2016 Annual Report
LETTER TO OUR STOCKHOLDERS
In 2016, we delivered strong results in a fundamentally
positive operating environment.
It was a year that required careful calibration of the business.
The cycle continued to move in our favor, underpinned by
growth in commercial construction. This helped fuel our
initiatives for vertical penetration, specialty rental expansion,
and tactical investments in our fleet.
At the same time, we contended with four notable
headwinds: global economic uncertainty in the first quarter,
an ongoing drag from upstream oil and gas, a weak Canadian
economy, and industry over-fleeting. While these things
were outside our control, we mitigated the impact through
rigorous fleet management and capital discipline.
For the full year 2016, United Rentals delivered earnings
per diluted share of $6.45 on a GAAP basis, and $8.65 on an
adjusted basis1, compared with $6.07 and $8.02, respectively,
for the prior year.
The company reported $566 million of net income in 2016,
and $2.76 billion of adjusted EBITDA1 at a 47.9% margin.
Free cash flow1 was a record $1.18 billion after capex.
We’re pleased with this performance in light of widespread
industry over-fleeting, which kept rates under pressure. By
late 2016, there were signs that a growing marketplace was
absorbing some of the excess fleet.
Against this backdrop, our specialty rental operations
of Trench Safety, Power & HVAC, and Pump Solutions
continued to outpace the company as a whole. Together,
they drove combined rental revenue growth of 9.5%
year-over-year, including 7% organic growth. We plan to
supplement the 14 specialty branches we opened in 2016
with another 17 cold-starts this year.
We see a large upside to our strategy for specialty expansion.
Standalone demand for these services is growing, and we can
serve all customers better as a single source by cross-selling
our specialty fleet. In 2016, we generated 13% more revenue
from cross-selling specialty solutions to National Accounts
versus the prior year. Our long-term goal remains to grow
the specialty segment to $2 billion in revenue.
Our digital platform is fast becoming another exciting area
of operations. In 2016, we launched robust e-commerce
capabilities that deepen customer connectivity and engage
new markets. The new technology interfaces with our rental
enterprise system to give customers 24-hour access to the
industry’s largest equipment rental fleet. While this channel
is still young, we’ve seen promising volumes from existing
accounts and first-time customers.
We completed the year with a strong showing in one of our
most important metrics: safety. Our total recordable incident
rate was below 1.0 for 2016, far better than the industry
average. We intend to build on our safety performance
throughout 2017 toward our goal of a zero rate.
Outlook
Our view of the cycle going forward is an important
narrative for investors. We believe that demand in our end
markets will continue to trend up in 2017. If government
spending stimulates construction, it will be incremental to an
environment that we already see as positive for our business.
Our confidence in the cycle continues to be reflected in
favorable U.S. indicators, construction backlogs, customer
sentiment and confidence surveys of chief executives—
the decision makers who create jobs for our customers.
Furthermore, we’re cautiously optimistic that the Canadian
economy has turned a corner.
On January 25, 2017, we announced our definitive agreement
to acquire NES Rentals, one of the largest U.S. equipment
rental companies. This investment is in lockstep with our
capital allocation strategy, our core business, our culture, and
our people. The transaction should be accretive to earnings,
revenue, EBITDA and free cash flow this year.
In addition, we’re funding Project XL, a series of initiatives
designed to enhance the long-term earning power of
the business through investments in customer service,
sales pipeline development, operational excellence, and
technology. We’ll also continue to develop our digital
strategy as a competitive moat.
For 2017, we’re guiding to a range of $5.75 billion to $5.95
billion of total revenue, and $2.70 billion to $2.85 billion of
adjusted EBITDA. We expect free cash flow to be between
$650 million and $750 million, after gross rental capex of
$1.4 billion to $1.5 billion. We plan to update this outlook
when the NES transaction is complete to reflect the
combined operations.
2017 is a landmark year for United Rentals—the culmination
of our first 20 years in business. We have our employees to
thank for the tremendous success of our journey to date.
Their willingness to achieve the impossible for our customers
has been the single biggest tailwind behind our growth.
Now our entire organization is poised to permanently
enhance our industry position and future profitability. We’re
operating with agility, an intense focus on returns, and the
experience to act not just as stewards of United Rentals, but
as catalysts for another 20 years of growth.
March 21, 2017
Michael J. Kneeland
Chief Executive Officer Chairman of the Board
Jenne K. Britell
1 Adjusted EPS, adjusted EBITDA and free cash flow are non-GAAP measure. Please see the reconciliation of these measures to
the comparable GAAP measures contained in the “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section in the accompanying Annual Report on Form 10-K for the year ended December 31, 2016, and in our fiscal
2016 earnings press release furnished on Form 8-K with the Securities and Exchange Commission on January 25, 2017.
T O TA L R E T U R N T O S T O C K H O L D E R S
The following tables and graph compare the cumulative total return of United Rentals common stock with the cumulative total
returns of the Standard & Poor’s 500 Index (“S&P 500 Index”) and an industry peer group index comprised of publicly traded
companies participating in the construction and distribution industries (“Peer Group Index”). The tables and graph assume that
$100 was invested on December 31, 2011 in shares of our common stock, shares of stock comprising the S&P 500 Index, shares
comprising the Peer Group Index, and the reinvestment of any dividends. The returns of each company within each of the S&P
500 Index and the Peer Group Index have been weighted annually for their respective stock market capitalization.
TOTAL CUMULATIVE RETURN
AA
(Includes reinvestment of dividends)
ANNUAL RETURN PERCENTAGE Years Ending
Company Name / Index
United Rentals, Inc.
S&P 500 Index
Peer Group Index
Company Name / Index
United Rentals, Inc.
S&P 500 Index
Peer Group Index
Peer Group Index
Dec12
Dec13
Dec14
54.04
16.00
12.97
Dec12
154.04
116.00
112.97
Base Period
Dec11
100
100
100
71.24
32.39
38.89
30.87
13.69
12.62
Dec15
-28.89
1.38
-10.77
INDEXED RETURNS Years Ending
Dec13
263.79
153.57
156.91
Dec14
345.21
174.60
176.72
Dec15
245.48
177.01
157.68
Dec16
45.55
11.96
23.30
Dec16
357.29
198.18
194.42
Avis Budget Group, Inc.
Cintas Corporation
HD Supply Holdings, Inc. – included from 6/27/13 when it began trading
Hertz Global Holdings, Inc.
J.B. Hunt Transport Services, Inc.
MSC Industrial Direct Co., Inc.
Pitney Bowes, Inc.
Republic Services, Inc.
Ryder System, Inc.
Trinity Industries, Inc.
Waste Management, Inc.
WESCO International, Inc.
W.W. Grainger, Inc.
$500
$400
$300
$200
$100
$0
12/31/11
United Rentals, Inc.
,
S&P 500 Index
5
Peer Group Index
p
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
The comparisons in the graph and tables above are not intended to forecast or be indicative of future performance of our common stock, either of the indices
or any of the companies comprising them. Data source: Standard & Poor’s Compustat.
[THIS PAGE INTENTIONALLY LEFT BLANK]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
Commission File Number 1-14387
United Rentals, Inc.
Commission File Number 1-13663
United Rentals (North America), Inc.
(Exact Names of Registrants as Specified in Their Charters)
Delaware
Delaware
(States of Incorporation)
100 First Stamford Place, Suite 700,
Stamford, Connecticut
(Address of Principal Executive Offices)
06-1522496
86-0933835
(I.R.S. Employer Identification Nos.)
06902
(Zip Code)
Registrants’ Telephone Number, Including Area Code: (203) 622-3131
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.01 par value, of United Rentals, Inc.
Name of Each Exchange on
Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes Í No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes Í No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. Í
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer Í
Accelerated Filer ‘
Non-Accelerated Filer ‘ Smaller Reporting Company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No Í
As of June 30, 2016 there were 86,725,103 shares of United Rentals, Inc. common stock outstanding. The aggregate market value of
common stock held by non-affiliates (defined as other than directors, executive officers and 10 percent beneficial owners) at June 30, 2016 was
approximately $5.18 billion, calculated by using the closing price of the common stock on such date on the New York Stock Exchange of $67.10.
As of January 23, 2017, there were 84,310,531 shares of United Rentals, Inc. common stock outstanding. There is no market for the common
stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc.
This Form 10-K is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a wholly owned
subsidiary of United Rentals, Inc.). United Rentals (North America), Inc. meets the conditions set forth in General Instruction (I)(1)(a) and (b) of
Form 10-K and is therefore filing this form with the reduced disclosure format permitted by such instruction.
Documents incorporated by reference: Portions of United Rentals, Inc.’s Proxy Statement related to the 2017 Annual Meeting of
Stockholders, which is expected to be filed with the Securities and Exchange Commission on or before March 21, 2017, are incorporated by
reference into Part III of this annual report.
FORM 10-K REPORT INDEX
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Removed and Reserved)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10-K Part
and Item No.
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
PART II
Item 5
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6
Item 7
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Page No.
3
10
22
23
24
24
24
26
27
47
49
97
97
99
100
100
100
100
100
Item 15
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements within the meaning of the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements can 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 strategy or outlook. You are cautioned that our business and operations are subject to a variety of
risks and uncertainties, many of which are beyond our control, and, consequently, our 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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the possibility that companies that we have acquired or may acquire, in our specialty business or
otherwise, could have undiscovered liabilities or involve other unexpected costs, may strain our
management capabilities or may be difficult to integrate;
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;
our significant indebtedness (which totaled $7.8 billion at December 31, 2016) 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;
inability to refinance our indebtedness on terms that are favorable to us, or at all;
incurrence of additional debt, which could exacerbate the risks associated with our current level of
indebtedness;
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;
restrictive covenants and amount of borrowings permitted in our debt instruments, which can limit our
financial and operational flexibility;
overcapacity of fleet in the equipment rental industry;
inability to benefit from government spending,
projects;
including spending associated with infrastructure
fluctuations in the price of our common stock and inability to complete stock repurchases in the time
frame and/or on the terms anticipated;
rates we charge and time utilization we achieve being less than anticipated;
inability to manage credit risk adequately or to collect on contracts with a large number of customers;
inability to access the capital that our businesses or growth plans may require;
incurrence of impairment charges;
trends in oil and natural gas could adversely affect the demand for our services and products;
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;
increases in our loss reserves to address business operations or other claims and any claims that exceed
our established levels of reserves;
incurrence of additional expenses (including indemnification obligations) and other costs in connection
with litigation, regulatory and investigatory matters;
1
•
•
•
•
•
•
•
•
•
•
•
•
•
the outcome or other potential consequences of regulatory matters and commercial litigation;
shortfalls in our insurance coverage;
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;
turnover in our management team and inability to attract and retain key personnel;
costs we incur being more than anticipated, and the inability to realize expected savings in the amounts
or time frames planned;
dependence on key suppliers to obtain equipment and other supplies for our business on acceptable
terms;
inability to sell our new or used fleet in the amounts, or at the prices, we expect;
competition from existing and new competitors;
risks related to security breaches, cybersecurity attacks and other significant disruptions in our
information technology systems;
the costs of complying with environmental, safety and foreign law and regulations, as well as other risks
associated with non-U.S. operations, including currency exchange risk;
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;
increases in our maintenance and replacement costs and/or decreases in the residual value of our
equipment; and
other factors discussed under Item 1A-Risk Factors, and elsewhere in this annual report.
We make no commitment to revise or update any forward-looking statements in order to reflect events or
circumstances after the date any such statement is made.
PART I
United Rentals, Inc., incorporated in Delaware in 1997, is principally a holding company. We primarily
conduct our operations through our wholly owned subsidiary, United Rentals (North America), Inc., and its
subsidiaries. As used in this report, the term “Holdings” refers to United Rentals, Inc., the term “URNA” refers to
United Rentals (North America), Inc., and the terms the “Company,” “United Rentals,” “we,” “us,” and “our”
refer to United Rentals, Inc. and its subsidiaries, in each case unless otherwise indicated.
Unless otherwise indicated, the information under Items 1, 1A and 2 is as of January 1, 2017.
2
Item 1.
Business
United Rentals is the largest equipment rental company in the world, and operates throughout the United States
and Canada. The table below presents key information about our business as of and for the years ended December 31,
2016 and 2015. Our business is discussed in more detail below. The data below should be read in conjunction with, and
is qualified by reference to, our Management’s Discussion and Analysis and our consolidated financial statements and
notes thereto contained elsewhere in this report.
December 31,
2016
2015
PERFORMANCE MEASURES
Total revenues (in millions)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rental revenue percent of total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year-over-year (decrease) increase in rental rates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year-over-year increase in the volume of equipment on rent . . . . . . . . . . . . . . . . . . . .
Time utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key account percent of equipment rental revenue (1)
. . . . . . . . . . . . . . . . . . . . . . . . .
National account percent of equipment rental revenue . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,762
$
5,817
86%
(2.2)%
3.1%
67.9%
70%
45%
85%
0.5%
3.2%
67.3%
64%
44%
FLEET
Fleet original equipment cost (“OEC”) (in billions) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fleet age in months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of fleet that is current on manufacturer’s recommended maintenance . . . . . .
Equipment rental revenue percent by fleet type:
General construction and industrial equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aerial work platforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General tools and light equipment
Power and HVAC (heating, ventilating and air conditioning) equipment
. . . . . .
Trench safety equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pumps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8.99
3,200
440,000
45.2
$
8.73
3,300
430,000
43.1
90%
43%
32%
8%
7%
6%
4%
92%
43%
32%
10%
6%
5%
4%
LOCATIONS/PERSONNEL
Rental locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approximate number of branches per district . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approximate number of districts per region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
887
5-10
7-9
12,500
897
5-10
6-9
12,700
INDUSTRY
Estimated market share (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated North American equipment rental industry revenue growth . . . . . . . . . . . .
United Rentals equipment rental revenue (decrease) increase . . . . . . . . . . . . . . . . . . .
2017 projected North American industry equipment rental revenue growth . . . . . . . .
CUSTOMERS/SUPPLIERS
Largest customer percent of total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Top 10 customers percent of total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Largest supplier percent of capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Top 10 supplier percent of capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.7%
4%
(0.2)%
3.5%
1%
6%
22%
62%
10.1%
6%
2.7%
—
1%
6%
21%
66%
(1) The key account percent of equipment rental revenue reflects the customers designated as key accounts as of
December 31, 2016 or 2015. The increase in the key account percent of equipment rental revenue in 2016
primarily reflects additional customers that were designated as key accounts in 2016. If the list of customers
designated as key accounts as of December 31, 2016 was applied to 2015, the key account percent of equipment
rental revenue for 2015 would have been 69 percent.
3
(2) Market share is calculated based on total equipment rental industry revenues as measured by the American
Rental Association (“ARA”). In 2015, we reported an estimated market share of 11.7 percent. ARA
subsequently increased the total amount of estimated equipment rental industry revenues based on new data
from the economic census. The estimated 2015 market share reported above reflects this increase in the total
estimated equipment rental industry revenues.
Strategy
For the past several years, we have executed a strategy focused on improving the profitability of our core
equipment rental business through revenue growth, margin expansion and operational efficiencies. In particular,
we have focused on customer segmentation, customer service differentiation,
fleet
management and operational efficiency.
rate management,
In 2017, we expect to continue our disciplined focus on increasing our profitability and return on invested
capital. In particular, our strategy calls for:
•
•
•
•
•
A consistently superior standard of service to customers, often provided through a single point of
contact;
The further optimization of our customer mix and fleet mix, with a dual objective: to enhance our
performance in serving our current customer base, and to focus on the accounts and customer types that
are best suited to our strategy for profitable growth. We believe these efforts will lead to even better
service of our target accounts, primarily large construction and industrial customers, as well as select
local contractors. Our fleet team’s analyses are aligned with these objectives to identify trends in
equipment categories and define action plans that can generate improved returns;
techniques,
including kaizen processes focused on
A continued focus on “Lean” management
continuous improvement. As of December 31, 2016, we have trained over 3,100 employees, over
70 percent of our district managers and over 60 percent of our branch managers on the Lean kaizen
process. We continue to implement this program across our branch network, with the objectives of:
reducing the cycle time associated with renting our equipment to customers; improving invoice accuracy
and service quality; reducing the elapsed time for equipment pickup and delivery; and improving the
effectiveness and efficiency of our repair and maintenance operations. As discussed in note 4 to our
consolidated financial statements, in the fourth quarter of 2015, we initiated a restructuring program
focused on cost savings throughout the organization partially due to the Lean initiatives not fully
generating the anticipated cost savings due to lower than expected rental volume in 2015. We closed this
restructuring program in the fourth quarter of 2016. We achieved the anticipated run rate savings from
the Lean initiatives in 2016 and expect to continue to generate savings from these initiatives;
The implementation of Project XL, which is a set of eight specific work streams focused on driving
profitable growth through revenue opportunities and generating incremental profitability through cost
savings across our business; and
The continued expansion of our trench, power and pump footprint, as well as our tools offering, and the
cross-selling of these services throughout our network. We plan to open at least 17 specialty rental
branches/tool hubs in 2017 and continue to invest in specialty rental fleet to further position United
Rentals as a single source provider of total jobsite solutions through our extensive product and service
resources and technology offerings.
4
Industry Overview and Economic Outlook
United Rentals serves the following three principal end markets for equipment rental in North America:
industrial and other non-construction; commercial (or private non-residential) construction; and residential
construction, which includes remodeling. In 2016, based on an analysis of our charge account customers’
Standard Industrial Classification (“SIC”) codes:
•
Industrial and other non-construction rentals represented approximately 51 percent of our rental
revenue, primarily reflecting rentals to manufacturers, energy companies, chemical companies, paper
mills, railroads, shipbuilders, utilities, retailers and infrastructure entities;
• Commercial construction rentals represented approximately 45 percent of our rental revenue, primarily
reflecting rentals related to the construction and remodeling of facilities for office space, lodging,
healthcare, entertainment and other commercial purposes; and
• Residential rentals represented approximately four percent of our rental revenue, primarily reflecting
rentals of equipment for the construction and renovation of homes.
We estimate that, in 2016, North American equipment rental industry revenue grew approximately 4 percent
year-over-year, with substantially all of the growth in the U.S. In 2016, our full year rental revenue decreased by
approximately 0.2 percent year-over-year. Excluding the adverse impact from currency, rental revenue would
have increased 0.2 percent year-over-year.
In 2017, based on our analyses of industry forecasts and macroeconomic indicators, we expect that the
majority of our end markets will continue to experience solid demand for equipment rental services. Specifically,
we expect that North American industry equipment rental revenue will increase approximately 4 percent, with
similar growth, on a constant currency basis, expected in both the U.S. and Canada.
Competitive Advantages
We believe that we benefit from the following competitive advantages:
Large and Diverse Rental Fleet. Our large and diverse fleet allows us to serve large customers that require
substantial quantities and/or wide varieties of equipment. We believe our ability to serve such customers should
allow us to improve our performance and enhance our market leadership position.
We manage our rental fleet, which is the largest and most comprehensive in the industry, utilizing a
life-cycle approach that focuses on satisfying customer demand and optimizing utilization levels. As part of this
life-cycle approach, we closely monitor repair and maintenance expense and can anticipate, based on our
extensive experience with a large and diverse fleet, the optimum time to dispose of an asset.
Significant Purchasing Power. We purchase large amounts of equipment, contractor supplies and other
items, which enables us to negotiate favorable pricing, warranty and other terms with our vendors.
National Account Program. Our national account sales force is dedicated to establishing and expanding
relationships with large companies, particularly those with a national or multi-regional presence. National
accounts are generally defined as customers with potential annual equipment rental spend of at least $500,000 or
customers doing business in multiple states. We offer our national account customers the benefits of a consistent
level of service across North America, a wide selection of equipment and a single point of contact for all their
equipment needs. National accounts are a subset of key accounts, which are our accounts that are managed by a
single point of contact. Establishing a single point of contact for our key accounts helps us provide customer
service management that is more consistent and satisfactory.
Operating Efficiencies. We benefit from the following operating efficiencies:
•
Equipment Sharing Among Branches. Each branch within a region can access equipment located
elsewhere in the region. This fleet sharing increases equipment utilization because equipment that is idle
at one branch can be marketed and rented through other branches. Additionally, fleet sharing allows us
to be more disciplined with our capital spend.
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• Customer Care Center. We have a Customer Care Center (“CCC”) with locations in Tampa, Florida and
Charlotte, North Carolina that handles all telephone calls to our customer service telephone line,
1-800-UR-RENTS. The CCC handles many of the 1-800-UR-RENTS telephone calls without having to
route them to individual branches, and allows us to provide a more uniform quality experience to
customers, manage fleet sharing more effectively and free up branch employee time.
• Consolidation of Common Functions. We reduce costs through the consolidation of functions that are
common to our branches, such as accounts payable, payroll, benefits and risk management, information
technology and credit and collection.
Information Technology Systems. We have a wide variety of information technology systems, some
proprietary and some licensed, that supports our operations. Our information technology infrastructure facilitates
our ability to make rapid and informed decisions, respond quickly to changing market conditions and share rental
equipment among branches. We have an in-house team of information technology specialists that supports our
systems.
Our information technology systems are accessible to management, branch and call center personnel.
Leveraging information technology to achieve greater efficiencies and improve customer service is a critical
element of our strategy. Each branch is equipped with one or more workstations that are electronically linked to
our other locations and to our data center. Rental transactions can be entered at these workstations and processed
on a real-time basis.
Our information technology systems:
•
•
•
enable branch personnel to (i) determine equipment availability, (ii) access all equipment within a
geographic region and arrange for equipment to be delivered from anywhere in the region directly to the
customer, (iii) monitor business activity on a real-time basis and (iv) obtain customized reports on a
including equipment utilization, rental rate trends,
wide range of operating and financial data,
maintenance histories and customer transaction histories;
permit customers to access their accounts online; and
allow management to obtain a wide range of operational and financial data.
We have a fully functional back-up facility designed to enable business continuity for our core rental and
financial systems in the event that our main computer facility becomes inoperative. This back-up facility also
allows us to perform system upgrades and maintenance without interfering with the normal ongoing operation of
our information technology systems.
Strong Brand Recognition. As the largest equipment rental company in the world, we have strong brand
recognition, which helps us attract new customers and build customer loyalty.
Geographic and Customer Diversity. We have 887 rental locations in 49 U.S. states and every Canadian
province and serve customers that range from Fortune 500 companies to small businesses and homeowners. We
believe that our geographic and customer diversity provides us with many advantages including:
•
•
•
enabling us to better serve National Account customers with multiple locations;
helping us achieve favorable resale prices by allowing us to access used equipment resale markets
across North America; and
reducing our dependence on any particular customer.
Our operations in Canada are subject to the risks normally associated with international operations. These
include (i) the need to convert currencies, which could result in a gain or loss depending on fluctuations in
exchange rates and (ii) the need to comply with foreign laws and regulations, as well as U.S. laws and regulations
information regarding our
applicable to our operations in foreign jurisdictions. For additional financial
geographic diversity, see note 3 to our consolidated financial statements.
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Strong and Motivated Branch Management. Each of our full-service branches has a manager who is
supervised by a district manager. We believe that our managers are among the most knowledgeable and
experienced in the industry, and we empower them, within budgetary guidelines, to make day-to-day decisions
concerning branch matters. Each regional office has a management team that monitors branch, district and
regional performance with extensive systems and controls, including performance benchmarks and detailed
monthly operating reviews.
Employee Training Programs. We are dedicated to providing training and development opportunities to our
employees. In 2016, our employees enhanced their skills through approximately 500,000 hours of training,
including safety training, sales and leadership training, equipment-related training from our suppliers and online
courses covering a variety of relevant subjects.
Risk Management and Safety Programs. Our risk management department is staffed by experienced
professionals directing the procurement of insurance, managing claims made against
the Company, and
developing loss prevention programs to address workplace safety, driver safety and customer safety. The
department’s primary focus is on the protection of our employees and assets, as well as protecting the Company
from liability for accidental loss.
Segment Information
We have two reportable segments– i) general rentals and ii) trench, power and pump. Segment financial
information is presented in note 3 to our consolidated financial statements.
The general rentals segment includes the rental of construction, aerial and industrial equipment, general
tools and light equipment, and related services and activities. The general rentals segment’s customers include
construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The general
rentals segment comprises nine geographic regions—Industrial (which serves the geographic Gulf region and has
a strong industrial presence), Mid-Atlantic, Midwest, Northeast, Pacific West, South-Central, South, Southeast
and Western Canada–and operates throughout the United States and Canada. We periodically review the size and
geographic scope of our regions, and have occasionally reorganized the regions to create a more balanced and
effective structure.
The trench, power and pump segment includes the rental of specialty construction products and related
services. The trench, power and pump segment is comprised of (i) the Trench Safety region, which rents trench
safety equipment such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates,
construction lasers and line testing equipment for underground work, (ii) the Power and HVAC region, which
rents power and HVAC equipment such as portable diesel generators, electrical distribution equipment, and
temperature control equipment including heating and cooling equipment, and (iii) the Pump Solutions region,
which rents pumps primarily used by energy and petrochemical customers. The trench, power and pump
segment’s customers include construction companies involved in infrastructure projects, municipalities and
industrial companies. This segment operates throughout the United States and in Canada.
Products and Services
Our principal products and services are described below.
Equipment Rental. We offer for rent approximately 3,200 classes of rental equipment on an hourly, daily,
weekly or monthly basis. The types of equipment that we offer include general construction and industrial
equipment; aerial work platforms; trench safety equipment; power and HVAC equipment; pumps; and general
tools and light equipment.
Sales of Rental Equipment. We routinely sell used rental equipment and invest in new equipment in order
to manage repairs and maintenance costs, as well as the composition and size of our fleet. We also sell used
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equipment in response to customer demand for the equipment. Consistent with the life-cycle approach we use to
manage our fleet, the rate at which we replace used equipment with new equipment depends on a number of
factors, including changing general economic conditions, growth opportunities, the market for used equipment,
the age of our fleet and the need to adjust fleet composition to meet customer demand.
We utilize many channels to sell used equipment: through our national and export sales forces, which can
access many resale markets across our network; at auction; through brokers; and directly to manufacturers. We
also sell used equipment through our website, which includes an online database of used equipment available for
sale.
Sales of New Equipment. We sell equipment such as aerial lifts, reach forklifts, telehandlers, compressors
and generators from many leading equipment manufacturers. The type of new equipment that we sell varies by
location.
Contractor Supplies Sales. We sell a variety of contractor supplies including construction consumables,
tools, small equipment and safety supplies.
Service and Other Revenues. We offer repair and maintenance services and sell parts for equipment that is
owned by our customers.
Customers
Our customer base is highly diversified and ranges from Fortune 500 companies to small businesses and
homeowners. Our customer base varies by branch and is determined by several factors, including the equipment
mix and marketing focus of the particular branch as well as the business composition of the local economy,
including construction opportunities with different customers. Our customers include:
•
•
construction companies that use equipment for constructing and renovating commercial buildings,
warehouses, industrial and manufacturing plants, office parks, airports, residential developments and
other facilities;
industrial companies—such as manufacturers, chemical companies, paper mills, railroads, ship builders
and utilities —that use equipment for plant maintenance, upgrades, expansion and construction;
• municipalities that require equipment for a variety of purposes; and
•
homeowners and other individuals that use equipment for projects that range from simple repairs to
major renovations.
Our business is seasonal, with demand for our rental equipment tending to be lower in the winter months.
Sales and Marketing
We market our products and services through multiple channels as described below.
Sales Force. Our sales representatives work in our branches and at our customer care center, and are
responsible for calling on existing and potential customers as well as assisting our customers in planning for their
equipment needs. We have ongoing programs for training our employees in sales and service skills and on
strategies for maximizing the value of each transaction.
National Account Program. Our National Account sales force is dedicated to establishing and expanding
relationships with large customers, particularly those with a national or multi-regional presence. Our National
Account team closely coordinates its efforts with the local sales force in each area.
E-Rentals. Our customers can check equipment availability and pricing, and reserve equipment online, 24
hours a day, seven days a week, by accessing our equipment catalog and used equipment listing, which can be
found at www.unitedrentals.com. Our customers can also use our UR Control® application to actively manage
their rental process and access real-time reports on their business activity with us.
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Total Control®. We utilize a proprietary software application, Total Control®, which provides our key
customers with a single in-house software application that enables them to monitor and manage all their
equipment needs. This software can be integrated into the customers’ enterprise resource planning system. Total
Control® is a unique customer offering that enables us to develop strong, long-term relationships with our larger
customers.
Advertising. We promote our business through local and national advertising in various media, including
television, trade publications, yellow pages, the Internet, radio and direct mail. We also regularly participate in
industry trade shows and conferences and sponsor a variety of local and national promotional events.
Suppliers
Our strategic approach with respect to our suppliers is to maintain the minimum number of suppliers per
category of equipment that can satisfy our anticipated volume and business requirements. This approach is
designed to ensure that the terms we negotiate are competitive and that there is sufficient product available to
meet anticipated customer demand. We utilize a comprehensive selection process to determine our equipment
vendors. We consider product capabilities and industry position, the terms being offered, product liability history,
customer acceptance and financial strength. We believe we have sufficient alternative sources of supply available
for each of our major equipment categories.
Competition
The North American equipment rental industry is highly fragmented and competitive. As the largest
equipment rental company in the industry, we estimate that we have an approximate 9.7 percent market share
based on 2016 total equipment rental industry revenues as measured by the ARA. Our estimated market share is
based on our total 2016 rental revenue calculated using ARA’s constant currency methodology divided by
ARA’s forecasted 2016 industry revenue. Our competitors primarily include small, independent businesses with
one or two rental locations; regional competitors that operate in one or more states; public companies or divisions
of public companies that operate nationally or internationally; and equipment vendors and dealers who both sell
and rent equipment directly to customers. We believe we are well positioned to take advantage of this
environment because, as a larger company, we have more resources and certain competitive advantages over our
smaller competitors. These advantages include greater purchasing power, the ability to provide customers with a
broader range of equipment and services, and greater flexibility to transfer equipment among locations in
response to, and in anticipation of, customer demand. The fragmented nature of the industry and our relatively
small market share, however, may adversely impact our ability to mitigate rental rate pressure.
Environmental and Safety Regulations
Our operations are subject to numerous laws governing environmental protection and occupational health
and safety matters. These laws regulate issues such as wastewater, stormwater, solid and hazardous wastes and
materials, and air quality. Our operations generally do not raise significant environmental risks, but we use and
store hazardous materials as part of maintaining our rental equipment fleet and the overall operations of our
business, dispose of solid and hazardous waste and wastewater from equipment washing, and store and dispense
petroleum products from above-ground storage tanks located at certain of our locations. Under environmental
and safety laws, we may be liable for, among other things, (i) the costs of investigating and remediating
contamination at our sites as well as sites to which we send hazardous wastes for disposal or treatment,
regardless of fault, and (ii) fines and penalties for non-compliance. We incur ongoing expenses associated with
the performance of appropriate investigation and remediation activities at certain of our locations.
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Employees
Approximately 3,900 of our employees are salaried and approximately 8,600 are hourly. Collective
bargaining agreements relating to approximately 80 separate locations cover approximately 850 of our
employees. We monitor employee satisfaction through ongoing surveys and consider our relationship with our
employees to be good.
Available Information
We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to these reports, as well as our other SEC filings, available on our website, free of charge, as
soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website
address is www.unitedrentals.com. The information contained on our website is not incorporated by reference in
this document.
Item 1A. Risk Factors
Our business, results of operations and financial condition are subject to numerous risks and uncertainties.
In connection with any investment decision with respect to our securities, you should carefully consider the
following risk factors, as well as the other information contained in this report and our other filings with the SEC.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also
impair our business operations. Should any of these risks materialize, our business, results of operations,
financial condition and future prospects could be negatively impacted, which in turn could affect the trading
value of our securities.
Our business is cyclical in nature. An economic slowdown or a decrease in general economic activity could
cause weakness in our end markets and have adverse effects on our revenues and operating results.
Our general rental equipment and trench, power and pump equipment are used in connection with private
non-residential construction and industrial activities, which are cyclical in nature. Our industry experienced a
decline in construction and industrial activity as a result of the economic downturn that commenced in the latter
part of 2008 and continued through 2010. The weakness in our end markets led to a decrease in the demand for
our equipment and in the rates we realized. Such decreases adversely affected our operating results by causing
our revenues to decline and, because certain of our costs are fixed, our operating margins to be reduced. A
slowdown in the economic recovery or worsening of economic conditions, in particular with respect to North
American construction and industrial activities, could cause weakness in our end markets and adversely affect
our revenues and operating results.
The following factors, among others, may cause weakness in our end markets, either temporarily or
long-term:
•
•
•
•
•
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a decrease in expected levels of infrastructure spending;
a lack of availability of credit;
an overcapacity of fleet in the equipment rental industry;
a decrease in the level of exploration, development, production activity and capital spending by oil and
natural gas companies;
an increase in the cost of construction materials;
an increase in interest rates;
adverse weather conditions, which may temporarily affect a particular region; or
terrorism or hostilities involving the United States or Canada.
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Our significant indebtedness exposes us to various risks.
At December 31, 2016, our total
indebtedness could
adversely affect our business, results of operations and financial condition in a number of ways by, among other
things:
indebtedness was $7.8 billion. Our substantial
•
increasing our vulnerability to, and limiting our flexibility to plan for, or react to, adverse economic,
industry or competitive developments;
• making it more difficult to pay or refinance our debts as they become due during periods of adverse
economic, financial market or industry conditions;
•
•
•
•
•
•
•
•
•
requiring us to devote a substantial portion of our cash flow to debt service, reducing the funds available
for other purposes, including funding working capital, capital expenditures, acquisitions, execution of
our growth strategy and other general corporate purposes, or otherwise constraining our financial
flexibility;
restricting our ability to move operating cash flows to Holdings. URNA’s payment capacity is restricted
under the covenants in the indentures governing its outstanding indebtedness;
affecting our ability to obtain additional financing for working capital, acquisitions or other purposes,
particularly since substantially all of our tangible assets are subject to security interests relating to
existing indebtedness;
decreasing our profitability or cash flow;
causing us to be less able to take advantage of significant business opportunities, such as acquisition
opportunities, and to react to changes in market or industry conditions;
causing us to be disadvantaged compared to competitors with less debt and lower debt service
requirements;
resulting in a downgrade in our credit rating or the credit ratings of any of the indebtedness of our
subsidiaries, which could increase the cost of further borrowings;
requiring our debt to become due and payable upon a change in control; and
limiting our ability to borrow additional monies in the future to fund working capital, capital
expenditures and other general corporate purposes.
