United Rentals, Inc. · NYSE:URI
United Rentals — Investor Presentation (April 2015)
73 slides from United Rentals's investor presentation, April 2015
Slide 1: Executing for Growth and Returns
Executing for Growth and Returns Investor Presentation First Quarter 2015
Slide 2: Introductory Information
Introductory Information Unless otherwise specified, the information in this presentation, including forward looking statements related to our outlook, is as of our most recent earnings call held on April 22, 2015. We make no commitment to update any such information contained in this presentation.
Slide 3: Table of Contents
Table of Contents Introduction 4 Market Overview 10 Margin Enhancement 18 Growth Through Customer Solutions 37 Fleet 43 Financial Overview 52 3
Slide 4: Industry Leader Creating a New Standard for Operational Execution
is the Industry Leader, Creating a New Standard for Operational Execution to Drive Growth and Returns Through the Cycle 4
Slide 5: Equipment Rental Leader
Equipment Rental Leader #1 U.S. Market Share 888 locations across North America United Rentals Diversified mix 12% Other – Industrial/Non Construction – 51% 77% HERC 5% – Non-Residential Construction – 45% Sunbelt 6% – Residential – 4% Team of 12,500 employees Scale Creates Distinct Competit
Slide 6: Creating a New Industry Standard
Creating a New Industry Standard Our Vision Deploying the best people, equipment and solutions to enable our customers to safely build a better and Superior stronger future returns to our stockholders by achieving Driven By These Values strong and consistent Safety First financial Leading By Exa
Slide 7: Our Four Pillar Strategy for Success
Our Four Pillar Strategy for Success New Standard Expand Specialty Fill Growth Grow the Core for Operational Businesses Pipeline Execution National Account Customer Grow cross-sell and Invest in related Strategy Service model customer relevancy adjacencies, such as tanks or pumps Total Con
Slide 8: Entering Next Phase of Strategic and Financial Evolution
Entering Next Phase of Strategic and Financial Evolution Operation United 2 and Business Mix RSC Transformation Delivering on new standard of Operation operational excellence United Became the scale across a more industry leader; diversified customer achieve benefits base to drive higher, Busi
Slide 9: Safety as a Core Value
Safety as a Core Value Achieved a 0.72 Total Recordable Incident Rate for Q1 2015. Building a URI continues to lead our industry in the area of employee World-Class safety and also is in the top quartile of world-class companies Safety Culture across all industry sectors. Expanding the course
Slide 10: Market Overview
= Market Overview — a a) . @ United Rentals’
Slide 11: North American Rental Industry Expected to Grow
North American Rental Industry Expected to Grow $Bn +9% 50 +9% +8% +8% +7% +7% 40 -1% +12% +9% +6% +7% +11% +9% -23% 30 -3% +6% +5% +0% +6% +19% +11% 20 10 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Broad-based Construction Activity Pic
Slide 12: Customer Confidence Index
Customer Confidence Index 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Down Same Up Optimism Increased in March (1) Survey of Key accounts only conducted by 3rd party. Approximately 170 surveys conducted each month Survey results as of 3/31/15 12
Slide 13: Current Pipeline of over $365B in Construction and Industrial Projects
Current Pipeline of over $365B in Construction and Industrial Projects Dodge Projects* – $64B IIR Industrial Projects** – $301B Bidding Bid Results Construction Engineering Construction $25.4 $17.2 $20.9 $131.0 $170.5 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $0.0 $80.0 $160.0 $240.0 $320.0 Ind
Slide 14: Strong US Construction Growth Expected in 2015
Strong US Construction Growth Expected in 2015 U.S. ‘15 Forecasted Construction Growth Rate: 6.2% AZ, CA, CO, FL, NV, OR, MI and WA expected to see double digit growth Strong Growth Expected in: • Commercial Construction • Education • Health Care • Multi-family Residential • Single-family Resident
Slide 15: Industrial Growth Expected Across U.S. in 2015
Industrial Growth Expected Across U.S. in 2015 U.S. ‘15 Forecasted Industrial Growth Rate: 3.3% Strong Growth Expected in: • Power • Chemical • Industrial Manufacturing • O&G Downstream • O&G Production (LNG) Source: IIR – Industrial Information Resources , Stratas Advisors March 2015 15
