) shortfalls in our insurance coverage; (31) increases in our loss reserves to address business operations or other claims and any claims that exceed our established levels of reserves; (32) incurrence of additional expenses (including indemnification obligations) and other costs in connection with litigation, regulatory and investigatory matters; (33) 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, and tariffs; (34) the outcome or other potential consequences of regulatory matters and commercial litigation; (35) labor shortages and/or disputes, work stoppages or other labor difficulties, which may impact our productivity and increase our costs, and changes in law that could affect our labor relations or operations generally; and (36) 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, 2022, 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.

_______________

  1. A discussion of the company’s full-year 2022 results of operations is included in its Annual Report on Form 10-K filed with the SEC.
  2. Rental revenue includes owned equipment rental revenue, re-rent revenue and ancillary revenue.
  3. 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.
  4. Net income margin and adjusted EBITDA margin represent net income or adjusted EBITDA divided by total revenue.
  5. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted EPS (earnings per share) and free cash flow are non-GAAP measures as defined in the tables below. See the tables below for reconciliations to the most comparable GAAP measures. Information reconciling forward-looking adjusted EBITDA to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below.
  6. The net leverage ratio reflects net debt (total debt less cash and cash equivalents) divided by adjusted EBITDA for the trailing 12 months. Total liquidity reflects cash and cash equivalents plus availability under the asset-based revolving credit facility (“ABL facility”) and the accounts receivable securitization facility.
  7. Information reconciling forward-looking adjusted EBITDA to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below.
  8. 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.
  9. The company’s Annual Report on Form 10-K filed with the SEC includes a discussion of this facility, which is referred to therein as the "Repurchase facility."
  10. 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.
 

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In millions, except per share amounts)

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

Equipment rentals

$

2,747

 

 

$

2,312

 

$

10,116

 

 

$

8,207

Sales of rental equipment

 

409

 

 

 

324

 

 

965

 

 

 

968

Sales of new equipment

 

39

 

 

 

50

 

 

154

 

 

 

203

Contractor supplies sales

 

32

 

 

 

29

 

 

126

 

 

 

109

Service and other revenues

 

69

 

 

 

61

 

 

281

 

 

 

229

Total revenues

 

3,296

 

 

 

2,776

 

 

11,642

 

 

 

9,716

Cost of revenues:

 

 

 

 

 

 

 

Cost of equipment rentals, excluding depreciation

 

1,057

 

 

 

913

 

 

4,018

 

 

 

3,329

Depreciation of rental equipment

 

491

 

 

 

439

 

 

1,853

 

 

 

1,611

Cost of rental equipment sales

 

168

 

 

 

164

 

 

399

 

 

 

537

Cost of new equipment sales

 

31

 

 

 

41

 

 

124

 

 

 

169

Cost of contractor supplies sales

 

18

 

 

 

21

 

 

84

 

 

 

78

Cost of service and other revenues

 

43

 

 

 

37

 

 

168

 

 

 

139

Total cost of revenues

 

1,808

 

 

 

1,615

 

 

6,646

 

 

 

5,863

Gross profit

 

1,488

 

 

 

1,161

 

 

4,996

 

 

 

3,853

Selling, general and administrative expenses

 

378

 

 

 

322

 

 

1,400

 

 

 

1,199

Merger related costs

 

 

 

 

 

 

 

 

 

3

Restructuring charge

 

 

 

 

1

 

 

 

 

 

2

Non-rental depreciation and amortization

 

86

 

 

 

93

 

 

364

 

 

 

372

Operating income

 

1,024

 

 

 

745

 

 

3,232

 

 

 

2,277

Interest expense, net

 

132

 

 

 

93

 

 

445

 

 

 

424

Other (income) expense, net

 

(3

)

 

 

8

 

 

(15

)

 

 

7

Income before provision for income taxes

 

895

 

 

 

644

 

 

2,802

 

 

 

1,846

Provision for income taxes

 

256

 

 

 

163

 

 

697

 

 

 

460

Net income

$

639

 

 

$

481

 

$

2,105

 

 

$

1,386

Diluted earnings per share

$

9.15

 

 

$

6.61

 

$

29.65

 

 

$

19.04

 

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions)

 

 

December 31, 2022

 

December 31, 2021

ASSETS

 

 

 

Cash and cash equivalents

$

106

 

 

$

144

 

Accounts receivable, net

 

2,004

 

 

 

1,677

 

Inventory

 

232

 

