United Leases experiences fourth quarter 2020 outcomes

STAMFORD, Conn .– (BUSINESS WIRE) – United Rentals, Inc. (NYSE: URI) today announced its fourth quarter 2020 financial results and reported full year results on Form 10-K1.

Fourth Quarter 2020 Highlights

Total revenue of $ 2.279 billion including rental income2 of $ 1.854 billion.
Fleet productivity3 declined by 3.8% year-on-year, mainly due to lower rental volumes. Fleet productivity improved 420 basis points sequentially, mainly due to better fleet absorption.
Net income of $ 297 million, representing a net income margin4 of 13.0%. GAAP diluted earnings per share of $ 4.09 and adjusted earnings per share of $ 5.04.
Adjusted EBITDA4 of $ 1.037 billion translates into an adjusted EBITDA margin4 of 45.5 percent.
Full year net cash from operating activities of $ 2.658 billion; Free cash flow5 of $ 2.440 billion including gross rental investments of $ 961 million.
Year-end net leverage ratio of 2.4x with total liquidity6 of USD 3.073 billion.

Comment from the CEO

Matthew Flannery, United Rentals CEO, said: “I would like to thank our employees for safely supporting our customers in 2020 and for delivering exceptional performance despite unprecedented challenges. Fourth quarter results exceeded our expectations, driven by stronger rental volumes and robust used equipment sales. We are encouraged by the momentum this gives us for 2021. "

Flannery continued, “Our forecast reflects an improvement in customer sentiment as the economy continues to recover and our own confidence in our ability to execute. After completing a challenging competition in the first quarter, we assume that we will be able to fall back on growth in the further course of the year, which, together with the continued cost discipline, will lead to strong profitability. We anticipate another robust year of free cash flow generation after significantly increasing our investments to support growing demand. "

_______________

A discussion of the company's results of operations for the full year 2020 is included in its annual report on Form 10-K, filed with the SEC.

Rental income includes income from renting your own equipment, income from re-letting and ancillary income.

Fleet productivity reflects the combined effects of changes in rental rates, time usage and mix on rental income from own equipment. See the table below for more information.

4th

Adjusted EPS (earnings per share) and Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) are non-GAAP measures as shown in the tables below. The following tables contain reconciliations for the most comparable GAAP measures. Net Income Margin and Adjusted EBITDA Margin are equal to net income or Adjusted EBITDA divided by total sales.

Free cash flow is a non-GAAP measure. The following table provides a reconciliation to the most comparable GAAP metric.

6th

Reflects cash and cash equivalents and availability under the Revolving Asset-Based Credit Facility ("ABL Facility") and the Securitization Facility for Receivables.

2021 outlook

The company announced the following outlook for 2021.

2021 outlook

2020 is

Total sales

$ 8.625 billion to $ 9.025 billion

$ 8.530 billion

Adjusted EBITDA7

$ 3.925 to $ 4.125 billion

$ 3.932 billion

Net rental investment after gross purchases

$ 1.15 billion to $ 1.45 billion after gross purchases of $ 2.0 billion to $ 2.3 billion

Net $ 103 million, gross $ 961 million

Cash generated from operations

$ 2.95 billion to $ 3.45 billion

$ 2.658 billion

Free cash flow (excluding merger and restructuring payments, these payments were $ 14 million in 2020)

$ 1.65 billion to $ 1.85 billion

$ 2.454 billion

Fourth quarter 2020 financial results summary

Rental income for the quarter was $ 1.854 billion, down 10.1% year over year.
Used equipment sales for the quarter returned $ 275 million on GAAP gross margin of 37.1% and adjusted gross margin8 of 42.5%. This is $ 244 million on a GAAP gross margin of 36.5% and an adjusted gross margin of 43.4% for the same period last year. Used equipment revenue for the quarter was around 49.5% of original equipment cost ("OEC") compared to 51.6% in the same period last year.
Net income for the quarter decreased 12.1% year over year to $ 297 million, while net income margin decreased 80 basis points to 13.0%. The rental gross margin decreased 120 basis points year over year, with the 40 basis point margin decrease due to depreciation charges, which decreased 8% year over year but increased as a percentage of revenue. The decline in gross margin on rent excluding depreciation was mainly due to increased insurance costs, which included the impact of hurricane activity in Q4 2020. Selling, general and administrative costs ("VVG costs") as well as depreciation and amortization outside of rent fell slightly year-on-year, but rose as a percentage of sales. The fourth quarter of 2020 also included increased charges related to the restructuring program started in 2020. The impact of these items on net profit margin was partially offset by lower interest expense, which reflected both a decrease in average debt and average cost of debt.
Adjusted EBITDA for the quarter decreased 10.1% year over year to $ 1.037 billion, while the Adjusted EBITDA margin decreased 150 basis points to 45.5%. The decrease in the Adjusted EBITDA margin included a decrease in the rental margin by 80 basis points (excluding depreciation), as explained above. The sales mix, in particular an increase in the share of sales from the sale of used equipment, also contributed to the decline in the adjusted EBITDA margin.