Slide 16: Why Rent – Total Cost of Ownership
Why Rent – Total Cost of Ownership Reasons to Rent Manage risk Save disposable costs Control expenses and inventory Cost control The right equipment for the job Equipment tracking 24/7 customer care No licenses Save on storage/warehousing Conserve capital Reduce downtime No n
Slide 17: Why Rent – Total Cost of Ownership
Why Rent – Total Cost of Ownership Needs Assessment Planning/ Fleet Availability Procurement Equipment Sourcing Fleet Deployment Eq. Logistics Operating/ Operator training Maintenance PM & Repair Regulatory Compliance ROI/Performance Analysis Reporting/ Wrench Time Enablement Opt
Slide 18: Margin Enhancement
Margin Enhancement Applying Powerful Tools to Deliver Further Margin Expansion
Slide 19: Positive Pricing Outlook
Positive Pricing Outlook Cumulative Purchase Price Inflation Relative to 2007* URI Adjusted EBITDA Margins and Rental Rate Index 25% 55.0% 47.8% 105 46.3% 45.8% 42.6% 20% 45.0% 100 35.5% 35.0% 31.5% 32.8% 30.9% 95 15% 26.7% 25.0% 90 10% 15.0% 85 5% 5.0% 80 0% -5.0% 2007 2008 2009 2010 2011 2012 PF 2
Slide 20: Support Further Margin Enhancement
Unique Operating Advantages Support Further Margin Enhancement Best Cost Continuous Structure Improvement Lean Scale Initiatives/ Advantage Operational Excellence Business Metro Mix Model Emphasizing Higher Utilization Contribution Margin Potential 20
Slide 21: Lean Processes Drive Real Value
Lean Processes Drive Real Value Run Rate of $42 Million Towards $100 Million Goal LEAN Activity Productivity Gains Value Levers Kaizen Decreased Outside Improved processes in Hauling Costs Cost per Delivery yards, shops, dispatch Increased Dispatches and sourcing per Driver Credit Memos & Im
Slide 22: Lean’s Goal
Lean’s Goal To build a sustainable, scalable platform for profitable growth… Sustainable Scalable Profitable Growth Engage our people Our entire Build a foundation in systematically and organization is for long-term continuously focused on delivering success eliminating waste unmatched customer ever
Slide 23: Do It Right the First Time
Do It Right the First Time Kaizen PIT B-PRO Process Improvement Team Best Practice Roll-Out A cross-functional Field and Ops Field Ownership team (Field & Ops Excellence Leaders Excellence Leaders) 1 Day, 1 Process 2-week 1-week discovery implementation Implementation of pre-selected s
Slide 24: Telematics
Telematics Commitment to Customer Benefits Internal Benefits Telematics Targeting 87% Visibility into run- Performance OEC time & equipment monitoring & service utilization alerts Telematics Locating of off-rent Standard on 2015 Ability to locate equipment for pick- deliveries equipment
Slide 25: GPS Technology – Monitoring Equipment
GPS Technology – Monitoring Equipment Action options when viewing in map Customers Can Quickly Find Rental Assets 25
Slide 26: Stronger Market, Customer & Fleet Mix
Stronger Market, Customer & Fleet Mix Four Levers to Help Achieve Less Cyclical Mix Diversified End Market Exposure Larger, More Stable Customers Residential 4% Non- Unassigned Residential 45% Accounts 36% Industrial/ 64% 51% Key Accounts Non-Construction Increasing Specialty Exposure Diversified Ac
Slide 27: What is Specialty Rental?
What is Specialty Rental? Fleet and Customers That Require a Different Business Model to Serve Effectively Trench Safety Power & HVAC Pump Solutions Tool Solutions Excavation support Complete solutions for Full range of pumps, Tool trailers stocked with solutions, confined space mobile power
Slide 28: Strategy by Business
Strategy by Business Trench Safety Power & HVAC Pump Solutions Tool Solutions Strategy Lead in product Expand footprint and Expand footprint. Utilize Gen Rent sales innovation. drive local market force to gain share in penetration. Diversify end markets Increase compliance and Industrial
Slide 29: Share of Business by Customer
Share of Business by Customer Specialty’s Diversified Customer Base* Trench Safety Power & HVAC 2% 2% Other 3% 5% Other 2% 4% 10% Government Events 10% 5% 14% Utilities Government 48% Commercial construction 45% Utilities 20% Upstream/midstream oil 33% Commercial construction 24% & gas Upstream/mids
Slide 30: Why is Specialty Rental an Attractive Business?
