Edgar Filing: UNITED RENTALS INC /DE

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________

FORM 10-Q

___________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-14387

Commission File Number 1-13663

___________________________________

United Rentals, Inc.

United Rentals (North America), Inc.

(Exact Names of Registrants as Specified in Their Charters)

___________________________________



Delaware Delaware		06-1522496 86-0933835
(States of Incorporation)		(I.R.S. Employer Identification Nos.)

100 First Stamford Place, Suite 700 Stamford, Connecticut		06902
(Address of Principal Executive Offices)		(Zip Code)

Registrants’ Telephone Number, Including Area Code: (203) 622-3131

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. x Yes o 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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	x	Accelerated Filer	o
Non-Accelerated Filer	o	Smaller Reporting Company	o
Emerging Growth Company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of April 17, 2017, there were 84,513,378 shares of United Rentals, Inc. common stock, $0.01 par value, 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.

Table of Contents

This combined Form 10-Q 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 (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format permitted by such instruction.

Table of Contents

UNITED RENTALS, INC.

UNITED RENTALS (NORTH AMERICA), INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

INDEX



		Page
PART I	FINANCIAL INFORMATION

Item 1	Unaudited Condensed Consolidated Financial Statements	6

	United Rentals, Inc. Condensed Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016	6

	United Rentals, Inc. Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016 (unaudited)	7

	United Rentals, Inc. Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016 (unaudited)	8

	United Rentals, Inc. Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2017 (unaudited)	9

	United Rentals, Inc. Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (unaudited)	10

	Notes to Unaudited Condensed Consolidated Financial Statements	11

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4	Controls and Procedures	38

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	39

Item 1A	Risk Factors	39

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6	Exhibits	40

	Signatures	41

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q 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, including NES Rentals Holdings II, Inc. (“NES ”), 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 $7.3 billion at March 31, 2017) 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, including spending associated with infrastructure projects;


•	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;


•	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;

Table of Contents


•	labor disputes, work stoppages or other labor difficulties, which may impact our productivity, and potential enactment of new legislation or other changes in law affecting our labor relations or operations generally; and


•	increases in our maintenance and replacement costs and/or decreases in the residual value of our equipment.

For a more complete description of these and other possible risks and uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2016, as well as to our subsequent filings with the SEC. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)



	March 31, 2017			December 31, 2016
	(unaudited)			December 31, 2016
ASSETS
Cash and cash equivalents	$	337		$	312
Accounts receivable, net of allowance for doubtful accounts of $55 at March 31, 2017 and $54 at December 31, 2016	854			920
Inventory	75			68
Prepaid expenses and other assets	54			61
Total current assets	1,320			1,361
Rental equipment, net	6,107			6,189
Property and equipment, net	426			430
Goodwill	3,262			3,260
Other intangible assets, net	701			742
Other long-term assets	6			6
Total assets	$	11,822		$	11,988
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt and current maturities of long-term debt	$	577		$	597
Accounts payable	382			243
Accrued expenses and other liabilities	358			344
Total current liabilities	1,317			1,184
Long-term debt	6,772			7,193
Deferred taxes	1,911			1,896
Other long-term liabilities	69			67
Total liabilities	10,069			10,340
Common stock—$0.01 par value, 500,000,000 shares authorized, 112,270,415 and 84,507,242 shares issued and outstanding, respectively, at March 31, 2017 and 111,985,215 and 84,222,042 shares issued and outstanding, respectively, at December 31, 2016	1			1
Additional paid-in capital	2,276			2,288
Retained earnings	1,763			1,654
Treasury stock at cost—27,763,173 shares at March 31, 2017 and December 31, 2016	(2,077		)	(2,077		)
Accumulated other comprehensive loss	(210		)	(218		)
Total stockholders’ equity	1,753			1,648
Total liabilities and stockholders’ equity	$	11,822		$	11,988

See accompanying notes.

