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United Rentals, Inc.$110.64$2.652.45%

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 United Rentals Announces Fourth Quarter and Full Year 2016 Results
   Wednesday, January 25, 2017 4:28:00 PM ET

--Agrees to Acquire NES Rentals

United Rentals, Inc. (URI ) today announced financial results for the fourth quarter and full year 2016.

For the fourth quarter of 2016, total revenue was $1.523 billion and rental revenue was $1.298 billion, compared with $1.523 billion and $1.278 billion, respectively, for the same period the prior year. On a GAAP basis, the company reported fourth quarter net income of $153 million, or $1.80(1) per diluted share, compared with $169 million, or $1.81 per diluted share, for the same period the prior year.

Adjusted EPS(2) for the quarter was $2.67 per diluted share, compared with $2.19 for the same period the prior year. Adjusted EBITDA(2) was $749 million and adjusted EBITDA margin was 49.2% for the quarter, compared with $744 million and 48.9%, respectively, for the same period the prior year.

For the full year 2016, total revenue was $5.762 billion and rental revenue was $4.941 billion, compared with $5.817 billion and $4.949 billion, respectively, for 2015. On a GAAP basis, full year net income was $566 million, or $6.45 per diluted share, compared with $585 million, or $6.07 per diluted share, for 2015.

Adjusted EPS for the full year was $8.65 per diluted share, compared with $8.02 per diluted share for 2015. Adjusted EBITDA was $2.759 billion and adjusted EBITDA margin was 47.9% for the full year, compared with $2.832 billion and 48.7%, respectively, for 2015.

NES Acquisition

The company announced today that it has entered into a definitive agreement under which it will acquire NES Rentals Holdings II, Inc. ("NES") for approximately $965 million in cash. The transaction is expected to close early in the second quarter of 2017, subject to Hart-Scott-Rodino clearance and customary conditions. The company plans to update its 2017 financial outlook, noted below, to reflect the combined operations upon completion of the transaction. Please refer to the company’s press release issued today for additional information on the NES transaction.

2016 Highlights

-- For the fourth quarter of 2016, rental revenue (which includes owned equipment rental revenue, re-rent revenue and ancillary items) increased 1.6% year-over-year. Within rental revenue, owned equipment rental revenue increased 1.9%, reflecting an increase of 4.3% in the volume of equipment on rent partially offset by a 1.8% decrease in rental rates.

_____________

1.   GAAP net income and diluted earnings per share for the fourth
                        quarter of 2016 includes a debt extinguishment loss of $40 million,
                        or $0.47 per diluted share.
2.                      Adjusted EPS (earnings per share) and adjusted EBITDA (earnings
                        before interest, taxes, depreciation and amortization) are non-GAAP
                        measures that exclude the impact of the special items noted in the
                        tables below. See the tables below for amounts.
                         

-- For the full year 2016, total revenue decreased 0.9% year-over-year, and rental revenue decreased 0.2%(3). Within rental revenue, owned equipment rental revenue decreased 0.3%, reflecting a 2.2% decrease in rental rates largely offset by an increase of 3.1% in the volume of equipment on rent.

-- For the fourth quarter of 2016, time utilization increased 110 basis points year-over-year to 69.3%. Full year 2016 time utilization increased 60 basis points year-over-year to 67.9%.

-- For the fourth quarter and full year 2016, the company’s Trench, Power and Pump specialty segment’s rental revenue increased by approximately 10% year-over-year, primarily on a same store basis.

-- For the fourth quarter of 2016, the company generated $135 million of proceeds from used equipment sales at a GAAP gross margin of 43.0% and an adjusted gross margin of 49.6%, compared with $157 million of proceeds at a GAAP gross margin of 40.1% and an adjusted gross margin of 46.5% the prior year.(4)

-- For the full year 2016, the company generated $496 million of proceeds from used equipment sales at a GAAP gross margin of 41.1% and an adjusted gross margin of 48.2%, compared with $538 million of proceeds at a GAAP gross margin of 42.2% and an adjusted gross margin of 47.6% for the prior year.

-- For the full year 2016, the company generated $1.953 billion of net cash provided by operating activities and $1.182 billion of free cash flow(5), compared with $1.995 billion and $919 million, respectively, for the same period last year. Net rental capital expenditures were $750 million, compared with $996 million for the same period last year.

-- During 2016, the company 1) redeemed all $300 million of its 8 (1)/4 % Senior Notes due 2020, all $750 million of its 7 (3)/8 % Senior Notes due 2021, and $850 million of its 7 (5)/8 % Senior Notes due 2022, and 2) issued $750 million of 5 (7)/8 % Senior Notes due 2026 and $750 million of 5 (1)/2 % Senior Notes due 2027.

CEO Comments

Michael Kneeland, chief executive officer of United Rentals, said, "We were very pleased with our fourth quarter results, which benefited from broad-based demand. While rental rates remained a year-on-year headwind, our sequential rate performance was somewhat better than expected, and OEC volumes were robust through the end of the quarter. These factors helped us exceed the upper-band of guidance on total revenue, adjusted EBITDA and free cash flow for the full year."