A portion of our indebtedness bears interest at variable rates that are linked to changing market interest
rates. As a result, an increase in market interest rates would increase our interest expense and our debt service
obligations. At December 31, 2016, we had $2.2 billion of indebtedness that bears interest at variable rates. Our
variable rate indebtedness currently represents 28 percent of our total indebtedness. See Item 7A—Quantitative
and Qualitative Disclosures About Market Risk for additional information related to interest rate risk.
To service our indebtedness, we will require a significant amount of cash and our ability to generate cash
depends on many factors beyond our control.
We depend on cash on hand and cash flows from operations to make scheduled debt payments. To a
significant extent, our ability to do so is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control. We may not be able to generate sufficient cash flow
from operations to repay our indebtedness when it becomes due and to meet our other cash needs. If we are
unable to service our indebtedness and fund our operations, we will have to adopt an alternative strategy that may
include:
•
•
•
reducing or delaying capital expenditures;
limiting our growth;
seeking additional capital;
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•
•
selling assets; or
restructuring or refinancing our indebtedness.
Even if we adopt an alternative strategy, the strategy may not be successful and we may continue to be
unable to service our indebtedness and fund our operations.
We may not be able to refinance our indebtedness on favorable terms, if at all. Our inability to refinance
our indebtedness could materially and adversely affect our liquidity and our ongoing results of operations.
Our ability to refinance indebtedness will depend in part on our operating and financial performance, which,
in turn, is subject to prevailing economic conditions and to financial, business, legislative, regulatory and other
factors beyond our control. In addition, prevailing interest rates or other factors at the time of refinancing could
increase our interest expense. A refinancing of our indebtedness could also require us to comply with more
onerous covenants and further restrict our business operations. Our inability to refinance our indebtedness or to
do so upon attractive terms could materially and adversely affect our business, prospects, results of operations,
financial condition and cash flows, and make us vulnerable to adverse industry and general economic conditions.
We may be able to incur substantially more debt and take other actions that could diminish our ability to
make payments on our indebtedness when due, which could further exacerbate the risks associated with
our current level of indebtedness.
Despite our indebtedness level, we may be able to incur substantially more indebtedness in the future. We
are not fully restricted under the terms of the indentures or agreements governing our current indebtedness from
incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other
actions, any of which could diminish our ability to make payments on our indebtedness when due and further
exacerbate the risks associated with our current level of indebtedness. If new debt is added to our or any of our
existing and future subsidiaries’ current debt, the related risks that we now face could intensify.
If we are unable to satisfy the financial and other covenants in certain of our debt agreements, our lenders
could elect to terminate the agreements and require us to repay the outstanding borrowings, or we could
face other substantial costs.
The only financial covenant that currently exists under our senior secured asset-based revolving credit
facility (“ABL facility”) is the fixed charge coverage ratio. Subject to certain limited exceptions specified in the
ABL facility, the fixed charge coverage ratio covenant under the ABL facility will only apply in the future if
specified availability under the ABL facility falls below 10 percent of the maximum revolver amount under the
ABL facility. When certain conditions are met, cash and cash equivalents and borrowing base collateral in excess
of the ABL facility size may be included when calculating specified availability under the ABL facility. As of
December 31, 2016, specified availability under the ABL facility exceeded the required threshold and, as a result,
the maintenance covenant was inapplicable. Under our accounts receivable securitization facility, we are
required, among other things, to maintain certain financial tests relating to: (i) the default ratio, (ii) the
delinquency ratio, (iii) the dilution ratio and (iv) days sales outstanding. The accounts receivable securitization
facility also requires us to comply with the fixed charge coverage ratio under the ABL facility, to the extent the
ratio is applicable under the ABL facility. If we are unable to satisfy these or any of the other relevant covenants,
the lenders could elect to terminate the ABL facility and/or the accounts receivable securitization facility and
require us to repay outstanding borrowings. In such event, unless we are able to refinance the indebtedness
coming due and replace the ABL facility, accounts receivable securitization facility and/or the other agreements
governing our debt, we would likely not have sufficient liquidity for our business needs and would be forced to
adopt an alternative strategy as described above. Even if we adopt an alternative strategy, the strategy may not be
successful and we may not have sufficient liquidity to service our debt and fund our operations.
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Restrictive covenants in certain of the agreements and instruments governing our indebtedness may
adversely affect our financial and operational flexibility.
In addition to financial covenants, various other covenants in the ABL facility, accounts receivable
securitization facility and the other agreements governing our debt impose significant operating and financial
restrictions on us and our restricted subsidiaries. Such covenants include, among other things, limitations on:
(i) liens; (ii) sale-leaseback transactions; (iii) indebtedness; (iv) mergers, consolidations and acquisitions;
(v) sales, transfers and other dispositions of assets; (vi) loans and other investments; (vii) dividends and other
distributions, stock repurchases and redemptions and other restricted payments; (viii) dividends, other payments
and other matters affecting subsidiaries; (ix) transactions with affiliates; and (x) issuances of preferred stock of
certain subsidiaries. Future debt agreements we enter into may include similar provisions.
These restrictions may also make more difficult or discourage a takeover of us, whether favored or opposed
by our management and/or our Board of Directors.
Our ability to comply with these covenants may be affected by events beyond our control, and any material
deviations from our forecasts could require us to seek waivers or amendments of covenants or alternative sources
of financing, or to reduce expenditures. We cannot guarantee that such waivers, amendments or alternative
financing could be obtained or, if obtained, would be on terms acceptable to us.
A breach of any of the covenants or restrictions contained in these agreements could result in an event of
default. Such a default could allow our debt holders to accelerate repayment of the related debt, as well as any
other debt to which a cross-acceleration or cross-default provision applies, and/or to declare all borrowings
outstanding under these agreements to be due and payable. If our debt is accelerated, our assets may not be
sufficient to repay such debt.
The amount of borrowings permitted under our ABL facility may fluctuate significantly, which may
adversely affect our liquidity, results of operations and financial position.
The amount of borrowings permitted at any time under our ABL facility is limited to a periodic borrowing
base valuation of the collateral thereunder. As a result, our access to credit under our ABL facility is potentially
subject to significant fluctuations depending on the value of the borrowing base of eligible assets as of any
measurement date, as well as certain discretionary rights of the agent in respect of the calculation of such
borrowing base value. The inability to borrow under our ABL facility may adversely affect our liquidity, results
of operations and financial position.
We rely on available borrowings under the ABL facility and the accounts receivable securitization facility
for cash to operate our business, which subjects us to market and counterparty risk, some of which is
beyond our control.
In addition to cash we generate from our business, our principal existing sources of cash are borrowings
available under the ABL facility and the accounts receivable securitization facility. If our access to such
financing was unavailable or reduced, or if such financing were to become significantly more expensive for any
reason, we may not be able to fund daily operations, which would cause material harm to our business or could
affect our ability to operate our business as a going concern. In addition, if certain of our lenders experience
difficulties that render them unable to fund future draws on the facilities, we may not be able to access all or a
portion of these funds, which could have similar adverse consequences.
Our growth strategies may be unsuccessful if we are unable to identify and complete future acquisitions
and successfully integrate acquired businesses or assets.
We have historically achieved a significant portion of our growth through acquisitions. We will continue to
consider potential acquisitions on a selective basis, including potential growth opportunities for our trench, power
and pump specialty business. From time-to-time we have also approached, or have been approached by, other
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public companies or large privately-held companies to explore consolidation opportunities. There can be no
assurance that we will be able to identify suitable acquisition opportunities in the future, with respect to our
specialty business or otherwise, or that we will be able to consummate any such transactions on terms and
conditions acceptable to us.
In addition, it is possible that we will not realize the expected benefits from any completed acquisition, or
that our existing operations will be adversely affected as a result of acquisitions. Acquisitions entail certain risks,
including:
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•
•
unrecorded liabilities of acquired companies and unidentified issues that we fail to discover during our
due diligence investigations or that are not subject to indemnification or reimbursement by the seller;
greater than expected expenses such as the need to obtain additional debt or equity financing for any
transaction;
unfavorable accounting treatment and unexpected increases in taxes;
adverse effects on our ability to maintain relationships with customers, employees and suppliers;
inherent risk associated with entering a geographic area or line of business in which we have no or
limited experience;
difficulty in assimilating the operations and personnel of an acquired company within our existing
operations, including the consolidation of corporate and administrative functions;
difficulty in integrating marketing, information technology and other systems;
difficulty in conforming standards, controls, procedures and policies, business cultures and
compensation structures;
difficulty in identifying and eliminating redundant and underperforming operations and assets;
loss of key employees of the acquired company;
operating inefficiencies that have a negative impact on profitability;
impairment of goodwill or other acquisition-related intangible assets;
failure to achieve anticipated synergies or receiving an inadequate return of capital; and
strains on management and other personnel time and resources to evaluate, negotiate and integrate
acquisitions.
Our failure to address these risks or other problems encountered in connection with any past or future acquisition
could cause us to fail to realize the anticipated benefits of the acquisitions, cause us to incur unanticipated liabilities and
harm our business generally. In addition, if we are unable to successfully integrate our acquisitions with our existing
business, we may not obtain the advantages that the acquisitions were intended to create, which may materially and
adversely affect our business, results of operations, financial condition, cash flows, our ability to introduce new
services and products and the market price of our stock.
We would expect to pay for any future acquisitions using cash, capital stock, notes and/or assumption of
indebtedness. To the extent that our existing sources of cash are not sufficient, we would expect to need
additional debt or equity financing, which involves its own risks, such as the dilutive effect on shares held by our
stockholders if we financed acquisitions by issuing convertible debt or equity securities, or the risks associated
with debt incurrence.
We have also spent resources and efforts, apart from acquisitions, in attempting to grow and enhance our rental
business over the past few years. These efforts place strains on our management and other personnel time and
resources, and require timely and continued investment in facilities, personnel and financial and management systems
14
and controls. We may not be successful in implementing all of the processes that are necessary to support any of our
growth initiatives, which could result in our expenses increasing disproportionately to our incremental revenues,
causing our operating margins and profitability to be adversely affected.
Our operating results may fluctuate, which could affect the trading value of our securities.
Our revenues and operating results may fluctuate from quarter to quarter or over the longer term due to a
number of factors, which could adversely affect the trading value of our securities. These factors, in addition to
general economic conditions and the factors discussed above under “Cautionary Statement Regarding
Forward-Looking Statements”, include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
the seasonal rental patterns of our customers, with rental activity tending to be lower in the winter;
changes in the size of our rental fleet and/or in the rate at which we sell our used equipment;
an overcapacity of fleet in the equipment rental industry;
changes in private non-residential construction spending or government funding for infrastructure and
other construction projects;
changes in demand for, or utilization of, our equipment or in the prices we charge due to changes in
economic conditions, competition or other factors;
commodity price pressures and the resultant increase in the cost of fuel and steel to our equipment
suppliers, which can result in increased equipment costs for us;
other cost fluctuations, such as costs for employee-related compensation and healthcare benefits;
labor shortages, work stoppages or other labor difficulties;
potential enactment of new legislation affecting our operations or labor relations;
completion of acquisitions, divestitures or recapitalizations;
increases in interest rates and related increases in our interest expense and our debt service obligations;
the possible need, from time to time, to record goodwill impairment charges or other write-offs or
charges due to a variety of occurrences, such as the adoption of new accounting standards, the
impairment of assets, rental location divestitures, dislocation in the equity and/or credit markets,
consolidations or closings, restructurings, the refinancing of existing indebtedness or the buy-out of
equipment leases; and
•
currency risks and other risks associated with international operations.
Our common stock price has fluctuated significantly and may continue to do so in the future.
Our common stock price has fluctuated significantly and may continue to do so in the future for a number of
reasons, including:
•
announcements of developments related to our business;
• market perceptions of any proposed merger or acquisition and the likelihood of our involvement in other
merger and acquisition activity;
•
•
•
variations in our
expectations;
revenues, gross margins, earnings or other
financial
results from investors’
departure of key personnel;
purchases or sales of large blocks of our stock by institutional investors or transactions by insiders;
15
•
•
•
•
•
fluctuations in the results of our operations and general conditions in the economy, our market, and the
markets served by our customers;
investor perceptions of the equipment rental industry in general and our Company in particular;
fluctuations in the prices of oil and natural gas;
expectations regarding our share repurchase program; and
the operating and stock performance of comparable companies or related industries.
In addition, prices in the stock market have been volatile over the past few years. In certain cases, the
fluctuations have been unrelated to the operating performance of the affected companies. As a result, the price of
our common stock could fluctuate in the future without regard to our operating performance.
We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase
program or that our share repurchase program will enhance long-term stockholder value. Share
repurchases could also increase the volatility of the price of our common stock and could diminish our
cash reserves.
In July 2015, our Board of Directors authorized a share repurchase program. Under the program, we are
authorized to repurchase shares of common stock for an aggregate purchase price not to exceed $1 billion,
excluding fees, commissions and other ancillary expenses. In October 2016, we paused repurchases under the
program as we evaluated a number of potential acquisition opportunities. As discussed in note 18 to the
consolidated financial statements, on January 25, 2017, we entered into a definitive merger agreement with NES
Rentals Holdings II, Inc. (“NES”), pursuant to which we have agreed to acquire NES in an all cash transaction.
We intend to complete the share repurchase program; however, we will re-evaluate the decision to do so as we
integrate NES and assess other potential uses of capital.
Although the Board of Directors has authorized a share repurchase program, the share repurchase program
does not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of
shares. The timing and amount of repurchases, if any, will depend upon several factors, including market and
business conditions, the trading price of the Company’s common stock and the nature of other investment
opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior
notice. In addition, repurchases of our common stock pursuant to our share repurchase program could affect our
stock price and increase its volatility. The existence of a share repurchase program could cause our stock price to
be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for
our stock. Additionally, our share repurchase program could diminish our cash reserves, which may impact our
ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. There can
be no assurance that any share repurchases will enhance stockholder value because the market price of our
common stock may decline below the levels at which we repurchased shares of stock. Although our share
repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so
and short-term stock price fluctuations could reduce the program’s effectiveness.
If we are unable to collect on contracts with customers, our operating results would be adversely affected.
One of the reasons some of our customers find it more attractive to rent equipment than own that equipment
is the need to deploy their capital elsewhere. This has been particularly true in industries with recent high growth
rates such as the construction industry. However, some of our customers may have liquidity issues and ultimately
may not be able to fulfill the terms of their rental agreements with us. If we are unable to manage credit risk
issues adequately, or if a large number of customers have financial difficulties at the same time, our credit losses
could increase above historical
levels and our operating results would be adversely affected. Further,
delinquencies and credit losses generally would be expected to increase if there was a slowdown in the economic
recovery or worsening of economic conditions.
16
If we are unable to obtain additional capital as required, we may be unable to fund the capital outlays
required for the success of our business.
If the cash that we generate from our business, together with cash that we may borrow under the ABL
facility and accounts receivable securitization facility, is not sufficient to fund our capital requirements, we will
require additional debt and/ or equity financing. However, we may not succeed in obtaining the requisite
additional financing or such financing may include terms that are not satisfactory to us. We may not be able to
obtain additional debt financing as a result of prevailing interest rates or other factors, including the presence of
covenants or other restrictions under the ABL facility and/or other agreements governing our debt. In the event
we seek to obtain equity financing, our stockholders may experience dilution as a result of the issuance of
additional equity securities. This dilution may be significant depending upon the amount of equity securities that
we issue and the prices at which we issue such securities. If we are unable to obtain sufficient additional capital
in the future, we may be unable to fund the capital outlays required for the success of our business, including
those relating to purchasing equipment, growth plans and refinancing existing indebtedness.
If we determine that our goodwill has become impaired, we may incur impairment charges, which would
negatively impact our operating results.
At December 31, 2016, we had $3.3 billion of goodwill on our consolidated balance sheet. Goodwill
represents the excess of cost over the fair value of net assets acquired in business combinations. We assess
potential impairment of our goodwill at least annually. Impairment may result from significant changes in the
manner of use of the acquired assets, negative industry or economic trends and/or significant underperformance
relative to historic or projected operating results. For a discussion of the goodwill impairment testing for our
Pump Solutions reporting unit, see “Critical Accounting Policies-Evaluation of Goodwill Impairment” in Part II,
Item 7A-Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Trends in oil and natural gas prices could adversely affect the level of exploration, development and
production activity of certain of our customers and the demand for our services and products.
Demand for our services and products is sensitive to the level of exploration, development and production
activity of, and the corresponding capital spending by, oil and natural gas companies, including national oil
regional exploration and production providers, and related service providers. The level of
companies,
exploration, development and production activity is directly affected by trends in oil and natural gas prices,
which historically have been volatile and are likely to continue to be volatile.
Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the
supply of and demand for oil and natural gas, market uncertainty, and a variety of other economic factors that are
beyond our control. Any prolonged reduction in oil and natural gas prices will depress the immediate levels of
exploration, development and production activity, which could have an adverse effect on our business, results of
operations and financial condition. Even the perception of longer-term lower oil and natural gas prices by oil and
natural gas companies and related service providers can similarly reduce or defer major expenditures by these
companies and service providers given the long-term nature of many large-scale development projects. Factors
affecting the prices of oil and natural gas include:
•
•
the level of supply and demand for oil and natural gas;
governmental regulations, including the policies of governments regarding the exploration for, and
production and development of, oil and natural gas reserves;
• weather conditions and natural disasters;
• worldwide political, military and economic conditions;
•
•
the level of oil production by non-OPEC countries and the available excess production capacity within
OPEC;
oil refining capacity and shifts in end-customer preferences toward fuel efficiency and the use of natural
gas;
17
•
•
the cost of producing and delivering oil and natural gas; and
potential acceleration of the development of alternative fuels.
We have a holding company structure and depend in part on distributions from our subsidiaries to pay
amounts due on our indebtedness. Certain provisions of law or contractual restrictions could limit
distributions from our subsidiaries.
We derive substantially all of our operating income from, and hold substantially all of our assets through,
our subsidiaries. The effect of this structure is that we depend in part on the earnings of our subsidiaries, and the
payment or other distribution to us of these earnings, to meet our obligations under our outstanding debt.
Provisions of law, such as those requiring that dividends be paid only from surplus, could limit the ability of our
subsidiaries to make payments or other distributions to us. Furthermore, these subsidiaries could in certain
circumstances agree to contractual restrictions on their ability to make distributions.
We are exposed to a variety of claims relating to our business, and our insurance may not fully cover them.
We are in the ordinary course exposed to a variety of claims relating to our business. These claims include
those relating to (i) personal injury or property damage involving equipment rented or sold by us, (ii) motor
vehicle accidents involving our vehicles and our employees and (iii) employment-related claims. Currently, we
carry a broad range of insurance for the protection of our assets and operations. However, such insurance may
not fully cover these claims for a number of reasons, including:
•
•
our insurance policies, reflecting a program structure that we believe reflects market conditions for
companies our size, are often subject to significant deductibles or self-insured retentions;
our director and officer liability insurance policy has no deductible for individual non-indemnifiable
loss, but is subject to a deductible for company reimbursement coverage;
• we do not currently maintain Company-wide stand-alone coverage for environmental liability (other
than legally required coverage), since we believe the cost for such coverage is high relative to the
benefit it provides; and
•
certain types of claims, such as claims for punitive damages or for damages arising from intentional
misconduct, which are often alleged in third party lawsuits, might not be covered by our insurance.
We establish and semi-annually evaluate our loss reserves to address casualty claims, or portions thereof,
not covered by our insurance policies. To the extent that we are subject to a higher frequency of claims, are
subject to more serious claims or insurance coverage is not available, we could have to significantly increase our
reserves, and our liquidity and operating results could be materially and adversely affected. It is also possible that
some or all of the insurance that is currently available to us will not be available in the future on economically
reasonable terms or at all.
Our charter provisions, as well as other factors, may affect the likelihood of a takeover or change of
control of the Company.
Although our Board elected not to extend our stockholders’ rights plan upon its expiration in September
2011, we still have in place certain charter provisions, such as the inability for stockholders to act by written
consent, that may have the effect of deterring hostile takeovers or delaying or preventing changes in control or
including transactions in which our
management of the Company that are not approved by our Board,
stockholders might otherwise receive a premium for their shares over then-current market prices. We are also
subject to Section 203 of the Delaware General Corporation Law which, under certain circumstances, restricts the
ability of a publicly held Delaware corporation to engage in a business combination, such as a merger or sale of
assets, with any stockholder that, together with affiliates, owns 15 percent or more of the corporation’s
outstanding voting stock, which similarly could prohibit or delay the accomplishment of a change of control
transaction. In addition, under the ABL facility, a change of control (as defined in the credit agreement)
18
constitutes an event of default, entitling our lenders to terminate the ABL facility and require us to repay
outstanding borrowings. A change of control (as defined in the applicable agreement) is also a termination event
under our accounts receivable securitization facility and generally would require us to offer to repurchase our
outstanding senior notes. As a result, the provisions of the agreements governing our debt also may affect the
likelihood of a takeover or other change of control.
Turnover of members of our management and our ability to attract and retain key personnel may
adversely affect our ability to efficiently manage our business and execute our strategy.
Our success is dependent, in part, on the experience and skills of our management team, and competition in
our industry and the business world for top management talent is generally significant. Although we believe we
generally have competitive pay packages, we can provide no assurance that our efforts to attract and retain our
senior management staff will be successful. Moreover, given the volatility in our stock price, it may be more
difficult and expensive to recruit and retain employees, particularly senior management, through grants of stock
or stock options. This, in turn, could place greater pressure on the Company to increase the cash component of its
compensation packages, which may adversely affect our operating results. If we are unable to fill and keep filled
all of our senior management positions, or if we lose the services of any key member of our senior management
team and are unable to find a suitable replacement in a timely fashion, we may be challenged to effectively
manage our business and execute our strategy.
Our operational and cost reduction strategies may not generate the improvements and efficiencies we
expect.
We have been pursuing a strategy of optimizing our field operations in order to improve sales force
effectiveness, and to focus our sales force’s efforts on increasing revenues from our National Account and other
large customers. We are also continuing to pursue our overall cost reduction program, which resulted in
substantial cost savings in the past. The extent to which these strategies will achieve our desired efficiencies and
goals in 2017 and beyond is uncertain, as their success depends on a number of factors, some of which are
beyond our control. Even if we carry out these strategies in the manner we currently expect, we may not achieve
the efficiencies or savings we anticipate, or on the timetable we anticipate, and there may be unforeseen
productivity, revenue or other consequences resulting from our strategies that may adversely affect us. Therefore,
there can be no guarantee that our strategies will prove effective in achieving the desired level of profitability,
margins or returns to stockholders.
We are dependent on our relationships with key suppliers to obtain equipment and other supplies for our
business on acceptable terms.
We have achieved significant cost savings through our centralization of equipment and non-equipment
purchases. However, as a result, we depend on and are exposed to the credit risk of a group of key suppliers.
While we make every effort to evaluate our counterparties prior to entering into long-term and other significant
procurement contracts, we cannot predict the impact on our suppliers of the current economic environment and
other developments in their respective businesses. Insolvency, financial difficulties or other factors may result in
our suppliers not being able to fulfill the terms of their agreements with us. Further, such factors may render
suppliers unwilling to extend contracts that provide favorable terms to us, or may force them to seek to
renegotiate existing contracts with us. Although we believe we have alternative sources of supply for the
equipment and other supplies used in our business, termination of our relationship with any of our key suppliers
could have a material adverse effect on our business, financial condition or results of operations in the unlikely
event that we were unable to obtain adequate equipment or supplies from other sources in a timely manner or at
all.
19
If our rental fleet ages, our operating costs may increase, we may be unable to pass along such costs, and
our earnings may decrease. The costs of new equipment we use in our fleet may increase, requiring us to
spend more for replacement equipment or preventing us from procuring equipment on a timely basis.
If our rental equipment ages, the costs of maintaining such equipment, if not replaced within a certain period
of time, will likely increase. The costs of maintenance may materially increase in the future and could lead to
material adverse effects on our results of operations.
The cost of new equipment for use in our rental fleet could also increase due to increased material costs for
our suppliers or other factors beyond our control. Such increases could materially adversely impact our financial
condition and results of operations in future periods. Furthermore, changes in customer demand could cause
certain of our existing equipment to become obsolete and require us to purchase new equipment at increased
costs.
Our industry is highly competitive, and competitive pressures could lead to a decrease in our market share
or in the prices that we can charge.
The equipment rental industry is highly fragmented and competitive. Our competitors include small,
independent businesses with one or two rental locations, regional competitors that operate in one or more states,
public companies or divisions of public companies, and equipment vendors and dealers who both sell and rent
equipment directly to customers. We may in the future encounter increased competition from our existing
competitors or from new competitors. Competitive pressures could adversely affect our revenues and operating
results by, among other things, decreasing our rental volumes, depressing the prices that we can charge or
increasing our costs to retain employees.
Disruptions in our information technology systems or a compromise of security with respect to our systems
could adversely affect our operating results by limiting our ability to effectively monitor and control our
operations, adjust to changing market conditions, implement strategic initiatives or support our online
ordering system.
We rely on our information technology systems to be able to monitor and control our operations, adjust to
changing market conditions,
implement strategic initiatives and support our online ordering system. Any
disruptions in these systems or the failure of these systems to operate as expected could, depending on the
magnitude of the problem, adversely affect our operating results by limiting our ability to effectively monitor and
control our operations, adjust to changing market conditions, implement strategic initiatives and service online
orders. In addition, the security measures we employ to protect our systems may not detect or prevent all
attempts to hack our systems, denial-of-service attacks, viruses, malicious software, phishing attacks, security
breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or
transmitted by the sites, networks and systems that we otherwise maintain. We have, from time to time,
experienced threats to our data and systems, including malware and computer virus attacks. Additionally, we
may not anticipate or combat all types of future attacks until after they have been launched. If any of these
breaches of security occur or are anticipated in the future, we could be required to expend additional capital and
other resources, including costs to deploy additional personnel and protection technologies, train employees and
engage third-party experts and consultants. In addition, because our systems sometimes contain information
about individuals and businesses, our failure to appropriately maintain the security of the data we hold, whether
as a result of our own error or the malfeasance or errors of others, could lead to disruptions in our online ordering
system or other data systems, unauthorized release of confidential or otherwise protected information or
corruption of data. Our failure to appropriately maintain the security of the data we hold could also violate
applicable privacy, data security and other laws and give rise to legal liabilities leading to lower revenues,
increased costs and other material adverse effects on our results of operations. Any compromise or breach of our
in adverse publicity, harm our reputation, lead to claims against us and affect our
systems could result
relationships with our customers and employees, any of which could have a material adverse effect on our
20
business. Certain of our software applications are also utilized by third parties who provide outsourced
administrative functions, which may increase the risk of a cybersecurity incident. Although we maintain
insurance coverage for various cybersecurity risks, there can be no guarantee that all costs or losses incurred will
be fully insured.
We are subject to numerous environmental and safety regulations. If we are required to incur compliance
or remediation costs that are not currently anticipated, our liquidity and operating results could be
materially and adversely affected.
Our operations are subject to numerous laws and regulations governing environmental protection and
occupational health and safety matters. These laws regulate issues such as wastewater, stormwater, solid and
hazardous waste and materials, and air quality. Under these laws, we may be liable for, among other things,
(i) the costs of investigating and remediating any contamination at our sites as well as sites to which we send
hazardous waste for disposal or treatment, regardless of fault, and (ii) fines and penalties for non-compliance.
While our operations generally do not raise significant environmental risks, we use hazardous materials to clean
and maintain equipment, dispose of solid and hazardous waste and wastewater from equipment washing, and
store and dispense petroleum products from above-ground storage tanks located at certain of our locations.
We cannot be certain as to the potential financial impact on our business if new adverse environmental
conditions are discovered or environmental and safety requirements become more stringent. If we are required to
incur environmental compliance or remediation costs that are not currently anticipated, our liquidity and
operating results could be materially and adversely affected, depending on the magnitude of such costs.
We have operations throughout the United States, which exposes us to multiple state and local regulations,
in addition to federal law and requirements as a government contractor. Changes in applicable law,
regulations or requirements, or our material failure to comply with any of them, can increase our costs
and have other negative impacts on our business.
Our 769 branch locations in the United States are located in 49 states, which exposes us to a host of different
state and local regulations, in addition to federal law and regulatory and contractual requirements we face as a
government contractor. These laws and requirements address multiple aspects of our operations, such as worker
safety, consumer rights, privacy, employee benefits and more, and there are often different requirements in
different jurisdictions. Changes in these requirements, or any material failure by our branches to comply with
them, can increase our costs, affect our reputation, limit our business, drain management time and attention and
otherwise impact our operations in adverse ways.
Our collective bargaining agreements and our relationship with our union-represented employees could
disrupt our ability to serve our customers, lead to higher labor costs or the payment of withdrawal
liability.
We currently have approximately 850 employees who are represented by unions and covered by collective
bargaining agreements and approximately 11,650 employees who are not represented by unions. Various unions
occasionally seek to organize certain of our nonunion employees. Union organizing efforts or collective
bargaining negotiations could potentially lead to work stoppages and/or slowdowns or strikes by certain of our
employees, which could adversely affect our ability to serve our customers. Further, settlement of actual or
threatened labor disputes or an increase in the number of our employees covered by collective bargaining
agreements can have unknown effects on our labor costs, productivity and flexibility.
Under the collective bargaining agreements that we have signed, we are obligated to contribute to several
multiemployer pension plans on behalf of some of our unionized employees. A multiemployer pension plan is a
plan that covers the union-represented workers of various unrelated companies. Under the Employee Retirement
Income Security Act, a contributing employer to an underfunded multiemployer plan is liable, generally upon
21
withdrawal from a plan, for its proportionate share of the plan’s unfunded vested liability. We currently have no
intention of withdrawing from any multiemployer plan. However, there can be no assurance that we will not
withdraw from one or more multiemployer plans in the future and be required to pay material amounts of
withdrawal liability if one or more of those plans are underfunded at the time of withdrawal.
Fluctuations in fuel costs or reduced supplies of fuel could harm our business.
We believe that one of our competitive advantages is the mobility of our fleet. Accordingly, our business
could be adversely affected by limitations on fuel supplies or significant increases in fuel prices that result in
higher costs to us for transporting equipment from one branch to another branch. Although we have used, and
may continue to use, futures contracts to hedge against fluctuations in fuel prices, a significant or protracted price
fluctuation or disruption of fuel supplies could have a material adverse effect on our financial condition and
results of operations.
Our rental fleet is subject to residual value risk upon disposition, and may not sell at the prices or in the
quantities we expect.
The market value of any given piece of rental equipment could be less than its depreciated value at the time
it is sold. The market value of used rental equipment depends on several factors, including:
•
the market price for new equipment of a like kind;
• wear and tear on the equipment relative to its age and the performance of preventive maintenance;
•
•
•
•
the time of year that it is sold;
the supply of used equipment on the market;
the existence and capacities of different sales outlets;
the age of the equipment at the time it is sold;
• worldwide and domestic demand for used equipment; and
•
general economic conditions.
We include in income from operations the difference between the sales price and the depreciated value of an
item of equipment sold. Changes in our assumptions regarding depreciation could change our depreciation
expense, as well as the gain or loss realized upon disposal of equipment. Sales of our used rental equipment at
prices that fall significantly below our projections and/or in lesser quantities than we anticipate will have a
negative impact on our results of operations and cash flows.
We have operations outside the United States. As a result, we may incur losses from the impact of foreign
currency fluctuations and have higher costs than we otherwise would have due to the need to comply with
foreign laws.
Our operations in Canada are subject to the risks normally associated with international operations. These
include (i) the need to convert currencies, which could result in a gain or loss depending on fluctuations in
exchange rates and (ii) the need to comply with foreign laws and regulations, as well as U.S. laws and regulations
applicable to our operations in foreign jurisdictions. See Item 7A—Quantitative and Qualitative Disclosures
About Market Risk for additional information related to currency exchange risk.
Item 1B. Unresolved Staff Comments
None.
22
Item 2.
Properties
As of January 1, 2017, we operated 887 rental locations. 769 of these locations are in the United States and
118 are in Canada. The number of locations in each state or province is shown in the table below, as well as the
number of locations that are in our general rentals (GR) and trench, power and pump (TPP) segments.
United States
• Alabama (GR 19, TPP 5)
• Maine (GR 2)
• Ohio (GR 12, TPP 4)
• Alaska (GR 2)
• Maryland (GR 10, TPP 4)
• Oklahoma (GR 23, TPP 4)
• Arizona (GR 12, TPP 2)
• Massachusetts (GR 6, TPP 2)
• Oregon (GR 9, TPP 2)
• Arkansas (GR 11, TPP 1)
• Michigan (GR 4, TPP 2)
•
Pennsylvania (GR 12, TPP 5)
• California (GR 61, TPP 18)
• Minnesota (GR 9, TPP 3)
• Rhode Island (GR 1)
• Colorado (GR 11, TPP 3)
• Mississippi (GR 12)
• Connecticut (GR 6, TPP 2)
• Missouri (GR 12, TPP 3)
• Delaware (GR 2, TPP 1)
• Montana (GR 1)
•
Florida (GR 25, TPP 12)
• Nebraska (GR 3, TPP 1)
•
•
•
•
South Carolina (GR 12, TPP 4)
South Dakota (GR 2)
Tennessee (GR 16, TPP 4)
Texas (GR 95, TPP 26)
• Georgia (GR 22, TPP 5)
• Nevada (GR 4, TPP 3)
• Utah (GR 2, TPP 3)
•
•
•
•
Idaho (GR 2)
• New Hampshire (GR 1, TPP 1)
• Vermont (GR 1)
Illinois (GR 14, TPP 3)
• New Jersey (GR 8, TPP 4)
• Virginia (GR 18, TPP 5)
Indiana (GR 8, TPP 1)
• New Mexico (GR 8)
• Washington (GR 18, TPP 5)
Iowa (GR 9, TPP 1)
• New York (GR 16)
• West Virginia (GR 5)
• North Carolina (GR 20, TPP 6)
• Wisconsin (GR 8, TPP 1)
• North Dakota (GR 6, TPP 2)
• Wyoming (GR 5)
• Kansas (GR 12)
• Kentucky (GR 9)
•
Louisiana (GR 25, TPP 10)
Canada
• Alberta (GR 22, TPP 9)
• British Columbia (GR 17, TPP 4)
• Manitoba (GR 4)
• New Brunswick (GR 6, TPP 1)
• Newfoundland (GR 6)
• Nova Scotia (GR 4)
• Ontario (GR 23, TPP 5)
•
Prince Edward Island (GR 1)
• Quebec (GR 5, TPP 1)
•
Saskatchewan (GR 7, TPP 3)
Our branch locations generally include facilities for displaying equipment and, depending on the location,
may include separate areas for equipment service, storage and displaying contractor supplies. We own 106 of our
branch locations and lease the other branch locations. We also lease or own other premises used for purposes
such as district and regional offices and service centers.