Table of Contents

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In millions, except per share amounts)



	Three Months Ended
	March 31,
	2017		2016
Revenues:
Equipment rentals	$	1,166	$	1,117
Sales of rental equipment	106		115
Sales of new equipment	39		30
Contractor supplies sales	18		19
Service and other revenues	27		29
Total revenues	1,356		1,310
Cost of revenues:
Cost of equipment rentals, excluding depreciation	474		449
Depreciation of rental equipment	248		243
Cost of rental equipment sales	60		68
Cost of new equipment sales	34		25
Cost of contractor supplies sales	13		13
Cost of service and other revenues	13		12
Total cost of revenues	842		810
Gross profit	514		500
Selling, general and administrative expenses	193		177
Merger related costs	2		—
Restructuring charge	—		2
Non-rental depreciation and amortization	62		67
Operating income	257		254
Interest expense, net	94		107
Other expense, net	2		—
Income before provision for income taxes	161		147
Provision for income taxes	52		55
Net income	$	109	$	92
Basic earnings per share	$	1.29	$	1.01
Diluted earnings per share	$	1.27	$	1.01

See accompanying notes.

Table of Contents

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In millions)



	Three Months Ended
	March 31,
	2017			2016
Net income	$	109		$	92
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	9			62
Fixed price diesel swaps	(1		)	1
Other comprehensive income	8			63
Comprehensive income (1)	$	117		$	155

(1)There were no material reclassifications from accumulated other comprehensive loss reflected in other comprehensive income during 2017 or 2016. 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 income during 2017 or 2016.

See accompanying notes.

Table of Contents

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In millions)



	Common Stock								Treasury Stock
	Number of Shares (1)	Amount		Additional Paid-in Capital			Retained Earnings		Number of Shares	Amount			Accumulated Other Comprehensive (Loss) Income (2)
Balance at December 31, 2016	84	$	1	$	2,288		$	1,654	28	$	(2,077	)	$	(218	)
Net income							109
Foreign currency translation adjustments													9
Fixed price diesel swaps													(1		)
Stock compensation expense, net	1			16
Exercise of common stock options				1
Shares repurchased and retired				(23		)
Other				(6		)
Balance at March 31, 2017	85	$	1	$	2,276		$	1,763	28	$	(2,077	)	$	(210	)

(1)Common stock outstanding decreased by approximately 8 million net shares during the year ended December 31, 2016.

(2)The Accumulated Other Comprehensive Loss balance primarily reflects foreign currency translation adjustments.

See accompanying notes.

Table of Contents

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)



	Three Months Ended
	March 31,
	2017			2016
Cash Flows From Operating Activities:
Net income	$	109		$	92
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	310			310
Amortization of deferred financing costs and original issue discounts	2			2
Gain on sales of rental equipment	(46		)	(47		)
Gain on sales of non-rental equipment	(1		)	(1		)
Stock compensation expense, net	16			9
Merger related costs	2			—
Restructuring charge	—			2
Excess tax benefits from share-based payment arrangements	—			(27		)
Increase in deferred taxes	10			25
Changes in operating assets and liabilities, net of amounts acquired:
Decrease in accounts receivable	65			103
Increase in inventory	(6		)	(4		)
Decrease in prepaid expenses and other assets	9			64
Increase in accounts payable	139			56
Increase in accrued expenses and other liabilities	14			20
Net cash provided by operating activities	623			604
Cash Flows From Investing Activities:
Purchases of rental equipment	(219		)	(100		)
Purchases of non-rental equipment	(22		)	(23		)
Proceeds from sales of rental equipment	106			115
Proceeds from sales of non-rental equipment	2			4
Purchases of other companies, net of cash acquired	—			(13		)
Purchases of investments	(1		)	—
Net cash used in investing activities	(134		)	(17		)
Cash Flows From Financing Activities:
Proceeds from debt	1,502			914
Payments of debt	(1,939		)	(1,337		)
Proceeds from the exercise of common stock options	1			—
Common stock repurchased	(23		)	(164		)
Payments of financing costs	(7		)	—
Excess tax benefits from share-based payment arrangements	—			27
Net cash used in financing activities	(466		)	(560		)
Effect of foreign exchange rates	2			13
Net increase in cash and cash equivalents	25			40
Cash and cash equivalents at beginning of period	312			179
Cash and cash equivalents at end of period	$	337		$	219
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes, net	$	1		$	(53	)
Cash paid for interest	90			69

See accompanying notes.

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data, unless otherwise indicated)

1. Organization, Description of Business and Basis of Presentation

United Rentals, Inc. (“Holdings,” “URI” or the “Company”) 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 shareholder.