 

 

164

 

Prepaid expenses and other assets

 

381

 

 

 

166

 

Total current assets

 

2,723

 

 

 

2,151

 

Rental equipment, net

 

13,277

 

 

 

10,560

 

Property and equipment, net

 

839

 

 

 

612

 

Goodwill

 

6,026

 

 

 

5,528

 

Other intangible assets, net

 

452

 

 

 

615

 

Operating lease right-of-use assets

 

819

 

 

 

784

 

Other long-term assets

 

47

 

 

 

42

 

Total assets

$

24,183

 

 

$

20,292

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Short-term debt and current maturities of long-term debt

$

161

 

 

$

906

 

Accounts payable

 

1,139

 

 

 

816

 

Accrued expenses and other liabilities

 

1,145

 

 

 

881

 

Total current liabilities

 

2,445

 

 

 

2,603

 

Long-term debt

 

11,209

 

 

 

8,779

 

Deferred taxes

 

2,671

 

 

 

2,154

 

Operating lease liabilities

 

642

 

 

 

621

 

Other long-term liabilities

 

154

 

 

 

144

 

Total liabilities

 

17,121

 

 

 

14,301

 

Common stock

 

1

 

 

 

1

 

Additional paid-in capital

 

2,626

 

 

 

2,567

 

Retained earnings

 

9,656

 

 

 

7,551

 

Treasury stock

 

(4,957

)

 

 

(3,957

)

Accumulated other comprehensive loss

 

(264

)

 

 

(171

)

Total stockholders’ equity

 

7,062

 

 

 

5,991

 

Total liabilities and stockholders’ equity

$

24,183

 

 

$

20,292

 

 

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

Net income

$

639

 

 

$

481

 

 

$

2,105

 

 

$

1,386

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

577

 

 

 

532

 

 

 

2,217

 

 

 

1,983

 

Amortization of deferred financing costs and original issue discounts

 

4

 

 

 

4

 

 

 

13

 

 

 

13

 

Gain on sales of rental equipment

 

(241

)

 

 

(160

)

 

 

(566

)

 

 

(431

)

Gain on sales of non-rental equipment

 

(3

)

 

 

(4

)

 

 

(9

)

 

 

(10

)

Insurance proceeds from damaged equipment

 

(7

)

 

 

(6

)

 

 

(32

)

 

 

(25

)

Stock compensation expense, net

 

32

 

 

 

30

 

 

 

127

 

 

 

119

 

Merger related costs

 

 

 

 

 

 

 

 

 

 

3

 

Restructuring charge

 

 

 

 

1

 

 

 

 

 

 

2

 

Loss on repurchase/redemption of debt securities

 

 

 

 

 

 

 

17

 

 

 

30

 

Increase in deferred taxes

 

407

 

 

 

111

 

 

 

537

 

 

 

268

 

Changes in operating assets and liabilities, net of amounts acquired:

 

 

 

 

 

 

 

Increase in accounts receivable

 

(68

)

 

 

(76

)

 

 

(329

)

 

 

(300

)

Decrease (increase) in inventory

 

8

 

 

 

1

 

 

 

(25

)

 

 

9

 

(Increase) decrease in prepaid expenses and other assets

 

(234

)

 

 

(58

)

 

 

(164

)

 

 

248

 

(Decrease) increase in accounts payable

 

(28

)

 

 

(241

)

 

 

304

 

 

 

307

 

Increase in accrued expenses and other liabilities

 

165

 

 

 

53

 

 

 

238

 

 

 

87

 

Net cash provided by operating activities

 

1,251

 

 

 

668

 

 

 

4,433

 

 

 

3,689

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

Purchases of rental equipment

 

(980

)

 

 

(690

)

 

 

(3,436

)

 

 

(2,998

)

Purchases of non-rental equipment and intangible assets

 

(72

)

 

 

(58

)

 

 

(254

)

 

 

(200

)

Proceeds from sales of rental equipment

 

409

 

 

 

324

 

 

 

965

 

 

 

968

 

Proceeds from sales of non-rental equipment

 

9

 

 

 

10

 

 

 

24

 

 

 

30

 

Insurance proceeds from damaged equipment

 

7

 

 

 

6

 

 

 

32

 

 

 

25

 

Purchases of other companies, net of cash acquired

 

(2,017

)

 

 

(1

)

 

 

(2,340

)

 

 

(1,436

)

Purchases of investments

 

(2

)

 

 