23
We have a fleet of approximately 7,800 vehicles. These vehicles are used for delivery, maintenance,
management and sales functions. Approximately 50 percent of this fleet is leased and the balance is owned.
Our corporate headquarters are located in Stamford, Connecticut, where we occupy approximately 47,000
square feet under a lease that expires in 2024. Additionally, we maintain other corporate facilities, including in
Shelton, Connecticut, where we occupy approximately 12,000 square feet under a lease that expires in 2021, and
in Scottsdale, Arizona, where we occupy approximately 20,000 square feet under a lease that expires in 2018.
Further, we maintain shared-service facilities in Tampa, Florida, where we occupy approximately 31,000 square
feet under a lease that expires in 2020 and in Charlotte, North Carolina, where we occupy approximately 55,000
square feet under a lease that expires in 2025.
Item 3.
Legal Proceedings
A description of legal proceedings can be found in note 13 to our consolidated financial statements, included
in this report at Item 8—Financial Statements and Supplementary Data, and is incorporated by reference into this
Item 3.
Item 4.
(Removed and Reserved)
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Price Range of Common Stock
Holdings’ common stock trades on the New York Stock Exchange under the symbol “URI.” The following
table sets forth, for the periods indicated, the intra-day high and low sale prices for our common stock, as
reported by the New York Stock Exchange.
2016:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
Low
$ 71.51
76.04
84.63
109.90
$103.85
105.83
87.99
80.18
$41.90
56.01
61.92
70.58
$81.25
86.88
56.66
57.41
As of January 1, 2017, there were 72 holders of record of our common stock. The number of beneficial
owners is substantially greater than the number of record holders because a large portion of our common stock is
held of record in broker “street names.”
Dividend Policy
Holdings has not paid dividends on its common stock since inception. The payment of any future dividends
or the authorization of stock repurchases or other recapitalizations will be determined by our board of directors in
light of conditions then existing, including earnings, financial condition and capital requirements, financing
agreements, business conditions, stock price and other factors. The terms of certain agreements governing our
outstanding indebtedness contain certain limitations on our ability to move operating cash flows to Holdings and/
or to pay dividends on, or effect repurchases of, our common stock. In addition, under Delaware law, dividends
may only be paid out of surplus or current or prior year’s net profits.
24
Purchases of Equity Securities by the Issuer
The following table provides information about acquisitions of Holdings’ common stock by Holdings during
the fourth quarter of 2016:
Period
October 1, 2016 to October 31,
Total Number of
Shares Purchased
Average Price
Paid Per Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (2)
Maximum
Dollar Amount
of Shares That
May Yet Be
Purchased
Under the
Program (2)
2016 . . . . . . . . . . . . . . . . . . . .
506,380(1)
$ 79.06
505,937
November 1, 2016 to
November 30, 2016 . . . . . . . .
153(1)
$ 84.48
December 1, 2016 to
December 31, 2016 . . . . . . . . .
1,267(1)
Total
. . . . . . . . . . . . . . . . . . . . . .
507,800
$106.18
$ 79.13
—
—
505,937
$372,997,032
—
—
—
(1)
In October 2016, November 2016 and December 2016, 443, 153 and 1,267 shares, respectively, were
withheld by Holdings to satisfy tax withholding obligations upon the vesting of restricted stock unit awards.
These shares were not acquired pursuant to any repurchase plan or program.
(2) On July 21, 2015, our Board authorized a $1 billion share repurchase program. In October 2016, we paused
repurchases under the program as we evaluated a number of potential acquisition opportunities. As
discussed in note 18 to the consolidated financial statements, on January 25, 2017, we entered into a
definitive merger agreement to acquire NES in an all cash transaction. We intend to complete the share
repurchase program; however, we will re-evaluate the decision to do so as we integrate NES and assess
other potential uses of capital.
Equity Compensation Plans
For information regarding equity compensation plans, see Item 12 of this annual report on Form 10-K.
25
Item 6.
Selected Financial Data
The following selected financial data reflects the results of operations and balance sheet data as of and for
the years ended December 31, 2012 to 2016. On April 30, 2012, we acquired RSC Holdings Inc. (“RSC”). RSC
has been included in our results of operations since that date. RSC was one of the largest equipment rental
providers in North America and had total revenue of $1.5 billion for 2011. In April 2014, we acquired certain
assets of the following entities: National Pump & Compressor, Ltd., Canadian Pump and Compressor Ltd.,
GulfCo Industrial Equipment, LP and LD Services, LLC (collectively “National Pump”). National Pump had
annual revenues of approximately $210. The results of National Pump’s operations have been included in our
consolidated financial statements since the acquisition date. National Pump was the second largest specialty
pump rental company in North America, and was a leading supplier of pumps for energy and petrochemical
customers. The data below should be read in conjunction with, and is qualified by reference to, our
Management’s Discussion and Analysis and our consolidated financial statements and notes thereto contained
elsewhere in this report.
Income statement data:
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . .
Merger related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense-subordinated convertible debentures . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
2014
2013
2012
(in millions, except per share data)
$ 5,762
3,359
2,403
719
—
14
255
1,415
511
—
(5)
909
343
566
6.49
6.45
$
$
$ 5,817
3,337
2,480
714
(26)
6
268
1,518
567
—
(12)
963
378
585
6.14
6.07
$
$
$ 5,685
3,253
2,432
758
11
(1)
273
1,391
555
—
(14)
850
310
540
5.54
5.15
$
$
$ 4,955
2,968
1,987
642
9
12
246
1,078
475
3
(5)
605
218
387
4.14
3.64
$
$
$ 4,117
2,530
1,587
588
111
99
198
591
512
4
(13)
88
13
75
0.91
0.79
$
$
December 31,
2016
2015
2014
2013
2012
(in millions)
Balance sheet data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated convertible debentures . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,988
7,790
—
1,648
$12,083
8,162
—
1,476
$12,129
7,962
—
1,796
$10,876
7,078
—
1,828
$10,648
7,196
55
1,543
26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(dollars in millions, except per share data and unless otherwise indicated)
Executive Overview
United Rentals is the largest equipment rental company in the world. Our customer service network consists
of 887 rental locations in the United States and Canada as well as centralized call centers and online capabilities.
Although the equipment rental industry is highly fragmented and diverse, we believe that we are well positioned
to take advantage of this environment because, as a larger company, we have more extensive resources and
certain compelling competitive advantages. These include a fleet of rental equipment with a total original
equipment cost (“OEC”), based on the initial consideration paid, of $9.0 billion, and a national branch network
that operates in 49 U.S. states and every Canadian province, and serves 99 of the 100 largest metropolitan areas
in the United States. In addition, our size gives us greater purchasing power, the ability to provide customers with
a broader range of equipment and services, the ability to provide customers with equipment that is more
consistently well-maintained and therefore more productive and reliable, and the ability to enhance the earning
potential of our assets by transferring equipment among branches to satisfy customer needs.
We offer approximately 3,200 classes of equipment for rent to construction and industrial companies,
manufacturers, utilities, municipalities, homeowners, government entities and other customers. Our revenues are
derived from the following sources: equipment rentals, sales of rental equipment, sales of new equipment,
contractor supplies sales and service and other revenues. In 2016, equipment rental revenues represented
86 percent of our total revenues.
For the past several years, we have executed a strategy focused on improving the profitability of our core
equipment rental business through revenue growth, margin expansion and operational efficiencies. In particular,
we have focused on customer segmentation, customer service differentiation,
fleet
management and operational efficiency.
rate management,
In 2017, we expect to continue our disciplined focus on increasing our profitability and return on invested
capital. In particular, our strategy calls for:
•
•
•
•
A consistently superior standard of service to customers, often provided through a single point of
contact;
The further optimization of our customer mix and fleet mix, with a dual objective: to enhance our
performance in serving our current customer base, and to focus on the accounts and customer types that
are best suited to our strategy for profitable growth. We believe these efforts will lead to even better
service of our target accounts, primarily large construction and industrial customers, as well as select
local contractors. Our fleet team’s analyses are aligned with these objectives to identify trends in
equipment categories and define action plans that can generate improved returns;
techniques,
including kaizen processes focused on
A continued focus on “Lean” management
continuous improvement. As of December 31, 2016, we have trained over 3,100 employees, over
70 percent of our district managers and over 60 percent of our branch managers on the Lean kaizen
process. We continue to implement this program across our branch network, with the objectives of:
reducing the cycle time associated with renting our equipment to customers; improving invoice accuracy
and service quality; reducing the elapsed time for equipment pickup and delivery; and improving the
effectiveness and efficiency of our repair and maintenance operations. As discussed in note 4 to our
consolidated financial statements, in the fourth quarter of 2015, we initiated a restructuring program
focused on cost savings throughout the organization partially due to the Lean initiatives not fully
generating the anticipated cost savings due to lower than expected rental volume in 2015. We closed this
restructuring program in the fourth quarter of 2016. We achieved the anticipated run rate savings from
the Lean initiatives in 2016 and expect to continue to generate savings from these initiatives;
The implementation of Project XL, which is a set of eight specific work streams focused on driving
profitable growth through revenue opportunities and generating incremental profitability through cost
savings across our business; and
27
•
The continued expansion of our trench, power and pump footprint, as well as our tools offering, and the
cross-selling of these services throughout our network. We plan to open at least 17 specialty rental
branches/tool hubs in 2017 and continue to invest in specialty rental fleet to further position United
Rentals as a single source provider of total jobsite solutions through our extensive product and service
resources and technology offerings.
In 2017, based on our analyses of industry forecasts and macroeconomic indicators, we expect that the
majority of our end markets will continue to experience solid demand for equipment rental services. Specifically,
we expect that North American industry equipment rental revenue will increase approximately 4 percent, with
similar growth, on a constant currency basis, expected in both the U.S. and Canada.
We use the American Rental Association criteria for reporting rental rates, time utilization and OEC. For the
full year 2016:
• Rental rates decreased 2.2 percent year-over-year;
•
•
•
•
The volume of OEC on rent increased 3.1 percent year-over-year;
Time utilization was 67.9 percent, an increase of 60 basis points year-over-year;
70 percent of equipment rental revenue was derived from key accounts, as compared to 64 percent in
2015. The increase in the key account percent of equipment rental revenue primarily reflects additional
customers that were designated as key accounts in 2016. If the list of customers designated as key
accounts as of December 31, 2016 was applied to 2015, the key account percent of equipment rental
revenue would have increased slightly from 2015. Key accounts are each managed by a single point of
contact to enhance customer service; and
The number of rental locations in our higher margin trench, power and pump (also referred to as
“specialty”) segment increased by eight year-over-year, after the addition of 14 cold starts.
Financial Overview
In 2016 and 2015, we took a number of positive actions related to our capital structure that have
significantly improved our financial flexibility and liquidity, including:
• Redeemed all of our 5 3/4 percent Senior Secured Notes, 8 3/8 percent Senior Subordinated Notes,
8 1/4 percent Senior Notes and 7 3/8 percent Senior Notes;
• Redeemed $850 principal amount of our 7 5/8 percent Senior Notes;
•
•
•
•
Issued $1 billion principal amount of 4 5/8 percent Senior Secured Notes due 2023;
Issued $800 principal amount of 5 1/2 percent Senior Notes due 2025;
Issued $750 principal amount of 5 7/8 percent Senior Notes due 2026;
Issued $750 principal amount of 5 1/2 percent Senior Notes due 2027;
• Amended and extended our ABL facility, and increased the size of the facility to $2.5 billion; and
• Amended and extended our accounts receivable securitization facility, and increased the size of the
facility to $625.
These actions have improved our financial flexibility and liquidity and positioned us to invest the necessary
capital to take advantage of business opportunities. As of December 31, 2016, we had available liquidity of
$1.18 billion, including cash of $312.
28
Net income. Net income and diluted earnings per share for each of the three years in the period ended
December 31, 2016 were as follows:
Year Ended December 31,
2016
2015
2014
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 566
$6.45
$ 585
$6.07
$ 540
$5.15
Net income and diluted earnings per share for each of the three years in the period ended December 31,
2016 include the after-tax impacts of the items below. The tax rates applied to the adjustments items below
reflect the statutory rates in the applicable entity.
Tax rate applied to items
below . . . . . . . . . . . . . . . . .
38.2%
38.6%
38.7%
2016
2015
2014
Year Ended December 31,
amortization (2)
Merger related costs (1) . . . . .
Merger related intangible asset
. . . . . . . . .
Impact on depreciation related
to acquired RSC fleet and
property and
equipment (3) . . . . . . . . . . .
Impact of the fair value
mark-up of acquired RSC
fleet (4) . . . . . . . . . . . . . . . .
Impact on interest expense
related to fair value
adjustment of acquired RSC
indebtedness (5) . . . . . . . . .
Restructuring charge (6) . . . . .
Asset impairment
charge (7) . . . . . . . . . . . . . .
Loss on extinguishment of
debt securities and
amendment of ABL
facility . . . . . . . . . . . . . . . . .
Contribution to
net income
(after-tax)
Impact on
diluted earnings
per share
Contribution to
net income
(after-tax)
Impact on
diluted earnings
per share
Contribution to
net income
(after-tax)
Impact on
diluted earnings
per share
$ —
$ —
$ 17
$ 0.17
$
(7)
$(0.06)
(99)
(1.12)
(111)
(1.15)
(115)
(1.10)
—
—
2
0.02
3
0.03
(22)
(0.25)
(18)
(0.19)
(22)
(0.21)
1
(9)
(2)
0.01
(0.11)
(0.03)
2
(4)
—
0.02
(0.04)
—
3
1
—
0.03
0.01
—
(62)
(0.70)
(75)
(0.78)
(48)
(0.46)
(1) This reflects transaction costs associated with the April 2014 National Pump acquisition. The income for the
year ended December 31, 2015 reflects a decline in the fair value of the contingent cash consideration
component of the National Pump purchase price.
(2) This reflects the amortization of the intangible assets acquired in the RSC and National Pump acquisitions.
(3) This reflects the impact of extending the useful lives of equipment acquired in the RSC acquisition, net of
the impact of additional depreciation associated with the fair value mark-up of such equipment.
(4) This reflects additional costs recorded in cost of rental equipment sales associated with the fair value
mark-up of rental equipment acquired in the RSC acquisition and subsequently sold.
(5) This reflects a reduction of interest expense associated with the fair value mark-up of debt acquired in the
RSC acquisition. See note 11 to our consolidated financial statements for additional detail on the acquired
debt.
(6) As discussed in note 4 to our consolidated financial statements, this reflects severance costs and branch
closure charges associated with our restructuring programs, all of which were closed as of December 31,
2016.
29
(7) This reflects write-offs of leasehold improvements and other fixed assets in connection with our
restructuring programs.
EBITDA GAAP Reconciliations. 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 the acquired RSC 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. Management
believes that EBITDA and adjusted EBITDA, when viewed with the Company’s results under U.S. generally
accepted accounting principles (“GAAP”) and the accompanying reconciliations, 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.
However, EBITDA and adjusted EBITDA are not measures of financial performance or liquidity under GAAP
and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as
indicators of operating performance or liquidity.
The table below provides a reconciliation between net income and EBITDA and adjusted EBITDA:
Year Ended December 31,
2016
2015
2014
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 566
343
511
990
255
$ 585
378
567
976
268
$ 540
310
555
921
273
EBITDA
2,665
2,774
2,599
Merger related costs (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of the fair value mark-up of acquired RSC fleet (4) . . . . . . . . . . . . . . . . . . .
—
14
45
35
(26)
6
49
29
11
(1)
74
35
Adjusted EBITDA
$2,759
$2,832
$2,718
30
The table below provides a reconciliation between net cash provided by operating activities and EBITDA
and adjusted EBITDA:
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . .
Gain on sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger related costs (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt securities and amendment of ABL facility . . . . . .
Excess tax benefits from share-based payment arrangements . . . . . . . . . . . . . . . . .
Changes in assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes, net
Year Ended December 31,
2016
2015
2014
$1,953
$1,995
$1,801
(9)
204
4
—
(14)
(45)
(101)
58
101
415
99
(10)
227
8
26
(6)
(49)
(123)
5
194
447
60
(17)
229
11
(11)
1
(74)
(80)
—
182
457
100
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,665
2,774
2,599
Add back:
Merger related costs (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of the fair value mark-up of acquired RSC fleet (4) . . . . . . . . . . . . . . . . . . .
—
14
45
35
(26)
6
49
29
11
(1)
74
35
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,759
$2,832
$2,718
(1) This reflects transaction costs associated with the April 2014 National Pump acquisition. The income for the
year ended December 31, 2015 reflects a decline in the fair value of the contingent cash consideration
component of the National Pump purchase price.
(2) As discussed in note 4 to our consolidated financial statements, this reflects severance costs and branch
closure charges associated with our restructuring programs, all of which were closed as of December 31,
2016.
(3) Represents non-cash, share-based payments associated with the granting of equity instruments.
(4) This reflects additional costs recorded in cost of rental equipment sales associated with the fair value
mark-up of rental equipment acquired in the RSC acquisition and subsequently sold.
For the year ended December 31, 2016, EBITDA decreased $109, or 3.9 percent, and adjusted EBITDA
decreased $73, or 2.6 percent. The EBITDA decrease primarily reflects decreased profit from equipment rentals
and sales of rental equipment, and the impact of the merger credit recognized during the year ended
December 31, 2015 associated with a decline in the fair value of the contingent cash consideration component of
the National Pump purchase price due to lower than expected financial performance compared to agreed upon
financial targets. The adjusted EBITDA decrease primarily reflects decreased profit from equipment rentals and
sales of rental equipment. For the year ended December 31, 2016, EBITDA margin decreased 140 basis points to
46.3 percent, and adjusted EBITDA margin decreased 80 basis points to 47.9 percent. The decrease in the
EBITDA margin primarily reflects decreased margins from equipment rentals and the impact of the National
Pump merger credit recognized during the year ended December 31, 2015. The decrease in the adjusted EBITDA
margin primarily reflects decreased margins from equipment rentals.
For the year ended December 31, 2015, EBITDA increased $175, or 6.7 percent, and adjusted EBITDA
increased $114, or 4.2 percent. The EBITDA increase primarily reflects increased profit from equipment rentals,
decreased selling, general and administrative expense and reduced merger costs associated with a decline in the
31
fair value of the contingent cash consideration component of the National Pump purchase price due to lower than
expected financial performance compared to agreed upon financial targets. The adjusted EBITDA increase
primarily reflects increased profit from equipment rentals. For the year ended December 31, 2015, EBITDA
margin increased 200 basis points to 47.7 percent, and adjusted EBITDA margin increased 90 basis points to
48.7 percent. The increase in the EBITDA margin primarily reflects increased margins from equipment rentals,
improved selling, general and administrative leverage, and reduced merger costs. The increase in the adjusted
EBITDA margin primarily reflects increased margins from equipment rentals and improved selling, general and
administrative leverage.
Revenues. Revenues for each of the three years in the period ended December 31, 2016 were as follows:
Year Ended December 31,
Change
2016
2015
2014
2016
2015
Equipment rentals* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,941
496
144
79
102
$4,949
538
157
79
94
$4,819
544
149
85
88
(0.2)%
(7.8)%
(8.3)%
— %
8.5%
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,762
$5,817
$5,685
(0.9)%
2.7%
(1.1)%
5.4%
(7.1)%
6.8%
2.3%
*Equipment rentals metrics:
Year-over-year (decrease) increase in rental rates (1) . . . . . . . . .
Year-over-year increase in the volume of equipment on rent
. . .
Time utilization (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67.9% 67.3% 68.8% 60 bps
(150) bps
(2.2)%
3.1%
0.5%
3.2%
(1) Rental rate changes are calculated based on the year-over-year variance in average contract rates, weighted
by the prior period revenue mix.
(2) Time utilization is calculated by dividing the amount of time an asset is on rent by the amount of time the
asset has been owned during the year.
Equipment rentals include our revenues from renting equipment, as well as revenue related to the fees we
charge customers: for equipment delivery and pick-up; to protect the customer against liability for damage to our
equipment while on rent; and for fuel. Collectively, these “ancillary fees” represented about 12 percent of
equipment rental revenue in 2016. Delivery and pick-up revenue, which represented about seven percent of
equipment rental revenue in 2016, is recognized when the service is performed. Customers have the option of
purchasing a damage waiver when they rent our equipment to protect against potential loss or damage; we refer
to the fee we charge for the waiver as Rental Protection Plan (or “RPP”) revenue. RPP revenue, which
represented about two percent of equipment rental revenue in 2016, is recognized ratably over the contract term.
Fees related to the consumption of fuel by our customers are recognized when the equipment is returned by the
customer (and consumption, if any, can be measured). Sales of rental equipment represent our revenues from the
sale of used rental equipment. Sales of new equipment represent our revenues from the sale of new equipment.
Contractor supplies sales represent our sales of supplies utilized by contractors, which include construction
consumables, tools, small equipment and safety supplies. Services and other revenues primarily represent our
revenues earned from providing repair and maintenance services on our customers’ fleet (including parts sales).
2016 total revenues of $5.8 billion decreased 0.9 percent compared with 2015. The revenue decrease
primarily reflects a 7.8 percent decrease in sales of rental equipment due primarily to a decrease in the volume of
equipment sold through wholesale channels. Rental revenue decreased 0.2 percent, primarily due to a 2.2 percent
rental rate decrease, partially offset by a 3.1 percent increase in the volume of OEC on rent, which included the
adverse impact of currency. Excluding the adverse impact from currency, rental revenue would have increased
0.2 percent year-over-year.
2015 total revenues of $5.8 billion increased 2.3 percent compared with 2014. As discussed above, in April
2014, we acquired National Pump, and the results of National Pump’s operations have been included in our
32
consolidated financial statements since the acquisition date. The revenue increase primarily reflects a 2.7 percent
increase in equipment rentals, which was primarily due to a 3.2 percent increase in the volume of OEC on rent,
which included the adverse impact of currency, and a 0.5 percent rental rate increase, partially offset by the
adverse impact of inflation related to replacement fleet purchases. Excluding the adverse impact from currency,
rental revenue would have increased 4.3 percent year-over-year.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with GAAP. A summary of our significant
accounting policies is contained in note 2 to our consolidated financial statements. In applying many accounting
principles, we make assumptions, estimates and/or judgments. These assumptions, estimates and/or judgments
are often subjective and may change based on changing circumstances or changes in our analysis. Material
changes in these assumptions, estimates and/or judgments have the potential to materially alter our results of
operations. We have identified below our accounting policies that we believe could potentially produce
materially different results if we were to change underlying assumptions, estimates and/or judgments. Although
actual results may differ from those estimates, we believe the estimates are reasonable and appropriate.
Revenue Recognition. We recognize revenues from renting equipment on a straight-line basis. Our rental
contract periods are hourly, daily, weekly or monthly. By way of example, if a customer were to rent a piece of
equipment and the daily, weekly and monthly rental rates for that particular piece were (in actual dollars) $100,
$300 and $900, respectively, we would recognize revenue of $32.14 per day. The daily rate for recognition
purposes is calculated by dividing the monthly rate of $900 by the monthly term of 28 days. This daily rate
assumes that the equipment will be on rent for the full 28 days, as we are unsure of when the customer will return
the equipment and therefore unsure of which rental contract period will apply.
As part of this straight-line methodology, when the equipment is returned, we recognize as incremental
revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on
the rental contract period applicable to the actual number of days the equipment was out on rent, over the
cumulative amount of revenue recognized to date. In any given accounting period, we will have customers return
equipment and be contractually required to pay us more than the cumulative amount of revenue recognized to
date under the straight-line methodology. For instance, continuing the above example, if the customer rented the
above piece of equipment on December 29 and returned it at the close of business on January 1, we would
recognize incremental revenue on January 1 of $171.44 (in actual dollars, representing the difference between the
amount the customer is contractually required to pay, or $300 at the weekly rate, and the cumulative amount
recognized to date on a straight-line basis, or $128.56, which represents four days at $32.14 per day).
We record amounts billed to customers in excess of recognizable revenue as deferred revenue on our
balance sheet. We had deferred revenue of $33 and $32 as of December 31, 2016 and 2015, respectively.
Equipment rentals include our revenues from renting equipment, as well as revenue related to the fees we charge
customers: for equipment delivery and pick-up; to protect the customer against liability for damage to our
equipment while on rent; and for fuel. Delivery and pick-up revenue is recognized when the service is performed.
Customers have the option of purchasing a damage waiver when they rent our equipment to protect against
potential loss or damage; we refer to the fee we charge for the waiver as Rental Protection Plan (or “RPP”)
revenue. RPP revenue is recognized ratably over the contract term. Fees related to the consumption of fuel by our
customers are recognized when the equipment is returned by the customer (and consumption, if any, can be
measured).
Revenues from the sale of rental equipment and new equipment are recognized at the time of delivery to, or
pick-up by, the customer and when collectibility is reasonably assured. Sales of contractor supplies are also
recognized at the time of delivery to, or pick-up by, the customer. Service revenue is recognized as the services
are performed.
33
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts. These allowances reflect
our estimate of the amount of our receivables that we will be unable to collect based on historical write-off
experience. Our estimate could require change based on changing circumstances, including changes in the
economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase
or decrease our allowances. Trade receivables that have contractual maturities of one year or less are written-off
when they are determined to be uncollectible based on the criteria necessary to qualify as a deduction for federal
tax purposes. Write-offs of such receivables require management approval based on specified dollar thresholds.
Useful Lives and Salvage Values of Rental Equipment and Property and Equipment. We depreciate rental
equipment and property and equipment over their estimated useful lives, after giving effect to an estimated
salvage value which ranges from zero percent to 10 percent of cost. Rental equipment is depreciated whether or
not it is out on rent. Costs we incur in connection with refurbishment programs that extend the life of our
equipment are capitalized and amortized over the remaining useful life of the equipment. The costs incurred
under these refurbishment programs were $18, $30 and $39 for the years ended December 31, 2016, 2015 and
2014, respectively, and are included in purchases of rental equipment in our consolidated statements of cash
flows.
The useful life of an asset is determined based on our estimate of the period over which the asset will
generate revenues; such periods are periodically reviewed for reasonableness. In addition, the salvage value,
which is also reviewed periodically for reasonableness, is determined based on our estimate of the minimum
value we will realize from the asset after such period. We may be required to change these estimates based on
changes in our industry or other changing circumstances. If these estimates change in the future, we may be
required to recognize increased or decreased depreciation expense for these assets.
To the extent that the useful lives of all of our rental equipment were to increase or decrease by one year, we
estimate that our annual depreciation expense would decrease or increase by approximately $88 or $110,
respectively. Similarly, to the extent the estimated salvage values of all of our rental equipment were to increase
or decrease by one percentage point, we estimate that our annual depreciation expense would change by
approximately $10. Any change in depreciation expense as a result of a hypothetical change in either useful lives
or salvage values would generally result in a proportional increase or decrease in the gross profit we would
recognize upon the ultimate sale of the asset. To the extent that the useful lives of all of our depreciable property
and equipment were to increase or decrease by one year, we estimate that our annual non-rental depreciation
expense would decrease or increase by approximately $20 or $30, respectively.
Acquisition Accounting. We have made a number of acquisitions in the past and may continue to make
acquisitions in the future. The assets acquired and liabilities assumed are recorded based on their respective fair
values at the date of acquisition. Long-lived assets (principally rental equipment), goodwill and other intangible
assets generally represent the largest components of our acquisitions. The intangible assets that we have acquired
are non-compete agreements, customer relationships and trade names and associated trademarks. Goodwill is
calculated as the excess of the cost of the acquired entity over the net of the fair value of the assets acquired and
the liabilities assumed. Non-compete agreements, customer relationships and trade names and associated
trademarks are valued based on an excess earnings or income approach based on projected cash flows.
When we make an acquisition, we also acquire other assets and assume liabilities. These other assets and
liabilities typically include, but are not limited to, parts inventory, accounts receivable, accounts payable and
other working capital items. Because of their short-term nature, the fair values of these other assets and liabilities
generally approximate the book values on the acquired entities’ balance sheets.
Evaluation of Goodwill Impairment. Goodwill is tested for impairment annually or more frequently if an
event or circumstance indicates that an impairment loss may have been incurred. Application of the goodwill
impairment test requires judgment, including: the identification of reporting units; assignment of assets and
34
liabilities to reporting units; assignment of goodwill to reporting units; determination of the fair value of each
reporting unit; and an assumption as to the form of the transaction in which the reporting unit would be acquired
by a market participant (either a taxable or nontaxable transaction).
We estimate the fair value of our reporting units (which are our regions) using a combination of an income
approach based on the present value of estimated future cash flows and a market approach based on market price
data of shares of our Company and other corporations engaged in similar businesses as well as acquisition
multiples paid in recent transactions. We believe this approach, which utilizes multiple valuation techniques,
yields the most appropriate evidence of fair value. We review goodwill for impairment utilizing a two-step
process. The first step of the impairment test requires a comparison of the fair value of each of our reporting
units’ net assets to the respective carrying value of net assets. If the carrying value of a reporting unit’s net assets
is less than its fair value, no indication of impairment exists and a second step is not performed. If the carrying
amount of a reporting unit’s net assets is higher than its fair value, there is an indication that an impairment may
exist and a second step must be performed. In the second step, the impairment is calculated by comparing the
implied fair value of the reporting unit’s goodwill (as if purchase accounting were performed on the testing date)
with the carrying amount of the goodwill. If the carrying amount of the reporting unit’s goodwill is greater than
the implied fair value of its goodwill, an impairment loss must be recognized for the excess and charged to
operations.
Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of
our operating results, business plans, expected growth rates, cost of capital and tax rates. We also make certain
forecasts about future economic conditions, interest rates and other market data. Many of the factors used in
assessing fair value are outside the control of management, and these assumptions and estimates may change in
future periods. Changes in assumptions or estimates could materially affect the estimate of the fair value of a
reporting unit, and therefore could affect the likelihood and amount of potential impairment. The following
assumptions are significant to our income approach:
Business Projections- We make assumptions about the level of equipment rental activity in the marketplace
and cost levels. These assumptions drive our planning assumptions for pricing and utilization and also
represent key inputs for developing our cash flow projections. These projections are developed using our
internal business plans over a ten-year planning period that are updated at least annually;
Long-term Growth Rates- Beyond the planning period, we also utilize an assumed long-term growth rate
representing the expected rate at which a reporting unit’s cash flow stream is projected to grow. These rates
are used to calculate the terminal value of our reporting units, and are added to the cash flows projected
during our ten-year planning period; and
Discount Rates- Each reporting unit’s estimated future cash flows are discounted at a rate that is consistent
with a weighted-average cost of capital that is likely to be expected by market participants. The weighted-
average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt
holders of a business enterprise.
The market approach is one of the other methods used for estimating the fair value of our reporting units’
business enterprise. This approach takes two forms: The first is based on the market value (market capitalization
plus interest-bearing liabilities) and operating metrics (e.g., revenue and EBITDA) of companies engaged in the
same or similar line of business. The second form is based on multiples paid in recent acquisitions of companies.
Financial Accounting Standards Board (“FASB”) guidance permits entities to first assess qualitative factors
to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.
In connection with our goodwill impairment test that was conducted as of October 1, 2015, we bypassed the
qualitative assessment for each of our reporting units and proceeded directly to the first step of the goodwill
35
impairment test. Our goodwill impairment testing as of this date indicated that all of our reporting units,
excluding our Pump Solutions reporting unit, had estimated fair values which exceeded their respective carrying
amounts by at least 51 percent. In connection with this impairment testing, we generally utilized discount rates of
10.0 percent for our general rentals segment, and Trench Safety and Power and HVAC reporting units, and
13.5 percent for our Pump Solutions reporting unit, as well as a long-term terminal growth rate for all reporting
units of 3.0 percent beyond our planning period.
Most of the assets in the Pump Solutions reporting unit were acquired in the April 2014 National Pump
acquisition discussed above. Based on the October 1, 2015 test, the Pump Solutions reporting unit’s estimated
fair value exceeded its carrying amount by 3.3 percent. In light of continuing pressures on the Pump Solutions
reporting unit related primarily to upstream oil and gas customers, we continued to monitor the Pump Solutions
reporting unit for impairment
test as of
November 30, 2015. As of the November 30, 2015 testing date, the estimated fair value of the Pump Solutions
reporting unit exceeded its carrying amount by 1 percent. No additional impairment indicators were noted as of
December 31, 2015.
through the end of 2015, and performed another impairment
Given the narrow margin by which the estimated fair value of the Pump Solutions reporting unit exceeded
its carrying amount, we also performed a sensitivity analysis related to the discount rate and long-term growth
rate used in the November 30, 2015 test. Specifically, we performed the sensitivity analysis by: (i) increasing the
discount rate by 50 basis points and (ii) reducing the long-term growth rate by 25 basis points. The Pump
Solutions reporting unit failed step one of the goodwill impairment test under the sensitivity test, and would have
required step two testing to determine potential goodwill impairment. We continued to monitor the Pump
Solutions reporting unit for impairment following the November 30, 2015 test.