Kneeland continued, "2017 should be a year of notable growth for us on several fronts. We expect to close the NES acquisition early in the second quarter and immediately embark on our integration plan. The transaction should be accretive to earnings, revenue, EBITDA and free cash flow this year. Once the acquisition is complete, we will issue new 2017 guidance to reflect the combined operations."

Kneeland added, "In addition to M&A investment, we expect our performance to be driven by broad-based market opportunities and growing demand. Our confidence in the cycle is supported by internal data, customer sentiment, and the strength of key leading indicators. Longer-term, we expect our 2017 strategic investments in increased capital spending, sales and marketing, digital and Project XL to extend our market position and enhance future profitability."

_______________

3.   The year-over-year rental revenue decrease includes the adverse
                        impact of currency. Excluding this impact, year-over-year, rental
                        revenue would have increased 0.2% for the full year 2016.
4.                      Used equipment sales adjusted gross margin excludes the impact of
                        the fair value mark-up of acquired RSC fleet that was sold.
5.                      Free cash flow is a non-GAAP measure. See the table below for
                        amounts and a reconciliation to the most comparable GAAP measure.
                         

2017 Outlook

The company provided the following outlook for the full year 2017. The company plans to update its 2017 outlook upon completion of the NES acquisition.

                                                                                    2017 Outlook                                             2016 Actual
                                                                           --------------------------------------------------------------------                      --------------------------------------
Total revenue                                                              $5.75 billion to $5.95 billion                                                            $5.762 billion
Adjusted EBITDA(6)                                                         $2.7 billion to $2.85 billion                                                             $2.759 billion
Net rental capital expenditures after gross purchases                      $900 million to $1.05 billion, after gross purchases of $1.4 billion                      $750 million net, $1.246 billion gross
                                                                           to $1.5 billion
Net cash provided by operating activities                                  $1.675 billion to $1.875 billion                                                          $1.953 billion
Free cash flow                                                             $650 million to $750 million                                                              $1.182 billion
                                                                                                                                                                      

Free Cash Flow and Fleet Size

For the full year 2016 and 2015, net cash provided by operating activities was $1.953 billion and $1.995 billion, respectively. For the full year 2016, free cash flow was $1.182 billion, after total rental and non-rental gross capital expenditures of $1.339 billion. By comparison, free cash flow for the full year 2015 was $919 million after total rental and non-rental gross capital expenditures of $1.636 billion.

The size of the rental fleet was $8.99 billion of original equipment cost at December 31, 2016, compared with $8.73 billion at December 31, 2015. The age of the rental fleet was 45.2 months on an OEC-weighted basis at December 31, 2016, compared with 43.1 months at December 31, 2015.

Share Repurchase Program

In 2016, the company repurchased $517 million of common stock under its previously announced $1 billion share repurchase program. $373 million remains to be purchased under the program. In October 2016, the company paused repurchases under the program as it evaluated a number of potential acquisition opportunities. Earlier today, the company entered into a definitive agreement to acquire NES in an all cash transaction. United Rentals intends to complete the share repurchase program; however, it will re-evaluate its decision to do so as it integrates NES and assesses other potential uses of capital.

Return on Invested Capital (ROIC)

Return on invested capital was 8.3% for the year ended December 31, 2016, a decrease of 50 basis points year-over-year. The company’s ROIC metric uses after-tax operating income for the trailing 12 months divided by average stockholders’ equity, debt and deferred taxes, net of average cash. To mitigate the volatility related to fluctuations in the company’s tax rate from period to period, the federal statutory tax rate of 35% is used to calculate after-tax operating income.(7)

Conference Call

United Rentals will hold a conference call tomorrow, Thursday, January 26, 2017, at 11:00 a.m. Eastern Time. The conference call number is 844-515-1184 (international: 478-219-0888). The conference call will also be available live by audio webcast at unitedrentals.com, where it will be archived until the next earnings call. The replay number for the call is 404-537-3406, passcode is 47825270.

______________

6.   Information reconciling forward-looking adjusted EBITDA to the
                        comparable GAAP financial measures is unavailable to the company
                        without unreasonable effort, as discussed below
7.                      When adjusting the denominator of the ROIC calculation to also
                        exclude average goodwill, ROIC was 11.2% for the year ended December
                        31, 2016, a decrease of 70 basis points year-over-year.
                         

Non-GAAP Measures

Free cash flow, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, and adjusted earnings per share (adjusted EPS) are non-GAAP financial measures as defined under the rules of the SEC. Free cash flow represents net cash provided by operating activities, less purchases of rental and non-rental equipment plus proceeds from sales of rental and non-rental equipment and excess tax benefits from share-based payment arrangements. 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 RSC fleet. Adjusted EPS represents EPS plus the sum of the merger related costs, restructuring charge, the impact on interest expense related to the fair value adjustment of acquired RSC indebtedness, the impact on depreciation related to acquired RSC fleet and property and equipment, the impact of the fair value mark-up of acquired RSC fleet, merger related intangible asset amortization, asset impairment charge and the loss on repurchase/redemption of debt securities and amendment of ABL facility. The company believes that: (i) free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements; (ii) EBITDA and adjusted EBITDA provide useful information about operating performance and period-over-period growth, and help investors gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced; and (iii) adjusted EPS provides useful information concerning future profitability. However, none of these measures should be considered as alternatives to net income, cash flows from operating activities or earnings per share under GAAP as indicators of operating performance or liquidity.