1

 

 

 

(7

)

 

 

 

Net cash used in investing activities

 

(2,646

)

 

 

(408

)

 

 

(5,016

)

 

 

(3,611

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

Proceeds from debt

 

4,666

 

 

 

1,334

 

 

 

9,885

 

 

 

8,364

 

Payments of debt

 

(3,215

)

 

 

(1,768

)

 

 

(8,241

)

 

 

(8,462

)

Payments of financing costs

 

(15

)

 

 

 

 

 

(24

)

 

 

(8

)

Common stock repurchased, including tax withholdings for share based compensation (1)

 

(10

)

 

 

(1

)

 

 

(1,068

)

 

 

(34

)

Net cash provided by (used in) financing activities

 

1,426

 

 

 

(435

)

 

 

552

 

 

 

(140

)

Effect of foreign exchange rates

 

(1

)

 

 

(1

)

 

 

(7

)

 

 

4

 

Net increase (decrease) in cash and cash equivalents

 

30

 

 

 

(176

)

 

 

(38

)

 

 

(58

)

Cash and cash equivalents at beginning of period

 

76

 

 

 

320

 

 

 

144

 

 

 

202

 

Cash and cash equivalents at end of period

$

106

 

 

$

144

 

 

$

106

 

 

$

144

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for income taxes, net

$

31

 

 

$

51

 

 

$

326

 

 

$

202

 

Cash paid for interest

 

67

 

 

 

29

 

 

 

406

 

 

 

391

 

(1)

 

See above for a discussion of our current share repurchase program. The common stock repurchases include i) shares repurchased pursuant to the share repurchase program that was completed in 2022 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 December 31, 2022

14.2%

 

(1.5)%

 

5.9%

 

0.2%

 

18.8%

Year Ended December 31, 2022

13.6%

 

(1.5)%

 

9.4%

 

1.8%

 

23.3%

Please refer to our Fourth Quarter 2022 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

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

Change

 

2022

 

2021

 

Change

General Rentals

 

 

 

 

 

 

 

 

 

 

 

Reportable segment equipment rentals revenue

$

2,023

 

 

$

1,699

 

 

19.1%

 

$

7,345

 

 

$

6,074

 

 

20.9%

Reportable segment equipment rentals gross profit

 

842

 

 

 

683

 

 

23.3%

 

 

2,905

 

 

 

2,269

 

 

28.0%

Reportable segment equipment rentals gross margin

 

41.6

%

 

 

40.2

%

 

140 bps

 

 

39.6

%

 

 

37.4

%

 

220 bps

Specialty

 

 

 

 

 

 

 

 

 

 

 

Reportable segment equipment rentals revenue

$

724

 

 

$

613

 

 

18.1%

 

$

2,771

 

 

$

2,133

 

 

29.9%

Reportable segment equipment rentals gross profit

 

357

 

 

 

277

 

 

28.9%

 

 

1,340

 

 

 

998

 

 

34.3%

Reportable segment equipment rentals gross margin

 

49.3

%

 

 

45.2

%

 

410 bps

 

 

48.4

%

 

 

46.8

%

 

160 bps

Total United Rentals

 

 

 

 

 

 

 

 

 

 

 

Total equipment rentals revenue

$

2,747

 

 

$

2,312

 

 

18.8%

 

$

10,116

 

 

$

8,207

 

 

23.3%

Total equipment rentals gross profit

 

1,199

 

 

 

960

 

 

24.9%

 

 

4,245

 

 

 

3,267

 

 

29.9%

Total equipment rentals gross margin

 

43.6

%

 

 

41.5

%

 

210 bps

 

 

42.0

%

 

 

39.8

%

 

220 bps

 

UNITED RENTALS, INC.

DILUTED EARNINGS PER SHARE CALCULATION

(In millions, except per share data)

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Numerator:

 

 

 

 

 

 

 

Net income available to common stockholders

$

639

 

$

481

 

$

2,105

 

$

1,386

Denominator:

 

 

 

 

 

 

 

Denominator for basic earnings per share—weighted-average common shares

 

69.4

 

 

72.5

 

 

70.7

 

 

72.4

Effect of dilutive securities:

 

 

 

 

 

 

 

Employee stock options

 

 

 

 

 

 

 

Restricted stock units

 

0.4

 

 

0.4

 

 

0.3

 

 

0.4

Denominator for diluted earnings per share—adjusted weighted-average common shares

 

69.8

 

 