In connection with our goodwill impairment test that was conducted as of October 1, 2016, we bypassed the
qualitative assessment for each reporting unit and proceeded directly to the first step of the goodwill impairment
test. Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Pump
Solutions reporting unit, had estimated fair values which exceeded their respective carrying amounts by at least
53 percent. The estimated fair value of our Pump Solutions reporting unit exceeded its carrying amount by
approximately 15 percent.
For the goodwill impairment test that was conducted as of October 1, 2016 for our Pump Solutions reporting
unit, we utilized a discount rate of 14.0 percent and a long-term terminal growth rate of 3.0 percent beyond our
planning period. The improvement in the margin by which the Pump Solutions reporting unit’s estimated fair
value exceeded its carrying amount in the October 1, 2016 test as compared to the November 30, 2015 test
primarily reflects (i) a reduction in the Pump Solutions reporting unit’s carrying value primarily due to the
depreciation and amortization of its assets, as well as a reduction in its working capital and (ii) improvement in
the Pump Solutions reporting unit’s revenue mix in its long term forecast largely due to having a smaller portion
of revenue attributable to upstream oil and gas customers, which have experienced significant volatility in recent
years, and a larger portion of revenue attributable to downstream oil and gas, construction, municipality and
mining customers. We also performed a sensitivity analysis related to the discount rate and long-term growth rate
used in the October 1, 2016 test by: (i) increasing the discount rate by 50 basis points and (ii) reducing the long-
term growth rate by 25 basis points. The Pump Solutions reporting unit passed step one of the goodwill
impairment test under the sensitivity test. The October 1, 2016 impairment test assumed earnings growth for the
Pump Solutions reporting unit over the next 10 years. Should this growth not occur, if the reporting unit
otherwise fails to meet its current financial plans, or if there were changes to any other key assumption used in
the test, the Pump Solutions reporting unit could fail step one of the goodwill impairment test in a future period.
As of December 31, 2016, there was $312 of goodwill in the Pump Solutions reporting unit. We will continue to
monitor the Pump Solutions reporting unit for impairment.
Impairment of Long-lived Assets (Excluding Goodwill). We review the recoverability of our long-lived assets,
including rental equipment and property and equipment, when events or changes in circumstances occur that indicate
that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our
36
ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without
interest charges). If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for
the difference between the estimated fair value and carrying value. We recognized immaterial asset impairment
charges during the years ended December 31, 2016, 2015 and 2014.
In addition to the impairment reviews we conduct in connection with branch consolidations and other
changes in the business, each quarter we conduct an impairment review of rental assets. As part of this
impairment review, we estimate the future rental revenues from our rental assets based on current and expected
utilization levels, the age of the assets and their remaining useful lives. Additionally, we estimate when the assets
are expected to be removed or retired from our rental fleet as well as the expected proceeds to be realized upon
disposition. Based on our most recently completed quarterly review, there was no impairment associated with our
rental assets.
Income Taxes. We recognize deferred tax assets and liabilities for certain future deductible or taxable temporary
differences expected to be reported in our income tax returns. These deferred tax assets and liabilities are computed
using the tax rates that are expected to apply in the periods when the related future deductible or taxable temporary
difference is expected to be settled or realized. In the case of deferred tax assets, the future realization of the deferred
tax benefits and carryforwards are determined with consideration to historical profitability, projected future taxable
income, the expected timing of the reversals of existing temporary differences, and tax planning strategies. After
consideration of all these factors, we recognize deferred tax assets when we believe that it is more likely than not that
we will realize them. The most significant positive evidence that we consider in the recognition of deferred tax assets is
the expected reversal of cumulative deferred tax liabilities resulting from book versus tax depreciation of our rental
equipment fleet that is well in excess of the deferred tax assets.
We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax
return regarding uncertainties in income tax positions. The first step is recognition: we determine whether it is more
likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the
more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate taxing
authority with full knowledge of all relevant information. The second step is measurement: a tax position that meets the
more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial
statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement.
We are subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, accruals
for tax contingencies are established based on the probable outcomes of such matters. Our ongoing assessments
of the probable outcomes of the examinations and related tax accruals require judgment and could increase or
decrease our effective tax rate as well as impact our operating results.
Reserves for Claims. We are exposed to various claims relating to our business, including those for which we
retain portions of the losses through the application of deductibles and self-insured retentions, which we sometimes
refer to as “self-insurance.” These claims include (i) workers’ compensation claims and (ii) claims by third parties for
injury or property damage involving our equipment, vehicles or personnel. These types of claims may take a
substantial amount of time to resolve and, accordingly, the ultimate liability associated with a particular claim may not
be known for an extended period of time. Our methodology for developing self-insurance reserves is based on
management estimates, which incorporate periodic actuarial valuations. Our estimation process considers, among other
matters, the cost of known claims over time, cost inflation and incurred but not reported claims. These estimates may
change based on, among other things, changes in our claims history or receipt of additional information relevant to
assessing the claims. Further, these estimates may prove to be inaccurate due to factors such as adverse judicial
determinations or settlements at higher than estimated amounts. Accordingly, we may be required to increase or
decrease our reserve levels.
37
Legal Contingencies. We are involved in a variety of claims, lawsuits, investigations and proceedings, as
described in note 13 to our consolidated financial statements and elsewhere in this report. We determine whether
an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can
be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using
available information. We develop our views on estimated losses in consultation with outside counsel handling
our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation
and settlement strategies. Should developments in any of these matters cause a change in our determination such
that we expect an unfavorable outcome and result in the need to recognize a material accrual, or should any of
these matters result in a final adverse judgment or be settled for a significant amount, they could have a material
adverse effect on our results of operations in the period or periods in which such change in determination,
judgment or settlement occurs.
Results of Operations
As discussed in note 3 to our consolidated financial statements, our two reportable segments are i) general
rentals and ii) trench, power and pump. The general rentals segment includes the rental of construction, aerial,
industrial and homeowner equipment and related services and activities. The general rentals segment’s customers
include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and
government entities. The general rentals segment operates throughout the United States and Canada. The trench,
power and pump segment is comprised of: (i) the Trench Safety region, which rents trench safety equipment such
as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers and line
testing equipment for underground work, (ii) the Power and HVAC region, which rents power and HVAC
equipment such as portable diesel generators, electrical distribution equipment, and temperature control
equipment including heating and cooling equipment, and (iii) the Pump Solutions region, which rents pumps
primarily used by energy and petrochemical customers. The trench, power and pump segment’s customers
include construction companies involved in infrastructure projects, municipalities and industrial companies. This
segment operates throughout the United States and in Canada.
As discussed in note 3 to our consolidated financial statements, we aggregate our nine geographic regions—
Industrial (which serves the geographic Gulf region and has a strong industrial presence), Mid-Atlantic, Midwest,
Northeast, Pacific West, South-Central, South, Southeast and Western Canada—into our general rentals reporting
segment. We periodically review the size and geographic scope of our regions, and have occasionally
reorganized the regions to create a more balanced and effective structure. Historically, there have been variances
in the levels of equipment rentals gross margins achieved by these regions. For the five year period ended
December 31, 2016, one of our general rentals’ regions had an equipment rentals gross margin that varied by
between 10 percent and 12 percent from the equipment rentals gross margins of the aggregated general rentals’
regions over the same period. The rental industry is cyclical, and there historically have been regions with
equipment rentals gross margins that varied by greater than 10 percent from the equipment rentals gross margins
of the aggregated general rentals’ regions, though the specific regions with margin variances of over 10 percent
have fluctuated. We expect margin convergence going forward given the cyclical nature of the rental industry,
and monitor the margin variances and confirm the expectation of future convergence on a quarterly basis.
We similarly monitor the margin variances for the regions in the trench, power and pump segment. The
Pump Solutions region is primarily comprised of locations acquired in the April 2014 National Pump acquisition
discussed below. As such, there isn’t a long history of the Pump Solutions region’s rental margins included in the
trench, power and pump segment. When monitoring for margin convergence, we include projected future results.
We monitor the trench, power and pump segment margin variances and confirm the expectation of future
convergence on a quarterly basis.
We believe that the regions that are aggregated into our segments have similar economic characteristics, as
each region is capital intensive, offers similar products to similar customers, uses similar methods to distribute its
products, and is subject to similar competitive risks. The aggregation of our regions also reflects the management
38
structure that we use for making operating decisions and assessing performance. Although we believe
aggregating these regions into our reporting segments for segment reporting purposes is appropriate, to the extent
that there are significant margin variances that do not converge, we may be required to disaggregate the regions
into separate reporting segments. Any such disaggregation would have no impact on our consolidated results of
operations.
These segments align our external segment reporting with how management evaluates business performance
and allocates resources. We evaluate segment performance based on segment equipment rentals gross profit. Our
revenues, operating results, and financial condition fluctuate from quarter to quarter reflecting the seasonal rental
patterns of our customers, with rental activity tending to be lower in the winter.
Revenues by segment were as follows:
General
rentals
Trench,
power and pump
Total
Year Ended December 31, 2016
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,166
459
128
64
91
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,908
Year Ended December 31, 2015
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,241
504
137
67
83
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,032
Year ended December 31, 2014
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,222
519
113
73
75
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,002
$775
37
16
15
11
$854
$708
34
20
12
11
$785
$597
25
36
12
13
$683
$4,941
496
144
79
102
$5,762
$4,949
538
157
79
94
$5,817
$4,819
544
149
85
88
$5,685
Equipment rentals. 2016 equipment rentals of $4.9 billion decreased $8, or 0.2 percent, as compared to
2015. The equipment rentals decrease was primarily due to a 2.2 percent rental rate decrease, partially offset by a
3.1 percent increase in the volume of OEC on rent, which included the adverse impact of currency. Excluding the
adverse impact from currency, rental revenue would have increased 0.2 percent year-over-year. Equipment
rentals represented 86 percent of total revenues in 2016. On a segment basis, equipment rentals represented
85 percent and 91 percent of total revenues for general rentals and trench, power and pump, respectively. General
rentals equipment rentals decreased $75, or 1.8 percent, as compared to 2015, primarily reflecting decreased
rental rates partially offset by a 2.9 percent increase in the volume of OEC on rent, which included the adverse
impact of currency. Trench, power and pump equipment rentals increased $67, or 9.5 percent, primarily
reflecting increased average OEC. Trench, power and pump average OEC for 2016 increased 6.7 percent as
compared to 2015.
2015 equipment rentals of $4.9 billion increased $0.1 billion, or 2.7 percent, as compared to 2014. As
discussed above, in April 2014, we acquired National Pump, and the results of National Pump’s operations have
been included in our consolidated financial statements since the acquisition date. The equipment rentals increase
39
was primarily due to a 3.2 percent increase in the volume of OEC on rent, which included the adverse impact of
currency, and a 0.5 percent rental rate increase, partially offset by the adverse impact of inflation related to
replacement fleet purchases. Excluding the adverse impact from currency, rental revenue would have increased
4.3 percent year-over-year. Equipment rentals represented 85 percent of total revenues in 2015. On a segment
basis, equipment rentals represented 84 percent and 90 percent of total revenues for general rentals and trench,
power and pump, respectively. General rentals equipment rentals increased slightly year-over-year, primarily
reflecting a 2.3 percent increase in the volume of OEC on rent, which included the adverse impact of currency,
partially offset by the adverse impact of inflation related to replacement fleet purchases. Excluding the adverse
impact from currency, general rentals’ rental revenue would have increased 1.7 percent year-over-year. Trench,
power and pump equipment rentals increased $111, or 18.6 percent, primarily reflecting increased average OEC,
partially offset by decreased time utilization due to the impact of the acquisition of National Pump discussed
above. The locations acquired in the National Pump acquisition experienced volume and pricing pressure
associated with upstream oil and gas customers. Trench, power and pump average OEC for 2015 increased
34 percent, including the impact of the acquisition of National Pump discussed above, as compared to 2014.
Sales of rental equipment. For the three years in the period ended December 31, 2016, sales of rental
equipment represented approximately 9 percent of our total revenues. Our general rentals segment accounted for
substantially all of these sales. 2016 sales of rental equipment of $496 decreased slightly from 2015, and 2015
sales of rental equipment of $538 decreased slightly from 2014.
Sales of new equipment. For the three years in the period ended December 31, 2016, sales of new equipment
represented approximately 3 percent of our total revenues. Our general rentals segment accounted for
substantially all of these sales. 2016 sales of new equipment of $144 decreased slightly from 2015, and 2015
sales of new equipment of $157 increased slightly from 2014.
Sales of contractor supplies. For the three years in the period ended December 31, 2016, sales of contractor
supplies represented approximately 1 percent of our total revenues. Our general rentals segment accounted for
substantially all of these sales. 2016 sales of contractor supplies were flat with 2015, and 2015 sales of contractor
supplies decreased slightly from 2014.
Service and other revenues. For the three years in the period ended December 31, 2016, service and other
revenues represented approximately 2 percent of our total revenues. Our general rentals segment accounted for
substantially all of these sales. 2016 service and other revenues of $102 increased slightly from 2015, and 2015
service and other revenues of $94 increased slightly from 2014.
Fourth Quarter 2016 Items. The fourth quarter of 2016 includes $6 of restructuring charges associated with
the restructuring program we initiated in the fourth quarter of 2015 and closed in the fourth quarter of 2016,
which is discussed further in note 4 to our consolidated financial statements. Additionally, as discussed in note
11 to our consolidated financial statements, in the fourth quarter of 2016, we redeemed $850 principal amount of
our 7 5/8 percent Senior Notes due 2022 and issued $750 principal amount of 5 1/2 percent Senior Notes due
2027. Upon the partial redemption of the 7 5/8 percent Senior Notes due 2022, we recognized a loss of $65 in
interest expense, net. The loss represented the difference between the net carrying amount and the total purchase
price of the redeemed notes.
Fourth Quarter 2015 Items. The fourth quarter of 2015 includes a decrease in stock compensation, net of
$14 as compared to the fourth quarter of 2014 primarily due to lower than expected revenue and profitability.
Additionally, as discussed in note 4 to our consolidated financial statements, in the fourth quarter of 2015, we
initiated a restructuring program in response to recent challenges in our operating environment. Though we
expected solid industry growth in 2016, the restructuring program was initiated in an effort to reduce costs in an
environment with continuing pressures on volume and pricing. We recognized $4 of costs for the program in the
fourth quarter of 2015. We completed the restructuring program in the fourth quarter of 2016. Additionally,
during the fourth quarter of 2015, we reached agreement on a settlement that provided us with a $5 refund on
previously paid property taxes. We recognized a reduction of $5 in cost of equipment rentals, excluding
40
depreciation, associated with the settlement during the fourth quarter of 2015. Additionally, our provision for
income taxes for the fourth quarter of 2015 includes the impact of a $5 increase in valuation allowances resulting
from the enactment of Connecticut state limitations on net operating loss utilization. During the nine months
ended September 30, 2015, we recognized $57 of excess tax benefits from share-based payment arrangements in
our consolidated statements of cash flows. The excess tax benefits from share-based payment arrangements
resulted from stock-based compensation windfall deductions in excess of the amounts reported for financial
reporting purposes. Such benefits are recognized as a credit to additional paid-in capital, and are reported as
financing cash flows. Our consolidated statements of cash flows for the nine months ended September 30, 2015
included a $57 increase to financing cash flows and a corresponding decrease to operating cash flows associated
with the excess tax benefits from share-based payment arrangements. During the fourth quarter of 2015, $52 of
the previously recognized excess tax benefits from share-based payment arrangements were reversed due to the
impact on taxable income of a bonus tax depreciation bill that passed in the fourth quarter of 2015. The reversal
of the previously recognized excess tax benefits from share-based payment arrangements resulted in a $52
increase to operating cash flows and a corresponding decrease to financing cash flows during the fourth quarter
of 2015.
Segment Equipment Rentals Gross Profit
Segment equipment rentals gross profit and gross margin for each of the three years in the period ended
December 31, 2016 were as follows:
General
rentals
Trench,
power and pump
Total
2016
2015
2014
Equipment Rentals Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment Rentals Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,725
41.4%
Equipment Rentals Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment Rentals Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,819
42.9%
Equipment Rentals Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment Rentals Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,790
42.4%
$ 364
47.0%
$ 328
46.3%
$ 302
50.6%
$2,089
42.3%
$2,147
43.4%
$2,092
43.4%
General rentals. For the three years in the period ended December 31, 2016, general rentals accounted for
84 percent of our total equipment rentals gross profit. This contribution percentage is consistent with general
rentals’ equipment rental revenue contribution over the same period. General rentals’ equipment rentals gross
profit in 2016 decreased $94 and equipment rentals gross margin decreased 150 basis points, primarily reflecting
decreased rental rates partially offset by a 70 basis point increase in time utilization. Time utilization was
69.3 percent and 68.6 percent for the years ended December 31, 2016 and 2015, respectively. The decreased
rental rates reflected continued pressure from oil and gas and from Canada, and the impact of recent industry
fleet expansion. Although we experienced rate pressures during 2016, we also saw improving demand in many of
our core markets, as evidenced by a 2.9 percent increase in the volume of OEC on rent.
General rentals’ equipment rentals gross profit in 2015 increased $29 and equipment rentals gross margin
increased 50 basis points, primarily reflecting cost improvements, partially offset by a 90 basis point decrease in
time utilization. As compared to the equipment rentals revenue increase of 0.5 percent, delivery costs decreased
3.2 percent and compensation costs decreased 3.4 percent. Time utilization was 68.6 percent and 69.5 percent for
the years ended December 31, 2015 and 2014, respectively. During the year ended December 31, 2015, our
locations with significant exposure to upstream oil and gas experienced volume and pricing pressure associated
with upstream oil and gas customers, which was a primary driver of the decrease in time utilization.
Trench, power and pump. For the year ended December 31, 2016, equipment rentals gross profit increased
by $36 and equipment rentals gross margin increased 70 basis points from 2015. The increase in equipment
rentals gross profit primarily reflects increased equipment rentals revenue on a larger fleet across a larger
41
network of branches. Year-over-year, trench, power and pump equipment rentals increased 9.5 percent and
average OEC increased 6.7 percent. Capitalizing on the demand for the higher margin equipment rented by our
trench, power and pump segment has been a key component of our strategy in recent years.
For the year ended December 31, 2015, equipment rentals gross profit increased by $26 and equipment
rentals gross margin decreased 430 basis points from 2014. The increase in equipment rentals gross profit
primarily reflects increased equipment rentals revenue on a significantly larger fleet at our locations excluding
the Pump Solutions region discussed below. At our locations excluding the Pump Solutions region, as compared
to 2014, equipment rentals revenue increased approximately 21 percent, average OEC increased approximately
28 percent and equipment rentals gross profit increased approximately 24 percent. The decrease in equipment
rentals gross margin primarily reflects decreased margins in the Pump Solutions region which experienced
volume and pricing pressure associated with upstream oil and gas customers. The aggregate equipment rentals
gross margin in the trench, power and pump segment excluding the Pump Solutions region increased by
approximately 130 basis points from 2014.
Gross Margin. Gross margins by revenue classification were as follows:
Total gross margin . . . . . . . . . . . . . . . . . . . . . .
Equipment rentals . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment
. . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . .
Year Ended December 31,
Change
2016
41.7%
42.3%
41.1%
17.4%
30.4%
59.8%
2015
42.6%
43.4%
42.2%
16.6%
30.4%
59.6%
2014
2016
2015
42.8%
(90) bps
43.4% (110) bps
42.1% (110) bps
80 bps
19.5%
— bps
30.6%
20 bps
63.6%
(20) bps
— bps
10 bps
(290) bps
(20) bps
(400) bps
2016 gross margin of 41.7 percent decreased 90 basis points as compared to 2015, primarily reflecting
decreased gross margins from equipment rentals and sales of rental equipment. Equipment rentals gross margin
decreased 110 basis points as compared to 2015, primarily reflecting a 2.2 percent rental rate decrease partially
offset by a 60 basis point increase in time utilization. Time utilization was 67.9 percent and 67.3 percent for the
years ended December 31, 2016 and 2015, respectively. The decreased rental rates reflected continued pressure
from oil and gas and from Canada, and the impact of recent industry fleet expansion. Although we experienced
rate pressures during 2016, we also saw improving demand in many of our core markets, as evidenced by a
3.1 percent increase in the volume of OEC on rent. Gross margin from sales of rental equipment decreased 110
basis points primarily due to decreased pricing.
2015 gross margin of 42.6 percent decreased slightly as compared to 2014. Equipment rentals gross margin
was flat with 2014, primarily reflecting a 0.5 percent rental rate increase and compensation cost improvements
offset by a 150 basis point decrease in time utilization. Time utilization was 67.3 percent and 68.8 percent for the
years ended December 31, 2015 and 2014, respectively. During the year ended December 31, 2015, the locations
acquired in the National Pump acquisition, and our other locations with significant exposure to upstream oil and
gas, experienced volume and pricing pressure associated with upstream oil and gas customers, which was a
primary driver of the decrease in time utilization. As compared to the equipment rentals revenue increase of
2.7 percent, compensation costs were flat with 2014. Gross margin from sales of new equipment decreased 290
basis points primarily due to changes in the mix of equipment sold. Gross margin from service and other
revenues decreased 400 basis points primarily due to increased revenue from training activities, which generate
lower margins than our other service revenues.
42
Other costs/(income)
The table below includes the other costs/(income) in our consolidated statements of income, as well as key
associated metrics, for the three years in the period ended December 31, 2016:
Year Ended December 31,
2014
2015
2016
Change
2016
2015
Selling, general and administrative (“SG&A”) expenses . . . .
SG&A expense as a percentage of revenue . . . . . . . . . . .
Merger related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . . .
Interest expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 719
$ 714
0.7%
12.5% 12.3% 13.3% 20 bps
$ 758
(5.8)%
(100) bps
(336.4)%
(700.0)%
14
(1.8)%
255
2.2%
511
(14.3)%
(5)
343
21.9%
37.7% 39.3% 36.5% (160) bps 280 bps
(100.0)%
133.3%
(4.9)%
(9.9)%
(58.3)%
(9.3)%
11
(1)
273
555
(14)
310
(26)
6
268
567
(12)
378
SG&A expense primarily includes sales force compensation, information technology costs, third party
professional fees, management salaries, bad debt expense and clerical and administrative overhead. SG&A
expense for the year ended December 31, 2016 did not change significantly year-over-year.
The decrease in SG&A expense for the year ended December 31, 2015 primarily reflects decreased
incentive compensation costs associated with lower than expected revenue and profitability. The impact of
increased bad debt expense was largely offset by cost improvements throughout SG&A. Bad debt expense
increased primarily due to improved receivable aging in 2014 which reduced the expense for year ended
December 31, 2014. The improvement in SG&A expense as a percentage of revenue for the year ended
December 31, 2015 primarily reflects decreased incentive compensation costs.
The merger related costs primarily reflect financial and legal advisory fees, and changes subsequent to the
acquisition date to the fair value of the contingent cash consideration we paid associated with the April 2014
National Pump acquisition. The income for the year ended December 31, 2015 reflects a decline in the fair value
of the contingent cash consideration component of the National Pump purchase price due to lower than expected
financial performance compared to agreed upon financial targets.
The restructuring charges for the years ended December 31, 2016, 2015 and 2014 reflect severance costs
and branch closure charges associated with our previously closed restructuring programs and the restructuring
program that commenced in the fourth quarter of 2015 and closed in the fourth quarter of 2016. The branch
closure charges primarily reflect continuing lease obligations at vacant facilities. The income for the year ended
December 31, 2014 primarily reflects buyouts or settlements of real estate leases for less than the recognized
reserves. See note 4 to our consolidated financial statements for additional information.
Non-rental depreciation and amortization includes (i) the amortization of other intangible assets and
(ii) depreciation expense associated with equipment that is not offered for rent (such as computers and office
equipment) and amortization expense associated with leasehold improvements. Our other intangible assets
consist of customer relationships, non-compete agreements and trade names and associated trademarks.
Interest expense, net for the years ended December 31, 2016, 2015 and 2014 includes aggregate losses of
$101, $123 and $80, respectively, associated with debt redemptions and the amendments of our ABL facility.
Excluding the impact of these losses, interest expense, net, for the year ended December 31, 2016 decreased
primarily due to lower average debt and a lower average cost of debt. Excluding the impact of these losses,
interest expense, net, for the year ended December 31, 2015 decreased primarily due to a lower average cost of
debt, partially offset by the impact of increased average outstanding debt.
43
The decrease in other income, net for the year ended December 31, 2016 primarily reflects decreased gains
on sales of non-rental equipment.
A detailed reconciliation of the effective tax rates to the U.S. federal statutory income tax rate is included in
note 12 to our consolidated financial statements.
Balance sheet. Prepaid expenses and other assets decreased by $55, or 47.4 percent, from December 31,
2015 to December 31, 2016 primarily due to an income tax refund received in 2016.
Liquidity and Capital Resources.
We manage our liquidity using internal cash management practices, which are subject to (i) the policies and
cooperation of the financial institutions we utilize to maintain and provide cash management services, (ii) the
terms and other requirements of the agreements to which we are a party and (iii) the statutes, regulations and
practices of each of the local jurisdictions in which we operate. See “Financial Overview” above for a summary
of the capital structure actions taken in 2016 and 2015 to improve our financial flexibility and liquidity.
Since 2012, we have repurchased a total of $1.450 billion of Holdings’ common stock under three
completed share repurchase programs. Additionally, in July 2015, our Board authorized a new $1 billion share
repurchase program. In October 2016, we paused repurchases under the program as we evaluated a number of
potential acquisition opportunities. As of January 23, 2017, we have repurchased $627 of Holdings’ common
stock under the $1 billion share repurchase program. As discussed in note 18 to the consolidated financial
statements, on January 25, 2017, we entered into a definitive merger agreement to acquire NES in an all cash
transaction. We intend to complete the share repurchase program; however, we will re-evaluate the decision to do
so as we integrate NES and assess other potential uses of capital.
Our principal existing sources of cash are cash generated from operations and from the sale of rental
equipment, and borrowings available under the ABL facility and accounts receivable securitization facility. As of
December 31, 2016, we had cash and cash equivalents of $312. Cash equivalents at December 31, 2016 consist
of direct obligations of financial institutions rated A or better. We believe that our existing sources of cash will
be sufficient to support our existing operations over the next 12 months. The table below presents financial
information associated with our principal sources of cash as of and for the year December 31, 2016:
ABL facility:
Borrowing capacity, net of letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 809
Outstanding debt, net of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,645
Interest rate at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average month-end debt outstanding during the year (1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate on average month-end debt outstanding during the year . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Maximum month-end debt outstanding during the year (1)
1,747
1,439
2.3%
2.1%
Accounts receivable securitization facility:
Borrowing capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding debt, net of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average month-end debt outstanding during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average interest rate on average month-end debt outstanding during the year . . .
Maximum month-end debt outstanding during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
568
1.5%
551
1.2%
621
(1) The maximum month-end amount outstanding under the ABL facility exceeded the average amount
outstanding during the year ended December 31, 2016 primarily due to the use of borrowings under the
ABL facility to partially finance the debt redemptions discussed in note 11 to the consolidated financial
statements.
44
We expect that our principal needs for cash relating to our operations over the next 12 months will be to
fund (i) operating activities and working capital, (ii) the purchase of rental equipment and inventory items
offered for sale, (iii) payments due under operating leases, (iv) debt service, (v) share repurchases and
(vi) acquisitions. We plan to fund such cash requirements from our existing sources of cash. In addition, we may
seek additional financing through the securitization of some of our real estate, the use of additional operating
leases or other financing sources as market conditions permit. For information on the scheduled principal and
interest payments coming due on our outstanding debt and on the payments coming due under our existing
operating leases, see “Certain Information Concerning Contractual Obligations.”
To access the capital markets, we rely on credit rating agencies to assign ratings to our securities as an
indicator of credit quality. Lower credit ratings generally result in higher borrowing costs and reduced access to
debt capital markets. Credit ratings also affect the costs of derivative transactions, including interest rate and
foreign currency derivative transactions. As a result, negative changes in our credit ratings could adversely
impact our costs of funding. Our credit ratings as of January 23, 2017 were as follows:
Moody’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standard & Poor’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ba3
BB-
Stable
Stable
Corporate Rating
Outlook
A security rating is not a recommendation to buy, sell or hold securities. There is no assurance that any
rating will remain in effect for a given period of time or that any rating will not be revised or withdrawn by a
rating agency in the future.
The amount of our future capital expenditures will depend on a number of factors, including general
economic conditions and growth prospects. We expect that we will fund such expenditures from cash generated
from operations, proceeds from the sale of rental and non-rental equipment and, if required, borrowings available
under the ABL facility and accounts receivable securitization facility. Net rental capital expenditures (defined as
purchases of rental equipment less the proceeds from sales of rental equipment) were $0.75 billion and
$1.00 billion in 2016 and 2015, respectively.
Loan Covenants and Compliance. As of December 31, 2016, we were in compliance with the covenants
and other provisions of the ABL facility, the accounts receivable securitization facility and the senior notes. Any
failure to be in compliance with any material provision or covenant of these agreements could have a material
adverse effect on our liquidity and operations.
The only financial covenant that currently exists under the ABL facility is the fixed charge coverage ratio.
Subject to certain limited exceptions specified in the ABL facility, the fixed charge coverage ratio covenant
under the ABL facility will only apply in the future if specified availability under the ABL facility falls below
10 percent of the maximum revolver amount under the ABL facility. When certain conditions are met, cash and
cash equivalents and borrowing base collateral in excess of the ABL facility size may be included when
calculating specified availability under the ABL facility. As of December 31, 2016, specified availability under
the ABL facility exceeded the required threshold and, as a result, this maintenance covenant is inapplicable.
Under our accounts receivable securitization facility, we are required, among other things, to maintain certain
financial tests relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales
outstanding. The accounts receivable securitization facility also requires us to comply with the fixed charge
coverage ratio under the ABL facility, to the extent the ratio is applicable under the ABL facility.
URNA’s payment capacity is restricted under the covenants in the ABL facility and the indentures
governing its outstanding indebtedness. Although this restricted capacity limits our ability to move operating
cash flows to Holdings, because of certain intercompany arrangements, we do not expect any material adverse
impact on Holdings’ ability to meet its cash obligations.
Sources and Uses of Cash. During 2016, we (i) generated cash from operating activities of $1.95 billion
and (ii) generated cash from the sale of rental and non-rental equipment of $510. We used cash during this period
45
principally to (i) purchase rental and non-rental equipment of $1.34 billion, (ii) purchase shares of our common
stock for $528 and (iii) make debt payments, net of proceeds, of $471. During 2015, we (i) generated cash from
operating activities of $2.0 billion, (ii) generated cash from the sale of rental and non-rental equipment of $555
and (iii) received cash from debt proceeds, net of payments, of $84. We used cash during this period principally
to (i) purchase rental and non-rental equipment of $1.64 billion, (ii) purchase other companies for $86, (iii)
purchase shares of our common stock for $789 and (iv) pay $52 of contingent consideration associated with the
National Pump acquisition. During 2015, cash also decreased by $29 due to the effect of foreign exchange rates.
Free Cash Flow GAAP Reconciliation
We define “free cash flow” as (i) net cash provided by operating activities less (ii) purchases of rental and
non-rental equipment plus (iii) proceeds from sales of rental and non-rental equipment and excess tax benefits
from share-based payment arrangements. 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.
Year Ended December 31,
2016
2015
2014
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . .
Purchases of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of non-rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Proceeds from sales of non-rental equipment
Excess tax benefits from share-based payment arrangements . . . . . . .
$ 1,953
(1,246)
(93)
496
14
58
$ 1,995
(1,534)
(102)
538
17
5
$ 1,801
(1,701)
(120)
544
33
—
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,182
$
919
$
557
Free cash flow for the year ended December 31, 2016 was $1.18 billion, an increase of $263 as compared to
$919 for the year ended December 31, 2015. Free cash flow increased primarily due to decreased purchases of
rental equipment. The excess tax benefits from share-based payment arrangements result from stock-based
compensation windfall deductions in excess of the amounts reported for financial reporting purposes. Such
benefits are recognized as a credit to additional paid-in capital, and are reported as financing cash flows. We
added the excess tax benefits back to our calculation of free cash flow to generally classify cash flows from
income taxes as operating cash flows. However, these excess tax benefits did not impact free cash flow for years
ended December 31, 2016 or 2015, as they do not result in increased cash flows until the associated income taxes
are settled. Free cash flow for the year ended December 31, 2015 was $919, an increase of $362 as compared to
$557 for the year ended December 31, 2014. Free cash flow for the years ended December 31, 2015 and 2014
includes aggregate cash payments of $5 and $17, respectively, related to merger and restructuring activity. Free
cash flow increased primarily due to increased net cash provided by operating activities and decreased purchases
of rental equipment.
Certain Information Concerning Contractual Obligations. The table below provides certain information
concerning the payments coming due under certain categories of our existing contractual obligations as of
December 31, 2016:
46
Debt and capital leases (1) . . . . . . . . . . . . . . . . . . .
Interest due on debt (2) . . . . . . . . . . . . . . . . . . . . .
Operating leases (1):
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Non-rental equipment
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Service agreements (3)
Purchase obligations (4)
2017
2018
2019
2020
2021
Thereafter
Total
$ 597
363
$ 21
356
$ 12
356
$
4
355
$1,656
334
$5,553
891
$ 7,843
2,655
99
41
14
853 —
63
82
30
22
3 —
—
44
15
—
—
28
8
—
—
39
2
—
—
355
118
17
853
Total (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,967
$492
$453
$418
$2,026
$6,485
$11,841
(1) The payments due with respect to a period represent (i) in the case of debt and capital leases, the scheduled
principal payments due in such period, and (ii) in the case of operating leases, the minimum lease payments
due in such period under non-cancelable operating leases.
(2) Estimated interest payments have been calculated based on the principal amount of debt and the applicable
interest rates as of December 31, 2016.
(3) These primarily represent service agreements with third parties to provide wireless and network services.
(4) As of December 31, 2016, we had outstanding purchase orders, which were negotiated in the ordinary
course of business, with our equipment and inventory suppliers. These purchase commitments can generally
be cancelled by us with 30 days notice and without cancellation penalties. The equipment and inventory
receipts from the suppliers for these purchases and related payments to the suppliers are expected to be
completed throughout 2017.