_______________

7th

Information that reconciles Forward Looking Adjusted EBITDA with comparable GAAP financial measures is not available to the company without undue effort, as discussed below.

8th.

Adjusted gross margin for used equipment sales excludes the impact of the fair value markup on the acquired RSC, NES, Neff and BlueLine fleets that were sold.

The General Rents segment posted rental income down 11.1% year over year to $ 1.432 billion for the quarter. The rental gross margin decreased 190 basis points to 38.0%, with the 40 basis point decrease in margin attributable to depreciation charges, which decreased 9% year over year but increased as a percentage of revenue. The remaining decline in gross rent margin excluding the depreciation effects was mainly due to the increased insurance costs discussed above.
In the specialty rentals or Trench, Power and Fluid Solutions segment, rental income fell 6.6% year-on-year to USD 422 million. The rental gross margin increased 70 basis points to 44.5%, primarily due to decreased fleet repair costs and overtime, partially offset by higher depreciation charges and certain other operating expenses as a percentage of revenue, as well as a higher proportion of revenue from certain low-margin ancillary costs in the fourth quarter of 2020.
Cash flow from operating activities decreased 12.1% for the full year to $ 2.658 billion and free cash flow including aggregate merger and restructuring payments increased 55.8% to $ 2.440 billion. The increase in free cash flow was mainly due to lower net rental investments (acquisition of rental equipment minus income from the sale of rental equipment), which was partially offset by lower net cash flows from operating activities. Net rental investments decreased $ 1.198 billion year over year, mainly driven by lower rental equipment purchases.
Capital management includes the company's target net leverage ratio range of 2.0x to 3.0x. The net leverage ratio was 2.4 times as of December 31, 2020, compared to 2.6 times as of December 31, 2019. In 2020, the company reduced its total net debt by $ 1.896 billion. On January 28, 2020, the company's Board of Directors approved a $ 500 million share buyback program. By March 18, 2020, when the program was suspended due to the pandemic, the company repurchased $ 257 million worth of common stock, reducing the number of diluted shares by 2.8%. The company cannot currently estimate when or if the program will restart and expects to provide an update at a later date.
Total liquidity as of December 31, 2020 was $ 3.073 billion, including $ 202 million in cash and cash equivalents. This is an increase of $ 930 million from December 31, 2019. The company has no term to maturity until 2026.
The return on investment (ROIC) 9 was 8.9% for the fiscal year ended December 31, 2020 compared to 10.4% for the fiscal year ended December 31, 2019. The year-over-year decrease was mainly due to a decrease in after-tax operating income. The ROIC was above the company's current weighted average cost of capital of approximately 7.0%.

_______________

The company's ROIC metric uses the after-tax profit for the past 12 months divided by the average equity, debt, and deferred taxes of shareholders less average cash. To reduce the volatility associated with fluctuations in the company's tax rate from period to period, the federal statutory corporate tax rate of 21% was used to calculate after-tax operating income.

telephone conference

United Rentals will host a conference call tomorrow, Thursday, January 28, 2021 at 11:00 a.m. Eastern Time. The conference call number is 855-458-4217 (international: 574-990-3618). The conference call will also be available live via audio webcast at unitedrentals.com and will be archived there until the next conference call. The repeat number for the call is 404-537-3406 and the passcode is 9683079.