We rent equipment to a diverse customer base that includes construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities 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.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the accounting policies described in our annual report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”) and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the 2016 Form 10-K.

In our opinion, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of financial condition, operating results and cash flows for the interim periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year.

New Accounting Pronouncements

Revenue from Contracts with Customers. In May 2014, and in subsequent updates, 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. This guidance will be effective for fiscal years and interim periods beginning after December 15, 2017, and early adoption (for fiscal years and interim periods beginning after December 15, 2016) is permitted. We expect to adopt this guidance when effective.

Owned equipment rental revenue is a component of our rental revenue that accounted for 87 percent and 74 percent of our equipment rental revenue and total revenue, respectively, during the three months ended March 31, 2017. We believe the accounting for owned equipment rental revenue is outside of the scope of the revenue guidance and will be evaluated under the new lease guidance described in more detail in the “Leases” disclosure below.

Additionally, we have reviewed the accounting for sales of rental equipment, sales of new equipment and contractor supplies sales, which collectively accounted for 12 percent of our total revenues during the three months ended March 31, 2017. While our review of these revenue items is ongoing, we do not expect the adoption of this guidance to have a significant impact on our financial statements associated with these items. The impact on our financial statements associated with our other revenue components is not currently estimable. We are also evaluating the impact of the new revenue standard on our internal controls over financial reporting.

Leases. In March 2016, the FASB issued guidance (“Topic 842”) to increase transparency and 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. 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 expect to adopt this guidance when effective, and the impact on our financial statements is not currently estimable.

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,

Table of Contents

(3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from settlement of corporate-owned life insurance policies, including bank-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.

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 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 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 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.

Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued guidance intended to simplify the subsequent accounting for goodwill acquired in a business combination. Prior guidance required utilizing a two-step process to review goodwill for impairment. A second step was required if there was an indication that an impairment may exist, and the second step required calculating the potential impairment 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. The new guidance eliminates the second step from the goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss should not exceed the total amount of goodwill allocated to the reporting unit). The guidance requires prospective adoption and will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption of this guidance is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We expect to adopt this guidance when effective, and do not expect it to have a significant impact on our financial statements.

Guidance Adopted in 2017

Improvements to Employee Share-Based Payment Accounting. In the first quarter of 2017, we adopted guidance that simplified several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We prospectively adopted the amendments in this guidance that relate to the classification of excess tax benefits from share-based payment arrangements on the statement of cash flows. 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. In the three months ended March 31, 2017, we recognized $8 of such excess tax benefits, and, pursuant to the adopted guidance, net income increased by $8, or $0.09 per basic and diluted share, reflecting the tax reduction associated with the excess tax benefits. Prior periods have not been adjusted to reflect the new guidance related to the classification of the excess tax benefits, as we have elected to prospectively adopt such guidance. Accordingly, our statement of cash flows for the three months ended March 31, 2016 reflects $27 of such excess tax benefits within net cash used in financing activities. All of the excess tax benefits for the three months ended March 31, 2016 pertain to share based payments that vested prior to 2016, and, accordingly, would not have impacted net income under the new guidance.

Other significant components of the adopted guidance include:

Table of Contents

•

Certain aspects of the guidance require a cumulative change to retained earnings upon adoption, though we did not recognize any such change. In 2016, we utilized all of the prior excess tax benefits from share-based payments that vested through 2016, and, accordingly, no change to retained earnings was required. Additionally, upon adopting this guidance, we elected to record forfeitures of share-based payments as they occur. Making such an election requires a cumulative change to retained earnings upon adoption. However, we historically adjusted estimated forfeitures to reflect actual forfeitures annually, as a result of which no change to retained earnings was required.


•	The guidance requires that cash paid by an employer to a taxing authority when directly withholding shares for tax-withholding purposes should be classified as a financing activity on the statement of cash flows. We have historically classified such payments as financing activities, so no retrospective change was required to our 2016 statement of cash flows.

NES Acquisition

On January 25, 2017, we entered into a definitive merger agreement with NES Rentals Holdings II, Inc. (“NES”), pursuant to which we agreed to acquire NES in an all cash transaction. The merger closed on April 3, 2017. The aggregate merger consideration paid to holders of NES common stock and options was approximately $965. The merger and related fees and expenses were funded through available cash, drawings on current debt facilities and new debt issuances. See note 6 to the condensed consolidated financial statements for additional detail on the debt issuances. NES was 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 had annual revenues of approximately $369. We expect to initiate a restructuring program in connection with the acquisition, and are identifying the actions that we expect to undertake under the program.