(5) This information excludes $4 of unrecognized tax benefits, which are discussed further in note 12 to our
is not possible to estimate the time period during which these
consolidated financial statements. It
unrecognized tax benefits may be paid to tax authorities.
Relationship Between Holdings and URNA. Holdings is principally a holding company and primarily
conducts its operations through its wholly owned subsidiary, URNA, and subsidiaries of URNA. Holdings
licenses its tradename and other intangibles and provides certain services to URNA in connection with its
operations. These services principally include: (i) senior management services; (ii) finance and tax-related
services and support; (iii) information technology systems and support; (iv) acquisition-related services; (v) legal
services; and (vi) human resource support. In addition, Holdings leases certain equipment and real property that
are made available for use by URNA and its subsidiaries.
Holdings receives royalties from URNA and its subsidiaries based upon a percent of revenue. During the
year ended December 31, 2015, the royalty percent of revenue (the “royalty rate”) increased from two and a half
percent to eight percent, resulting in Holdings receiving increased royalties from URNA during the year ended
December 31, 2015 (see note 17 to our consolidated financial statements). The royalty rate increased as a result
of a reassessment of the benefit provided by Holdings’ trademark and its business support to URNA and its
subsidiaries. The increase in the royalty rate results in increased intercompany receivables for Holdings. Our total
available capacity for making share repurchases and dividend payments includes the intercompany receivable
balance of Holdings. As of December 31, 2016, our total available capacity for making share repurchases and
dividend payments, which includes URNA’s capacity to make restricted payments and the intercompany
receivable balance of Holdings, was $713.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk primarily consists of (i) interest rate risk associated with our variable and fixed
rate debt and (ii) foreign currency exchange rate risk associated with our Canadian operations.
Interest Rate Risk. As of December 31, 2016, we had an aggregate of $2.2 billion of indebtedness that bears
interest at variable rates, comprised of borrowings under the ABL facility and the accounts receivable
securitization facility. See “Liquidity and Capital Resources” above for the amounts outstanding, and the interest
47
rates thereon, as of December 31, 2016 under the ABL facility and the accounts receivable securitization facility.
As of December 31, 2016, based upon the amount of our variable rate debt outstanding, our annual after-tax
earnings would decrease by approximately $14 for each one percentage point increase in the interest rates
applicable to our variable rate debt.
The amount of variable rate indebtedness outstanding under the ABL facility and accounts receivable
securitization facility may fluctuate significantly. For additional information concerning the terms of our variable
rate debt, see note 11 to our consolidated financial statements.
At December 31, 2016, we had an aggregate of $5.6 billion of indebtedness that bears interest at fixed rates.
A one percentage point decrease in market interest rates as of December 31, 2016 would increase the fair value
of our fixed rate indebtedness by approximately six percent. For additional information concerning the fair value
and terms of our fixed rate debt, see note 10 (see “Fair Value of Financial Instruments”) and note 11 to our
consolidated financial statements.
Currency Exchange Risk. The functional currency for our Canadian operations is the Canadian dollar. As a
result, our future earnings could be affected by fluctuations in the exchange rate between the U.S. and Canadian
dollars. Based upon the level of our Canadian operations during 2016 relative to the Company as a whole, a
10 percent change in this exchange rate would cause our annual after-tax earnings to change by approximately
$5. We do not engage in purchasing forward exchange contracts for speculative purposes.
48
Item 8.
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of United Rentals, Inc.
We have audited the accompanying consolidated balance sheets of United Rentals, Inc. as of December 31,
2016 and 2015, and the related consolidated statements of income, comprehensive income, stockholders’ equity
and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the
financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of United Rentals, Inc. at December 31, 2016 and 2015, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), United Rentals, Inc.’s internal control over financial reporting as of December 31, 2016, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated January 25, 2017 expressed
an unqualified opinion thereon.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 25, 2017
49
UNITED RENTALS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts of $54 at December 31, 2016
and $55 at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2016
2015
$
312
$
179
920
68
61
1,361
6,189
430
3,260
742
6
930
69
116
1,294
6,186
445
3,243
905
10
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,988
$12,083
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt and current maturities of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
597
243
344
1,184
7,193
1,896
67
$
607
271
355
1,233
7,555
1,765
54
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,340
10,607
Common stock—$0.01 par value, 500,000,000 shares authorized, 111,985,215 and
84,222,042 shares issued and outstanding, respectively, at December 31, 2016 and
111,586,585 and 91,776,436 shares issued and outstanding, respectively, at December 31,
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock at cost—27,763,173 and 19,810,149 shares at December 31, 2016 and
December 31, 2015, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
2,288
1,654
1
2,197
1,088
(2,077)
(218)
(1,560)
(250)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,648
1,476
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,988
$12,083
See accompanying notes.
50
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Year Ended December 31,
2016
2015
2014
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,941
496
144
79
102
$4,949
538
157
79
94
$4,819
544
149
85
88
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,762
5,817
5,685
Cost of revenues:
Cost of equipment rentals, excluding depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of rental equipment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of new equipment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,862
990
292
119
55
41
3,359
2,403
719
—
14
255
1,415
511
(5)
909
343
1,826
976
311
131
55
38
3,337
2,480
714
(26)
6
268
1,518
567
(12)
963
378
1,806
921
315
120
59
32
3,253
2,432
758
11
(1)
273
1,391
555
(14)
850
310
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 566
$ 585
$ 540
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6.49
$ 6.45
$ 6.14
$ 6.07
$ 5.54
$ 5.15
See accompanying notes.
51
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed price diesel swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
$566
2015
$ 585
2014
$540
28
4
32
(174)
(2)
(176)
(90)
(3)
(93)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$598
$ 409
$447
(1) There were no material reclassifications from accumulated other comprehensive loss reflected in other
comprehensive income (loss) during the years ended December 31, 2016, 2015 or 2014. There is no tax
impact related to the foreign currency translation adjustments, as the earnings are considered permanently
reinvested. There were no material taxes associated with other comprehensive loss during the years ended
December 31, 2016, 2015 or 2014.
See accompanying notes.
52
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
Balance at January 1, 2014
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . .
Fixed price diesel swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 percent Convertible Senior Notes (1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased and retired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Stock
Number of
Shares
Amount
Additional
Paid-in
Capital
(Accumulated
Deficit)
Retained
Earnings
93
$1
$2,054
$ (37)
540
Treasury Stock
Number of
Shares
5
Amount
$(209)
Accumulated
Other
Comprehensive
Income (Loss)
$ 19
(90)
(3)
—
10
(5)
98
74
2
58
(20)
$1
$2,168
$503
5
10
(593)
$(802)
$(74)
5
3
(1) Primarily reflects amortization of the original issue discount on our 4 percent Convertible Senior Notes and cash received from the option
counterparties to our convertible note hedges associated with conversions of a portion of our 4 percent Convertible Senior Notes. The 4 percent
Convertible Senior Notes matured in 2015.
See accompanying notes.
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(In millions)
Common Stock
Number of
Shares
Amount
Additional
Paid-in
Capital
98
$1
$2,168
Treasury Stock
Retained
Earnings
Number of
Shares
Amount
Accumulated
Other
Comprehensive
Loss
$ 503
585
10
$ (802)
$ (74)
(174)
(2)
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed price diesel swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 percent Convertible Senior Notes (1)
Shares repurchased and retired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment arrangements, net . . . . . . . .
—
4
(10)
49
1
5
(31)
5
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92
$1
$2,197
$1,088
5
4
10
20
(758)
$(1,560)
$(250)
(1) Reflects amortization of the original issue discount on the 4 percent Convertible Senior Notes and the conversion of all outstanding 4 percent
Convertible Senior Notes.
See accompanying notes.
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(In millions)
Common Stock
Number of
Shares
Amount
Additional
Paid-in
Capital
92
$1
$2,197
Treasury Stock
Retained
Earnings
Number of
Shares
Amount
Accumulated
Other
Comprehensive
Loss (1)
$1,088
566
20
$(1,560)
$(250)
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed price diesel swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased and retired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment arrangements, net . . . . . . . .
—
(8)
45
1
(11)
56
28
4
8
28
$ (517)
$(2,077)
$(218)
Balance at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
$1
$2,288
$1,654
5
5
(1) As of December 31, 2016, 2015 and 2014, the Accumulated Other Comprehensive Loss balance primarily reflects foreign currency translation
adjustments.
See accompanying notes.
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs and original issue discounts . . . . . . . . . . . . . . .
Gain on sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net
Merger related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on repurchase/redemption of debt securities and amendment of ABL facility . . . . .
Excess tax benefits from share-based payment arrangements . . . . . . . . . . . . . . . . . . . . . .
Increase in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2016
2015
2014
(In millions)
$
566
$
585
$
540
1,245
9
(204)
(4)
45
—
14
101
(58)
123
15
1
77
(29)
52
1,244
10
(227)
(8)
49
(26)
6
123
(5)
336
(11)
8
(38)
(8)
(43)
1,194
17
(229)
(11)
74
11
(1)
80
—
261
(101)
11
(52)
(23)
30
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,953
1,995
1,801
Cash Flows From Investing Activities:
Purchases of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of other companies, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,246)
(93)
496
14
(28)
(2)
(1,534)
(102)
538
17
(86)
(3)
(1,701)
(120)
544
33
(756)
—
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(859)
(1,170)
(2,000)
Cash Flows From Financing Activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from debt
Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received in connection with the 4 percent Convertible Senior Notes and related
hedge, net
Excess tax benefits from share-based payment arrangements . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosure of cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes, net
8,752
(9,223)
—
(24)
1
(528)
8,566
(8,482)
(52)
(27)
1
(789)
7,070
(6,283)
—
(22)
2
(613)
—
58
(964)
3
133
179
312
415
99
$
$
3
5
(775)
(29)
21
158
179
447
60
$
$
42
—
196
(14)
(17)
175
158
457
100
$
$
See accompanying notes.
56
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions, except per share data and unless otherwise indicated)
1. Organization, Description of Business and Consolidation
United Rentals, Inc. (“Holdings”) is principally a holding company and conducts its operations primarily
through its wholly owned subsidiary, United Rentals (North America), Inc. (“URNA”), and subsidiaries of
URNA. Holdings’ primary asset is its sole ownership of all issued and outstanding shares of common stock of
URNA. URNA’s various credit agreements and debt instruments place restrictions on its ability to transfer funds
to its stockholder. As used in this report, the terms the “Company,” “United Rentals,” “we,” “us,” and “our” refer
to United Rentals, Inc. and its subsidiaries, unless otherwise indicated.
We rent equipment
includes construction and industrial companies,
manufacturers, utilities, municipalities, homeowners and others in the United States and Canada. In addition to
renting equipment, we sell new and used rental equipment, as well as related contractor supplies, parts and
service.
to a diverse customer base that
The accompanying consolidated financial statements include our accounts and those of our controlled
intercompany accounts and transactions have been eliminated. We
subsidiary companies. All significant
consolidate variable interest entities if we are deemed the primary beneficiary of the entity.
2. Summary of Significant Accounting Policies
Cash Equivalents
We consider all highly liquid instruments with maturities of three months or less when purchased to be cash
equivalents. Our cash equivalents at December 31, 2016 consist of direct obligations of financial institutions
rated A or better.
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts. These allowances reflect our estimate of the amount of our
receivables that we will be unable to collect based on historical write-off experience. Our estimate could require
change based on changing circumstances, including changes in the economy or in the particular circumstances of
individual customers. Accordingly, we may be required to increase or decrease our allowances. Trade receivables
that have contractual maturities of one year or less are written-off when they are determined to be uncollectible
based on the criteria necessary to qualify as a deduction for federal tax purposes. Write-offs of such receivables
require management approval based on specified dollar thresholds.
Inventory
Inventory consists of new equipment, contractor supplies, tools, parts, fuel and related supply items.
Inventory is stated at the lower of cost or market. Cost is determined, depending on the type of inventory, using
either a specific identification, weighted-average or first-in, first-out method.
Rental Equipment
Rental equipment, which includes service and delivery vehicles, is recorded at cost and depreciated over the
estimated useful life of the equipment using the straight-line method. The range of estimated useful lives for
rental equipment is two to 12 years. Rental equipment is depreciated to a salvage value of zero to 10 percent of
cost. Rental equipment is depreciated whether or not it is out on rent. Costs we incur in connection with
refurbishment programs that extend the life of our equipment are capitalized and amortized over the remaining
useful life of the equipment. The costs incurred under these refurbishment programs were $18, $30 and $39 for
57
the years ended December 31, 2016, 2015 and 2014, respectively, and are included in purchases of rental
equipment in our consolidated statements of cash flows. Ordinary repair and maintenance costs are charged to
operations as incurred. Repair and maintenance costs are included in cost of revenues on our consolidated
statements of income. Repair and maintenance expense (including both labor and parts) for our rental equipment
was $629, $628 and $604 for the years ended December 31, 2016, 2015 and 2014, respectively.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives using the
straight-line method. The range of estimated useful lives for property and equipment is two to 39 years. Ordinary
repair and maintenance costs are charged to expense as incurred. Leasehold improvements are amortized using
the straight-line method over their estimated useful lives or the remaining life of the lease, whichever is shorter.
Acquisition Accounting
We have made a number of acquisitions in the past and may continue to make acquisitions in the future. The
assets acquired and liabilities assumed are recorded based on their respective fair values at the date of
acquisition. Long-lived assets (principally rental equipment), goodwill and other intangible assets generally
represent the largest components of our acquisitions. The intangible assets that we have acquired are non-
compete agreements, customer relationships and trade names and associated trademarks. Goodwill is calculated
as the excess of the cost of the acquired entity over the net of the fair value of the assets acquired and the
liabilities assumed. Non-compete agreements, customer relationships and trade names and associated trademarks
are valued based on an excess earnings or income approach based on projected cash flows.
When we make an acquisition, we also acquire other assets and assume liabilities. These other assets and
liabilities typically include, but are not limited to, parts inventory, accounts receivable, accounts payable and
other working capital items. Because of their short-term nature, the fair values of these other assets and liabilities
generally approximate the book values on the acquired entities’ balance sheets.
Evaluation of Goodwill Impairment
Goodwill is tested for impairment annually or more frequently if an event or circumstance indicates that an
impairment loss may have been incurred. Application of the goodwill impairment test requires judgment,
including: the identification of reporting units; assignment of assets and liabilities to reporting units; assignment
of goodwill to reporting units; determination of the fair value of each reporting unit; and an assumption as to the
form of the transaction in which the reporting unit would be acquired by a market participant (either a taxable or
nontaxable transaction).
We estimate the fair value of our reporting units (which are our regions) using a combination of an income
approach based on the present value of estimated future cash flows and a market approach based on market price
data of shares of our Company and other corporations engaged in similar businesses as well as acquisition
multiples paid in recent transactions within our industry (including our own acquisitions). We believe this
approach, which utilizes multiple valuation techniques, yields the most appropriate evidence of fair value. We
review goodwill for impairment utilizing a two-step process. The first step of the impairment test requires a
comparison of the fair value of each of our reporting units’ net assets to the respective carrying value of net
assets. If the carrying value of a reporting unit’s net assets is less than its fair value, no indication of impairment
exists and a second step is not performed. If the carrying amount of a reporting unit’s net assets is higher than its
fair value, there is an indication that an impairment may exist and a second step must be performed. In the second
step, the impairment is calculated by comparing the implied fair value of the reporting unit’s goodwill (as if
purchase accounting were performed on the testing date) with the carrying amount of the goodwill. If the
carrying amount of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an
impairment loss must be recognized for the excess and charged to operations.
58
Financial Accounting Standards Board (“FASB”) guidance permits entities to first assess qualitative factors
to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.
In connection with our goodwill impairment test that was conducted as of October 1, 2015, we bypassed the
qualitative assessment for each of our reporting units and proceeded directly to the first step of the goodwill
impairment test. Our goodwill impairment testing as of this date indicated that all of our reporting units,
excluding our Pump Solutions reporting unit, had estimated fair values which exceeded their respective carrying
amounts by at least 51 percent.
In April 2014, we completed the acquisition of the following entities: National Pump & Compressor, Ltd.,
Canadian Pump and Compressor Ltd., GulfCo Industrial Equipment, LP and LD Services, LLC (collectively
“National Pump”). Most of the assets in the Pump Solutions reporting unit were acquired in the National Pump
acquisition. Based on the October 1, 2015 test, the Pump Solutions reporting unit’s estimated fair value exceeded
its carrying amount by 3.3 percent. In light of continuing pressures on the Pump Solutions reporting unit related
primarily to upstream oil and gas customers, we continued to monitor the Pump Solutions reporting unit for
impairment through the end of 2015, and performed another impairment test as of November 30, 2015. As of the
November 30, 2015 testing date, the estimated fair value of the Pump Solutions reporting unit exceeded its
carrying amount by 1 percent. No additional impairment indicators were noted as of December 31, 2015.
Given the narrow margin by which the estimated fair value of the Pump Solutions reporting unit exceeded
its carrying amount, we also performed a sensitivity analysis related to the discount rate and long-term growth
rate used in the November 30, 2015 test. Specifically, we performed the sensitivity analysis by: (i) increasing the
discount rate by 50 basis points and (ii) reducing the long-term growth rate by 25 basis points. The Pump
Solutions reporting unit failed step one of the goodwill impairment test under the sensitivity test, and would have
required step two testing to determine potential goodwill impairment. We continued to monitor the Pump
Solutions reporting unit for impairment following the November 30, 2015 test.
In connection with our goodwill impairment test that was conducted as of October 1, 2016, we bypassed the
qualitative assessment for each reporting unit and proceeded directly to the first step of the goodwill impairment
test. Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Pump
Solutions reporting unit, had estimated fair values which exceeded their respective carrying amounts by at least
53 percent. The estimated fair value of our Pump Solutions reporting unit exceeded its carrying amount by
approximately 15 percent.
For the goodwill impairment test that was conducted as of October 1, 2016 for our Pump Solutions reporting
unit, we utilized a discount rate of 14.0 percent and a long-term terminal growth rate of 3.0 percent beyond our
planning period. The improvement in the margin by which the Pump Solutions reporting unit’s estimated fair
value exceeded its carrying amount in the October 1, 2016 test as compared to the November 30, 2015 test
primarily reflects (i) a reduction in the Pump Solutions reporting unit’s carrying value primarily due to the
depreciation and amortization of its assets, as well as a reduction in its working capital and (ii) improvement in
the Pump Solutions reporting unit’s revenue mix in its long term forecast largely due to having a smaller portion
of revenue attributable to upstream oil and gas customers, which have experienced significant volatility in recent
years, and a larger portion of revenue attributable to downstream oil and gas, construction, municipality and
mining customers. We also performed a sensitivity analysis related to the discount rate and long-term growth rate
used in the October 1, 2016 test by: (i) increasing the discount rate by 50 basis points and (ii) reducing the long-
term growth rate by 25 basis points. The Pump Solutions reporting unit passed step one of the goodwill
impairment test under the sensitivity test. The October 1, 2016 impairment test assumed earnings growth for the
Pump Solutions reporting unit over the next 10 years. Should this growth not occur, if the reporting unit
otherwise fails to meet its current financial plans, or if there were changes to any other key assumption used in
the test, the Pump Solutions reporting unit could fail step one of the goodwill impairment test in a future period.
As of December 31, 2016, there was $312 of goodwill in the Pump Solutions reporting unit. We will continue to
monitor the Pump Solutions reporting unit for impairment.
59
Restructuring Charges
Costs associated with exit or disposal activities, including lease termination costs and certain employee
severance costs associated with restructuring, branch closings or other activities, are recognized at fair value
when they are incurred.
Other Intangible Assets
Other intangible assets consist of non-compete agreements, customer relationships and trade names and
associated trademarks. The non-compete agreements are being amortized on a straight-line basis over initial
periods of approximately 5 years. The customer relationships are being amortized either using the sum of the
years’ digits method or on a straight-line basis over initial periods ranging from 7 to 15 years. The trade names
and associated trademarks are being amortized using the sum of the years’ digits method over an initial period of
5 years. We believe that the amortization methods used reflect the estimated pattern in which the economic
benefits will be consumed.
Long-Lived Assets
Long-lived assets are recorded at the lower of amortized cost or fair value. As part of an ongoing review of
the valuation of long-lived assets, we assess the carrying value of such assets if facts and circumstances suggest
they may be impaired. If this review indicates the carrying value of such an asset may not be recoverable, as
determined by an undiscounted cash flow analysis over the remaining useful life, the carrying value would be
reduced to its estimated fair value.
Translation of Foreign Currency
Assets and liabilities of our Canadian subsidiaries that have a functional currency other than U.S. dollars are
translated into U.S. dollars using exchange rates at the balance sheet date. Revenues and expenses are translated
at average exchange rates effective during the year. Foreign currency translation gains and losses are included as
a component of accumulated other comprehensive (loss) income within stockholders’ equity.
Revenue Recognition
Our rental contract periods are hourly, daily, weekly or monthly and we recognize revenues from renting
equipment on a straight-line basis. As part of this straight-line methodology, when the equipment is returned, we
recognize as incremental revenue the excess, if any, between the amount the customer is contractually required to
pay over the cumulative amount of revenue recognized to date. We record amounts billed to customers in excess
of recognizable revenue as deferred revenue on our balance sheet. We had deferred revenue of $33 and $32 as of
December 31, 2016 and 2015, respectively.
Equipment rentals include our revenues from renting equipment, as well as revenue related to the fees we
charge customers: for equipment delivery and pick-up; to protect the customer against liability for damage to our
equipment while on rent; and for fuel. Delivery and pick-up revenue is recognized when the service is performed.
Customers have the option of 51 purchasing a damage waiver when they rent our equipment to protect against
potential loss or damage; we refer to the fee we charge for the waiver as Rental Protection Plan (or “RPP”)
revenue. RPP revenue is recognized ratably over the contract term. Fees related to the consumption of fuel by our
customers are recognized when the equipment is returned by the customer (and consumption, if any, can be
measured).
Revenues from the sale of rental equipment and new equipment are recognized at the time of delivery to, or
pick-up by, the customer and when collectibility is reasonably assured. Sales of contractor supplies are also
recognized at the time of delivery to, or pick-up by, the customer. Service revenue is recognized as the services
are performed. Sales tax amounts collected from customers are recorded on a net basis.
60
Delivery Expense
Equipment rentals include our revenues from fees we charge for equipment delivery. Delivery costs are
charged to operations as incurred, and are included in cost of revenues on our consolidated statements of income.
Advertising Expense
We promote our business through local and national advertising in various media, including television, trade
publications, branded sponsorships, yellow pages, the Internet, radio and direct mail. Advertising costs are
generally expensed as incurred. These costs may include the development costs for branded content and
advertising campaigns. Advertising expense, net of the qualified advertising reimbursements discussed below,
was immaterial for the years ended December 31, 2016, 2015 and 2014.
We receive reimbursements for advertising that promotes a vendor’s products or services. Such
reimbursements that meet the applicable criteria under U.S. generally accepted accounting principles (“GAAP”)
are offset against advertising costs in the period in which we recognize the incremental advertising cost. The
amounts of qualified advertising reimbursements that reduced advertising expense were $19, $17 and $16 for the
years ended December 31, 2016, 2015 and 2014, respectively.
Insurance
We are insured for general liability, workers’ compensation and automobile liability, subject to deductibles
or self-insured retentions per occurrence. Losses within the deductible amounts are accrued based upon the
aggregate liability for reported claims incurred, as well as an estimated liability for claims incurred but not yet
reported. These liabilities are not discounted. The Company is also self-insured for group medical claims but
purchases “stop loss” insurance to protect itself from any one significant loss.
Income Taxes
We use the liability method of accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial statement and tax bases of assets and
liabilities and are measured using the tax rates and laws that are expected to be in effect when the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be
more likely than not to be realized in future periods. The most significant positive evidence that we consider in
the recognition of deferred tax assets is the expected reversal of cumulative deferred tax liabilities resulting from
book versus tax depreciation of our rental equipment fleet that is well in excess of the deferred tax assets.
We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a
tax return regarding uncertainties in income tax positions. The first step is recognition: we determine whether it is
more likely than not that a tax position will be sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position
has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the
appropriate taxing authority with full knowledge of all relevant information. The second step is measurement: a
tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of
benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that
is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions
taken in a tax return and amounts recognized in the financial statements will generally result in one or more of
the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable,
a reduction in a deferred tax asset or an increase in a deferred tax liability.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant
61
estimates impact the calculation of the allowance for doubtful accounts, depreciation and amortization, income
taxes, reserves for claims, loss contingencies (including legal contingencies) and the fair values of financial
instruments. Actual results could materially differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk include cash and
cash equivalents and accounts receivable. We maintain cash and cash equivalents with high quality financial
institutions. Concentration of credit risk with respect to receivables is limited because a large number of
geographically diverse customers makes up our customer base. Our largest customer accounted for less than one
percent of total revenues in each of 2016, 2015, and 2014. Our customer with the largest receivable balance
represented approximately two percent and one percent of total receivables at December 31, 2016 and 2015,
respectively. We manage credit risk through credit approvals, credit limits and other monitoring procedures.
Stock-Based Compensation
We measure stock-based compensation at the grant date based on the fair value of the award and recognize
stock-based compensation expense over the requisite service period. Determining the fair value of stock option
awards requires judgment, including estimating stock price volatility, forfeiture rates and expected option life.
Restricted stock awards are valued based on the fair value of the stock on the grant date and the related
compensation expense is recognized over the service period. Similarly, for time-based restricted stock awards
subject to graded vesting, we recognize compensation cost on a straight-line basis over the requisite service
period. For performance-based restricted stock units (“RSUs”), compensation expense is recognized if
satisfaction of the performance condition is considered probable. We classify cash flows from tax benefits
resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (“excess tax
benefits”) as financing cash flows.
New Accounting Pronouncements
Revenue from Contracts with Customers. In May 2014,
the Financial Accounting Standards Board
(“FASB”) issued guidance to clarify the principles for recognizing revenue. This guidance includes the required
steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The FASB has agreed to a one-year deferral of the original
effective date of this guidance and as a result it will be effective for fiscal years and interim periods beginning
after December 15, 2017. The FASB’s update allows entities to apply the new guidance as of the original
effective date (for fiscal years and interim periods beginning after December 15, 2016). We expect to adopt this
guidance when effective, and the impact on our financial statements is not currently estimable.
Leases.
In March 2016,
to increase transparency and
the FASB issued guidance (“Topic 842”)
comparability among organizations by requiring i) recognition of lease assets and lease liabilities on the balance
sheet and ii) disclosure of key information about leasing arrangements. The accounting applied by lessors under
Topic 842 is largely unchanged from previous GAAP. Some changes to the lessor accounting guidance were
made to align both of the following: i) the lessor accounting guidance with certain changes made to the lessee
accounting guidance and ii) key aspects of the lessor accounting model with revenue recognition guidance. Topic
842 will be effective for fiscal years and interim periods beginning after December 15, 2018, and early adoption
is permitted. A modified retrospective approach is required for adoption for all leases that exist at or commence
after the date of initial application with an option to use certain practical expedients. We are currently assessing
whether we will early adopt, and the impact on our financial statements is not currently estimable.
Improvements to Employee Share-Based Payment Accounting. In March 2016, the FASB issued guidance to
simplify several aspects of the accounting for share-based payment transactions, including the income tax
62
consequences, classification of awards as either equity or liabilities, and classification on the statement of cash
flows. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2016, and
early adoption is permitted. Different components of the guidance require prospective, retrospective and/or
modified retrospective adoption. We expect to adopt this guidance when effective, and do not expect the
guidance to have a significant impact on our financial statements.
Statement of Cash Flows. In August 2016, the FASB issued guidance to reduce the diversity in the
presentation of certain cash receipts and cash payments presented and classified in the statement of cash flows.
The guidance addresses the following specific cash flow issues: (1) debt prepayment or debt extinguishment
costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are
insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments
made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from
including bank-owned life insurance policies,
settlement of corporate-owned life insurance policies,
(6) distributions received from equity method investees, (7) beneficial interests in securitization transitions and
(8) separately identifiable cash flows and application of predominance principle. The guidance will be effective
for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted. The
guidance requires retrospective adoption. We expect to adopt this guidance when effective, and do not expect the
guidance to have a significant impact on our financial statements. The presentation of insurance proceeds
received for damage to our equipment is the primary item that we expect to change as a result of this guidance.
For the year ended December 31, 2016, $12 of insurance proceeds received for damage to equipment was
included in operating activities on our consolidated statements of cash flows. Under the new guidance, these
proceeds would be included in investing activities on our consolidated statements of cash flows.
Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued guidance that will
require companies to present assets held at amortized cost and available for sale debt securities net of the amount
expected to be collected. The guidance requires the measurement of expected credit losses to be based on
relevant information from past events, including historical experiences, current conditions and reasonable and
supportable forecasts that affect collectibility. The new guidance will be effective for fiscal years and interim
periods beginning after December 15, 2019 and early adoption is permitted for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years. Different components of the guidance
require modified retrospective and/or prospective adoption. We are currently assessing whether we will early
adopt, and the impact on our financial statements is not currently estimable.
Intra-Entity Transfers of Assets Other Than Inventory. In October 2016, the FASB issued guidance that will
require companies to recognize the income tax effects of intra-entity sales and transfers of assets other than
inventory in the period in which the transfer occurs. The new guidance will be effective for fiscal years and
interim periods beginning after December 15, 2017 and early adoption is permitted. The guidance requires
modified retrospective adoption. We expect to adopt this guidance when effective, and do not expect the
guidance to have a significant impact on our financial statements.
3. Segment Information
Our two reportable segments are i) general rentals and ii) trench, power and pump. The general rentals
segment includes the rental of i) general construction and industrial equipment, such as backhoes, skid-steer
loaders, forklifts, earthmoving equipment and material handling equipment, ii) aerial work platforms, such as
boom lifts and scissor lifts and iii) general tools and light equipment, such as pressure washers, water pumps and
power tools. The general rentals segment reflects the aggregation of nine geographic regions—Industrial (which
serves the geographic Gulf region and has a strong industrial presence), Mid-Atlantic, Midwest, Northeast,
Pacific West, South-Central, South, Southeast and Western Canada—and operates throughout the United States
and Canada. We periodically review the size and geographic scope of our regions, and have occasionally
reorganized the regions to create a more balanced and effective structure.
63
The trench, power and pump segment includes the rental of specialty construction products such as i) trench
safety equipment, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates,
construction lasers and line testing equipment for underground work, ii) power and HVAC equipment, such as
portable diesel generators, electrical distribution equipment, and temperature control equipment and iii) pumps
primarily used by energy and petrochemical customers. The trench, power and pump segment is comprised of the
following regions, each of which primarily rents the corresponding equipment type described above: (i) the
Trench Safety region, (ii) the Power and HVAC region, and (iii) the Pump Solutions region. The trench, power
and pump segment’s customers include construction companies involved in infrastructure projects, municipalities
and industrial companies. This segment operates throughout the United States and in Canada.
The following table presents the percentage of equipment rental revenue by equipment type for the years
ended December 31, 2016, 2015 and 2014:
Year Ended December 31,
2016
2015
2014
Primarily rented by our general rentals segment:
General construction and industrial equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aerial work platforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General tools and light equipment
43% 43% 43%
32% 32% 33%
8% 10% 10%
Primarily rented by our trench, power and pump segment:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Power and HVAC equipment
Trench safety equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pumps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7%
6%
4%
6%
5%
4%
6%
5%
3%
These segments align our external segment reporting with how management evaluates business performance
and allocates resources. We evaluate segment performance based on segment equipment rentals gross profit.
The accounting policies for our segments are the same as those described in the summary of significant
accounting policies in note 2. Certain corporate costs, including those related to selling, finance, legal, risk
management, human resources, corporate management and information technology systems, are deemed to be of
an operating nature and are allocated to our segments based primarily on rental fleet size.
64
The following table sets forth financial information by segment as of and for the years ended December 31,
2016, 2015 and 2014:
General
rentals
Trench,
power and pump
Total
2016
2015
2014
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,166
459
128
64
91
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,908
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rentals gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,066
1,725
1,189
$10,496
$ 4,241
504
137
67
83
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,032
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rentals gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,071
1,819
1,439
$10,561
$ 4,222
519
113
73
75
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,002
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rentals gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,060
1,790
1,594
$10,597
$ 775
37
16
15
11
854
179
364
150
$1,492
$ 708
34
20
12
11
785
173
328
197
$1,522
$ 597
25
36
12
13
683
134
302
227
$1,532
$ 4,941
496
144
79
102
5,762
1,245
2,089
1,339
$11,988
$ 4,949
538
157
79
94
5,817
1,244
2,147
1,636
$12,083
$ 4,819
544
149
85
88
5,685
1,194
2,092
1,821
$12,129
65
Equipment rentals gross profit is the primary measure management reviews to make operating decisions and
assess segment performance. The following is a reconciliation of equipment rentals gross profit to income before
provision for income taxes:
Year Ended December 31,
2016
2015
2014
Total equipment rentals gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit from other lines of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,089
314
(719)
—
(14)
(255)
(511)
5
$2,147
333
(714)
26
(6)
(268)
(567)
12
$2,092
340
(758)
(11)
1
(273)
(555)
14
Income before provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 909
$ 963
$ 850
We operate in the United States and Canada. The following table presents geographic area information for
the years ended December 31, 2016, 2015 and 2014, except for balance sheet information, which is presented as
of December 31, 2016 and 2015:
Domestic
Foreign (Canada)
Total
2016
2015
2014
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,524
444
129
68
87
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,252
Rental equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles, net
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,709
390
$3,699
$4,452
480
137
69
80
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,218
Rental equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles, net
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,657
399
$3,838
$4,217
478
124
70
73
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,962
$417
52
15
11
15
510
480
40
$303
$497
58
20
10
14
599
529
46
$310
$602
66
25
15
15
$723
$4,941
496
144
79
102
5,762
6,189
430
$4,002
$4,949
538
157
79
94
5,817
6,186
445
$4,148
$4,819
544
149
85
88
$5,685
66
4. Restructuring Charges
Closed Restructuring Programs
We have two closed restructuring programs. The first was initiated in 2008 in recognition of a challenging
economic environment and closed in 2011. The second closed restructuring program was initiated following the
April 30, 2012 acquisition of RSC, and was completed in 2013. The restructuring charges under the closed
restructuring programs include severance costs associated with headcount reductions, as well as branch closure
charges which principally relate to continuing lease obligations at vacant facilities.