Information reconciling forward-looking adjusted EBITDA to GAAP financial measures is unavailable to the company without unreasonable effort. The company is not able to provide reconciliations of adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of the company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Preparation of such reconciliations would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to the company without unreasonable effort. The company provides a range for its adjusted EBITDA forecast that it believes will be achieved, however it cannot accurately predict all the components of the adjusted EBITDA calculation. The company provides an adjusted EBITDA forecast because it believes that adjusted EBITDA, when viewed with the company’s results under GAAP, provides useful information for the reasons noted above. However, adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity.

About United Rentals

United Rentals, Inc. is the largest equipment rental company in the world. The company has an integrated network of 887 rental locations in 49 states and every Canadian province. The company’s approximately 12,500 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers approximately 3,200 classes of equipment for rent with a total original cost of $8.99 billion. United Rentals is a member of the Standard & Poor’s 500 Index, the Barron’s 400 Index and the Russell 3000 Index(R) and is headquartered in Stamford, Conn. Additional information about United Rentals is available at unitedrentals.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. These statements can generally be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "seek," "on-track," "plan," "project," "forecast," "intend" or "anticipate," or the negative thereof or comparable terminology, or by discussions of vision, strategy or outlook. These statements are based on current plans, estimates and projections, and, therefore, you should not place undue reliance on them. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Factors that could cause actual results to differ materially from those projected include, but are not limited to, the following: (1) the challenges associated with past or future acquisitions, such as undiscovered liabilities, costs, integration issues and/or the inability to achieve the cost and revenue synergies expected; (2) a slowdown in North American construction and industrial activities, which occurred during the 2008-2010 economic downturn and significantly affected our revenues and profitability, could reduce demand for equipment and prices that we can charge; (3) our significant indebtedness, which requires us to use a substantial portion of our cash flow for debt service and can constrain our flexibility in responding to unanticipated or adverse business conditions; (4) the inability to refinance our indebtedness at terms that are favorable to us, or at all; (5) the incurrence of additional debt, which could exacerbate the risks associated with our current level of indebtedness; (6) noncompliance with covenants in our debt agreements, which could result in termination of our credit facilities and acceleration of outstanding borrowings; (7) restrictive covenants and amount of borrowings permitted under our debt agreements, which could limit our financial and operational flexibility; (8) an overcapacity of fleet in the equipment rental industry; (9) a decrease in levels of infrastructure spending, including lower than expected government funding for construction projects; (10) fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated; (11) our rates and time utilization being less than anticipated; (12) our inability to manage credit risk adequately or to collect on contracts with customers; (13) our inability to access the capital that our business or growth plans may require; (14) the incurrence of impairment charges; (15) trends in oil and natural gas could adversely affect demand for our services and products; (16) our dependence on distributions from subsidiaries as a result of our holding company structure and the fact that such distributions could be limited by contractual or legal restrictions; (17) an increase in our loss reserves to address business operations or other claims and any claims that exceed our established levels of reserves; (18) the incurrence of additional costs and expenses (including indemnification obligations) in connection with litigation, regulatory or investigatory matters; (19) the outcome or other potential consequences of litigation and other claims and regulatory matters relating to our business, including certain claims that our insurance may not cover; (20) the effect that certain provisions in our charter and certain debt agreements and our significant indebtedness may have of making more difficult or otherwise discouraging, delaying or deterring a takeover or other change of control of us; (21) management turnover and inability to attract and retain key personnel; (22) our costs being more than anticipated and/or the inability to realize expected savings in the amounts or time frames planned; (23) our dependence on key suppliers to obtain equipment and other supplies for our business on acceptable terms; (24) our inability to sell our new or used fleet in the amounts, or at the prices, we expect; (25) competition from existing and new competitors; (26) security breaches, cybersecurity attacks and other significant disruptions in our information technology systems; (27) the costs of complying with environmental, safety and foreign laws and regulations, as well as other risks associated with non-U.S. operations, including currency exchange risk; (28) labor difficulties and labor-based legislation affecting our labor relations and operations generally; and (29) 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. The forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.