Non-GAAP Measures

Free cash flow, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA and adjusted earnings per share (adjusted EPS) are non-GAAP financial measures within the meaning of SEC rules. The free cash flow corresponds to the net cash flow from operating activities less purchases and income from equipment. The device purchases and revenues correspond to the cash flow from investing activities. EBITDA is the sum of net profit, provision for income taxes, interest expense, net, depreciation on rental equipment and unlet depreciation. Adjusted EBITDA corresponds to EBITDA plus the sum of the merger-related costs, restructuring costs, share compensation expense, net income and the effects of the fair value premium of the acquired fleet. The adjusted EPS corresponds to the EPS plus the sum of the merger-related costs, the restructuring costs, the effects on the depreciation in connection with the acquired fleet and property, plant and equipment, the effects of the fair value premium of the acquired fleet, the merger-related amortization of intangible assets and the Impairment of assets The burden and loss from repurchasing / redeeming debt and amending the ABL facility. The Company believes that: (i) free cash flow provides useful additional information about available cash flow to meet future debt service obligations and working capital requirements; (ii) EBITDA and Adjusted EBITDA provide useful information about operating performance and growth over the reporting period and help investors understand the factors and trends that affect our current cash earnings, which are used to make capital investments and service debts . and (iii) the adjusted EPS provides useful information on future profitability. However, none of these measures should be viewed as an alternative to net income, cash flow from operating activities, or GAAP earnings per share as an indicator of operating performance or liquidity.

Information that will bring forward-looking adjusted EBITDA in line with GAAP financial measures is not available to the company without undue effort. The company is unable to reconcile Adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are beyond the control of the company and / or cannot be reasonably predicted, such as B. the provision for income taxes. Such reconciliations would require a GAAP forward-looking balance sheet, income statement, and cash flow statement, and such forward-looking statements are not available to the Company without undue effort. The company offers a range of adjusted EBITDA guidance that it believes will be met. However, it cannot accurately predict all of the components of the Adjusted EBITDA calculation. The company provides an Adjusted EBITDA forecast because it believes that Adjusted EBITDA, when compared with the company's GAAP results, provides useful information for the reasons noted above. Adjusted EBITDA, however, is not a measure of financial performance or liquidity under GAAP and therefore should not be viewed as an alternative to net income or cash flow from operating activities as an indicator of operational performance or liquidity.