The table below provides certain information concerning our restructuring charges under the closed
restructuring programs:
Description
Year ended December 31, 2014:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Year ended December 31, 2015:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2016:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning
Reserve Balance
Charged to
Costs and
Expenses (1)
Payments
and Other
Ending
Reserve Balance
$ 33
2
$ 35
$ 20
—
$ 20
$ 13
—
$ 13
$ (1)
—
$ (1)
$
$
2
—
2
$—
—
$—
$ (12)
(2)
$ (14)
$ (9)
—
$ (9)
$ (5)
—
$ (5)
$ 20
—
$ 20
$ 13
—
$ 13
$
8
—
$
8
(1) Reflected in our consolidated statements of income as “Restructuring charge.” The restructuring charges are
not allocated to our segments.
As of December 31, 2016, we have incurred total restructuring charges under the closed restructuring
programs of $216, comprised of $150 of branch closure charges and $66 of severance costs.
2015-2016 Cost Savings Restructuring Program
In the fourth quarter of 2015, we initiated a restructuring program (the “2015/2016 restructuring program”)
in response to challenges in our operating environment. In particular, during 2015, we experienced volume and
pricing pressure in our general rental business and our Pump Solutions region associated with upstream oil and
gas customers. Additionally, our Lean initiatives did not fully generate the anticipated cost savings due to lower
than expected growth. Though we expected solid industry growth in 2016, the 2015/2016 restructuring program
was initiated in an effort to reduce costs in an environment with continuing pressures on volume and pricing. The
program was completed in the fourth quarter of 2016.
67
The table below provides certain information concerning our restructuring charges under the 2015/2016
restructuring program:
Description
Beginning
Reserve Balance
Charged to
Costs and
Expenses (1)
Payments
and Other
Ending
Reserve Balance
Year ended December 31, 2015:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2016:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
—
$—
$—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3
3
$—
4
$
4
$ 10
4
$ 14
$—
(1)
$ (1)
$ (2)
(6)
$ (8)
$—
3
$
$
$
3
8
1
9
(1) Reflected in our consolidated statements of income as “Restructuring charge.” The restructuring charges are
not allocated to our segments.
As of December 31, 2016, we incurred total restructuring charges under the 2015/2016 restructuring
program of $18, comprised of $10 of branch closure charges and $8 of severance costs.
5. Rental Equipment
Rental equipment consists of the following:
Rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,413
(3,224)
$ 9,022
(2,836)
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,189
$ 6,186
December 31,
2016
2015
6. Property and Equipment
Property and equipment consist of the following:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2016
2015
$ 96
212
93
87
188
221
$ 98
226
86
78
171
212
897
(467)
871
(426)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 430
$ 445
68
7. Goodwill and Other Intangible Assets
The following table presents the changes in the carrying amount of goodwill for each of the three years in
the period ended December 31, 2016:
General
rentals
Trench,
power and pump
Balance at January 1, 2014 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill related to acquisitions (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . .
$2,812
12
(20)
Balance at December 31, 2014 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,804
Goodwill related to acquisitions (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2015 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill related to acquisitions (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . .
16
(34)
2,786
5
6
$141
330
(3)
468
—
(11)
457
4
2
Total
$2,953
342
(23)
3,272
16
(45)
3,243
9
8
Balance at December 31, 2016 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,797
$463
$3,260
(1) The total carrying amount of goodwill for all periods in the table above is reflected net of $1,557 of
(2)
accumulated impairment charges, which were primarily recorded in our general rentals segment.
Includes goodwill adjustments for the effect on goodwill of changes to net assets acquired during the
measurement period, which were not significant to our previously reported operating results or financial
condition.
Other intangible assets were comprised of the following at December 31, 2016 and 2015:
December 31, 2016
Weighted-
Average Remaining
Amortization Period
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names and associated trademarks . . . . . . . . . . . . . . . .
28 months
10 years
4 months
$
70
$1,465
80
$
$ 57
$737
$ 79
$ 13
$728
1
$
December 31, 2015
Weighted-
Average Remaining
Amortization Period
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names and associated trademarks . . . . . . . . . . . . . . . .
31 months
11 years
16 months
$
69
$1,453
80
$
$ 44
$583
$ 70
$ 25
$870
$ 10
Amortization expense for other
intangible assets was $174, $193 and $204 for
the years ended
December 31, 2016, 2015 and 2014, respectively.
As of December 31, 2016, estimated amortization expense for other intangible assets for each of the next
five years and thereafter was as follows:
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$146
126
111
95
80
184
$742
69
8. Accrued Expenses and Other Liabilities and Other Long-Term Liabilities
Accrued expenses and other liabilities consist of the following:
Self-insurance accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring reserves (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
National accounts accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to seller
Other (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2016
2015
$ 35
55
23
17
79
40
40
2
53
$ 43
41
22
16
91
38
39
4
61
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$344
$355
(1) Relates to branch closure charges and severance costs. See note 4 for additional detail.
(2) Primarily relates to amounts billed to customers in excess of recognizable equipment rental revenue. See
note 2 (“Revenue Recognition”) for additional detail.
(3) Other includes multiple items, none of which are individually significant.
Other long-term liabilities consist of the following:
Self-insurance accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2016
2015
$59
8
$67
$47
7
$54
9. Derivatives
We recognize all derivative instruments as either assets or liabilities at fair value, and recognize changes in
the fair value of the derivative instruments based on the designation of the derivative. We are exposed to certain
risks relating to our ongoing business operations. During the year ended December 31, 2016, the risks we
managed using derivative instruments were diesel price risk and foreign currency exchange rate risk. At
December 31, 2016, we had outstanding fixed price swap contracts on diesel purchases which were entered into
to mitigate the price risk associated with forecasted purchases of diesel. During the year ended December 31,
2016, we entered into forward contracts to purchase Canadian dollars to mitigate the foreign currency exchange
rate risk associated with certain Canadian dollar denominated intercompany loans. At December 31, 2016, there
were no outstanding forward contracts to purchase Canadian dollars. The outstanding forward contracts on diesel
purchases were designated and qualify as cash flow hedges and the forward contracts to purchase Canadian
dollars, which were all settled as of December 31, 2016, represented derivative instruments not designated as
hedging instruments.
Fixed Price Diesel Swaps
The fixed price swap contracts on diesel purchases that were outstanding at December 31, 2016 were
designated and qualify as cash flow hedges and the effective portion of the unrealized gain or loss on these
contracts is reported as a component of accumulated other comprehensive income and is reclassified into
earnings in the period during which the hedged transaction affects earnings (i.e., when the hedged gallons of
70
diesel are used). The remaining gain or loss on the fixed price swap contracts in excess of the cumulative change
in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), is recognized in
our consolidated statements of income during the current period. As of December 31, 2016, we had outstanding
fixed price swap contracts covering 7.0 million gallons of diesel which will be purchased throughout 2017 and
2018.
Foreign Currency Forward Contracts
The forward contracts to purchase Canadian dollars, which were all settled as of December 31, 2016,
represented derivative instruments not designated as hedging instruments and gains or losses due to changes in
the fair value of the forward contracts were recognized in our consolidated statements of income during the
period in which the changes in fair value occurred. During the year ended December 31, 2016, forward contracts
were used to purchase $894 Canadian dollars, representing the total amount due at maturity for certain Canadian
dollar denominated intercompany loans that were settled during the year ended December 31, 2016. Upon
maturity, the proceeds from the forward contracts were used to pay down the Canadian dollar denominated
intercompany loans.
Financial Statement Presentation
As of December 31, 2016 and 2015, immaterial amounts ($6 or less) were reflected in prepaid expenses and
other assets, accrued expenses and other liabilities, and accumulated other comprehensive income in our
consolidated balance sheets associated with the outstanding fixed price swap contracts that were designated and
qualify as cash flow hedges. Insignificant amounts (less than $1) were reflected in our consolidated statement of
cash flows for the years ended December 31, 2016, 2015 and 2014 associated with the forward contracts to
purchase Canadian dollars. Operating cash flows in our consolidated statement of cash flows for the years ended
December 31, 2016, 2015 and 2014 include $29, $35 and $41, respectively, associated with the fixed price diesel
swaps, comprised of 1) the cost to purchase 10.1 million, 10.6 million and 10.5 million hedged gallons of diesel
during the years ended December 31, 2016, 2015 and 2014, respectively, and 2) cash paid to or received from the
counterparties to the fixed price swaps.
71
The effect of our derivative instruments on our consolidated statements of income for the years ended
December 31, 2016, 2015 and 2014 was as follows:
Location of income
(expense)
recognized on
derivative/hedged item
Amount of income
(expense)
recognized
on derivative
Amount of income
(expense)
recognized
on hedged item
Year ended December 31, 2016:
Derivatives designated as hedging
instruments:
Fixed price diesel swaps . . . . . . . Other income (expense), net (1)
$ *
Cost of equipment rentals,
excluding
depreciation (2), (3)
Derivatives not designated as
hedging instruments:
Foreign currency forward
contracts . . . . . . . . . . . . . . . . . Other income (expense), net
Year ended December 31, 2015:
Derivatives designated as hedging
instruments:
(6)
(3)
Fixed price diesel swaps . . . . . . . Other income (expense), net (1)
$ *
Cost of equipment rentals,
excluding
depreciation (2), (3)
Derivatives not designated as
hedging instruments:
Foreign currency forward
contracts . . . . . . . . . . . . . . . . . Other income (expense), net
Year ended December 31, 2014:
Derivatives designated as hedging
instruments:
(7)
(5)
Fixed price diesel swaps . . . . . . . Other income (expense), net (1)
$ *
Cost of equipment rentals,
excluding
depreciation (2), (3)
Derivatives not designated as
hedging instruments:
Foreign currency forward
contracts . . . . . . . . . . . . . . . . . Other income (expense), net
*
(7)
(23)
3
(29)
5
(40)
7
Amounts are insignificant (less than $1).
*
(1) Represents the ineffective portion of the fixed price diesel swaps.
(2) Amounts recognized on derivative represent the effective portion of the fixed price diesel swaps.
(3) Amounts recognized on hedged item reflect the use of 10.1 million, 10.6 million and 10.5 million gallons of
diesel covered by the fixed price swaps during the years ended December 31, 2016, 2015 and 2014,
respectively.
72
10. Fair Value Measurements
We account for certain assets and liabilities at fair value, and categorize each of our fair value measurements
in one of the following three levels based on the lowest level input that is significant to the fair value
measurement in its entirety:
Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical
assets or liabilities.
Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities
include:
a) quoted prices for similar assets or liabilities in active markets;
b) quoted prices for identical or similar assets or liabilities in inactive markets;
c) inputs other than quoted prices that are observable for the asset or liability;
d) inputs that are derived principally from or corroborated by observable market data by correlation or other
means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for
substantially the full term of the asset or liability.
Level 3—Inputs to the valuation methodology are unobservable (i.e., supported by little or no market
activity) and significant to the fair value measure.
Assets and Liabilities Measured at Fair Value
As of December 31, 2016 and 2015, our only assets and liabilities measured at fair value were our fixed
price diesel swaps contracts, which are Level 2 derivatives measured at fair value on a recurring basis. As of
December 31, 2016 and 2015, immaterial amounts ($6 or less) were reflected in prepaid expenses and other
assets, and accrued expenses and other liabilities in our consolidated balance sheets, reflecting the fair values of
the fixed price swap contracts. As discussed in note 9 to the consolidated financial statements, we entered into
the fixed price swap contracts on diesel purchases to mitigate the price risk associated with forecasted purchases
of diesel. Fair value is determined based on observable market data. As of December 31, 2016, we have fixed
price swap contracts covering 7.0 million gallons of diesel which we will buy throughout 2017 and 2018 at the
average contract price of $2.56 per gallon, while the average forward price for the hedged gallons was $2.73 per
gallon as of December 31, 2016.
Fair Value of Financial Instruments
The carrying amounts reported in our consolidated balance sheets for accounts receivable, accounts payable
and accrued expenses and other liabilities approximate fair value due to the immediate to short-term maturity of
these financial instruments. The fair values of our senior secured asset-based revolving credit facility (“ABL
facility”) and accounts receivable securitization facility approximate their book values as of December 31, 2016
and 2015. The estimated fair values of our other financial instruments at December 31, 2016 and 2015 have been
calculated based upon available market information or an appropriate valuation technique, and are as follows:
December 31, 2016
December 31, 2015
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Level 1:
Senior and senior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 3:
Capital leases (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,506
$5,715
$5,916
$6,030
71
70
96
95
(1) The fair value of capital leases reflects the present value of the leases using a 7.0 percent interest rate.
73
11. Debt
Debt, net of unamortized original issue discounts or premiums, and unamortized debt issuance costs,
consists of the following:
December 31,
2016
2015
Accounts Receivable Securitization Facility (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.5 billion ABL Facility (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 3/8 percent Senior Notes (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 1/4 percent Senior Notes (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 5/8 percent Senior Notes due 2022 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 1/8 percent Senior Notes due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 5/8 percent Senior Secured Notes due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 3/4 percent Senior Notes due 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 1/2 percent Senior Notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 7/8 percent Senior Notes due 2026 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 1/2 percent Senior Notes due 2027 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 568
1,645
—
—
469
936
991
839
792
740
739
71
$ 571
1,579
740
315
1,306
937
989
838
791
—
—
96
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less short-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,790
(597)
8,162
(607)
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,193
$7,555
(2)
(1) $809 and $57 were available under our ABL facility and accounts receivable securitization facility,
respectively, at December 31, 2016. The ABL facility availability is reflected net of $36 of letters of credit.
At December 31, 2016,
the interest rates applicable to our ABL facility and accounts receivable
securitization facility were 2.3 percent and 1.5 percent, respectively.
In 2016, we redeemed all of our 7 3/8 percent Senior Notes and 8 1/ percent Senior Notes, and $850 principal
amount of 4 our 7 5/8 percent Senior Notes due 2022. Upon redemption, we recognized an aggregate loss of
$100 in interest expense, net. The loss represented the difference between the net carrying amount and the
total purchase price of the redeemed notes.
In 2016, URNA issued $750 principal amount of 5 7/8 percent Senior Notes due 2026 and $750 principal
amount of 5 1/2 percent Senior Notes due 2027. See below for additional detail.
(3)
Short-term debt
As of December 31, 2016, our short-term debt primarily reflects $568 of borrowings under our accounts
receivable securitization facility. As discussed below, in 2016, we amended and extended our accounts receivable
securitization facility. During the year ended December 31, 2016, the monthly average amount outstanding under
the accounts receivable securitization facility was $551 and the weighted-average interest rate thereon was
1.2 percent. The maximum month-end amount outstanding under the accounts receivable securitization facility
during the year ended December 31, 2016 was $621.
74
Accounts Receivable Securitization Facility. In August 2016, we amended and extended our accounts
receivable securitization facility. The amended facility expires on August 29, 2017, has a facility size of $625,
and may be extended on a 364-day basis by mutual agreement of the Company and the lenders under the facility.
Borrowings under the facility are reflected as short-term debt on our consolidated balance sheets. Key provisions
of the facility include the following:
•
•
•
•
borrowings are permitted only to the extent that the face amount of the receivables in the collateral
pool, net of applicable reserves, exceeds the outstanding loans by a specified amount. As of
December 31, 2016, there were $655 of receivables, net of applicable reserves, in the collateral pool;
the receivables in the collateral pool are the lenders’ only source of repayment;
upon early termination of the facility, no new amounts will be advanced under the facility and
collections on the receivables securing the facility will be used to repay the outstanding borrowings;
and
standard termination events including, without limitation, a change of control of Holdings, URNA or
certain of its subsidiaries, a failure to make payments, a failure to comply with standard default,
delinquency, dilution and days sales outstanding covenants, or breach of the fixed charge coverage ratio
covenant under the ABL facility (if applicable).
ABL Facility. In June 2008, Holdings, URNA, and certain of our subsidiaries entered into a credit agreement
providing for a five-year $1.25 billion ABL facility, a portion of which is available for borrowing in Canadian
dollars. The ABL facility was subsequently upsized and extended. The size of the ABL facility was $2.5 billion
as of December 31, 2016.
The ABL facility is subject to, among other things, the terms of a borrowing base derived from the value of
eligible rental equipment and eligible inventory. The borrowing base is subject to certain reserves and caps
customary for financings of this type. All amounts borrowed under the credit agreement must be repaid on or
before June 2021. Loans under the credit agreement bear interest, at URNA’s option: (i) in the case of loans in
U.S. dollars, at a rate equal to the London interbank offered rate or an alternate base rate, in each case plus a
spread, or (ii) in the case of loans in Canadian dollars, at a rate equal to the Canadian prime rate or an alternate
rate (Bankers’ Acceptance Rate), in each case plus a spread. The interest rates under the credit agreement are
subject to change based on the availability in the facility. A commitment fee accrues on any unused portion of the
commitments under the credit agreement at a fixed rate per annum. Ongoing extensions of credit under the credit
agreement are subject to customary conditions, including sufficient availability under the borrowing base. The
credit agreement also contains covenants that, unless certain financial and other conditions are satisfied, require
URNA to satisfy various financial tests and to maintain certain financial ratios. As discussed below (see “Loan
Covenants and Compliance”), the only material financial covenant that currently exists in the ABL facility is the
fixed charge coverage ratio. As of December 31, 2016, availability under the ABL facility has exceeded the
required threshold and, as a result, this maintenance covenant is inapplicable. In addition, the credit agreement
contains customary negative covenants applicable to Holdings, URNA and our subsidiaries, including negative
covenants that restrict the ability of such entities to, among other things, (i) incur additional indebtedness or
engage in certain other types of financing transactions, (ii) allow certain liens to attach to assets, (iii) repurchase,
or pay dividends or make certain other restricted payments on, capital stock and certain other securities,
(iv) prepay certain indebtedness and (v) make acquisitions and investments. The U.S. dollar borrowings under
the credit agreement are secured by substantially all of our assets and substantially all of the assets of certain of
our U.S. subsidiaries (other than real property and certain accounts receivable). The U.S. dollar borrowings under
the credit agreement are guaranteed by Holdings and by URNA and, subject to certain exceptions, our domestic
subsidiaries. Borrowings under the credit agreement by URNA’s Canadian subsidiaries are also secured by
substantially all the assets of URNA’s Canadian subsidiaries and supported by guarantees from the Canadian
subsidiaries and from Holdings and URNA, and, subject to certain exceptions, our domestic subsidiaries. Under
the ABL facility, a change of control (as defined in the credit agreement) constitutes an event of default, entitling
our lenders, among other things, to terminate our ABL facility and to require us to repay outstanding borrowings.
75
As of December 31, 2016, the ABL facility was our only long-term variable rate debt instrument. During the
year ended December 31, 2016, the monthly average amount outstanding under the ABL facility was $1.4 billion
and the weighted-average interest rate thereon was 2.1 percent. The maximum month-end amount outstanding
under the ABL facility during the year ended December 31, 2016 was $1.7 billion.
7 5⁄ 8 percent Senior Notes due 2022. In March 2012, Funding SPV issued $1.325 billion aggregate principal
amount of 7 5⁄ 8 percent Senior Notes (the “7 5⁄ 8 percent Notes”), which are due April 15, 2022. The net proceeds
from the sale of the 7 5⁄ 8 percent Notes were approximately $1.295 billion (after deducting the initial purchasers’
fees and offering expenses). Upon consummation of the RSC merger, URNA assumed the 7 5⁄ 8 percent Notes.
The 7 5⁄ 8 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions,
URNA’s domestic subsidiaries. As of December 31, 2016, after the redemption of $850 principal amount of the
7 5⁄ 8 percent Notes in 2016, the outstanding principal amount of the notes was $475.The 7 5⁄ 8 percent Notes may
be redeemed on or after April 15, 2017, at specified redemption prices that range from 103.813 percent in 2017,
to 100 percent in 2020 and thereafter, plus accrued and unpaid interest. The indenture governing the 7 5⁄ 8 percent
Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional
indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets;
(v) loans and other investments; (vi) dividends and other distributions, stock repurchases and redemptions and
other
(vii) dividends, other payments and other matters affecting subsidiaries;
(viii) transactions with affiliates; and (ix) designations of unrestricted subsidiaries, as well as a requirement to
timely file periodic reports with the SEC. Each of these covenants is subject to important exceptions and
qualifications that would allow URNA and its subsidiaries to engage in these activities under certain conditions.
The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must
make an offer to purchase all of the then outstanding 7 5⁄ 8 percent Notes tendered at a purchase price in cash
equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.
restricted payments;
6 1⁄ 8 percent Senior Notes due 2023. In October 2012, URNA issued $400 aggregate principal amount of
6 1⁄ 8 percent Senior Notes (the “6 1⁄ 8 percent Notes”), which are due June 15, 2023. In March 2014, URNA issued
$525 principal amount of 6 1⁄ 8 percent Notes as an add on to the existing 6 1⁄ 8 percent Notes. The notes issued in
March 2014 have identical terms, and are fungible, with the existing 6 1⁄ 8 percent Notes. The net proceeds from
the issuances of the 6 1⁄ 8 percent Notes were $939 (after deducting offering expenses). The 6 1⁄ 8 percent Notes are
unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA’s domestic subsidiaries.
The 6 1⁄ 8 percent Notes may be redeemed by URNA on or after December 15, 2017, at specified redemption
prices that range from 103.063 percent in 2017 to 100 percent in 2020 and thereafter. The indenture governing
the 6 1⁄ 8 percent Notes contains certain restrictive covenants,
limitations on
(i) additional indebtedness; (ii) restricted payments; (iii) liens; (iv) asset sales; (v) preferred stock of certain
subsidiaries; (vi) transactions with affiliates; (vii) dividends and other payments; (viii) designations of
unrestricted subsidiaries; (ix) additional subsidiary guarantees and (x) mergers, consolidations or sales of
substantially all of our assets. The indenture also requires that, in the event of a change of control (as defined in
the indenture), URNA must make an offer to purchase all of the then outstanding 6 1⁄ 8 percent Notes tendered at a
purchase price in cash equal to 101 percent of the principal amount thereof plus accrued and unpaid interest, if
any, thereon. The carrying value of the 6 1⁄ 8 percent Notes includes the $21 unamortized portion of the original
issue premium recognized in conjunction with the March 2014 issuance, which is being amortized through the
maturity date in 2023. The effective interest rate on the 6 1⁄ 8 percent Senior Notes is 5.7 percent.
including, among others,
4 5⁄ 8 percent Senior Secured Notes due 2023. In March 2015, URNA issued $1.0 billion aggregate principal
amount of 4 5⁄ 8 percent Senior Secured Notes (the “4 5⁄ 8 percent Notes”), which are due July 15, 2023. The net
proceeds from the issuance were approximately $990 (after deducting offering expenses). The 4 5⁄ 8 percent Notes
are guaranteed by Holdings and certain domestic subsidiaries of URNA and are secured on a second-priority
basis by liens on substantially all of URNA’s and the guarantors’ assets that secure the ABL facility, subject to
certain exceptions. The 4 5⁄ 8 percent Notes may be redeemed on or after July 15, 2018, at specified redemption
in 2021 and thereafter, plus accrued
prices that range from 103.469 percent
to 100 percent
in 2018,
76
and unpaid interest, if any. The indenture governing the 4 5⁄ 8 percent Notes contains certain restrictive covenants,
including, among others, limitations on (i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and
acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and other investments; (vi) dividends
and other distributions, stock repurchases and redemptions and other restricted payments; (vii) restrictions
affecting subsidiaries; (viii) transactions with affiliates and (ix) designations of unrestricted subsidiaries, as well
as a requirement to timely file periodic reports with the SEC. The indenture also includes covenants relating to
the grant of and maintenance of liens for the benefit of the notes collateral agent. Each of the restrictive
covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to
engage in these activities under certain conditions. The indenture also requires that, in the event of a change of
control (as defined in the indenture), URNA must make an offer to purchase all of the then-outstanding 4 5⁄ 8
percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon.
5 3⁄4 percent Senior Notes due 2024. In March 2014, URNA issued $850 aggregate principal amount of 5 3⁄4
percent Senior Notes (the “5 3⁄4 percent Notes”), which are due November 15, 2024. The net proceeds from the
issuance were $837 (after deducting offering expenses). The 5 3⁄4 percent Notes are unsecured and are guaranteed
by Holdings and, subject to limited exceptions, URNA’s domestic subsidiaries. The 5 3⁄4 percent Notes may be
redeemed on or after May 15, 2019, at specified redemption prices that range from 102.875 percent in the
12-month period commencing on May 15, 2019, to 100 percent in the 12-month period commencing on May 15,
2022 and thereafter, plus accrued and unpaid interest. The indenture governing the 5 3⁄4 percent Notes contains
certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional indebtedness;
(iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and
other investments; (vi) dividends and other distributions, stock repurchases and redemptions and other restricted
payments; (vii) restrictions affecting subsidiaries; (viii) transactions with affiliates and (ix) designations of
unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of these
covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to
engage in these activities under certain conditions. The indenture also requires that, in the event of a change of
control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 5 3⁄4
percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon.
5 1⁄ 2 percent Senior Notes due 2025. In March 2015, URNA issued $800 aggregate principal amount of 5 1⁄ 2
percent Senior Notes which are due July 15, 2025 (the “2025 5 1⁄ 2 percent Notes”). The net proceeds from the
issuance were approximately $792 (after deducting offering expenses). The 2025 5 1⁄ 2 percent Notes are
unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 2025 5 1⁄ 2 percent
Notes may be redeemed on or after July 15, 2020, at specified redemption prices that range from 102.75 percent
in 2020, to 100 percent in 2023 and thereafter, plus accrued and unpaid interest, if any. The indenture governing
the 2025 5 1⁄ 2 percent Notes contains certain restrictive covenants, including, among others, limitations on
(i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other
dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases
and redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with
affiliates and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports
with the SEC. Each of the restrictive covenants is subject to important exceptions and qualifications that would
allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also
requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to
purchase all of the then-outstanding 2025 5 1⁄ 2 percent Notes tendered at a purchase price in cash equal to
101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.
5 7⁄ 8 percent Senior Notes due 2026. In May 2016, URNA issued $750 aggregate principal amount of 5 7⁄ 8
percent Senior Notes (the “5 7⁄ 8 percent Notes”) which are due September 15, 2026. The net proceeds from the
issuance were approximately $741 (after deducting offering expenses). The 5 7⁄ 8 percent Notes are unsecured and
are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 5 7⁄ 8 percent Notes may be
77
redeemed on or after September 15, 2021, at specified redemption prices that range from 102.938 percent in
2021, to 100 percent in 2024 and thereafter, plus accrued and unpaid interest, if any. The indenture governing the
5 7⁄ 8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii)
additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions
of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases and
redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with
affiliates; and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic
reports with the SEC. Each of the restrictive covenants is subject to important exceptions and qualifications that
would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also
requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to
purchase all of the then-outstanding 5 7⁄ 8 percent Notes tendered at a purchase price in cash equal to 101 percent
of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.
5 1⁄ 2 percent Senior Notes due 2027. In November 2016, URNA issued $750 aggregate principal amount of
5 1⁄ 2 percent Senior Notes which are due May 15, 2027 (the “2027 5 1⁄ 2 percent Notes”). The net proceeds from
the issuance were approximately $741 (after deducting offering expenses). The 2027 5 1⁄ 2 percent Notes are
unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 2027 5 1⁄ 2 percent
Notes may be redeemed on or after May 15, 2022, at specified redemption prices that range from 102.75 percent
in 2022, to 100 percent in 2025 and thereafter, plus accrued and unpaid interest, if any. The indenture governing
the 2027 5 1⁄ 2 percent Notes contains certain restrictive covenants, including, among others, limitations on
(i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other
dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases
and redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with
affiliates; and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic
reports with the SEC. Each of the restrictive covenants is subject to important exceptions and qualifications that
would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also
requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to
purchase all of the then-outstanding 2027 5 1⁄ 2 percent Notes tendered at a purchase price in cash equal to
101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.
Loan Covenants and Compliance
As of December 31, 2016, we were in compliance with the covenants and other provisions of the ABL
facility, the accounts receivable securitization facility and the senior notes. Any failure to be in compliance with
any material provision or covenant of these agreements could have a material adverse effect on our liquidity and
operations.
The only financial covenant that currently exists under the ABL facility is the fixed charge coverage ratio.
Subject to certain limited exceptions specified in the ABL facility, the fixed charge coverage ratio covenant
under the ABL facility will only apply in the future if specified availability under the ABL facility falls below
10 percent of the maximum revolver amount under the ABL facility. When certain conditions are met, cash and
cash equivalents and borrowing base collateral in excess of the ABL facility size may be included when
calculating specified availability under the ABL facility. As of December 31, 2016, specified availability under
the ABL facility exceeded the required threshold and, as a result, this maintenance covenant is inapplicable.
Under our accounts receivable securitization facility, we are required, among other things, to maintain certain
financial tests relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales
outstanding. The accounts receivable securitization facility also requires us to comply with the fixed charge
coverage ratio under the ABL facility, to the extent the ratio is applicable under the ABL facility.
78
Maturities
Maturities of the Company’s debt (exclusive of any unamortized original issue discounts or premiums, and
unamortized debt issuance costs) for each of the next five years and thereafter at December 31, 2016 are as
follows:
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 597
21
12
4
1,656
5,553
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,843
12.
Income Taxes
The components of the provision for income taxes for each of the three years in the period ended
December 31, 2016 are as follows:
Current
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31,
2016
2015
2014
$186
10
24
220
$ 13
15
14
42
$
2
42
5
49
119
(1)
5
123
300
5
31
336
240
2
19
261
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$343
$378
$310
A reconciliation of the provision for income taxes and the amount computed by applying the statutory
federal income tax rate of 35 percent to the income before provision for income taxes for each of the three years
in the period ended December 31, 2016 is as follows:
Computed tax at statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$318
21
9
(5)
$337
41
8
(8)
$297
22
8
(17)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$343
$378
$310
Year ended December 31,
2016
2015
2014
79
The components of deferred income tax assets (liabilities) are as follows:
December 31, December 31,
2016
2015
Reserves and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt cancellation and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss and credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103
33
28
164
(1,820)
(231)
(9)
(2,060)
$
112
48
73
233
(1,714)
(272)
(12)
(1,998)
Total deferred income tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,896)
$(1,765)
The following table summarizes the activity related to unrecognized tax benefits, some of which would
impact our effective tax rate if recognized:
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3
1
—
—
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
4
$ 7
1
(1)
(4)
$ 3
2016
2015
We include interest accrued on the underpayment of income taxes in interest expense, and penalties, if any,
related to unrecognized tax benefits in selling, general and administrative expense. Interest expense of less than
$1 related to income tax was reflected in our consolidated statements of income for each of the years ended
December 31, 2016, 2015 and 2014.
We file income tax returns in the United States and in Canada. With few exceptions, we have completed our
domestic and international income tax examinations, or the statute of limitations has expired in the respective
jurisdictions, for years prior to 2010. The Internal Revenue Service (“IRS”) has completed audits for periods
prior to 2010. Canadian authorities have concluded income tax audits for periods through 2010. Included in the
balance of unrecognized tax benefits at December 31, 2016 are certain tax positions associated with Canadian
transfer pricing and U.S. state inter-company royalty related issues. The Company has submitted a request to the
(“APA”) associated with our
Canadian Competent Authority for an Advanced Pricing Arrangement
intercompany transactions. The process has been delayed due to changes in the management and staff in the
Canadian Revenue Agency (“CRA”). The latest communication received from the CRA indicated that the CRA’s
position on this matter should be expected within the next 12 months. It is not possible to estimate the amount of
the change, if any, to the previously recorded uncertain tax positions.
For financial reporting purposes, income before provision for income taxes for our foreign subsidiaries was
$29, $70 and $168 for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016,
unremitted earnings of foreign subsidiaries were approximately $382. Since it is our intention to indefinitely
reinvest these earnings, no U.S. taxes have been provided for these amounts. If we changed our reinvestment
policy and decided to remit earnings as a dividend, a deferred tax liability would arise. Determination of the
amount of unrecognized deferred tax liability on these unremitted taxes is not practicable.
We have net operating loss carryforwards (“NOLs”) of $527 for state income tax purposes that expire from
2016 through 2036. We have recorded valuation allowances against this deferred asset of $9 and $12 as of
80
December 31, 2016 and 2015, respectively. We have no NOLs recorded for federal income tax purposes. In
2016, the Company utilized $155 of existing NOLs to offset tax liabilities.
13. Commitments and Contingencies
We are subject to a number of claims and proceedings that generally arise in the ordinary conduct of our
business. These matters include, but are not limited to, general liability claims (including personal injury, product
liability, and property and automobile claims), indemnification and guarantee obligations, employee injuries and
employment-related claims, self-insurance obligations and contract and real estate matters. Based on advice of
counsel and available information, including current status or stage of proceeding, and taking into account
accruals included in our consolidated balance sheets for matters where we have established them, we currently
believe that any liabilities ultimately resulting from these ordinary course claims and proceedings will not,
individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of
operations or cash flows.
Indemnification
The Company indemnifies its officers and directors pursuant to indemnification agreements and may in
addition indemnify these individuals as permitted by Delaware law.
Operating Leases
We lease rental equipment, real estate and certain office equipment under operating leases. Certain real
estate leases require us to pay maintenance, insurance, taxes and certain other expenses in addition to the stated
rental payments. Future minimum lease payments by year and in the aggregate, for non-cancelable operating
leases with initial or remaining terms of one year or more are as follows at December 31, 2016:
Real
Estate
Leases
Non-Rental
Equipment
Leases
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 99
82
63
44
28
39
$355
$ 41
30
22
15
8
2
$118
Our real estate leases provide for varying terms, including customary escalation clauses. We evaluate our
operating leases in accordance with GAAP. Our leases generally include default provisions that are customary,
and do not contain material adverse change clauses, cross-default provisions or subjective default provisions. In
these leases, the occurrence of an event of default is objectively determinable based on predefined criteria. Based
on the facts and circumstances that existed at lease inception and with consideration of our history as a lessee, we
believe that it is reasonable to assume that an event of default will not occur.