 
                                                                                                                               UNITED RENTALS, INC.
                                                                                                                              CONDENSED CONSOLIDATED
                                                                                                                         STATEMENTS OF INCOME (UNAUDITED)
                                                                                                                               (In millions, except
                                                                                                                                per share amounts)
                                                                                                                                                    
                                                                                                             Three Months Ended                                                                                                   Year Ended
                                                                                                                December 31,                                                                                                     December 31,
                                                                       -----------------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------------
                                                                                       2016                                   2015                                                      2016                                2015
                                                                       -------------------------------------                     -------------------------------------                     -------------------------------------                     ------------------------------
Revenues:
Equipment rentals                                                            $   1,298                                                 $   1,278                                                 $   4,941                                            $ 4,949
Sales of rental equipment                                                          135                                                       157                                                       496                                                538
Sales of new equipment                                                              48                                                        47                                                       144                                                157
Contractor supplies sales                                                           19                                                        19                                                        79                                                 79
Service and other revenues                                                          23                                     22                                    102                              94  
                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Total revenues                                                                   1,523                                  1,523                                  5,762                           5,817  
                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Cost of revenues:
Cost of equipment rentals, excluding depreciation                                  471                                                       467                                                     1,862                                              1,826
Depreciation of rental equipment                                                   255                                                       252                                                       990                                                976
Cost of rental equipment sales                                                      77                                                        94                                                       292                                                311
Cost of new equipment sales                                                         40                                                        40                                                       119                                                131
Cost of contractor supplies sales                                                   14                                                        13                                                        55                                                 55
Cost of service and other revenues                                                   9                                      9                                     41                              38  
                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Total cost of revenues                                                             866                                    875                                  3,359                           3,337  
                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Gross profit                                                                       657                                                       648                                                     2,403                                              2,480
Selling, general and administrative expenses                                       186                                                       180                                                       719                                                714
Merger related costs                                                    --                                            --                                            --                                                (26 )
Restructuring charge                                                                 6                                                         5                                                        14                                                  6
Non-rental depreciation and amortization                                            63                                     66                                    255                             268  
                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Operating income                                                                   402                                                       397                                                     1,415                                              1,518
Interest expense, net                                                              162                                                       107                                                       511                                                567
Other income, net                                                                   (2 )                                                      (2 )                                                      (5 )                                              (12 )
                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Income before provision for income taxes                                           242                                                       292                                                       909                                                963
Provision for income taxes                                                          89                                    123                                    343                             378  
                                                                       ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Net income                                                                   $     153                              $     169                              $     566                         $   585  
                                                                       ------- ------- --------------------                      ------- ------- --------------------                      ------- ------- --------------------                      -- ----- --------------------
Diluted earnings per share                                                   $    1.80                              $    1.81                              $    6.45                         $  6.07  
                                                                       ------- ------- --------------------                      ------- ------- --------------------                      ------- ------- --------------------                      -- ----- --------------------
                                                                                                                                                                                                                                                               
 
                                                                                UNITED RENTALS, INC.
                                                                           CONDENSED CONSOLIDATED BALANCE
                                                                                 SHEETS (UNAUDITED)
                                                                                    (In millions)
                                                                                                           
                                                                                                    December 31, 2016                                      December 31, 2015
                                                                                           ----------------------------------                     ----------------------------------
ASSETS
Cash and cash equivalents                                                                      $    312                                               $    179
Accounts receivable, net                                                                            920                                                    930
Inventory                                                                                            68                                                     69
Prepaid expenses and other assets                                                                    61                                 116  
                                                                                           ---------------------------------                      ---------------------------------
    Total current assets                                                                          1,361                                                  1,294
Rental equipment, net                                                                             6,189                                                  6,186
Property and equipment, net                                                                         430                                                    445
Goodwill                                                                                          3,260                                                  3,243
Other intangible assets, net                                                                        742                                                    905
Other long-term assets                                                                                6                                  10  
                                                                                           ---------------------------------                      ---------------------------------
Total assets                                                                                   $ 11,988                            $ 12,083  
                                                                                           ----- ------ --------------------                      ----- ------ --------------------
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt and current maturities of long-term debt                                       $    597                                               $    607
Accounts payable                                                                                    243                                                    271
Accrued expenses and other liabilities                                                              344                                 355  
                                                                                           ---------------------------------                      ---------------------------------
    Total current liabilities                                                                     1,184                                                  1,233
Long-term debt                                                                                    7,193                                                  7,555
Deferred taxes                                                                                    1,896                                                  1,765
Other long-term liabilities                                                                          67                                  54  
                                                                                           ---------------------------------                      ---------------------------------
Total liabilities                                                                                10,340                              10,607  
                                                                                           ---------------------------------                      ---------------------------------
Common stock                                                                                          1                                                      1
Additional paid-in capital                                                                        2,288                                                  2,197
Retained earnings                                                                                 1,654                                                  1,088
Treasury stock                                                                                   (2,077 )                                               (1,560 )
Accumulated other comprehensive loss                                                               (218 )                                                 (250 )
                                                                                           ---------------------------------                      ---------------------------------
Total stockholders’ equity                                             1,648                               1,476  
                                                                                           ---------------------------------                      ---------------------------------
Total liabilities and stockholders’ equity                          $ 11,988                            $ 12,083  
                                                                                           ----- ------ --------------------                      ----- ------ --------------------
                                                                                                                                                                
 
                                                                                                                                         UNITED RENTALS, INC.
                                                                                                                                        CONDENSED CONSOLIDATED
                                                                                                                                 STATEMENTS OF CASH FLOWS (UNAUDITED)
                                                                                                                                             (In millions)
                                                                                                                                                                        