2. Segment Information

Our 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.

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 municipalities, industrial plants, and mining, construction, and agribusiness 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.

These segments align our external segment reporting with how management evaluates and allocates resources. We evaluate segment performance based on segment equipment rentals gross profit.

The following tables set forth financial information by segment.

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)



	General rentals		Trench, power and pump		Total
Three Months Ended March 31, 2017
Equipment rentals	$	977	$	189	$	1,166
Sales of rental equipment	96		10		106
Sales of new equipment	35		4		39
Contractor supplies sales	14		4		18
Service and other revenues	24		3		27
Total revenue	1,146		210		1,356
Depreciation and amortization expense	264		46		310
Equipment rentals gross profit	360		84		444
Capital expenditures	211		30		241
Three Months Ended March 31, 2016
Equipment rentals	$	955	$	162	$	1,117
Sales of rental equipment	106		9		115
Sales of new equipment	26		4		30
Contractor supplies sales	16		3		19
Service and other revenues	26		3		29
Total revenue	1,129		181		1,310
Depreciation and amortization expense	266		44		310
Equipment rentals gross profit	357		68		425
Capital expenditures	104		19		123



	March 31, 2017		December 31, 2016
Total reportable segment assets
General rentals	$	10,348	$	10,496
Trench, power and pump	1,474		1,492
Total assets	$	11,822	$	11,988

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:



	Three Months Ended
	March 31,
	2017			2016
Total equipment rentals gross profit	$	444		$	425
Gross profit from other lines of business	70			75
Selling, general and administrative expenses	(193		)	(177		)
Merger related costs	(2		)	—
Restructuring charge	—			(2		)
Non-rental depreciation and amortization	(62		)	(67		)
Interest expense, net	(94		)	(107		)
Other expense, net	(2		)	—
Income before provision for income taxes	$	161		$	147

3. Restructuring Charges

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

Restructuring Charges

Restructuring charges include severance costs associated with headcount reductions, as well as branch closure charges which principally relate to continuing lease obligations at vacant facilities. We incur severance costs and branch closure charges in the ordinary course of our business. 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 three restructuring programs, under which we have incurred total restructuring charges of $234.

Closed Restructuring Programs

We have three closed restructuring programs. The first was initiated in 2008 in recognition of a challenging economic environment and was completed in 2011. The second was initiated following the April 30, 2012 acquisition of RSC Holdings Inc. ("RSC"), and was completed in 2013. The third was initiated in the fourth quarter of 2015 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. In 2016, we achieved the anticipated run rate savings from the Lean initiatives, and this restructuring program was completed in 2016.

The table below provides certain information concerning restructuring activity during the three months ended March 31, 2017:



	Reserve Balance at		Charged to Costs and Expenses		Payments and Other			Reserve Balance at
	December 31, 2016		Charged to Costs and Expenses		Payments and Other			March 31, 2017
Branch closure charges	$	16	$	—	$	—		$	16
Severance costs	1		—		(1		)	—
Total	$	17	$	—	$	(1	)	$	16

As discussed in note 1 to our condensed consolidated financial statements, we expect to initiate a restructuring program in connection with the NES acquisition that closed on April 3, 2017, and are identifying the actions that we expect to undertake under the program.

4. 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 three months ended March 31, 2017 and 2016, the only risk we managed using derivative instruments was diesel price risk. At March 31, 2017, 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.

Fixed Price Diesel Swaps

The fixed price swap contracts on diesel purchases that were outstanding at March 31, 2017 were designated and qualify as cash flow hedges and the effective portion of the 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 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 condensed consolidated statements of income during the current period. As of March 31, 2017, we had outstanding fixed price swap contracts covering 6.0 million gallons of diesel which will be purchased throughout 2017 and 2018.

Financial Statement Presentation

As of March 31, 2017 and December 31, 2016, immaterial amounts ($1 or less) were reflected in prepaid expenses and other assets, accrued expenses and other liabilities, and accumulated other comprehensive income in our condensed consolidated balance sheets associated with the outstanding fixed price swap contracts that were designated and qualify as cash flow hedges.