About United Rentals

United Rentals, Inc. is the largest equipment rental company in the world. The company has an integrated network of 1,154 rental locations in North America and 11 in Europe. In North America, the company operates in 49 states and in every Canadian province. The company's approximately 18,250 employees look after construction and industrial customers, utility companies, municipalities, homeowners and others. The company offers around 4,000 classes of equipment for rent, with an original total cost of $ 13.78 billion. United Rentals is a member of the Standard & Poor's 500 Index, the Barron's 400 Index and the Russell 3000 Index® and is headquartered in Stamford, Connecticut. For more information about United Rentals, visit unitedrentals.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. These statements can generally be identified by the use of forward-looking terminology such as "believe", "expect", "can", "will", "should", "seek", "on track", "plan". "Project", "forecast", "intention" or "anticipation" or their negative or comparable terminology or through discussions about vision, strategy or outlook. These statements are based on current plans, estimates and projections. Hence, you should not inappropriately rely on them. No forward-looking statement can be guaranteed and actual results could differ materially from those projected. Factors that could cause actual results to differ materially from those projected include: (1) the cyclical nature of our business, which is very sensitive to North American construction and industrial activities; When construction or industrial activity declines, our revenues and, since many of our costs are fixed, our profitability can be affected. (2) Uncertainty about how long it will take for the coronavirus (COVID-19) pandemic to subside, including the time it will take for vaccines to be widely adopted and adopted in the US and the rest of the world, and the effectiveness of such vaccines in slowing or containing the spread of COVID-19 and mitigating the economic impact of the pandemic; (3) the impact of the COVID-19 pandemic on global economic conditions, including the impact of various public health measures, many of which have reduced demand for equipment rentals; (4) the impact of global economic conditions (including potential trade wars) and public health crises and epidemics such as COVID-19 on us, our customers and our suppliers in the US and the rest of the world; (5) the rates we calculated and the time usage we achieved are lower than expected (also due to COVID-19); (6) Over-fleet in the equipment rental industry, also due to lower fleet demand due to the impact of COVID-19 on our customers; (7) inability to benefit from government spending, including spending related to infrastructure projects; (8) Trends in oil and natural gas could adversely affect demand for our services and products. (9) competition from existing and new competitors; (10) our significant debt, which requires us to use a significant portion of our cash flow to service debt, and which may limit our flexibility in responding to unexpected or adverse business conditions; (11) the inability to refinance our debt on terms that are favorable to us (also due to volatility and uncertainty in the capital markets due to COVID-19) or not at all; (12) the creation of additional debt that could exacerbate the risks associated with our current debt; (13) failure to comply with any financial or other requirement in our debt agreements that could cause our lenders to terminate the agreements and oblige us to pay back any outstanding loans; (14) restrictive requirements and the amount of credit allowed in our debt instruments that can limit our financial and operational flexibility; (15) Inability to access the capital our businesses or growth plans may need (including due to uncertainties in capital or other financial markets due to COVID-19); (16) The possibility that companies that we have acquired or may acquire have undiscovered liabilities or other unexpected costs could strain our management skills or be difficult to integrate. (17) the occurrence of impairment losses; (18) fluctuations in the price of our common stock and inability to complete share buybacks within the timeframe and / or on the expected terms (e.g. due to COVID-19); (19) Our charter provisions as well as provisions of certain debt agreements and our considerable indebtedness may make a takeover or another change of control from us difficult or discouraged, delayed or prevented in any other way. (20) inability to adequately manage credit risk or enter into contracts with a large number of customers; (21) Revenue in our management team and inability to attract and retain key personnel, and loss, absence, or inability of employees to work or perform key functions in the face of a public health crisis or epidemic (including COVID-19); (22) costs that we incur more than expected and the inability to generate expected savings in the amounts or timeframes foreseen; (23) our reliance on key suppliers to obtain equipment and other supplies for our business on acceptable terms; (24) increase in our maintenance and replacement costs and / or decrease in the residual value of our equipment; (25) Inability to sell our new or used fleet in the quantities we expect or at the prices we expect; (26) Risks related to security breaches, cybersecurity attacks, insufficient protection of personal data, compliance with data protection laws and other material disruptions in our information technology systems; (27) Risks related to climate change and climate change regulation; (28) The fact that, due to our holding structure, we have to be partially dependent on distributions from subsidiaries and these distributions could be limited by contractual or legal restrictions. (29) Deficits in our insurance coverage; (30) Increasing our loss reserves to cover business transactions or other claims as well as claims that exceed our defined reserves; (31) additional costs (including indemnification obligations) and other costs related to litigation, regulatory and investigative matters; (32) the cost of complying with environmental, safety and foreign laws and regulations and other risks associated with operations outside of the United States, including exchange rate risk (including as a result of Brexit) and tariffs; (33) the outcome or other possible consequence of regulatory matters and trade disputes; (34) labor disputes, work stoppages or other work difficulties that may affect our productivity and the possible passing of new laws or other legislative changes that generally affect our industrial relations or activities; and (35) the impact of changes in tax law.

For a more complete description of these and other potential risks and uncertainties, please see our Annual Report on Form 10-K for the year ended December 31, 2020 and our subsequent filings with the SEC. The forward-looking statements contained herein speak only as of the date of this document. We undertake no obligation to update or publicly release changes to any forward-looking statement to reflect new information or subsequent events, circumstances or changes in expectations.

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNKNOWN)

(In millions, excluding amounts per share)

	Three months ended				end of year
	December 31,				December 31,
	2020		2019		2020		2019
Revenues:
Equipment rental	$	1,854	$	2.062	$	7.140	$	7.964
Sale of rental equipment	275		244		858		831
Sales of new equipment	78		79		247		268
Contractor delivers sales	25th		26th		98		104
Service and other income	47		45		187		184
Total revenue	2.279		2,456		8.530		9,351
Cost of sales:
Equipment rental costs without depreciation	737		802		2.820		3.126
Depreciation of rental equipment	385		420		1,601		1.631
Cost of selling rental equipment	173		155		526		518
Cost of selling new equipment	67		68		214		231
Cost of the contractor supplies sales	17th		19th		69		73
Service costs and other income	31		27		117		102
Total cost of revenue	1,410		1,491		5.347		5,681
Gross income	869		965		3.183		3,670
Selling and general administration	258		268		979		1,092
Merger costs	– –		– –		– –		1
Restructuring costs	6th		2		17th		18th
Non-renting depreciation	95		96		387		407
Operating profit	510		599		1,800		2.152
Net interest expense	125		170		669		648
Other income, net	(2)		(4)		(8th)		(10)
Earnings before provision for income taxes	387		433		1,139		1.514
Provision for income taxes	90		95		249		340
Net income	$	297	$	338	$	890	$	1,174
Diluted earnings per share	$	4.09	$	4.49	$	12.20	$	11/15