                                                                                                                                 Three Months Ended                                                                                                  Year Ended
                                                                                                                                    December 31,                                                                                                    December 31,
                                                                                           -----------------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------
                                                                                                           2016                                   2015                                                      2016                               2015
                                                                                           -------------------------------------                     -------------------------------------                     -------------------------------------                     -----------------------------
Cash Flows From Operating Activities:
Net income                                                                                       $     153                                                 $     169                                                 $     566                                             $ 585
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization                                                                          318                                                       318                                                     1,245                                             1,244
Amortization of deferred financing costs and original issue discounts                                    2                                                         2                                                         9                                                10
Gain on sales of rental equipment                                                                      (58 )                                                     (63 )                                                    (204 )                                            (227 )
Gain on sales of non-rental equipment                                                                   (1 )                                                      (2 )                                                      (4 )                                              (8 )
Stock compensation expense, net                                                                         12                                                        12                                                        45                                                49
Merger related costs                                                                        --                                            --                                            --                                               (26 )
Restructuring charge                                                                                     6                                                         5                                                        14                                                 6
Loss on repurchase/redemption of debt securities and amendment of                                       65                                            --                                                       101                                               123
ABL facility
Excess tax benefits from share-based payment arrangements                                               (5 )                                                      52                                                       (58 )                                              (5 )
Increase in deferred taxes                                                                              33                                                       242                                                       123                                               336
Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable                                                           8                                                        61                                                        15                                               (11 )
    Decrease in inventory                                                                                4                                                         8                                                         1                                                 8
    Decrease (increase) in prepaid expenses and other assets                                             2                                                       (55 )                                                      77                                               (38 )
    Decrease in accounts payable                                                                      (166 )                                                    (203 )                                                     (29 )                                              (8 )
    (Decrease) increase in accrued expenses and other liabilities                                      (50 )                                                    (108 )                                                      52                            (43 )
                                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      ----------------------------
Net cash provided by operating activities                                                              323                                                       438                                                     1,953                                             1,995
Cash Flows From Investing Activities:
Purchases of rental equipment                                                                         (101 )                                                    (109 )                                                  (1,246 )                                          (1,534 )
Purchases of non-rental equipment                                                                      (28 )                                                     (26 )                                                     (93 )                                            (102 )
Proceeds from sales of rental equipment                                                                135                                                       157                                                       496                                               538
Proceeds from sales of non-rental equipment                                                              2                                                         3                                                        14                                                17
Purchases of other companies, net of cash acquired                                          --                                            --                                                       (28 )                                             (86 )
Purchases of investments                                                                                (2 )                                                      (3 )                                                      (2 )                                              (3 )
                                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      ----------------------------
Net cash provided by (used in) investing activities                                                      6                                                        22                                                      (859 )                                          (1,170 )
Cash Flows From Financing Activities:
Proceeds from debt                                                                                   2,940                                                     1,113                                                     8,752                                             8,566
Payments of debt                                                                                    (3,202 )                                                  (1,389 )                                                  (9,223 )                                          (8,482 )
Payment of contingent consideration                                                         --                                            --                                            --                                               (52 )
Payments of financing costs                                                                            (12 )                                          --                                                       (24 )                                             (27 )
Proceeds from the exercise of common stock options                                                       1                                            --                                                         1                                                 1
Common stock repurchased                                                                               (40 )                                                    (122 )                                                    (528 )                                            (789 )
Cash received in connection with the 4 percent Convertible Senior                           --                                                         3                                            --                                                 3
Notes and related hedge, net
Excess tax benefits from share-based payment arrangements                                                5                                    (52 )                                                      58                              5  
                                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      ----------------------------
Net cash used in financing activities                                                                 (308 )                                                    (447 )                                                    (964 )                                            (775 )
Effect of foreign exchange rates                                                                        (6 )                                                      (5 )                                                       3                            (29 )
                                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      ----------------------------
Net increase in cash and cash equivalents                                                               15                                                         8                                                       133                                                21
Cash and cash equivalents at beginning of period                                                       297                                    171                                    179                            158  
                                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      ----------------------------
Cash and cash equivalents at end of period                                                       $     312                              $     179                              $     312                          $ 179  
                                                                                           ------- ------- --------------------                      ------- ------- --------------------                      ------- ------- --------------------                      --- --- --------------------
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net                                                                  $      85                                                 $       5                                                 $      99                                             $  60
Cash paid for interest                                                                                 121                                                       143                                                       415                                               447
                                                                                                                                                                                                                                                                                  
 
                                                                                                                   UNITED RENTALS, INC.
                                                                                                                    SEGMENT PERFORMANCE
                                                                                                                            ($
                                                                                                                       in millions)
                                                                                                                               