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

The effect of our derivative instruments on our condensed consolidated statements of income for the three months ended March 31, 2017 and 2016 was as follows:

Three Months Ended March 31, 2017

Three Months Ended March 31, 2016

Location of income

(expense)

recognized on

derivative/hedged item

Amount of income

(expense)

recognized

on derivative

Amount of income

(expense)

recognized

on hedged item

Amount of income

(expense)

recognized

on derivative

Amount of income

(expense)

recognized

on hedged item

Derivatives designated as hedging instruments:

Fixed price diesel swaps

Other income

(expense), net (1)

$ *

Cost of equipment

rentals, excluding

depreciation (2),

(3)

)


*	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 1.9 million and 2.6 million gallons and of diesel covered by the fixed price swaps during the three months ended March 31, 2017 and 2016, respectively. These amounts are reflected, net of cash received from, or paid to, the counterparties to the fixed price swaps, in operating cash flows in our condensed consolidated statement of cash flows.

5. Fair Value Measurements

We account for certain assets and liabilities at fair value. We 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 or 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 March 31, 2017 and December 31, 2016, 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 March 31, 2017 and December 31, 2016, immaterial amounts ($1 or less) were reflected in prepaid expenses and other assets, and accrued expenses and other liabilities in our condensed consolidated balance sheets, reflecting the fair values of the fixed price diesel swaps contracts. As discussed in note 4 to the condensed 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

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

based on observable market data. As of March 31, 2017, we have fixed price swap contracts that mature throughout 2017 and 2018 covering 6.0 million gallons of diesel which we will buy at the average contract price of $2.56 per gallon, while the average forward price for the hedged gallons was $2.60 per gallon as of March 31, 2017.

Fair Value of Financial Instruments

The carrying amounts reported in our condensed 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”), accounts receivable securitization facility and capital leases approximated their book values as of March 31, 2017 and December 31, 2016. The estimated fair values of our financial instruments, all of which are categorized in Level 1 of the fair value hierarchy, as of March 31, 2017 and December 31, 2016 have been calculated based upon available market information, and were as follows:



	March 31, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior notes	$	6,016	$	6,246	$	5,506	$	5,715

6. Debt

Debt, net of unamortized original issue discounts or premiums, and unamortized debt issuance costs, consists of the following:



	March 31, 2017			December 31, 2016
Accounts Receivable Securitization Facility expiring 2017 (1)	$	550		$	568
$2.5 billion ABL Facility expiring 2021 (2)	720			1,645
7 ⁵/₈ percent Senior Notes due 2022	470			469
6 ¹/₈ percent Senior Notes due 2023	936			936
4 ⁵/₈ percent Senior Secured Notes due 2023	991			991
5 ³/₄ percent Senior Notes due 2024	840			839
5 ¹/₂ percent Senior Notes due 2025	792			792
5 ⁷/₈ percent Senior Notes due 2026 (3)	998			740
5 ¹/₂ percent Senior Notes due 2027 (4)	989			739
Capital leases	63			71
Total debt (5)	7,349			7,790
Less short-term portion (6)	(577		)	(597		)
Total long-term debt	$	6,772		$	7,193

___________________

(1)

At March 31, 2017, $18 was available under our accounts receivable securitization facility. The interest rate applicable to the accounts receivable securitization facility was 1.7 percent at March 31, 2017. During the three months ended March 31, 2017, the monthly average amount outstanding under the accounts receivable securitization facility was $518, and the weighted-average interest rate thereon was 1.6 percent. The maximum month-end amount outstanding under the accounts receivable securitization facility during the three months ended March 31, 2017 was $551. Borrowings under the accounts receivable securitization facility are permitted only to the extent that the face amount of the receivables in the collateral pool, net of applicable reserves and other deductions, exceeds the outstanding loans. As of March 31, 2017, there were $569 of receivables, net of applicable reserves and other deductions, in the collateral pool.