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED COMPENSATION SHEETS (NOT SUITABLE)

(In millions)

December 31, 2020

December 31, 2019

FINANCIAL ASSETS

Cash and cash equivalents

202

Claims, net

1,315

1.530

inventory

125

120

Prepaid expenses and other assets

375

140

Total current assets

2.017

1,842

Rental equipment, net

8.705

9.787

Property, plant and equipment, net

604

Goodwill

5.168

5.154

Other intangible assets, net

648

895

Rights of use to operating leases

688

669

Other long-term assets

19th

Total assets

17,868

18,970

LIABILITIES AND SHAREHOLDERS 'EQUITY

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

704

997

Settlement liabilities

466

454

Provisions and other liabilities

720

747

Total short-term liabilities

1,890

2.198

Long-term liabilities

8,978

10,431

Deferred taxes

1,768

1,887

Operating lease liabilities

549

533

Other long-term liabilities

138

Total liabilities

13,323

15,140

Common stock

Capital reserve

2,482

2,440

Retained earnings

6.165

5.275

Own shares

(3,957)

(3,700)

Cumulative other comprehensive loss

(146)

(186)

Total equity

4,545

3.830

Total liabilities and equity

17,868

18,970

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED DECLARATIONS OF CASH FLOWS (UNKNOWN)

(In millions)

	Three months ended				end of year
	December 31,				December 31,
	2020		2019		2020		2019
The cash flow from operating activities:
Net income	$	297	$	338	$	890	$	1,174
Adjustments to reconcile net income with cash flow from operating activities:
Depreciation	480		516		1,988		2.038
Depreciation on deferred financing costs and original issue discounts	3		4th		14th		15th
Profit from the sale of rental equipment	(102)		(89)		(332)		(313)
Profit from the sale of equipment that is not rented	(3)		(3)		(8th)		(6)
The insurance covers damaged devices	(6)		(6)		(40)		(24)
Share Compensation Expense, net	24		16		70		61
Merger costs	– –		– –		– –		1
Restructuring costs	6th		2		17th		18th
Loss on repurchase / redemption of debt and change in ABL facility	24		29		183		61
(Decrease) increase in deferred taxes	(55)		87		(121)		204
Changes in operating assets and liabilities:
Acceptance of claims	16		69		218		39
(Increase) decrease in inventory	(17)		9		(5)		(8th)
Increase in prepaid expenses and other assets	(258)		(38)		(228)		(59)
(Decrease) increase in liabilities	(78)		(387)		10		(86)
Increase (decrease) in provisions and other liabilities	39		(105)		2		(91)
Cash generated from operations	370		442		2.658		3.024
Cash flows from investing activities:
Purchase of rental equipment	(176)		(158)		(961)		(2,132)
Purchase of non-rented equipment	(52)		(61)		(197)		(218)
Income from the sale of rental equipment	275		244		858		831
Income from the sale of equipment that is not rented	11		11		42		37
The insurance covers damaged devices	6th		6th		40		24
Purchases from other companies net of cash acquired	– –		(2)		(2)		(249)
Purchases of investments	(1)		(1)		(3)		(3)
Cash flow from investing activities	63		39		(223)		(1,710)
Cash flow from financing activities:
Income from debt	2,009		3.135		9.260		9.260
Payments of Debt	(2,416)		(3,409)		(11,245)		(9,678)
Payment of financing costs	– –		(10)		(23)		(28)
Proceeds from the exercise of common stock options	– –		1		1		11
Buyback of Common Stock (1)	(5)		(206)		(286)		(870)
Cash flow from financing activities	(412)		(489)		(2,293)		(1,305)
Effect of exchange rates	7th		– –		8th		– –
Net increase (decrease) in cash and cash equivalents	28		(8th)		150		9
Cash and cash equivalents at the beginning of the period	174		60		52		43
Cash and cash equivalents at the end of the reporting period	$	202	$	52	$	202	$	52
Additional disclosure of cash flow information:
Cash payment for income taxes, net	$	79	$	142	$	318	$	238
Cash for interest	45		101		483		581

(1)

We have a $ 500 million share buyback program that began in the first quarter of 2020 and should last 12 months. As explained above, due to the COVID-19 pandemic, we have decided to suspend buybacks under the program. We cannot currently estimate when or if the program will restart and we expect to provide an update at a later date. Common stock repurchases will include i) stocks repurchased under our stock repurchase programs and ii) stocks withheld to meet tax deduction obligations when exercising Restricted Stock Unit Awards.