Rent expense under all non-cancelable real estate, rental equipment and other equipment operating leases
totaled $149, $139 and $131 for the years ended December 31, 2016, 2015 and 2014, respectively.
Capital Leases
Capital lease obligations consist primarily of vehicle and building leases with periods expiring at various
dates through 2028. Capital lease obligations were $71 and $96 at December 31, 2016 and 2015, respectively.
81
The following table presents capital lease financial statement information for the years ended December 31,
2016, 2015 and 2014, except for balance sheet information, which is presented as of December 31, 2016 and
2015:
Depreciation of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
$20
4
2016
2015
$ 20
3
190
(70)
$ 20
3
186
(56)
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120
130
Property and equipment, net:
Non-rental vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . .
7
21
(16)
8
21
(16)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 12
$ 13
Future minimum lease payments for capital leases for each of the next five years and thereafter at
December 31, 2016 are as follows:
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
$32
23
13
4
2
3
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amount representing interest (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77
(6)
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$71
(1) The weighted average interest rate on our capital
lease obligations as of December 31, 2016 was
approximately 5.7 percent.
Employee Benefit Plans
We currently sponsor a defined contribution 401(k) retirement plan, which is subject to the provisions of the
Employee Retirement Income Security Act of 1974. We also sponsor a deferred profit sharing plan for the
benefit of the full-time employees of our Canadian subsidiaries. Under these plans, we match a percentage of the
participants’ contributions up to a specified amount. Company contributions to the plans were $23, $22 and $19
in the years ended December 31, 2016, 2015 and 2014, respectively.
Environmental Matters
The Company and its operations are subject
to various laws and related regulations governing
environmental matters. Under such laws, an owner or lessee of real estate may be liable for the costs of removal
or remediation of certain hazardous or toxic substances located on or in, or emanating from, such property, as
well as investigation of property damage. We incur ongoing expenses associated with the performance of
appropriate remediation at certain locations.
82
14. Common Stock
We have 500 million authorized shares of common stock, $0.01 par value. At December 31, 2016 and 2015,
there were 0.5 million and 0.6 million shares of common stock reserved for issuance pursuant to options granted
under our stock option plans, respectively.
As of December 31, 2016, there were an aggregate of 1.1 million outstanding time and performance-based
RSUs and 3.7 million shares available for grant of stock and options under our 2010 Long Term Incentive Plan.
A summary of the transactions within the Company’s stock option plans follows (shares in thousands):
Weighted-
Average
Shares Exercise Price
Outstanding at January 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(213)
(10)
875
Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(87)
(4)
652
Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
561
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
(54)
Outstanding at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
507
564
537
507
As of December 31, 2016 (options in thousands):
$17.85
—
11.21
19.98
19.99
—
13.54
20.29
20.99
—
17.42
—
21.37
$16.18
$19.49
$21.37
Range of Exercise Prices
$0.01- 5.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.01-10.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.01-15.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.01-20.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25.01-30.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30.01-35.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40.01-45.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50.01-55.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Contractual
Outstanding Life (Years)
Amount
Weighted
Average
Exercise
Price
Amount
Exercisable
100
169
12
12
27
62
51
74
507
2.2
3.2
2.1
2.8
3.2
4.2
5.1
6.2
$ 3.38
8.32
14.50
15.22
26.01
31.49
41.25
53.78
$21.37
100
169
12
12
27
62
51
74
507
Weighted
Average
Exercise
Price
$ 3.38
8.32
14.50
15.22
26.01
31.49
41.25
53.78
$21.37
83
The following table presents information associated with options as of December 31, 2016 and 2015, and
for the years ended December 31, 2016, 2015 and 2014:
Intrinsic value of options outstanding as of December 31 . . . . . . . .
Intrinsic value of options exercisable as of December 31 . . . . . . . . .
Intrinsic value of options exercised . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average grant date fair value per option . . . . . . . . . . . . . .
$ 43
43
4
$—
$ 29
28
7
$—
17
$—
2016
2015
2014
In addition to stock options, the Company issues time-based and performance-based RSUs to certain
officers and key executives under various plans. The RSUs automatically convert to shares of common stock on a
one-for-one basis as the awards vest. The time-based RSUs typically vest over a three year vesting period
beginning 12 months from the grant date and thereafter annually on the anniversary of the grant date. The
performance-based RSUs vest over the performance period which is currently the calendar year. There were
346 thousand shares of common stock issued upon vesting of RSUs during 2016, net of 190 thousand shares
surrendered to satisfy tax obligations. The Company measures the value of RSUs at fair value based on the
closing price of the underlying common stock on the grant date. The Company amortizes the fair value of
outstanding RSUs as stock-based compensation expense over the requisite service period on a straight-line basis,
or sooner if the employee effectively vests upon termination of employment under certain circumstances. For
performance-based RSUs, compensation expense is recognized to the extent
the satisfaction of the
performance condition is considered probable.
that
A summary of RSUs granted follows (RSUs in thousands):
RSUs granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average grant date price per unit . . . . . . . . . . . . . . .
901
$60.55
463
$86.84
805
$92.28
Year Ended December 31,
2016
2015
2014
As of December 31, 2016, the total pretax compensation cost not yet recognized by the Company with
regard to unvested RSUs was $32. The weighted-average period over which this compensation cost is expected
to be recognized is 1.9 years.
A summary of RSU activity for the year ended December 31, 2016 follows (RSUs in thousands):
Nonvested as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . .
Weighted-
Average
Grant Date Fair
Value
$81.94
60.55
64.62
79.19
$71.29
Stock Units
530
901
(645)
(35)
751
The total fair value of RSUs vested during the fiscal years ended December 31, 2016, 2015 and 2014 was
$39, $84, and $54, respectively.
Stockholders’ Rights Plan. Our stockholders’ rights plan expired in accordance with its terms on
September 27, 2011. Our board of directors elected not to renew or extend the plan.
84
15. Quarterly Financial Information (Unaudited)
First
Fourth
Quarter Quarter Quarter Quarter
Second
Third
For the year ended December 31, 2016 (1):
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share—diluted (3) . . . . . . . . . . . . . . . . . . . . . . . .
For the year ended December 31, 2015 (2):
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share—diluted (3) . . . . . . . . . . . . . . . . . . . . . . . .
$1,310
500
254
92
1.01
1.01
$1,315
524
300
115
1.19
1.16
$1,421
590
347
134
1.52
1.52
$1,429
618
375
86
0.89
0.88
$1,508
656
412
187
2.18
2.16
$1,550
690
446
215
2.28
2.25
$1,523
657
402
153
1.82
1.80
$1,523
648
397
169
1.82
1.81
Full
Year
$5,762
2,403
1,415
566
6.49
6.45
$5,817
2,480
1,518
585
6.14
6.07
(1) The fourth quarter of 2016 includes $6 of restructuring charges associated with the restructuring program we
initiated in the fourth quarter of 2015 and closed in the fourth quarter of 2016, which is discussed further in
note 4 to our consolidated financial statements. Additionally, as discussed in note 11 to our consolidated
financial statements, in the fourth quarter of 2016, we redeemed $850 principal amount of our 7 5/8 percent
Senior Notes due 2022 and issued $750 principal amount of 5 1/2 percent Senior Notes due 2027. Upon the
partial redemption of the 7 5/8 percent Senior Notes due 2022, we recognized a loss of $65 in interest
expense, net. The loss represented the difference between the net carrying amount and the total purchase
price of the redeemed notes.
(2) The fourth quarter of 2015 included a decrease in stock compensation, net of $14 as compared to the fourth
quarter of 2014 primarily due to lower than expected revenue and profitability. Additionally, as discussed in
note 4 to our consolidated financial statements, in the fourth quarter of 2015, we initiated a restructuring
program in response to recent challenges in our operating environment. Though we expected solid industry
growth in 2016, the restructuring program was initiated in an effort to reduce costs in an environment with
continuing pressures on volume and pricing. We recognized $4 of costs for the program in the fourth quarter
of 2015. The program was completed in the fourth quarter of 2016. Additionally, during the fourth quarter
of 2015, we reached agreement on a settlement that provided us with a $5 refund on previously paid
property taxes. We recognized a reduction of $5 in cost of equipment rentals, excluding depreciation,
associated with the settlement during the fourth quarter of 2015. Additionally, our provision for income
taxes for the fourth quarter of 2015 includes the impact of a $5 increase in valuation allowances resulting
from the enactment of Connecticut state limitations on net operating loss utilization.
85
(3) Diluted earnings per share includes the after-tax impacts of the following:
First
Fourth
Quarter Quarter Quarter Quarter
Second
Third
Full
Year
For the year ended December 31, 2016:
Merger related intangible asset amortization (5) . . . . . . . . . . . . . . .
Impact of the fair value mark-up of acquired RSC fleet (7) . . . . . .
Impact on interest expense related to fair value adjustment of
acquired RSC indebtedness (8) . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charge (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt securities and amendment of ABL
facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the year ended December 31, 2015:
Merger related costs (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger related intangible asset amortization (5) . . . . . . . . . . . . . . .
Impact on depreciation related to acquired RSC fleet and property
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of the fair value mark-up of acquired RSC fleet (7) . . . . . .
Impact on interest expense related to fair value adjustment of
and equipment (6)
acquired RSC indebtedness (8) . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt securities . . . . . . . . . . . . . . . . . . . .
$(0.30) $(0.28) $(0.28) $(0.29) $(1.12)
(0.25)
(0.05)
(0.06)
(0.06)
(0.06)
—
(0.01)
(0.02) —
—
(0.02)
—
(0.02)
—
—
(0.05)
—
0.01
(0.11)
(0.03)
—
(0.18)
(0.07)
(0.47)
(0.70)
$ 0.17
(0.32)
$ — $ — $ — $ 0.17
(1.15)
(0.27)
(0.28)
(0.28)
0.01
(0.04)
—
(0.04)
—
(0.04)
—
(0.07)
0.02
(0.19)
0.01
—
(0.01)
—
—
—
—
(0.76) —
—
(0.03)
—
0.02
(0.04)
(0.78)
(4) This reflects transaction costs associated with the National Pump acquisition discussed above. The income
during the year ended December 31, 2015 reflects a decline in the fair value of the contingent cash
consideration component of the National Pump purchase price.
(5) This reflects the amortization of the intangible assets acquired in the RSC and National Pump acquisitions.
(6) This reflects the impact of extending the useful lives of equipment acquired in the RSC acquisition, net of
the impact of additional depreciation associated with the fair value mark-up of such equipment.
(7) This reflects additional costs recorded in cost of rental equipment sales associated with the fair value
mark-up of rental equipment acquired in the RSC acquisition and subsequently sold.
(8) This reflects a reduction of interest expense associated with the fair value mark-up of debt acquired in the
RSC acquisition.
(9) As discussed in note 4 to our consolidated financial statements, this reflects severance costs and branch
closure charges associated with our restructuring programs.
86
16. Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the
weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net
income available to common stockholders by the weighted-average number of common shares plus the effect of
dilutive potential common shares outstanding during the period. The following table sets forth the computation of
basic and diluted earnings per share (shares in thousands):
Numerator:
Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator:
Denominator for basic earnings per share—weighted-average common
Year Ended December 31,
2016
2015
2014
$
566
$
585
$
540
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,217
95,170
97,489
Effect of dilutive securities:
Employee stock options and warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 percent Convertible Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per share—adjusted weighted- average
277
—
281
300
660
249
394
6,386
687
common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,775
96,379
104,956
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
6.49
6.45
$
$
6.14
6.07
$
$
5.54
5.15
17. Condensed Consolidating Financial Information of Guarantor Subsidiaries
URNA is 100 percent owned by Holdings (“Parent”) and, as of December 31, 2016 and/or December 31,
2015, had outstanding (i) certain indebtedness that is guaranteed by both Parent and, with the exception of its
U.S. special purpose vehicle which holds receivable assets relating to the Company’s accounts receivable
securitization facility (the “SPV”), all of URNA’s U.S. subsidiaries (the “guarantor subsidiaries”) and (ii) certain
indebtedness that was guaranteed only by the guarantor subsidiaries (specifically, the 8 1/4 percent Senior
Notes). As discussed in note 11 to the consolidated financial statements, in 2016, all of the 8 1/4 percent Senior
Notes were redeemed. Other than the guarantee by certain Canadian subsidiaries of URNA’s indebtedness under
the ABL facility, none of URNA’s indebtedness is guaranteed by URNA’s foreign subsidiaries or the SPV
(together, the “non-guarantor subsidiaries”). The receivable assets owned by the SPV have been sold or
contributed by URNA to the SPV and are not available to satisfy the obligations of URNA or Parent’s other
subsidiaries. The guarantor subsidiaries are all 100 percent-owned and the guarantees are made on a joint and
several basis. The guarantees are not full and unconditional because a guarantor subsidiary can be automatically
released and relieved of its obligations under certain circumstances, including sale of the guarantor subsidiary,
the sale of all or substantially all of the guarantor subsidiary’s assets, the requirements for legal defeasance or
covenant defeasance under the applicable indenture being met or designating the guarantor subsidiary as an
unrestricted subsidiary for purposes of the applicable covenants. The guarantees are also subject to subordination
provisions (to the same extent that the obligations of the issuer under the relevant notes are subordinated to other
debt of the issuer) and to a standard limitation which provides that the maximum amount guaranteed by each
guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under
fraudulent conveyance laws. Based on our understanding of Rule 3-10 of Regulation S-X (“Rule 3-10”), we
believe that the guarantees of the guarantor subsidiaries comply with the conditions set forth in Rule 3-10 and
therefore continue to utilize Rule 3-10 to present condensed consolidating financial information for Holdings,
URNA, the guarantor subsidiaries and the non-guarantor subsidiaries. Separate consolidated financial statements
of the guarantor subsidiaries have not been presented because management believes that such information would
not be material to investors. However, condensed consolidating financial information is presented.
87
URNA covenants in the ABL facility, accounts receivable securitization facility and the other agreements
governing our debt impose operating and financial restrictions on URNA, Parent and the guarantor subsidiaries,
including limitations on the ability to make share repurchases and dividend payments. As of December 31, 2016,
the amount available for distribution under the most restrictive of these covenants was $377. The Company’s
total available capacity for making share repurchases and dividend payments includes the intercompany
receivable balance of Parent. As of December 31, 2016, our total available capacity for making share repurchases
and dividend payments, which includes URNA’s capacity to make restricted payments and the intercompany
receivable balance of Parent, was $713.
The condensed consolidating financial information of Parent and its subsidiaries is as follows:
88
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2016
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign SPV Eliminations
Total
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ — $
Accounts receivable, net . . . . . . . . . . . . . . . . . . . —
Intercompany receivable (payable) . . . . . . . . . . .
336
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Prepaid expenses and other assets . . . . . . . . . . . .
5
Total current assets . . . . . . . . . . . . . . . . . . . . . .
341
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . —
38
Property and equipment, net . . . . . . . . . . . . . . . .
1,292
Investments in subsidiaries . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Goodwill
Other intangibles, net
. . . . . . . . . . . . . . . . . . . . . —
Other long-term assets . . . . . . . . . . . . . . . . . . . . . —
21
38
(137)
61
51
34
5,709
326
1,013
3,013
686
6
$ — $ 291 $— $ — $
—
(188)
—
—
(188)
—
26
978
—
—
—
96
786
(115) —
7 —
5 —
284
786
480 —
40 —
— —
247 —
56 —
— —
—
104
—
—
104
—
—
(3,283)
—
—
—
312
920
—
68
61
1,361
6,189
430
—
3,260
742
6
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,671 $10,787
$ 816
$1,107 $786
$(3,179) $11,988
LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT)
Short-term debt and current maturities of long-
term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . —
—
Accrued expenses and other liabilities
1 $
1
Total current liabilities . . . . . . . . . . . . . . . . . . .
2
. . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
20
Other long-term liabilities . . . . . . . . . . . . . . . . . . —
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity (deficit) . . . . . . . . . . .
23
1,648
Total liabilities and stockholders’ equity
25
217
305
547
7,076
1,805
67
9,495
1,292
$ — $
—
13
13
111
—
—
124
692
3 $568
26 —
25
1
$ — $
—
—
—
—
—
—
54
569
4 —
71 —
— —
129
978
569
217
—
(3,179)
10,340
1,648
597
243
344
1,184
7,193
1,896
67
(deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,671 $10,787
$ 816
$1,107 $786
$(3,179) $11,988
89
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2015
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign SPV Eliminations
Total
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ — $
Accounts receivable, net . . . . . . . . . . . . . . . . . . . —
Intercompany receivable (payable) . . . . . . . . . . .
144
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Prepaid expenses and other assets . . . . . . . . . . . . —
Total current assets . . . . . . . . . . . . . . . . . . . . . .
144
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . —
45
Property and equipment, net . . . . . . . . . . . . . . . .
1,307
Investments in subsidiaries . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Goodwill
Other intangibles, net
. . . . . . . . . . . . . . . . . . . . . —
Other long-term assets . . . . . . . . . . . . . . . . . . . . .
3
18
41
40
62
98
259
5,657
334
958
3,000
838
7
$ — $ 161 $— $ — $
—
(176)
—
—
(176)
—
20
924
—
—
—
785
104
(109) —
7 —
18 —
181
785
529 —
46 —
— —
243 —
67 —
— —
—
101
—
—
101
—
—
(3,189)
—
—
—
179
930
—
69
116
1,294
6,186
445
—
3,243
905
10
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,499 $11,053
$ 768
$1,066 $785
$(3,088) $12,083
LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT)
Short-term debt and current maturities of long-
term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . —
Accrued expenses and other liabilities . . . . . . . . —
1 $
1
Total current liabilities . . . . . . . . . . . . . . . . . . .
4
. . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Other long-term liabilities . . . . . . . . . . . . . . . . . . —
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity (deficit) . . . . . . . . . . .
23
1,476
Total liabilities and stockholders’ equity
34
237
314
585
7,430
1,677
54
9,746
1,307
$ — $ — $572
34 —
27 —
—
14
14
110
—
—
124
644
61
572
11 —
70 —
— —
142
924
572
213
$ — $
—
—
—
—
—
—
607
271
355
1,233
7,555
1,765
54
—
(3,088)
10,607
1,476
(deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,499 $11,053
$ 768
$1,066 $785
$(3,088) $12,083
90
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Year Ended December 31, 2016
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . —
Sales of rental equipment
Sales of new equipment
. . . . . . . . . . . . . . . —
Contractor supplies sales . . . . . . . . . . . . . . . —
Service and other revenues . . . . . . . . . . . . . —
$ — $4,524
444
129
68
87
Total revenues . . . . . . . . . . . . . . . . . . . . . . —
5,252
Cost of revenues:
Cost of equipment rentals, excluding
depreciation . . . . . . . . . . . . . . . . . . . . . . . —
Depreciation of rental equipment
. . . . . . . . —
Cost of rental equipment sales . . . . . . . . . . —
Cost of new equipment sales . . . . . . . . . . . . —
Cost of contractor supplies sales . . . . . . . . . —
Cost of service and other revenues . . . . . . . —
Total cost of revenues . . . . . . . . . . . . . . . . —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . —
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . .
43
Restructuring charge . . . . . . . . . . . . . . . . . . —
Non-rental depreciation and amortization
15
Operating (loss) income . . . . . . . . . . . . . . .
Interest (income) expense, net . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . .
(58)
(6)
(471)
Income (loss) before provision for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . .
Income (loss) before equity in net earnings
(loss) of subsidiaries . . . . . . . . . . . . . . . .
Equity in net earnings (loss) of subsidiaries
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . .
419
154
265
301
566
32
1,669
900
265
107
47
35
3,023
2,229
579
7
216
1,427
509
521
397
157
240
61
301
32
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
—
(3)
—
(3)
21
18
28
$417
$—
52 —
15 —
11 —
15 —
510 —
$ —
—
—
—
—
—
$4,941
496
144
79
102
5,762
193 —
90 —
27 —
12 —
8 —
6 —
336 —
174 —
72
25
7 —
24 —
71
2
40
29
8
21
—
(25)
8
(95)
62
24
38
—
21
38
22 —
—
—
—
—
—
—
—
—
—
—
—
—
(5)
—
5
—
5
(383)
(378)
(82)
1,862
990
292
119
55
41
3,359
2,403
719
14
255
1,415
511
(5)
909
343
566
—
566
32
Comprehensive income (loss) . . . . . . . . . .
$ 598
$ 333
$ 46
$ 43
$ 38
$(460)
$ 598
91
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Year Ended December 31, 2015
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . —
Sales of rental equipment
Sales of new equipment
. . . . . . . . . . . . . . . —
Contractor supplies sales . . . . . . . . . . . . . . . —
Service and other revenues . . . . . . . . . . . . . —
$ — $4,452
480
137
69
80
Total revenues . . . . . . . . . . . . . . . . . . . . . . —
5,218
Cost of revenues:
Cost of equipment rentals, excluding
depreciation . . . . . . . . . . . . . . . . . . . . . . . —
Depreciation of rental equipment
. . . . . . . . —
Cost of rental equipment sales . . . . . . . . . . —
Cost of new equipment sales . . . . . . . . . . . . —
Cost of contractor supplies sales . . . . . . . . . —
Cost of service and other revenues . . . . . . . —
Total cost of revenues . . . . . . . . . . . . . . . . —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . —
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . .
5
Merger related costs . . . . . . . . . . . . . . . . . . —
Restructuring charge . . . . . . . . . . . . . . . . . . —
Non-rental depreciation and amortization
15
1,603
881
279
115
48
33
2,959
2,259
596
(26)
5
228
Operating (loss) income . . . . . . . . . . . . . . .
Interest (income) expense, net . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . .
(20)
(3)
(471)
1,456
559
513
Income (loss) before provision (benefit) for
income taxes . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . .
Income (loss) before equity in net earnings
(loss) of subsidiaries . . . . . . . . . . . . . . . .
Equity in net earnings (loss) of
454
201
384
141
253
243
subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
332
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . .
585
(176)
89
332
(176)
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
1
(2)
8
—
(10)
(5)
(5)
52
47
(175)
$ 497
$—
58 —
20 —
10 —
14 —
599 —
$ —
—
—
—
—
—
$4,949
538
157
79
94
5,817
223 —
95 —
32 —
16 —
7 —
5 —
378 —
221 —
—
79
33
—
1 —
24 —
117
3
44
70
18
52
(33)
5
(98)
60
23
37
—
52
—
37
(139) —
—
—
—
—
—
—
—
—
—
—
—
—
—
(5)
—
5
—
5
(473)
(468)
490
1,826
976
311
131
55
38
3,337
2,480
714
(26)
6
268
1,518
567
(12)
963
378
585
—
585
(176)
Comprehensive income (loss) . . . . . . . . . .
$ 409
$ 156
$(128)
$ (87) $ 37
$ 22
$ 409
92
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Year Ended December 31, 2014
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . —
Sales of rental equipment
Sales of new equipment
. . . . . . . . . . . . . . . —
Contractor supplies sales . . . . . . . . . . . . . . . —
Service and other revenues . . . . . . . . . . . . . —
$ — $4,217
478
124
70
73
Total revenues . . . . . . . . . . . . . . . . . . . . . . —
4,962
Cost of revenues:
Cost of equipment rentals, excluding
depreciation . . . . . . . . . . . . . . . . . . . . . . . —
Depreciation of rental equipment
. . . . . . . . —
Cost of rental equipment sales . . . . . . . . . . —
Cost of new equipment sales . . . . . . . . . . . . —
Cost of contractor supplies sales . . . . . . . . . —
Cost of service and other revenues . . . . . . . —
Total cost of revenues . . . . . . . . . . . . . . . . —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . —
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . .
55
Merger related costs . . . . . . . . . . . . . . . . . . —
Restructuring charge . . . . . . . . . . . . . . . . . . —
Non-rental depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . .
17
Operating (loss) income . . . . . . . . . . . . . . .
Interest expense (income), net . . . . . . . . . . .
Other (income) expense, net (1) . . . . . . . . .
(72)
9
(149)
Income (loss) before provision for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . .
Income (loss) before equity in net earnings
(loss) of subsidiaries . . . . . . . . . . . . . . . .
Equity in net earnings (loss) of subsidiaries
Net income (loss) . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . .
68
1
67
473
540
(93)
1,558
820
277
101
49
27
2,832
2,130
607
11
(1)
226
1,287
538
212
537
236
301
172
473
(93)
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
—
—
1
(4)
5
(3)
(6)
—
(6)
125
119
(90)
$602
$—
66 —
25 —
15 —
15 —
723 —
$ —
—
—
—
—
—
$4,819
544
149
85
88
5,685
248 —
101 —
38 —
19 —
10 —
5 —
421 —
302 —
84
—
—
9
—
—
29 —
189
4
17
168
43
125
—
(9)
5
(91)
77
30
47
—
125
(72) —
47
—
—
—
—
—
—
—
—
—
—
—
—
—
(6)
—
6
—
6
(770)
(764)
255
1,806
921
315
120
59
32
3,253
2,432
758
11
(1)
273
1,391
555
(14)
850
310
540
—
540
(93)
Comprehensive income (loss) . . . . . . . . . .
$ 447
$ 380
$ 29
$ 53
$ 47
$(509)
$ 447
(1)
In 2015, the amount of royalties Holdings receives from URNA and its subsidiaries was adjusted as
discussed above (see Item 7- Management’s Discussion and Analysis of Financial Condition and Results of
Operations- Liquidity and Capital Resources- Relationship between Holdings and URNA). Other (income)
expense, net for 2014 reflects the lower royalty rate that was used in 2014.
93
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2016
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . .
Net cash (used in) provided by financing
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
$
9
(9)
$1,774
(844)
$ (3)
—
$136
$ 37
(6) —
$—
—
$1,953
(859)
activities . . . . . . . . . . . . . . . . . . . . . . . . . —
Effect of foreign exchange rates . . . . . . . . . —
(927)
—
Net increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . —
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
3
18
3
—
—
—
(37)
(3)
3 —
130 —
161 —
—
—
—
—
(964)
3
133
179
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $
21
$—
$291
$—
$—
$ 312
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2015
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . .
Net cash (used in) provided by financing
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
$ 13
(13)
$ 1,804
(1,035)
$ (3)
—
$ 11
$ 170
(122) —
$—
—
$ 1,995
(1,170)
activities . . . . . . . . . . . . . . . . . . . . . . . . —
Effect of foreign exchange rates . . . . . . . . —
(759)
—
Net increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . —
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . —
Cash and cash equivalents at end of
10
8
3
—
—
—
(11)
(8)
(29) —
11 —
150 —
—
—
—
—
(775)
(29)
21
158
period . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $
18
$—
$ 161
$—
$—
$
179
94
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2014
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . .
Net cash provided by (used in) financing
Parent
URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
$ 13
(13)
$ 1,644
(1,773)
$
4
—
$ (83)
$ 223
(214) —
$—
—
$ 1,801
(2,000)
activities . . . . . . . . . . . . . . . . . . . . . . . . —
Effect of foreign exchange rate . . . . . . . . —
Net decrease in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . —
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . —
Cash and cash equivalents at end of
120
—
(9)
17
(4)
—
—
—
(3)
83
(14) —
(8) —
158 —
—
—
—
—
196
(14)
(17)
175
period . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $
8
$—
$ 150
$—
$—
$
158
18. Subsequent Events
On January 25, 2017, we entered into a definitive merger agreement with NES Rentals Holdings II, Inc.
(“NES ”), pursuant to which we have agreed to acquire NES in an all cash transaction. The aggregate merger
consideration paid to holders of NES common stock and options is expected to be approximately $965. The
merger and related fees and expenses will be funded through available cash, drawings on current debt facilities
and new debt issuances. NES is a provider of rental equipment with 73 branches located throughout the eastern
half of the U.S., and had approximately 1,100 employees and approximately $900 of rental assets at original
equipment cost as of December 31, 2016. NES has annual revenues of approximately $369. The proposed merger
is subject to Hart-Scott-Rodino antitrust clearance and customary conditions. We expect the merger to close early
in the second quarter of 2017.
95
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
UNITED RENTALS, INC.
(In millions)
Description
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Deductions
Balance
at End
of Period
Year ended December 31, 2016:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for obsolescence and shrinkage . . . . . . . . . . . . . . . . . . . . . .
Self-insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2015:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for obsolescence and shrinkage . . . . . . . . . . . . . . . . . . . . . .
Self-insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2014:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for obsolescence and shrinkage . . . . . . . . . . . . . . . . . . . . . .
Self-insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$55
4
90
$43
3
92
$49
3
94
$ 24
17
108
$ 32
18
110
$ 13
18
105
$ 25(a)
18(b)
104(c)
$ 20(a)
17(b)
112(c)
$ 19(a)
18(b)
107(c)
$54
3
94
$55
4
90
$43
3
92
The above information reflects the continuing operations of the Company for the periods presented.
Additionally, because the Company has retained certain self-insurance liabilities associated with the
discontinued traffic control business, those amounts have been included as well.
(a) Represents write-offs of accounts, net of recoveries.
(b) Represents write-offs.
(c) Represents payments.
96
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is
accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
The Company’s management carried out an evaluation, under the supervision and with participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a–15(e) and 15d–15(e) of the Exchange Act, as of December 31, 2016. Based
on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s
disclosure controls and procedures were effective as of December 31, 2016.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act. The Company’s
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to
the maintenance of records that,
the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
in reasonable detail, accurately and fairly reflect
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management assessed
the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. In making
this assessment, management used the criteria set forth in Internal Control—Integrated Framework (2013
framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on this assessment, our management has concluded that the Company’s internal control over financial
reporting was effective as of December 31, 2016.
The Company’s financial statements included in this annual report on Form 10-K have been audited by
Ernst & Young LLP, independent registered public accounting firm, as indicated in the following report.
Ernst & Young LLP has also provided an attestation report on the Company’s internal control over financial
reporting.
97
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of United Rentals, Inc.
We have audited United Rentals, Inc. internal control over financial reporting as of December 31, 2016, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), (the COSO criteria). United Rentals, Inc.’s
management
is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Controls over Financial Reporting. Our responsibility is to express an
opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
limitations,
In our opinion, United Rentals, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of United Rentals, Inc. as of December 31, 2016 and 2015, and
the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for
each of the three years in the period ended December 31, 2016 and our report dated January 25, 2017 expressed
an unqualified opinion thereon.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 25, 2017
98
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended
December 31, 2016 that materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
Not applicable.
99
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated by reference to the applicable information in our
Proxy Statement related to the 2017 Annual Meeting of Stockholders (the “2017 Proxy Statement”), which is
expected to be filed with the SEC on or before March 21, 2017.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the applicable information in the 2017
Proxy Statement, which is expected to be filed with the SEC on or before March 21, 2017.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item is incorporated by reference to the applicable information in the 2017
Proxy Statement, which is expected to be filed with the SEC on or before March 21, 2017.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the applicable information in the 2017
Proxy Statement, which is expected to be filed with the SEC on or before March 21, 2017.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to the applicable information in the 2017
Proxy Statement, which is expected to be filed with the SEC on or before March 21, 2017.
100
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as a part of this report
(1) Consolidated financial statements:
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements United Rentals,
Inc. Consolidated Balance Sheets at December 31, 2016 and 2015
United Rentals, Inc. Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014
United Rentals, Inc. Consolidated Statements of Comprehensive Income for the years ended December 31, 2016,
2015 and 2014
United Rentals, Inc. Consolidated Statements of Stockholders’ Equity for the years ended December 2016, 2015
and 2014
United Rentals, Inc. Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and
2014
Notes to consolidated financial statements
Report of Independent Registered Public Accounting Firm on Internal Controls over Financial Reporting
(2) Schedules to the financial statements:
Schedule II Valuation and Qualifying Accounts
Schedules other than those listed are omitted as they are not applicable or the required or equivalent information
has been included in the financial statements or notes thereto.
(3) Exhibits: The exhibits to this report are listed in the exhibit index below.