(2)

At March 31, 2017, $1.7 billion was available under our ABL facility, net of $36 of letters of credit. The interest rate applicable to the ABL facility was 2.5 percent at March 31, 2017. During the three months ended March 31, 2017, the monthly average amount outstanding under the ABL facility was $1.0 billion, and the weighted-average interest rate thereon was 2.3 percent. The maximum month-end amount outstanding under the ABL facility during the three months ended March 31, 2017 was $1.5 billion. As discussed below, pending the payment of the purchase price for the NES

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

acquisition discussed in note 1 to the condensed consolidated financial statements, the net proceeds from debt issued in February 2017 were used to reduce borrowings under the ABL facility. Following the closing of the NES acquisition on April 3, 2017, we used borrowings under the ABL facility to partially fund the NES acquisition.

(3)

In February 2017, URNA issued $250 principal amount of 5 ⁷/₈ percent Senior Notes as an add-on to our existing 5 ⁷/₈ percent Senior Notes. The net proceeds from the issuance were $258 (including the original issue premium and after deducting offering expenses). Pending the payment of the purchase price for the NES acquisition, the net proceeds from the issuance were used to reduce borrowings under the ABL facility. The acquisition closed on April 3, 2017. Upon closing of the NES acquisition, we used available cash and borrowings under the ABL facility to finance the NES acquisition. After the February 2017 issuance, the aggregate principal amount of outstanding 5 ⁷/₈ percent Senior Notes was $1.0 billion. The newly issued notes have identical terms, and are fungible, with the 5 ⁷/₈ percent Senior Notes outstanding at December 31, 2016. The carrying value of the 5 ⁷/₈ percent Senior Notes includes the $11 unamortized portion of the original issue premium recognized in conjunction with the February 2017 issuance, which is being amortized through the maturity date in 2026. The effective interest rate on the 5 ⁷/₈ percent Senior Notes is 5.7 percent.

(4)

In February 2017, URNA issued $250 principal amount of 5 ¹/₂ percent Senior Notes due 2027 (the "2027 5 ¹/₂ percent Senior Notes") as an add-on to our existing 2027 5 ¹/₂ percent Senior Notes. The net proceeds from the issuance were $250 (including the original issue premium and after deducting offering expenses). Pending the payment of the purchase price for the NES acquisition, the net proceeds from the issuance were used to reduce borrowings under the ABL facility. Upon closing of the NES acquisition, we used available cash and borrowings under the ABL facility to finance the NES acquisition. After the February 2017 issuance, the aggregate principal amount of outstanding 2027 5 ¹/₂ percent Senior Notes was $1.0 billion. The newly issued notes have identical terms, and are fungible, with the 2027 5 ¹/₂ percent Senior Notes outstanding at December 31, 2016. The carrying value of the 2027 5 ¹/₂ percent Senior Notes includes the $3 unamortized portion of the original issue premium recognized in conjunction with the February 2017 issuance, which is being amortized through the maturity date in 2027. The effective interest rate on the 2027 5 ¹/₂ percent Senior Notes is 5.5 percent.

(5)

As discussed above, we completed the NES acquisition on April 3, 2017. The aggregate consideration paid to holders of NES common stock and options was approximately $965. Total debt as of March 31, 2017 reflects $500 principal amount of debt issued in connection with the acquisition, as discussed above. Upon closing, we paid the consideration due to holders of NES common stock and options using available cash and drawings on the ABL facility. After payment of such consideration, total outstanding debt was approximately $8.0 billion.


(6)	As of March 31, 2017, our short-term debt primarily reflects $550 of borrowings under our accounts receivable securitization facility.

Loan Covenants and Compliance

As of March 31, 2017, 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 maintenance 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 March 31, 2017, specified availability under the ABL facility exceeded the required threshold and, as a result, this financial 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.

7. Legal and Regulatory Matters

We are subject to a number of claims and proceedings that generally arise in the ordinary course of our business. These matters include, but are not limited to, general liability claims (including personal injury, property and auto claims), indemnification and guarantee obligations, employee injuries and employment-related claims, self-insurance obligations, contract and real estate matters, and other general business litigation. Based on advice of counsel and available information, including current status or stage of proceeding, and taking into account accruals for matters where we have established them,

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

we currently believe that any liabilities ultimately resulting from such claims and proceedings will not, individually or in the aggregate, have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

8. 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):



	Three Months Ended
	March 31,
	2017		2016
Numerator:
Net income available to common stockholders	$	109	$	92
Denominator:
Denominator for basic earnings per share—weighted-average common shares	84,456		90,510
Effect of dilutive securities:
Employee stock options	414		263
Restricted stock units	507		170
Denominator for diluted earnings per share—adjusted weighted-average common shares	85,377		90,943
Basic earnings per share	$	1.29	$	1.01
Diluted earnings per share	$	1.27	$	1.01

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

9. Condensed Consolidating Financial Information of Guarantor Subsidiaries

URNA is 100 percent owned by Holdings (“Parent”) and has certain outstanding 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”). 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.