UNITED RENTALS, INC.

RENTAL INCOME

Fleet productivity is a comprehensive metric that provides better insight into our managers' decisions to support growth and ROI. In particular, we want to optimize the interplay of rental prices, time usage and the mix when increasing rental income. Fleet productivity summarizes the effects of changes in rates, occupancy and mix on rental income for your own equipment in a metric.

We believe this metric is useful for assessing the effectiveness of our rate, time use, and mix decisions, especially as they aid in creating shareholder value. The following table shows the components of the year-over-year change in rental income using the fleet productivity method:

year for year

change in

average OEC

Accepted

year for year

Effects on inflation (1)

fleet

Productivity (2)

Contribution by

Neben- und

Einnahmen aus der Wiedervermietung (3)

Totale Veränderung

in Mieteinnahmen

Three months ended

December 31, 2020

(5,6)%

(1,5)%

(3,8)%

0,8%

(10,1)%

end of year

December 31, 2020

(2,2)%

(1,5)%

(6,9)%

0,3%

(10,3)%

Weitere Informationen zur Flottenproduktivität finden Sie in unserer Investorenpräsentation für das vierte Quartal 2020 auf unitedrentals.com.

(1)

Reflects the estimated impact of inflation on the revenue productivity of fleet based on OEC, which is recorded at cost.

(2)

Reflects the combined impact of changes in rental rates, time utilization and mix on owned equipment rental revenue. Changes in customers, fleet, geographies and segments all contribute to changes in mix. The negative fleet productivity above includes the impact of COVID-19, which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions.

(3)

Reflects the combined impact of changes in other types of equipment rental revenue: ancillary and re-rent (excludes owned equipment rental revenue).

UNITED RENTALS, INC.

SEGMENT PERFORMANCE

($ in millions)

	Three months ended							end of year
	December 31,							December 31,
	2020			2019			Veränderung	2020			2019			Veränderung
General Rentals
Reportable segment equipment rentals revenue	$	1,432		$	1,610		(11.1)%	$	5,472		$	6,202		(11.8)%
Reportable segment equipment rentals gross profit	544			642			(15.3)%	1,954			2,407			(18.8)%
Reportable segment equipment rentals gross margin	38.0		%.	39.9		%.	(190) bps	35.7		%.	38.8		%.	(310) bps
Trench, Power and Fluid Solutions
Reportable segment equipment rentals revenue	$	422		$	452		(6.6)%	$	1,668		$	1,762		(5.3)%
Reportable segment equipment rentals gross profit	188			198			(5.1)%	765			800			(4.4)%
Reportable segment equipment rentals gross margin	44.5		%.	43.8		%.	70 bps	45.9		%.	45.4		%.	50 bps
Total United Rentals
Total equipment rentals revenue	$	1,854		$	2,062		(10.1)%	$	7,140		$	7,964		(10.3)%
Total equipment rentals gross profit	732			840			(12.9)%	2,719			3,207			(15.2)%
Total equipment rentals gross margin	39.5		%.	40.7		%.	(120) bps	38.1		%.	40.3		%.	(220) bps

UNITED RENTALS, INC.

DILUTED EARNINGS PER SHARE CALCULATION

(In millions, excluding data per share)

	Three months ended				end of year
	December 31,				December 31,
	2020		2019		2020		2019
Numerator:
Net income available to common stockholders	$	297	$	338	$	890	$	1,174
Denominator:
Denominator for basic earnings per share—weighted-average common shares	72.3		75.1		72.7		77.3
Effect of dilutive securities:
Employee stock options	—		—		—		0.1
Restricted stock units	0.3		0.3		0.2		0.3
Denominator for diluted earnings per share—adjusted weighted-average common shares	72.6		75.4		72.9		77.7
Diluted earnings per share	$	4.09	$	4.49	$	12.20	$	15.11

UNITED RENTALS, INC.

ADJUSTED EARNINGS PER SHARE GAAP RECONCILIATION

We define “earnings per share – adjusted” as the sum of earnings per share – GAAP, as reported plus the impact of the following special items: merger related costs, merger related intangible asset amortization, impact on depreciation related to acquired fleet and property and equipment, impact of the fair value mark-up of acquired fleet, restructuring charge, asset impairment charge and loss on repurchase/redemption of debt securities and amendment of ABL facility. Management believes that earnings per share – adjusted provides useful information concerning future profitability. However, earnings per share – adjusted is not a measure of financial performance under GAAP. Accordingly, earnings per share – adjusted should not be considered an alternative to GAAP earnings per share. The table below provides a reconciliation between earnings per share – GAAP, as reported, and earnings per share – adjusted.