(b) Description of exhibits
Exhibit
Number
2(a)
2(b)
2(c)
3(a)
3(b)
3(c)
Description of Exhibit
Agreement and Plan of Merger, dated as of December 15, 2011, by and between United Rentals, Inc.
and RSC Holdings Inc. (incorporated by reference to Exhibit 2.1 of the United Rentals, Inc. Report
on Form 8-K filed on December 21, 2011)
Agreement and Plan of Merger, dated as of April 30, 2012, by and between United Rentals
(North America), Inc. and UR Merger Sub Corporation (incorporated by reference to Exhibit 1.1 of
the United Rentals, Inc. Report on Form 8-K filed on May 3, 2012)
Asset Purchase Agreement, dated as of March 7, 2014, by and among United Rentals
(North America), Inc. and United Rentals of Canada, Inc., on the one hand, and LD Services, LLC,
National Pump & Compressor, Ltd., Canadian Pump & Compressor Ltd., GulfCo Industrial
Equipment, L.P. (collectively, the “Sellers”) and the general partner and limited partners, members,
shareholders or other equity holders of each Seller, as the case may be, on the other hand
(incorporated by reference to Exhibit 2.1 of the United Rentals, Inc. Report on Form 8-K filed on
March 10, 2014)
Restated Certificate of Incorporation of United Rentals, Inc., dated March 16, 2009 (incorporated by
reference to Exhibit 3.1 of the United Rentals, Inc. Report on Form 8-K filed on March 17, 2009)
By-laws of United Rentals, Inc., amended as of September 8, 2016 (incorporated by reference to
Exhibit 3.1 of the United Rentals, Inc. Report on Form 8-K filed on September 14, 2016)
Restated Certificate of Incorporation of United Rentals (North America), Inc., dated April 30, 2012
(incorporated by reference to Exhibit 3(c) of the United Rentals, Inc. Report on Form 10-Q for the
quarter ended June 30, 2013)
101
Exhibit
Number
Description of Exhibit
3(d)
4(a)
4(b)
4(c)
4(d)
4(e)
4(f)
4(g)
4(h)
4(i)
By-laws of United Rentals (North America), Inc., dated May 8, 2013 (incorporated by reference to
Exhibit 3(d) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended June 30, 2013)
Form of Certificate representing United Rentals, Inc. Common Stock (incorporated by reference to
Exhibit 4 of Amendment No. 2 to the United Rentals, Inc. Registration Statement on Form S-l,
Registration No. 333-39117, filed on December 3, 1997)
Indenture, dated as of March 9, 2012, relating to 7 5/8 percent Senior Notes due 2022, between UR
Financing Escrow Corporation and Wells Fargo Bank, National Association, as Trustee (including
the Form of Note) (incorporated by reference to Exhibit 4.1 of the United Rentals, Inc. Report on
Form 8-K filed on March 12, 2012)
First Supplemental Indenture, dated as of April 30, 2012, relating to 7 5/8 percent Senior Notes due
2022, among UR Financing Escrow Corporation, UR Merger Sub Corporation, United Rentals, Inc.,
the subsidiaries named therein and Wells Fargo Bank, National Association, as Trustee (incorporated
by reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on May 3, 2012)
Indenture, dated as of October 30, 2012, relating to 6 1/8 percent Senior Notes due 2023, among
United Rentals (North America), Inc., United Rentals, Inc., the subsidiaries named therein and
Wells Fargo Bank, National Association, as Trustee (including the Form of Note) (incorporated by
reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on October 30, 2012)
Indenture for the 5 3/4 percent Notes due 2024, dated as of March 26, 2014, among United Rentals
(North America), Inc., United Rentals, Inc., United Rentals (North America), Inc.’s subsidiaries
named therein and Wells Fargo Bank, National Association, as Trustee (including the Form of 2024
Note) (incorporated by reference to Exhibit 4.1 of the United Rentals, Inc. and United Rentals
(North America), Inc. Report on Form 8-K filed on March 26, 2014)
Indenture for the 4 5/8 percent Notes due 2023, dated as of March 26, 2015, among United Rentals
(North America), Inc. (the “Company”), United Rentals, Inc., the Company’s subsidiaries named
therein and Wells Fargo Bank, National Association, as Trustee and Notes Collateral Agent
(including the Form of 2023 Note)
the
United Rentals, Inc. Report on Form 8-K filed on March 26, 2015)
(incorporated by reference to Exhibit 4.1 of
Indenture for the 5 1/2 percent Notes due 2025, dated as of March 26, 2015, among United Rentals
(North America), Inc. (the “Company”), United Rentals, Inc., the Company’s subsidiaries named
therein and Wells Fargo Bank, National Association, as Trustee (including the Form of 2025 Note)
(incorporated by reference to Exhibit 4.2 of the United Rentals, Inc. Report on Form 8-K filed on
March 26, 2015)
Indenture for the 5 7/8 percent Notes due 2026, dated as of May 13, 2016, among United Rentals
(North America), Inc. (the “Company”), United Rentals, Inc., the Company’s subsidiaries named
therein and Wells Fargo Bank, National Association, as Trustee (including the Form of 2026 Note)
(incorporated by reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on
May 13, 2016)
Indenture for the 5 1/2 percent Notes due 2027, dated as of November 7, 2016, among United Rentals
(North America), Inc. (the “Company”), United Rentals, Inc., the Company’s subsidiaries named
therein and Wells Fargo Bank, National Association, as Trustee (including the Form of 2027 Note)
(incorporated by reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on
November 7, 2016)
10(a)
2001 Comprehensive Stock Plan of United Rentals, Inc. (formerly the 2001 Senior Stock Plan)
(incorporated by reference to Exhibit 10(f) of the United Rentals, Inc. Report on Form 10-Q for the
quarter ended June 30, 2006, Commission File No. 001-14387)‡
102
Exhibit
Number
10(b)
10(c)
10(d)
10(e)
10(f)
10(g)
10(h)
10(i)
10(j)
10(k)
10(l)
10(m)
10(n)
10(o)
Description of Exhibit
United Rentals, Inc. Deferred Compensation Plan, as amended and restated, effective December 16,
2008 (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Report on Form 8-K,
Commission File No. 001-14387, filed on December 19, 2008)‡
United Rentals, Inc. Deferred Compensation Plan for Directors, as amended and restated, effective
January 1, 2013 (incorporated by reference to Exhibit 10(f) of the United Rentals, Inc. Report on
Form 10-K for year ended December 31, 2012)‡
United Rentals, Inc. Deferred Compensation Plan for Directors, as amended and restated, effective
December 16, 2008 (incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on
Form 8-K, Commission File No. 001-14387, filed on December 19, 2008)‡
Amendment Number One to the United Rentals, Inc. Deferred Compensation Plan for Directors, as
amended and restated, effective December 16, 2008 (incorporated by reference to Exhibit 10(h) of
the United Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2010)‡
United Rentals, Inc. 2014 Annual Incentive Compensation Plan, (incorporated by reference to
Appendix B of the United Rentals, Inc. Proxy Statement on Schedule 14A filed on March 26, 2014)‡
United Rentals, Inc. Long-Term Incentive Plan, as amended and restated, effective December 16, 2008
(incorporated by reference to Exhibit 10.5 of the United Rentals, Inc. Report on Form 8-K, Commission
File No. 001-14387, filed on December 19, 2008)‡
United Rentals, Inc. Second Amended and Restated 2010 Long Term Incentive Plan (incorporated by
reference to Appendix C of the United Rentals, Inc. Proxy Statement on Schedule 14A filed on
March 26, 2014)‡
Form of United Rentals, Inc. Restricted Stock Unit Agreement for Senior Management; effective for
grants of awards beginning in 2015 (incorporated by reference to Exhibit 10(h) on Form 10-Q for the
quarter ended March 31, 2015)‡
Form of United Rentals, Inc. 2015 Performance-Based Restricted Stock Unit Agreement for Senior
Management (incorporated by reference to Exhibit 10(i) on Form 10-Q for the quarter ended
March 31, 2015)‡
Form of United Rentals, Inc. 2010 Long-Term Incentive Plan Director Restricted Stock Unit
Agreement (incorporated by reference to Exhibit 10(b) of the United Rentals, Inc. Report on
Form 10-Q for the quarter ended June 30, 2010)‡
Form of United Rentals, Inc. 2010 Long Term Incentive Plan Restricted Stock Unit Agreement
(Performance-Based) (incorporated by reference to Exhibit 10(a) of the United Rentals, Inc. Report
on Form 10-Q for the quarter ended March 31, 2011)‡
United Rentals, Inc. Restricted Stock Unit Deferral Plan, as amended and restated, effective December 16,
2008 (incorporated by reference to Exhibit 10.3 of the United Rentals, Inc. Report on Form 8-K,
Commission File No. 001-14387, filed on December 19, 2008)‡
Amendment Number One to the United Rentals, Inc. Restricted Stock Unit Deferral Plan, as
amended and restated, effective December 16, 2008 (incorporated by reference to Exhibit 10(p) of
the United Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2010)‡
Form of United Rentals, Inc. Restricted Stock Unit Agreement for Senior Management (incorporated
by reference to Exhibit 10(b) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
June 30, 2006, Commission File No. 001-14387)‡
103
Exhibit
Number
10(p)
10(q)
10(r)
10(s)
10(t)
10(u)
10(v)
10(w)
10(x)
10(y)
10(z)
10(aa)
10(bb)
10(cc)
Description of Exhibit
Form of United Rentals, Inc., Restricted Stock Unit Agreement for Senior Management, effective for
grants of awards beginning in 2010 (incorporated by reference to Exhibit 10(e) of the United Rentals,
Inc. Report on Form 10-Q for the quarter ended March 31, 2010)‡
Form of United Rentals, Inc. Restricted Stock Unit Agreement for Non-Employee Directors (incorporated
by reference to Exhibit 10(c) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
June 30, 2006, Commission File No. 001-14387)‡
Form of United Rentals, Inc. Stock Option Agreement for Senior Management (incorporated by
reference to Exhibit 10.4 of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
June 30, 2009)‡
Form of United Rentals, Inc. Stock Option Agreement for Senior Management, effective for grants of
awards beginning in 2010 (incorporated by reference to Exhibit 10(d) of the United Rentals, Inc.
Report on Form 10-Q for the quarter ended March 31, 2010)‡
Form of Directors Option Agreement of United Rentals, Inc. (incorporated by reference to Exhibit
99.1 of the United Rentals, Inc. Report on Form 8-K, Commission File No. 001-14387, filed on
March 8, 2005)‡
Form of United Rentals, Inc. 2012 Performance Award Agreement for Senior Management
(incorporated by reference to Exhibit 10(j) of the United Rentals, Inc. Report on Form 10-Q for the
quarter ended June 30, 2012)‡
Board of Directors compensatory plans, as described under the caption “Director Compensation” in the
United Rentals, Inc. definitive proxy statement to be filed with the Securities and Exchange Commission
(in connection with the Annual Meeting of Stockholders) on or before March 21, 2016, are hereby
incorporated by reference‡
RSC Holdings Amended and Restated Stock Incentive Plan (incorporated by reference to Exhibit 4.1
of the United Rentals, Inc. Registration Statement on Form S-8, No. 333-181084 filed on May 1,
2012)‡
Employment Agreement, dated as of August 22, 2008, between United Rentals,
Inc. and
Michael J. Kneeland (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Report on
Form 8-K, Commission File No. 001-14387, filed on August 25, 2008)‡
First (renumbered Second) Amendment, dated January 15, 2009, to the Employment Agreement
between United Rentals, Inc. and Michael J. Kneeland (incorporated by reference to Exhibit 10.1 of the
United Rentals, Inc. Report on Form 8-K, Commission File No. 001-14387, filed on January 15, 2009)‡
Third Amendment, dated March 13, 2009, to the Employment Agreement between United Rentals,
Inc. and Michael J. Kneeland (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc.
Report on Form 8-K filed on March 17, 2009)‡
Fourth Amendment, effective as of August 22, 2008, to the Employment Agreement between United
Rentals, Inc. and Michael J. Kneeland (incorporated by reference to Exhibit 10(dd) of the United
Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2010) ‡
Fifth Amendment, effective October 22, 2012,
to the Employment Agreement between
United Rentals, Inc. and Michael J. Kneeland (incorporated by reference to Exhibit 10(gg) of the
United Rentals, Inc. Report on Form 10-K for year ended December 31, 2012)‡
Form of 2001 Comprehensive Stock Plan Restricted Stock Unit Agreement with Michael J. Kneeland
(incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on Form 8-K,
Commission File No. 001-14387, filed on August 25, 2008)‡
104
Exhibit
Number
10(dd)
10(ee)
10(ff)
10(gg)
10(hh)
10(ii)
10(jj)
10(kk)
10(ll)
Description of Exhibit
Employment Agreement, dated as of December 1, 2008, between United Rentals, Inc. and William
B. Plummer (including Restricted Stock Unit Agreement) (incorporated by reference to Exhibit 10.1
of the United Rentals, Inc. Report on Form 8-K, Commission File No. 001-14387, filed on
November 25, 2008)‡
Second Amendment, effective as of December 1, 2008, to the Employment Agreement between
United Rentals, Inc. and William B. Plummer (incorporated by reference to Exhibit 10(gg) of the
United Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2010)‡
Third Amendment, dated as of December 22, 2011,
to the Employment Agreement between
United Rentals, Inc. and William B. Plummer (incorporated by reference to Exhibit 10(hh) of the
United Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2011)‡
Fourth Amendment, dated as of March 28, 2012,
to the Employment Agreement between
United Rentals, Inc. and William B. Plummer (incorporated by reference to Exhibit 10(g) of the
United Rentals, Inc. Report on Form 10-Q for the quarter ended March 31, 2012) ‡
Employment Agreement, dated August 30, 2006, between United Rentals, Inc. and John Fahey
(incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on Form 8-K,
Commission File No. 001-14387, filed on September 1, 2006)‡
to the Employment Agreement between
First Amendment, effective as of August 30, 2006,
United Rentals, Inc. and John Fahey (incorporated by reference to Exhibit 10(ii) of the United
Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2010)‡
Employment Agreement, dated as of February 2, 2009, between United Rentals, Inc. and Jonathan
Gottsegen (incorporated by reference to Exhibit 10(gg) of the United Rentals, Inc. Report on
Form 10-K for the year ended December 31, 2008)‡
First Amendment, dated as of March 31, 2010,
to the Employment Agreement between
United Rentals, Inc. and Jonathan Gottsegen (incorporated by reference to Exhibit 10(c) of the
United Rentals, Inc. Report on Form 10-Q for the quarter ended March 31, 2010)‡
Second Amendment, effective as of February 2, 2009, to the Employment Agreement between
United Rentals, Inc. and Jonathan Gottsegen (incorporated by reference to Exhibit 10(nn) of the
United Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2010) ‡
10(mm) Third Amendment, dated as of March 28, 2012,
to the Employment Agreement between
United Rentals, Inc. and Jonathan M. Gottsegen (incorporated by reference to Exhibit 10(h) of the
United Rentals, Inc. Report on Form 10-Q for the quarter ended March 31, 2012) ‡
10(nn)
10(oo)
10(pp)
10(qq)
Employment Agreement, dated as of March 12, 2010, between United Rentals, Inc. and Matthew
Flannery (incorporated by reference to Exhibit 10(b) of the United Rentals, Inc. Report on
Form 10-Q for the quarter ended March 31, 2010)‡
to the Employment Agreement between
First Amendment, effective as of March 12, 2010,
United Rentals, Inc. and Matthew Flannery (incorporated by reference to Exhibit 10(rr) of the
United Rentals, Inc. Annual Report on Form 10-K for the year ended December 31, 2010)‡
First Amendment, dated April 28, 2008, to the Employment Agreement between United Rentals, Inc.
and Dale Asplund (incorporated by reference to Exhibit 10(b) of the United Rentals, Inc. Report on
Form 10-Q for the quarter ended March 31, 2011) ‡
Second Amendment, effective as of April 3, 2013,
to the Employment Agreement between
United Rentals, Inc. and Dale Asplund (incorporated by reference to Exhibit 10(b) of the
United Rentals, Inc. Report on Form 10-Q for the quarter ended March 31, 2013) ‡
105
Exhibit
Number
10(rr)
10(ss)
10(tt)
10(uu)
10(vv)
Description of Exhibit
Employment Agreement, effective as of December 1, 2014 between United Rentals, Inc. and
Jessica Graziano‡
Employment Agreement, effective as of January 20, 2016 between United Rentals, Inc. and
Jeffrey Fenton‡
Employment Agreement, effective as of January 20, 2016 between United Rentals, Inc. and
Craig Pintoff‡
Form of Indemnification Agreement for Executive Officers and Directors (incorporated by reference
to Exhibit 10(a) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
September 30, 2014)‡
Second Amended and Restated Credit Agreement, dated as of March 31, 2015, among
United Rentals, Inc., United Rentals (North America), Inc., certain subsidiaries of United Rentals,
Inc. and United Rentals (North America), Inc. referred to therein, United Rentals of Canada, Inc.,
United Rentals Financing Limited Partnership, Bank of America, N.A., and the other financial
institutions referred to therein (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc.
Report on Form 8-K filed on April 1, 2015)
10(ww) Amendment No.1 to Second Amended and Restated Credit Agreement, dated as of June 8, 2016, among
United Rentals, Inc., United Rentals (North America) Inc., certain subsidiaries of United Rentals
(North America), Inc. referred to therein, United Rentals of Canada, Inc., United Rentals Financing
Limited Partnership, Bank of America, N.A., and the other financial institutions referred to therein
(incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Report on Form 8-K filed on June 8,
2016)
10(xx)
Second Amended and Restated U.S. Security Agreement, dated as of March 31, 2015, among
United Rentals,
of
United Rentals, Inc. and United Rentals (North America), Inc. referred to therein and Bank of
America, N.A., as agent (incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report
on Form 8-K filed on April 1, 2015)
Inc., United Rentals
(North America),
subsidiaries
certain
Inc.,
10(yy) Amended and Restated U.S. Intellectual Property Security Agreement, dated as of October 14, 2011,
by and among United Rentals, Inc., United Rentals (North America), Inc., certain subsidiaries of
United Rentals, Inc. and United Rentals (North America), Inc. and Bank of America, N.A., as agent
(incorporated by reference to Exhibit 10.3 of the United Rentals, Inc. Report on Form 8-K filed on
October 17, 2011)
10(zz)
Supplement to the Intellectual Property Security Agreement, dated as of April 30, 2012, among
InfoManager, Inc., United Rentals Realty, LLC and Wynne Systems, Inc. (incorporated by reference
to Exhibit 10.9 of the United Rentals, Inc. Report on Form 8-K filed on May 3, 2012)
10(aaa) Second Amended and Restated U.S. Guarantee Agreement, dated as of March 31, 2015, among
Inc., and certain subsidiaries of
United Rentals,
United Rentals, Inc. and United Rentals (North America), Inc. referred to therein in favor of
Bank of America, N.A., as agent (incorporated by reference to Exhibit 10.3 of the United Rentals,
Inc. Report on Form 8-K filed on April 1, 2015)
Inc., United Rentals
(North America),
10(bbb) Second Amended and Restated Canadian Security Agreement, dated as of March 31, 2015, among
United Rentals of Canada, Inc., certain subsidiaries of United Rentals, Inc. and United Rentals
(North America), Inc. referred to therein and Bank of America, N.A., as agent (incorporated by
reference to Exhibit 10.4 of the United Rentals, Inc. Report on Form 8-K filed on April 1, 2015)
106
Exhibit
Number
Description of Exhibit
10(ccc) Second Amended and Restated Canadian URFLP Guarantee Agreement, dated as of March 31, 2015,
by United Rentals of Nova Scotia (No. 1), ULC and United Rentals of Nova Scotia (No. 2), ULC in
favor of the U.S. secured parties referred to therein (incorporated by reference to Exhibit 10.5 of the
United Rentals, Inc. Report on Form 8-K filed on April 1, 2015)
10(ddd) Second Amended and Restated Canadian Guarantee Agreement, dated as of March 31, 2015, by
United Rentals of Canada, Inc. and certain subsidiaries of United Rentals, Inc. and United Rentals
(North America), Inc. referred to therein in favor of the Canadian secured parties referred to therein
(incorporated by reference to Exhibit 10.6 of the United Rentals, Inc. Report on Form 8-K filed on
April 1, 2015)
10(eee) Amended and Restated Security Agreement, dated as of March 26, 2015, by and among
United Rentals, Inc., United Rentals (North America), Inc., certain subsidiaries of United Rentals,
Inc. and United Rentals (North America), Inc. and Wells Fargo Bank, N.A., as Note Trustee and
Collateral Agent (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Report on
Form 8-K filed on March 26, 2015)
10(fff)
Intellectual Property Security Agreement, dated as of
July 23, 2012, by and among
United Rentals, Inc., United Rentals (North America), Inc., certain subsidiaries of United Rentals,
Inc. and United Rentals (North America), Inc. and Wells Fargo Bank, N.A., as Collateral Agent
(incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on Form 8-K filed on
July 23, 2012)
10(ggg) Third Amended and Restated Receivables Purchase Agreement, dated as of September 24, 2012, by
and among The Bank of Nova Scotia, PNC Bank, National Association, The Bank of
Tokyo-Mitsubishi UFJ, Ltd., New York Branch, Liberty Street Funding LLC, Market Street Funding
LLC, Gotham Funding Corporation, United Rentals Receivables LLC II and United Rentals, Inc.
(without annexes) (incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on
Form 8-K filed on September 25, 2012)
10(hhh) Assignment and Acceptance Agreement and Amendment No. 1 to Third Amended and Restated
Receivables Purchase Agreement, dated as of February 1, 2013, among United Rentals Receivables
LLC II, United Rentals, Inc., Liberty Street Funding LLC, Market Street Funding LLC, Gotham
Funding Corporation, The Bank of Nova Scotia, PNC Bank National Association, The Bank of
Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Bank of America, N.A. (incorporated by
reference to Exhibit 10.1 of the United Rentals, Inc. Report on Form 8-K filed on February 4, 2013)
10(iii) Amendment No. 2 to the Third Amended and Restated Receivables Purchase Agreement and Amendment
No. 1 to the Third Amended and Restated Purchase and Contribution Agreement, dated as of
September 17, 2013, by and among United Rentals (North America), Inc., United Rentals Receivables
LLC II, United Rentals, Inc., Liberty Street Funding LLC, Gotham Funding Corporation, Market Street
Funding, LLC, The Bank of Nova Scotia, PNC Bank, National Association, Bank of
America, National Association, and The Bank of Tokyo-Mitsubishi UFJ. Ltd., New York Branch
(incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Report on Form 8-K filed on
September 23, 2013)
10(jjj) Amendment No. 3 to the Third Amended and Restated Receivables Purchase Agreement, dated as of
September 18, 2014, by and among United Rentals (North America), Inc., United Rentals
Receivables
LLC,
Gotham Funding Corporation, The Bank of Nova Scotia, PNC Bank, National Association, SunTrust
Bank and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch (incorporated by reference to
Exhibit 10.1 of the United Rentals, Inc. Report on Form 8-K filed on September 19, 2014)
Funding
Rentals,
Liberty
United
Street
LLC
Inc.,
II,
107
Exhibit
Number
Description of Exhibit
10(kkk) Assignment and Acceptance Agreement and Amendment No. 4 to the Third Amended and Restated
Receivables Purchase Agreement and Amendment No. 2 to the Third Amended and Restated
Purchase and Contribution Agreement, dated as of September 1, 2015, by and among United
Rentals (North America), Inc., United Rentals Receivables LLC II, United Rentals, Inc., Liberty
Street Funding LLC, Gotham Funding Corporation, The Bank of Nova Scotia, PNC Bank, National
Association, SunTrust Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, and
Bank of Montreal (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Form 8-K
filed on September 2, 2015)
10(lll)
Assignment and Acceptance Agreement and Amendment No. 5 to the Third Amended and Restated
Receivables Purchase Agreement and Amendment No. 3 to Third Amended and Restated Purchase
and Contribution Agreement, dated as of August 30, 2016, by and among United Rentals
(North America), Inc., United Rentals Receivables LLC II, United Rentals, Inc., Liberty Street
Funding LLC, Gotham Funding Corporation, Fairway Finance Company, LLC, The Bank of Nova
Scotia, PNC Bank, National Association, SunTrust Bank, The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
New York Branch, and Bank of Montreal (incorporated by reference to Exhibit 10.1 of the
United Rentals, Inc. Form 8-K filed on August 30, 2016)
10(mmm) Third Amended and Restated Purchase and Contribution Agreement, dated as of September 24,
2012, by and among United Rentals Receivables LLC II, United Rentals, Inc. and United Rentals
(North America), Inc. (without annexes) (incorporated by reference to Exhibit 10.1 of the
United Rentals, Inc. Report on Form 8-K filed on September 25, 2012)
10(nnn) Amended and Restated Performance Undertaking, dated as of September 24, 2012, executed by
United Rentals, Inc. in favor of United Rentals Receivables LLC II (incorporated by reference to
Exhibit 10.3 of the United Rentals, Inc. Report on Form 8-K filed on September 25, 2012)
10(ooo) Master Exchange Agreement, dated as of January 1, 2009, among United Rentals Exchange, LLC,
IPX1031 LLC, United Rentals (North America),
Inc.
(incorporated by reference to Exhibit 10.3 of the United Rentals, Inc. Report on Form 8-K,
Commission File No. 001-14387, filed on January 7, 2009)
Inc. and United Rentals Northwest,
10(ppp)
Intercreditor Agreement, dated as of March 9, 2012 among Bank of America, N.A. as credit
agreement agent and Wells Fargo Bank, National Association as notes trustee and second lien
collateral agent, acknowledged by UR Merger Sub Corporation, the Company and certain other
grantors (incorporated by reference to Exhibit 10.5 of the United Rentals, Inc. Report on Form 8-K
filed on March 12, 2012)
12*
21*
23*
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of United Rentals, Inc.
Consent of Ernst & Young LLP
31(a)*
Rule 13a-14(a) Certification by Chief Executive Officer
31(b)*
Rule 13a-14(a) Certification by Chief Financial Officer
32(a)**
Section 1350 Certification by Chief Executive Officer
32(b)**
Section 1350 Certification by Chief Financial Officer
108
Exhibit
Number
101
Description of Exhibit
The following materials from the Annual Report on Form 10-K for the Company and URNA, for the
year ended December 31, 2016, filed on January 25, 2017, formatted in XBRL (eXtensible Business
Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii)
Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Stockholders’
Equity, (v) Consolidated Statements of Cash Flows, (vi) Notes to the Consolidated Financial
Statements and (vii) Schedule to the Consolidated Financial Statements.
Filed herewith.
*
** Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange
‡
Act.
This document is a management contract or compensatory plan or arrangement required to be filed as an
exhibit to this form pursuant to Item 15(a) of this report.
109
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: January 25, 2017
UNITED RENTALS, INC.
By: /s/ MICHAEL J. KNEELAND
Michael J. Kneeland, Chief Executive Officer
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Signatures
/S/
JENNE K. BRITELL
Jenne K. Britell
/S/ JOSÉ B. ALVAREZ
José B. Alvarez
/s/ BOBBY J. GRIFFIN
Bobby J. Griffin
/s/ SINGLETON B. MCALLISTER
Singleton B. McAllister
/S/ BRIAN D. MCAULEY
Brian D. McAuley
/s/
JOHN S. MCKINNEY
John S. McKinney
/s/
JASON D. PAPASTAVROU
Jason D. Papastavrou
/s/ FILIPPO PASSERINI
Filippo Passerini
/s/ DONALD C. ROOF
Donald C. Roof
/s/ L. “KEITH” WIMBUSH
L. “Keith” Wimbush
/S/ MICHAEL J. KNEELAND
Michael J. Kneeland
/S/ WILLIAM B. PLUMMER
William B. Plummer
/s/
JESSICA T. GRAZIANO
Jessica T. Graziano
Title
Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
Date
January 25, 2017
January 25, 2017
January 25, 2017
January 25, 2017
January 25, 2017
January 25, 2017
January 23, 2017
January 25, 2017
January 25, 2017
January 25, 2017
Director and Chief Executive Officer
(Principal Executive Officer)
January 25, 2017
Chief Financial Officer
(Principal Financial Officer)
Vice President, Controller
(Principal Accounting Officer)
January 25, 2017
January 25, 2017
110
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C O R P O R AT E I N F O R M AT I O N
INVESTOR INFORMATION
STOCKHOLDER INFORMATION
For investor information,
including our 2016 Form 10-K,
our quarterly earnings releases
and our other Securities
Exchange Act reports, please
visit our website:
unitedrentals.com
Investment professionals
may contact:
Ted Grace
(203) 618-7122
tgrace@ur.com
2017 ANNUAL MEETING
Thursday, May 4, 2017
at 9:00 am Eastern Time.
Boston Marriott Cambridge
50 Broadway
Cambridge, MA 02142
For stockholder services
24 hours a day:
Call toll-free
(800) 937-5449
in the United States
and Canada, or
(718) 921-8200.
E-mail:
investors@unitedrentals.com
To speak to a stockholder
services representative,
please call between 9:00 am and
5:00 pm Eastern Time, Monday
through Friday.
• Account information
• Transfer requirements
• Lost certificates
• Change of address
• Tax forms
Write:
American Stock Transfer
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
www.amstock.com
UNITED RENTALS STOCK LISTING
United Rentals common stock is listed on the New York Stock Exchange
under the symbol “URI.” The common stock is included in the
Standard & Poor’s 500 Index and the Russell 3000 Index®.
The following table sets forth, for the periods indicated, the intra-day
high and low sale prices and close prices for our common stock, as
reported by the New York Stock Exchange.
UNITED RENTALS COMMON STOCK PRICES
2016
High
Low
w
Close
2015
High
Low
w
Close
2014
High
Low
w
Close
1st Qtr.
2nd Qtr. 3rd Qtr.
4th Qtr.
$71.51
41.90
62.19
$76.04
56.01
67.10
$103.85
81.25
91.16
$105.83
86.88
87.62
$84.63
61.92
78.49
$87.99
56.66
60.05
$109.90
70.58
105.58
$80.18
57.41
72.54
$96.51
74.32
94.94
$108.46
85.01
104.73
$119.83
103.60
111.10
$119.35
88.34
102.01
As of January 1, 2017, there were approximately 72 holders
of record of our common stock. We believe that the number of
beneficial owners is substantially greater than the number of record
holders because a large portion of our common stock is held of record
in “street name.”
We have not paid dividends on our common stock since inception.
However, the payment of any future dividends will be determined by
our Board of Directors in light of conditions then existing. The terms
of certain of our indebtedness contain certain limitations on our
ability to pay dividends.
CORPORATE HEADQUARTERS
United Rentals, Inc.
100 First Stamford Place, Suite 700
Stamford, CT 06902
Phone: (203) 622-3131
Fax: (203) 622-6080
unitedrentals.com
INDEPENDENT AUDITORS
Ernst & Young LLP
5 Times Square
New York, NY 10036
(212) 773-3000
Donald C. Roof
Bobby J. Griffin
Filippo Passerini
Jenne K. Britell Michael J. Kneeland
L. Keith Wimbush
José B. Alvarez
Singleton B. McAllister
John S. McKinney
Jason D. Papastavrou
Brian D. McAuley
DIRECTORS AND OFFICERS
Board of Directors
Executive Officers
Jenne K . Britell, Ph.D.
Chairman
José B. Alvarez (3, 4)
Senior Lecturer
Harvard Business School
Bobby J. Griffin (1, 3, 4)
Director
Michael J. Kneeland (4)
President and
Chief Executive Officer
United Rentals, Inc.
Singleton B. McAllister (2, 4)
Of Counsel
Husch Blackwell
Brian D. McAuley (3)
Chairman
Pacific DataVision, Inc.
John S. McKinney (1, 3)
Director
Jason D. Papastavrou, Ph.D. (1)
Founder and
Chief Executive Officer
ARIS Capital Management
Filippo Passerini (1, 2)
Operating Executive –
U.S. Buyouts,
The Carlyle Group
Donald C. Roof (1, 2, 3)
Director
L. Keith Wimbush (2, 3)
Director
Michael J. Kneeland
President and
Chief Executive Officer
William B. Plummer
Executive Vice President
and Chief Financial Officer
Matthew J. Flannery
Executive Vice President and
Chief Operating Officer
Dale A. Asplund
Executive Vice President –
Business Services and
Chief Information Officer
Craig A. Pintoff
Executive Vice President –
Chief Administrative and
Legal Officer
Jeffrey J. Fenton
Senior Vice President –
Business Development
Jessica T. Graziano
Senior Vice President –
Controller and Principal
Accounting Officer
Senior Vice Presidents
Michael D. Durand
Senior Vice President –
Operations
Joli L. Gross
Senior Vice President –
Deputy General Counsel
and Corporate Secretary
David A. Hobbs
Senior Vice President –
Operations
Christopher K. Hummel
Senior Vice President –
Chief Marketing Officer
Paul I. McDonnell
Senior Vice President –
Sales and Speciality
Operations
Kenneth B. Mettel
Senior Vice President –
Performance Analytics
Irene Moshouris
Senior Vice President –
Treasurer
Kevin C. Parr
Senior Vice President –
Operations
Corporate Vice Presidents
Raymond J. Alletto
Vice President –
Risk Management
Fred B. Bratman
Vice President
Gregg L. Christensen
Vice President –
National Accounts
James A. Dorris
Vice President –
Environmental, Health
and Safety
John J. Fahey
Vice President –
Internal Audit
William “Ted” Grace
Vice President –
Investor Relations
Homer “Ned” Graham
Vice President –
Operations Excellence
Daniel T. Higgins
Vice President –
Technology and Operations
Committees of the Board
(1) Audit Committee, Jason D. Papastavrou, Chair
(2) Compensation Committee, Donald C. Roof, Chair
(3) Nominating and Corporate Governance Committee, José B. Alvarez, Chair
(4) Strategy Committee, Bobby J. Griffin, Chair
Helge Jacobsen
Vice President –
Operations Excellence
Michael G. Cloer
Vice President –
Southeast Region
Thomas P. Jones
Vice President –
Field Sales
Brent R. Kuchynka
Vice President –
Corporate Fleet
Management
Anthony S. Leopold
Vice President –
Strategy and Business
Development
Gordon McDonald
Vice President –
Managed Services
Joseph W. Pledger
Vice President –
Finance Operations
Timothy S. Rule
Vice President –
Market Development
Daniel C. Sparks
Vice President –
Sales Operations and Support
Regional Vice Presidents
Robert C. Bower
Vice President –
Pacific West Region
Chris A. Burlog
Vice President –
Midwest Region
John “Scott” Fisher
Vice President –
Western Canada Region
Joshuah P. Flores
Vice President –
Tools and Industrial
Solutions
Todd M. Hayes
Vice President –
Trench Safety Region
John J. Humphrey
Vice President –
Mid-Atlantic Region
William A. Kiker
Vice President –
Pump Solutions
Donald “Chad” Matter
Vice President –
Industrial Region
Jeffrey S. McGinnis
Vice President –
South Region
Kevin M. O’Brien
Vice President –
South-Central Region
Craig A. Schmidt
Vice President –
Northeast Region
David C. Scott
Vice President –
Power & HVAC Region
The United Rentals name and logo are registered
trademarks of United Rentals, Inc. and its affiliates.
All rights reserved. All other trademarks, service marks
and brand names that appear in this document are the
property of their respective owners.
The covers and narrative portions of this
annual report are printed on papers
containing 10% post-consumer fiber.
The 10K is printed on paper containing
10% post-consumer recycled fiber.
UNITED RENTALS, INC.
100 First Stamford Place, Suite 700
Stamford, CT 06902
unitedrentals.com
The equipment rental leader
Total 2016 revenues: $5.76 billion
Market coverage: 887 rental branches,
U.S. and Canada
Customers: Primarily industrial and
construction companies and utilities
Employees: Approximately 12,500
Rental fleet original cost: $8.99 billion
Rental range: Approximately 3,200
equipment classes