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 March 31, 2017, the amount available for distribution under the most restrictive of these covenants was $415. The Company’s total available capacity for making share repurchases and dividend payments includes the intercompany receivable balance of Parent. As of March 31, 2017, 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 $810.

The condensed consolidating financial information of Parent and its subsidiaries is as follows:

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2017



	Parent		URNA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries					Eliminations			Total
	Parent		URNA			Guarantor Subsidiaries			Foreign			SPV		Eliminations			Total
ASSETS
Cash and cash equivalents	$	—	$	14		$	—		$	323		$	—	$	—		$	337
Accounts receivable, net	—		38			—			87			729		—			854
Intercompany receivable (payable)	395		(188		)	(196		)	(117		)	—		106			—
Inventory	—		68			—			7			—		—			75
Prepaid expenses and other assets	6		42			—			6			—		—			54
Total current assets	401		(26		)	(196		)	306			729		106			1,320
Rental equipment, net	—		5,631			—			476			—		—			6,107
Property and equipment, net	38		319			30			39			—		—			426
Investments in subsidiaries	1,342		978			983			—			—		(3,303		)	—
Goodwill	—		3,013			—			249			—		—			3,262
Other intangible assets, net	—		648			—			53			—		—			701
Other long-term assets	—		6			—			—			—		—			6
Total assets	$	1,781	$	10,569		$	817		$	1,123		$	729	$	(3,197	)	$	11,822
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Short-term debt and current maturities of long-term debt	$	1	$	24		$	—		$	2		$	550	$	—		$	577
Accounts payable	—		344			—			38			—		—			382
Accrued expenses and other liabilities	—		321			11			25			1		—			358
Total current liabilities	1		689			11			65			551		—			1,317
Long-term debt	2		6,655			111			4			—		—			6,772
Deferred taxes	25		1,815			—			71			—		—			1,911
Other long-term liabilities	—		68			1			—			—		—			69
Total liabilities	28		9,227			123			140			551		—			10,069
Total stockholders’ equity (deficit)	1,753		1,342			694			983			178		(3,197		)	1,753
Total liabilities and stockholders’ equity (deficit)	$	1,781	$	10,569		$	817		$	1,123		$	729	$	(3,197	)	$	11,822

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2016



	Parent		URNA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries					Eliminations			Total
	Parent		URNA			Guarantor Subsidiaries			Foreign			SPV		Eliminations			Total
ASSETS
Cash and cash equivalents	$	—	$	21		$	—		$	291		$	—	$	—		$	312
Accounts receivable, net	—		38			—			96			786		—			920
Intercompany receivable (payable)	336		(137		)	(188		)	(115		)	—		104			—
Inventory	—		61			—			7			—		—			68
Prepaid expenses and other assets	5		51			—			5			—		—			61
Total current assets	341		34			(188		)	284			786		104			1,361
Rental equipment, net	—		5,709			—			480			—		—			6,189
Property and equipment, net	38		326			26			40			—		—			430
Investments in subsidiaries	1,292		1,013			978			—			—		(3,283		)	—
Goodwill	—		3,013			—			247			—		—			3,260
Other intangible assets, net	—		686			—			56			—		—			742
Other long-term assets	—		6			—			—			—		—			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	$	1	$	25		$	—		$	3		$	568	$	—		$	597
Accounts payable	—		217			—			26			—		—			243
Accrued expenses and other liabilities	—		305			13			25			1		—			344
Total current liabilities	1		547			13			54			569		—			1,184
Long-term debt	2		7,076			111			4			—		—			7,193
Deferred taxes	20		1,805			—			71			—		—			1,896
Other long-term liabilities	—		67			—			—			—		—			67
Total liabilities	23		9,495			124			129			569		—			10,340
Total stockholders’ equity (deficit)	1,648		1,292			692			978			217		(3,179		)	1,648
Total liabilities and stockholders’ equity (deficit)	$	1,671	$	10,787		$	816		$	1,107		$	786	$	(3,179	)	$	11,988