	Three months ended						end of year
	December 31,						December 31,
	2020			2019			2020			2019
Earnings per share – GAAP, as reported	$	4.09		$	4.49		$	12.20		$	15.11
After-tax impact of:
Merger related costs (2)	—			—			—			0,01
Merger related intangible asset amortization (3)	0.52			0.60			2.22			2.48
Impact on depreciation related to acquired fleet and property and equipment (4)	(0,04)			0,05			0.08			0.39
Impact of the fair value mark-up of acquired fleet (5)	0.16			0.16			0.51			0.72
Restructuring charge (6)	0.06			0,03			0.18			0.18
Asset impairment charge (7)	—			(0,01)			0.37			0,05
Loss on repurchase/redemption of debt securities and amendment of ABL facility (8)	0.25			0.28			1.88			0.58
Earnings per share – adjusted	$	5.04		$	5.60		$	17.44		$	19.52
Tax rate applied to above adjustments (1)	25.2		%.	25.1		%.	25.2		%.	25.3		%.

(1)

The tax rates applied to the adjustments reflect the statutory rates in the applicable entities.

(2)

Reflects transaction costs associated with the BakerCorp International Holdings, Inc. (“BakerCorp”) and BlueLine acquisitions that were completed in 2018. We have made a number of acquisitions in the past and may continue to make acquisitions in the future. Merger related costs only include costs associated with major acquisitions that significantly impact our operations. The acquisitions that have included merger related costs are RSC, which had annual revenues of approximately $1.5 billion prior to the acquisition, National Pump, which had annual revenues of over $200 million prior to the acquisition, NES, which had annual revenues of approximately $369 million prior to the acquisition, Neff, which had annual revenues of approximately $413 million prior to the acquisition, BakerCorp, which had annual revenues of approximately $295 million prior to the acquisition and BlueLine, which had annual revenues of approximately $786 million prior to the acquisition.

(3)

Reflects the amortization of the intangible assets acquired in the RSC, National Pump, NES, Neff, BakerCorp and BlueLine acquisitions.

(4)

Reflects the impact of extending the useful lives of equipment acquired in the RSC, NES, Neff, BakerCorp and BlueLine acquisitions, net of the impact of additional depreciation associated with the fair value mark-up of such equipment.

(5)

Reflects additional costs recorded in cost of rental equipment sales associated with the fair value mark-up of rental equipment acquired in the RSC, NES, Neff and BlueLine acquisitions and subsequently sold.

(6)

Primarily reflects severance and branch closure charges associated with our closed restructuring programs and our current restructuring program. We only include such costs that are part of a restructuring program as restructuring charges. Since the first such restructuring program was initiated in 2008, we have completed five restructuring programs. We have cumulatively incurred total restructuring charges of $350 million under our restructuring programs.

(7)

Reflects write-offs of leasehold improvements and other fixed assets. The 2020 charges primarily reflect the discontinuation of certain equipment programs, and were not related to COVID-19.

(8th)

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

UNITED RENTALS, INC.

EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATIONS

(In millions)

EBITDA represents the sum of net income, provision for income taxes, interest expense, net, depreciation of rental equipment, and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the merger related costs, restructuring charge, stock compensation expense, net, and the impact of the fair value mark-up of acquired fleet. These items are excluded from adjusted EBITDA internally when evaluating our operating performance and for strategic planning and forecasting purposes, and allow investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies. The net income and adjusted EBITDA margins represent net income or adjusted EBITDA divided by total revenue. Management believes that EBITDA and adjusted EBITDA, when viewed with the company’s results under GAAP and the accompanying reconciliation, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that EBITDA and adjusted EBITDA help investors gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.

The table below provides a reconciliation between net income and EBITDA and adjusted EBITDA.