                                                                                                   Three Months Ended                                                                                      Year Ended
                                                                                                      December 31,                                                                                        December 31,
                                                                       --------------------------------------------------------------------------                     -------------------------------------------------------------------------------------
                                                                           2016          2015       Change                         2016         2015             Change
                                                                       ------------                     ------------                     -------                      -----------                     -----------                     --------------------
General Rentals
Reportable segment equipment rentals revenue                            $ 1,099                          $ 1,097                            0.2%                       $ 4,166                         $ 4,241                                      (1.8)%
Reportable segment equipment rentals gross profit                           482                              480                            0.4%                         1,725                           1,819                                      (5.2)%
Reportable segment equipment rentals gross margin                          43.9  %                          43.8  %                       10 bps                          41.4 %                          42.9 %                            (150) bps
Trench, Power and Pump
Reportable segment equipment rentals revenue                            $   199                          $   181                            9.9%                       $   775                         $   708                                        9.5%
Reportable segment equipment rentals gross profit                            90                               79                           13.9%                           364                             328                                       11.0%
Reportable segment equipment rentals gross margin                          45.2  %                          43.6  %                       160 bps                         47.0 %                          46.3 %                             70 bps
Total United Rentals
Total equipment rentals revenue                                         $ 1,298                          $ 1,278                            1.6%                       $ 4,941                         $ 4,949                                      (0.2)%
Total equipment rentals gross profit                                        572                              559                            2.3%                         2,089                           2,147                                      (2.7)%
Total equipment rentals gross margin                                       44.1  %                          43.7  %                       40 bps                          42.3 %                          43.4 %                            (110) bps
                                                                                                                                                                                                                                       
 
                                                                                                                                      UNITED RENTALS, INC.
                                                                                                                                   DILUTED EARNINGS PER SHARE
                                                                                                                                           CALCULATION
                                                                                                                              (In millions, except per share data)
                                                                                                                                                                        
                                                                                                                                     Three Months Ended                                                                                            Year Ended
                                                                                                                                        December 31,                                                                                              December 31,
                                                                                                   ---------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------
                                                                                                                   2016                               2015                                                  2016                             2015
                                                                                                   -------------------------------------                     -----------------------------                     -------------------------------------                     ------------------------
Numerator:
Net income available to common stockholders                                                              $     153                                            $  169                                                 $     566                                            $                  585
Denominator:
Denominator for basic earnings per share--weighted-average common                                 84.4                                              92.7                                                      87.2                                                              95.2
shares
Effect of dilutive securities:
Employee stock options                                                                                         0.3                                               0.3                                                       0.3                                                               0.3
4 percent Convertible Senior Notes                                                                  --                                               0.3                                            --                                                               0.7
Restricted stock units                                                                                         0.4                            0.3                                    0.3                         0.2
                                                                                                   ------------------------------------                      ----------------------------                      ------------------------------------ -------------------- ------------------------
Denominator for diluted earnings per share--adjusted                                              85.1                                              93.6                                                      87.8                                                              96.4
weighted-average common shares
Diluted earnings per share                                                                               $    1.80                                            $ 1.81                                                 $    6.45                                            $                 6.07
                                                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                                                             

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 rental depreciation related to acquired RSC fleet and property and equipment, impact of the fair value mark-up of acquired RSC fleet, impact on interest expense related to fair value adjustment of acquired RSC indebtedness, 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                                                                                   Year Ended
                                                                                                                                December 31,                                                                                                        December 31,
                                                                                       -----------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------
                                                                                                       2016                                   2015                                                      2016                                   2015
                                                                                       -------------------------------------                     -------------------------------------                     -------------------------------------                     -------------------------------------
Earnings per share - GAAP, as reported                                                       $    1.80                                                 $    1.81                                                 $    6.45                                                 $    6.07
After-tax impact of:
Merger related costs (1)                                                                --                                            --                                            --                                                     (0.17 )
Merger related intangible asset amortization (2)                                                  0.29                                                      0.28                                                      1.12                                                      1.15
Impact on depreciation related to acquired RSC fleet and property                       --                                            --                                            --                                                     (0.02 )
and equipment (3)
Impact of the fair value mark-up of acquired RSC fleet (4)                                        0.06                                                      0.07                                                      0.25                                                      0.19
Impact on interest expense related to fair value adjustment of                          --                                            --                                                     (0.01 )                                                   (0.02 )
acquired RSC indebtedness (5)
Restructuring charge (6)                                                                          0.05                                                      0.03                                                      0.11                                                      0.04
Asset impairment charge (7)                                                             --                                            --                                                      0.03                                            --
Loss on repurchase/redemption of debt securities and amendment of                                 0.47                         --                                   0.70                                   0.78  
ABL facility
                                                                                       --------------  --------------------                      --------------  --------------------                      --------------  --------------------                      --------------  --------------------
Earnings per share - adjusted                                                                $    2.67                              $    2.19           $    8.65           $    8.02  
                                                                                       ------- ------- --------------------                      ------- ------- -------------------- -------------------- ------- ------- -------------------- -------------------- ------- ------- --------------------
Tax rate applied to above adjustments (8)                                                         37.9                    %                                 38.4                    %                                 38.2                    %                                 38.6                    %
                                                                                                                                                                                                                                                                                      