72.9

 

 

71.0

 

 

72.8

Diluted earnings per share

$

9.15

 

$

6.61

 

$

29.65

 

$

19.04

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, asset impairment charge and loss on repurchase/redemption of debt securities. 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

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Earnings per share - GAAP, as reported

$

9.15

 

 

$

6.61

 

 

$

29.65

 

 

$

19.04

 

After-tax (1) impact of:

 

 

 

 

 

 

 

Merger related costs (2)

 

 

 

 

 

 

 

 

 

 

0.03

 

Merger related intangible asset amortization (3)

 

0.39

 

 

 

0.47

 

 

 

1.79

 

 

 

1.98

 

Impact on depreciation related to acquired fleet and property and equipment (4)

 

0.08

 

 

 

0.13

 

 

 

0.56

 

 

 

0.16

 

Impact of the fair value mark-up of acquired fleet (5)

 

0.12

 

 

 

0.10

 

 

 

0.29

 

 

 

0.38

 

Restructuring charge (6)

 

 

 

 

 

 

 

 

 

 

0.02

 

Asset impairment charge (7)

 

 

 

 

0.08

 

 

 

0.03

 

 

 

0.14

 

Loss on repurchase/redemption of debt securities (8)

 

 

 

 

 

 

 

0.18

 

 

 

0.31

 

Earnings per share - adjusted

$

9.74

 

 

$

7.39

 

 

$

32.50

 

 

$

22.06

 

Tax rate applied to above adjustments (1)

 

25.3

%

 

 

25.2

%

 

 

25.3

%

 

 

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 General Finance acquisition that was completed in May 2021. Merger related costs only include costs associated with major acquisitions completed since 2012 that significantly impact our operations (the "major acquisitions," each of which had annual revenues of over $200 million prior to acquisition).

(3)

 

Reflects the amortization of the intangible assets acquired in the major acquisitions.

(4)

 

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.

(5)

 

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.

(6)

 

Primarily reflects severance and branch closure charges associated with our closed 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 six restructuring programs. We have cumulatively incurred total restructuring charges of $352 million under our restructuring programs.

(7)

 

Reflects write-offs of leasehold improvements and other fixed assets.

(8)

 

Primarily reflects the difference between the net carrying amount and the total purchase price of the redeemed notes.

UNITED RENTALS, INC.
EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATIONS
($ in millions, except footnotes)

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 charges, 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

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Net income

$

639

 

 

$

481

 

 

$

2,105

 

 

$

1,386

 

Provision for income taxes

 

256

 

 

 

163

 

 

 

697

 

 

 

460

 

Interest expense, net

 

132

 

 

 

93

 

 

 

445

 

 

 

424

 

Depreciation of rental equipment

 

491

 

 

 

439

 

 

 

1,853

 

 

 

1,611

 

Non-rental depreciation and amortization

 

86

 

 

 

93

 

 

 

364

 

 

 

372

 

EBITDA

$

1,604

 

 

$

1,269

 

 

$

5,464

 

 

$

4,253

 

Merger related costs (1)

 

 

 

 

 

 

 

 

 

 

3

 

Restructuring charge (2)

 

 

 

 

1

 

 

 

 

 

 

2

 

Stock compensation expense, net (3)

 

32

 

 

 

30

 

 

 

127

 

 

 

119

 

Impact of the fair value mark-up of acquired fleet (4)

 

11

 

 

 

9

 

 

 

27

 

 

 

37

 

Adjusted EBITDA

$

1,647

 

 

$

1,309

 

 

$

5,618

 

 

$

4,414

 

Net income margin

 

19.4

%

 

 

17.3

%

 

 

18.1

%

 

 

14.3

%

Adjusted EBITDA margin

 

50.0

%

 

 

47.2

%

 

 

48.3

%

 

 

45.4

%

(1)

 

Reflects transaction costs associated with the General Finance acquisition that was completed in May 2021. Merger related costs only include costs associated with major acquisitions.

(2)

 

Primarily reflects severance and branch closure charges associated with our closed 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 six restructuring programs. We have cumulatively incurred total restructuring charges of $352 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 certain major acquisitions and subsequently sold.

UNITED RENTALS, INC.
EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATIONS (continued)
(In millions, except footnotes)

The table below provides a reconciliation between net cash provided by operating activities and EBITDA and adjusted EBITDA.