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME

For the Three Months Ended March 31, 2017




	Parent			URNA		Guarantor Subsidiaries			Non-Guarantor Subsidiaries						Eliminations			Total
									Foreign			SPV
Revenues:
Equipment rentals	$	—		$	1,070	$	—		$	96		$	—		$	—		$	1,166
Sales of rental equipment	—			95		—			11			—			—			106
Sales of new equipment	—			35		—			4			—			—			39
Contractor supplies sales	—			16		—			2			—			—			18
Service and other revenues	—			24		—			3			—			—			27
Total revenues	—			1,240		—			116			—			—			1,356
Cost of revenues:
Cost of equipment rentals, excluding depreciation	—			423		—			51			—			—			474
Depreciation of rental equipment	—			227		—			21			—			—			248
Cost of rental equipment sales	—			54		—			6			—			—			60
Cost of new equipment sales	—			31		—			3			—			—			34
Cost of contractor supplies sales	—			12		—			1			—			—			13
Cost of service and other revenues	—			11		—			2			—			—			13
Total cost of revenues	—			758		—			84			—			—			842
Gross profit	—			482		—			32			—			—			514
Selling, general and administrative expenses	23			145		—			17			8			—			193
Merger related costs	—			2		—			—			—			—			2
Non-rental depreciation and amortization	4			52		—			6			—			—			62
Operating (loss) income	(27		)	283		—			9			(8		)	—			257
Interest (income) expense, net	(2		)	93		1			1			2			(1		)	94
Other (income) expense, net	(112		)	124		—			12			(22		)	—			2
Income (loss) before provision (benefit) for income taxes	87			66		(1		)	(4		)	12			1			161
Provision (benefit) for income taxes	21			28		—			(2		)	5			—			52
Income (loss) before equity in net earnings (loss) of subsidiaries	66			38		(1		)	(2		)	7			1			109
Equity in net earnings (loss) of subsidiaries	43			5		(2		)	—			—			(46		)	—
Net income (loss)	109			43		(3		)	(2		)	7			(45		)	109
Other comprehensive income (loss)	8			8		8			7			—			(23		)	8
Comprehensive income (loss)	$	117		$	51	$	5		$	5		$	7		$	(68	)	$	117

Table of Contents

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME

For the Three Months Ended March 31, 2016




	Parent			URNA		Guarantor Subsidiaries			Non-Guarantor Subsidiaries						Eliminations			Total
									Foreign			SPV
Revenues:
Equipment rentals	$	—		$	1,024	$	—		$	93		$	—		$	—		$	1,117
Sales of rental equipment	—			104		—			11			—			—			115
Sales of new equipment	—			27		—			3			—			—			30
Contractor supplies sales	—			17		—			2			—			—			19
Service and other revenues	—			25		—			4			—			—			29
Total revenues	—			1,197		—			113			—			—			1,310
Cost of revenues:
Cost of equipment rentals, excluding depreciation	—			404		—			45			—			—			449
Depreciation of rental equipment	—			221		—			22			—			—			243
Cost of rental equipment sales	—			62		—			6			—			—			68
Cost of new equipment sales	—			23		—			2			—			—			25
Cost of contractor supplies sales	—			12		—			1			—			—			13
Cost of service and other revenues	—			9		—			3			—			—			12
Total cost of revenues	—			731		—			79			—			—			810
Gross profit	—			466		—			34			—			—			500
Selling, general and administrative expenses	6			144		—			19			8			—			177
Restructuring charge	—			2		—			—			—			—			2
Non-rental depreciation and amortization	4			57		—			6			—			—			67
Operating (loss) income	(10		)	263		—			9			(8		)	—			254
Interest (income) expense, net	(2		)	106		1			1			2			(1		)	107
Other (income) expense, net	(106		)	122		—			9			(25		)	—			—
Income (loss) before provision for income taxes	98			35		(1		)	(1		)	15			1			147
Provision (benefit) for income taxes	37			13		—			(1		)