(1)   Reflects transaction costs associated with the April 2014 National
                         Pump acquisition. The income for the year ended December 31, 2015
                         reflects a decline in the fair value of the contingent cash
                         consideration component of the National Pump purchase price.
(2)                      Reflects the amortization of the intangible assets acquired in the
                         RSC and National Pump acquisitions.
(3)                      Reflects the impact of extending the useful lives of equipment
                         acquired in the RSC acquisition, net of the impact of additional
                         depreciation associated with the fair value mark-up of such
                         equipment.
(4)                      Reflects additional costs recorded in cost of rental equipment sales
                         associated with the fair value mark-up of rental equipment acquired
                         in the RSC acquisition and subsequently sold.
(5)                      Reflects a reduction of interest expense associated with the fair
                         value mark-up of debt acquired in the RSC acquisition.
(6)                      Reflects severance costs and branch closure charges associated with
                         our restructuring programs, all of which were closed as of December
                         31, 2016.
(7)                      Reflects write-offs of leasehold improvements and other fixed assets
                         in connection with our restructuring programs.
(8)                      The tax rates applied to the adjustments reflect the statutory rates
                         in the applicable entity.
                          
                          

UNITED RENTALS, INC. EBITDA AND ADJUSTED EBITDA GAAP RECONCILIATION (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 RSC fleet. These items are excluded from adjusted EBITDA internally when evaluating our operating performance and allow investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies. Management believes that EBITDA and adjusted EBITDA, when viewed with the Company’s results under 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. However, EBITDA and adjusted EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. The table below provides a reconciliation between net income and EBITDA and adjusted EBITDA.

                                                                                                   Three Months Ended                                                                               Year Ended
                                                                                                                         December 31,                                                                                                    December 31,
                                                                                -----------------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------
                                                                                                2016                                   2015                                                      2016                               2015
                                                                                -------------------------------------                     -------------------------------------                     -------------------------------------                     -----------------------------
Net income                                                                            $     153                                                 $     169                                                 $     566                                           $   585
Provision for income taxes                                                                   89                                                       123                                                       343                                               378
Interest expense, net                                                                       162                                                       107                                                       511                                               567
Depreciation of rental equipment                                                            255                                                       252                                                       990                                               976
Non-rental depreciation and amortization                                                     63                                     66                                    255                            268  
                                                                                ------------------------------------                      ------------------------------------                      ------------------------------------                      ----------------------------
EBITDA (A)                                                                            $     722                                                 $     717                                                 $   2,665                                           $ 2,774
Merger related costs (1)                                                         --                                            --                                            --                                               (26 )
Restructuring charge (2)                                                                      6                                                         5                                                        14                                                 6
Stock compensation expense, net (3)                                                          12                                                        12                                                        45                                                49
Impact of the fair value mark-up of acquired RSC fleet (4)                                    9                                     10                                     35                             29  
                                                                                ------------------------------------                      ------------------------------------                      ------------------------------------                      ----------------------------
Adjusted EBITDA (B)                                                                   $     749                              $     744                              $   2,759                        $ 2,832  
                                                                                ------- ------- --------------------                      ------- ------- --------------------                      ------- ------- --------------------                      - ----- --------------------
                                                                                                                                                                                                                                                                       
(A) Our EBITDA margin was 47.4% and 47.1% for the three months
ended December 31, 2016 and 2015, respectively, and 46.3% and
47.7% for the year ended December 31, 2016 and 2015, respectively.
(B) Our adjusted EBITDA margin was 49.2% and 48.9% for the three
months ended December 31, 2016 and 2015, respectively, and 47.9%
and 48.7% for the year ended December 31, 2016 and 2015,
respectively.
                        
(1)                                           Reflects transaction costs associated with the April 2014 National
                                              Pump acquisition. The income for the year ended December 31, 2015
                                              reflects a decline in the fair value of the contingent cash
                                              consideration component of the National Pump purchase price.
(2)                                           Reflects severance costs and branch closure charges associated with
                                              our restructuring programs, all of which were closed as of December
                                              31, 2016.
(3)                                           Represents non-cash, share-based payments associated with the
                                              granting of equity instruments.
(4)                                           Reflects additional costs recorded in cost of rental equipment sales
                                              associated with the fair value mark-up of rental equipment acquired
                                              in the RSC acquisition and subsequently sold.
                                               
 
                                                                                                                                         UNITED RENTALS, INC.
                                                                                                                                      RECONCILIATION OF NET CASH
                                                                                                                                   PROVIDED BY OPERATING ACTIVITIES
                                                                                                                                             TO EBITDA AND
                                                                                                                                            ADJUSTED EBITDA
                                                                                                                                             (In millions)
                                                                                                                                                                        