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Net cash provided by operating activities

$

1,251

 

 

$

668

 

 

$

4,433

 

 

$

3,689

 

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

)

 

 

(4

)

 

 

(13

)

 

 

(13

)

Gain on sales of rental equipment

 

241

 

 

 

160

 

 

 

566

 

 

 

431

 

Gain on sales of non-rental equipment

 

3

 

 

 

4

 

 

 

9

 

 

 

10

 

Insurance proceeds from damaged equipment

 

7

 

 

 

6

 

 

 

32

 

 

 

25

 

Merger related costs (1)

 

 

 

 

 

 

 

 

 

 

(3

)

Restructuring charge (2)

 

 

 

 

(1

)

 

 

 

 

 

(2

)

Stock compensation expense, net (3)

 

(32

)

 

 

(30

)

 

 

(127

)

 

 

(119

)

Loss on repurchase/redemption of debt securities (5)

 

 

 

 

 

 

 

(17

)

 

 

(30

)

Changes in assets and liabilities

 

40

 

 

 

386

 

 

 

(151

)

 

 

(328

)

Cash paid for interest

 

67

 

 

 

29

 

 

 

406

 

 

 

391

 

Cash paid for income taxes, net

 

31

 

 

 

51

 

 

 

326

 

 

 

202

 

EBITDA

$

1,604

 

 

$

1,269

 

 

$

5,464

 

 

$

4,253

 

Add back:

 

 

 

 

 

 

 

Merger related costs (1)

 

 

 

 

 

 

 

 

 

 

3

 

Restructuring charge (2)

 

 

 

 

1

 

 

 

 

 

 

2

 

Stock compensation expense, net (3)

 

32

 

 

 

30

 

 

 

127

 

 

 

119

 

Impact of the fair value mark-up of acquired fleet (4)

 

11

 

 

 

9

 

 

 

27

 

 

 

37

 

Adjusted EBITDA

$

1,647

 

 

$

1,309

 

 

$

5,618

 

 

$

4,414

 

(1)

 

Reflects transaction costs associated with the General Finance acquisition that was completed in May 2021. Merger related costs only include costs associated with major acquisitions.

(2)

 

Primarily reflects severance and branch closure charges associated with our closed 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 six restructuring programs. We have cumulatively incurred total restructuring charges of $352 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 certain major acquisitions and subsequently sold.

(5)

 

Primarily reflects the difference between the net carrying amount and the total purchase price of the redeemed notes.

UNITED RENTALS, INC.
FREE CASH FLOW GAAP RECONCILIATION
(In millions, except footnotes)

We define “free cash flow” as net cash provided by operating activities less purchases of, and plus proceeds from, equipment and intangible assets. The equipment and intangible asset 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

 

Year Ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

Net cash provided by operating activities

$

1,251

 

 

$

668

 

 

$

4,433

 

 

$

3,689

 

Purchases of rental equipment

 

(980

)

 

 

(690

)

 

 

(3,436

)

 

 

(2,998

)

Purchases of non-rental equipment and intangible assets

 

(72

)

 

 

(58

)

 

 

(254

)

 

 

(200

)

Proceeds from sales of rental equipment

 

409

 

 

 

324

 

 

 

965

 

 

 

968

 

Proceeds from sales of non-rental equipment

 

9

 

 

 

10

 

 

 

24

 

 

 

30

 

Insurance proceeds from damaged equipment

 

7

 

 

 

6

 

 

 

32

 

 

 

25

 

Free cash flow (1)

$

624

 

 

$

260

 

 

$

1,764

 

 

$

1,514

 

(1)  

Free cash flow included aggregate merger and restructuring related payments of $1 million and $2 million for the three months ended December 31, 2022 and 2021, respectively, and $4 million and $13 million for the years ended December 31, 2022 and 2021, respectively.

The table below provides a reconciliation between 2023 forecasted net cash provided by operating activities and free cash flow.

Net cash provided by operating activities

$4,400-$4,800

Purchases of rental equipment

$(3,300)-$(3,550)

Proceeds from sales of rental equipment

$1,200-$1,400

Purchases of non-rental equipment and intangible assets, net of proceeds from sales and insurance proceeds from damaged equipment

$(200)-$(300)

Free cash flow (excluding the impact of merger and restructuring related payments)

$2,100- $2,350

 

Contacts

Ted Grace
(203) 618-7122
Cell: (203) 399-8951
tgrace@ur.com

Contacts

Ted Grace
(203) 618-7122
Cell: (203) 399-8951
tgrace@ur.com