Three months ended

end of year

December 31,

2020

2019

2020

2019

Net income

297

338

890

1,174

Provision for income taxes

249

340

Interest expense, net

125

170

669

648

Depreciation of rental equipment

385

420

1,601

1,631

Non-rental depreciation and amortization

387

407

EBITDA

992

1,119

3,796

4,200

Merger related costs (1)

—

Restructuring charge (2)

6th

17th

18th

Stock compensation expense, net (3)

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

17th

Adjusted EBITDA

1,037

1,154

3,932

4,355

Net income margin

13.0

13.8

10.4

12.6

Adjusted EBITDA margin

45.5

47.0

46.1

46.6

(1)

Reflects transaction costs associated with the BakerCorp and BlueLine acquisitions that were completed in 2018. We have made a number of acquisitions in the past and may continue to make acquisitions in the future. Merger related costs only include costs associated with major acquisitions that significantly impact our operations. The acquisitions that have included merger related costs are RSC, which had annual revenues of approximately $1.5 billion prior to the acquisition, National Pump, which had annual revenues of over $200 million prior to the acquisition, NES, which had annual revenues of approximately $369 million prior to the acquisition, Neff, which had annual revenues of approximately $413 million prior to the acquisition, BakerCorp, which had annual revenues of approximately $295 million prior to the acquisition and BlueLine, which had annual revenues of approximately $786 million prior to the acquisition.

(2)

(3)

Represents non-cash, share-based payments associated with the granting of equity instruments.

(4)

UNITED RENTALS, INC.

EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATIONS (continued)

(In millions)

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

	Three months ended				end of year
	December 31,				December 31,
	2020		2019		2020		2019
Net cash provided by operating activities	$	370	$	442	$	2,658	$	3,024
Adjustments for items included in net cash provided by operating activities but excluded from the calculation of EBITDA:
Amortization of deferred financing costs and original issue discounts	(3)		(4)		(14)		(15)
Gain on sales of rental equipment	102		89		332		313
Gain on sales of non-rental equipment	3		3		8th		6th
Insurance proceeds from damaged equipment	6th		6th		40		24
Merger related costs (1)	—		—		—		(1)
Restructuring charge (2)	(6)		(2)		(17)		(18)
Stock compensation expense, net (3)	(24)		(16)		(70)		(61)
Loss on repurchase/redemption of debt securities and amendment of ABL facility (5)	(24)		(29)		(183)		(61)
Changes in assets and liabilities	444		387		241		170
Cash paid for interest	45		101		483		581
Cash paid for income taxes, net	79		142		318		238
EBITDA	$	992	$	1,119	$	3,796	$	4,200
Add back:
Merger related costs (1)	—		—		—		1
Restructuring charge (2)	6th		2		17th		18th
Stock compensation expense, net (3)	24		16		70		61
Impact of the fair value mark-up of acquired fleet (4)	15		17th		49		75
Adjusted EBITDA	$	1,037	$	1,154	$	3,932	$	4,355

(1)

(2)

(3)

Represents non-cash, share-based payments associated with the granting of equity instruments.

(4)

(5)

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

UNITED RENTALS, INC.

FREE CASH FLOW GAAP RECONCILIATION

(In millions)

We define “free cash flow” as net cash provided by operating activities less purchases of, and plus proceeds from, equipment. The equipment purchases and proceeds are included in cash flows from investing activities. Management believes that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. However, free cash flow is not a measure of financial performance or liquidity under GAAP. Accordingly, free cash flow should not be considered an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. The table below provides a reconciliation between net cash provided by operating activities and free cash flow.

	Three months ended				end of year
	December 31,				December 31,
	2020		2019		2020		2019
Net cash provided by operating activities	$	370	$	442	$	2,658	$	3,024
Purchases of rental equipment	(176)		(158)		(961)		(2,132)
Purchases of non-rental equipment	(52)		(61)		(197)		(218)
Proceeds from sales of rental equipment	275		244		858		831
Proceeds from sales of non-rental equipment	11		11		42		37
Insurance proceeds from damaged equipment	6th		6th		40		24
Free cash flow (1)	$	434	$	484	$	2,440	$	1,566

(1)

Free cash flow included aggregate merger and restructuring related payments of $5 million and $4 million for the three months ended December 31, 2020 and 2019, respectively, and $14 million and $26 million for the years ended December 31, 2020 and 2019, respectively.

The table below provides a reconciliation between 2021 forecasted net cash provided by operating activities and free cash flow.

Net cash provided by operating activities

$2,950- $3,450

Purchases of rental equipment

$(2,000)-$(2,300)

Proceeds from sales of rental equipment

$800-$900

Purchases of non-rental equipment, net of proceeds from sales

$(100)-$(200)

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

$1,650- $1,850