                                                                                                                                 Three Months Ended                                                                                                   Year Ended
                                                                                                                                    December 31,                                                                                                     December 31,
                                                                                           -----------------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------------
                                                                                                           2016                                   2015                                                      2016                                2015
                                                                                           -------------------------------------                     -------------------------------------                     -------------------------------------                     ------------------------------
Net cash provided by operating activities                                                        $     323                                                 $     438                                                 $   1,953                                            $ 1,995
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                                   (2 )                                                      (2 )                                                      (9 )                                              (10 )
Gain on sales of rental equipment                                                                       58                                                        63                                                       204                                                227
Gain on sales of non-rental equipment                                                                    1                                                         2                                                         4                                                  8
Merger related costs (1)                                                                    --                                            --                                            --                                                 26
Restructuring charge (2)                                                                                (6 )                                                      (5 )                                                     (14 )                                               (6 )
Stock compensation expense, net (3)                                                                    (12 )                                                     (12 )                                                     (45 )                                              (49 )
Loss on repurchase/redemption of debt securities and amendment of                                      (65 )                                          --                                                      (101 )                                             (123 )
ABL facility
Excess tax benefits from share-based payment arrangements                                                5                                                       (52 )                                                      58                                                  5
Changes in assets and liabilities                                                                      214                                                       137                                                       101                                                194
Cash paid for interest                                                                                 121                                                       143                                                       415                                                447
Cash paid for income taxes, net                                                                         85                                      5                                     99                              60  
                                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
EBITDA                                                                                           $     722                                                 $     717                                                 $   2,665                                            $ 2,774
Add back:
Merger related costs (1)                                                                    --                                            --                                            --                                                (26 )
Restructuring charge (2)                                                                                 6                                                         5                                                        14                                                  6
Stock compensation expense, net (3)                                                                     12                                                        12                                                        45                                                 49
Impact of the fair value mark-up of acquired RSC fleet (4)                                               9                                     10                                     35                              29  
                                                                                           ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------
Adjusted EBITDA                                                                                  $     749                              $     744                              $   2,759                         $ 2,832  
                                                                                           ------- ------- --------------------                      ------- ------- --------------------                      ------- ------- --------------------                      -- ----- --------------------
                                                                                                                                                                                                                                                                                   
(1)   Reflects transaction costs associated with the April 2014 National
                         Pump acquisition. The income for the year ended December 31, 2015
                         reflects a decline in the fair value of the contingent cash
                         consideration component of the National Pump purchase price.
(2)                      Reflects severance costs and branch closure charges associated with
                         our restructuring programs, all of which were closed as of December
                         31, 2016.
(3)                      Represents non-cash, share-based payments associated with the
                         granting of equity instruments.
(4)                      Reflects additional costs recorded in cost of rental equipment sales
                         associated with the fair value mark-up of rental equipment acquired
                         in the RSC acquisition and subsequently sold.
                          
                          

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

We define free cash flow as (i) net cash provided by operating activities less (ii) purchases of rental and non-rental equipment plus (iii) proceeds from sales of rental and non-rental equipment, and excess tax benefits from share-based payment arrangements. Management believes that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. However, free cash flow is not a measure of financial performance or liquidity under GAAP. Accordingly, free cash flow should not be considered an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. The table below provides a reconciliation between net cash provided by operating activities and free cash flow.

                                                                                             Three Months Ended                                                                    Year Ended
                                                                                                                   December 31,                                                                                         December 31,
                                                                                   -----------------------------------------------------------------------------                     -----------------------------------------------------------------------------------
                                                                                               2016                          2015                                              2016                             2015
                                                                                   ----------------------------                     ----------------------------                     -------------------------------                     -------------------------------
Net cash provided by operating activities                                           $ 323                                            $ 438                                             $ 1,953                                             $ 1,995
Purchases of rental equipment                                                        (101 )                                           (109 )                                            (1,246 )                                            (1,534 )
Purchases of non-rental equipment                                                     (28 )                                            (26 )                                               (93 )                                              (102 )
Proceeds from sales of rental equipment                                               135                                              157                                                 496                                                 538
Proceeds from sales of non-rental equipment                                             2                                                3                                                  14                                                  17
Excess tax benefits from share-based payment arrangements (1)                           5                           (52 )                                                58                                5  
                                                                                   ---------------------------                      ---------------------------                      ------------------------------                      ------------------------------
Free cash flow                                                                      $ 336                         $ 411                          $ 1,182                          $   919  
                                                                                   -- --- --------------------                      -- --- --------------------                      --- ----- --------------------                      --- ----- --------------------
                                                                                                                                                                                                                                                    
(1)   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, and are reported
                         as financing cash flows. We added the excess tax benefits back to
                         our calculation of free cash flow to generally classify cash flows
                         from income taxes as operating cash flows. However, these excess tax
                         benefits did not impact free cash flow for the three months or years
                         ended December 31, 2016 or 2015, as they do not result in increased
                         cash flows until the associated income taxes are settled.
                          
                          

The table below provides a reconciliation between 2017 forecasted net cash provided by operating activities and free cash flow. The company plans to update its 2017 outlook upon completion of the NES acquisition.

Net cash provided by operating activities                             $1,675- $1,875
Purchases of rental equipment                                                         $(1,400)-$(1,500)
Proceeds from sales of rental equipment                                                       $450-$500
Purchases of non-rental equipment, net of proceeds from sales                              $(75)-$(125)
Free cash flow                                                                               $650- $750
                                                                                    

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170125006208r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170125006208/en/

SOURCE: United Rentals, Inc.

United Rentals, Inc. 
Ted Grace, 203-618-7122 
Cell: 203-399-8951 
tgrace@ur.com


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