Why is Specialty Rental an Attractive Business? High ROCA and longer asset lives on Specialty High Returns equipment Customer Specialty improves relationships with high-value Loyalty industrial and key accounts Competitive Offer customized solutions to customer verticals Advantage requiring de
Slide 31: Economics of Specialty: High Returns on Initial OEC Investment
Economics of Specialty: High Returns on Initial OEC Investment Multiple of Cash Flows Earned Over Asset Life / OEC 8.8x 4.6x 4.5x 3.9x Trench Tools Pumps Power & HVAC Asset Life: 10-15 yrs ~7 yrs 7-10 yrs ~10 yrs EBITDA/OEC: 62% 56% 48% 35% Specialty is Accretive to Overall ROIC 31
Slide 32: Cross Sell Delivers Customer Value
Cross Sell Delivers Customer Value Significant runway ahead to grow cross selling in Specialty segments % of National Accounts currently doing business with each Specialty segment 100% ACCOUNT PENETRATION 80 OPPORTUNITY 60 40 Using tools Using Trench Using 20 Power Using Pumps 0 Tools Trench Power P
Slide 33: Trench Safety Continues Strong Growth
Trench Safety Continues Strong Growth Largest trench safety rental company in North America 9,000 customers participated in our training courses in Q1 2015 3 additional branches to be opened in 2015 Trench Safety Annual Rental Revenue Growth 36% 31% 21% 20% 18% FY 2011 FY 2012 FY 2013 FY 2014
Slide 34: Power & HVAC Offers Attractive Growth Opportunity
Power & HVAC Offers Attractive Growth Opportunity High returns & longer asset life 2 branches to open in 2015 Leveraging our existing customer relationships to cross sell Power & HVAC Power & HVAC Annual Rental Revenue Growth 63% 62% 48% 34% 26% FY 2011 FY 2012 FY 2013 FY 2014 Q1 2015 Strong Y
Slide 35: Pump Solutions Yields Strong Cross Sell Opportunities
Pump Solutions Yields Strong Cross Sell Opportunities Pump Solutions provides customers a full range of pumps, hose, and fittings for fluid transfer Diversifying revenue base with our URI cross-sell network for Pumps with our strong National Account network 7 new Pump branches planned in 2015, 5
Slide 36: Tool Solutions Improves Productivity
Tool Solutions Improves Productivity Provide Tool Management Solutions to Industrial Customers in Hoisting, Welding, Torqueing, Pipe Fitting, & Other Tools High margins and attractive return assets Drive customer entanglement with industrial and commercial accounts National Accounts represent
Slide 37: Growth Through Customer Solutions
Growth Through Customer Solutions Achieve Superior Performance by Leveraging Unique Advantages
Slide 38: Customer Solutions Drive Revenue Growth and Capital Efficiency
Customer Solutions Drive Revenue Growth and Capital Efficiency Tailored engagement strategies to meet the specific needs of different customers – from large enterprises Engagement to small, local businesses Strategy Focus dialogue on solutions to increase productive “wrench time” for customers’
Slide 39: Customer Engagement Strategy
Customer Engagement Strategy “Company-wide “Ease of Doing Solutions” “Reliable Partner” Business” Large Industrial Large Commercial Locals Enterprise Agreements Job Site Management Consumption “Wrench Time” Availability Management 24/7 After Hours Reliability “Wrench Time” Breadth & De
Slide 40: Helping Customers Manage Fleet
Helping Customers Manage Fleet Embeds United as Rental Company of Choice Equipment Utilization 43.0% Software eliminates waste with enhanced visibility/accountability – Increase equipment 20.5% utilization – Less duplication – Conserve capital 6.0% through rental – Eliminate equipment maintenance
Slide 41: Attractive Added Value for Customers
Attractive Added Value for Customers A Meaningful Competitive Edge 669 $196.0 $146.0 409 194 84 Q1 2014 Q1 2015 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Installs began late Q2 2014 with Roll- Revenue Grew 34.25% YOY Out of Total Control® Customers Embrace Total Control® $ Millions 41
Slide 42: “On Sites” = Up Time
“On Sites” = Up Time “Inside the Fence” Sites Increased Utilization – Leniency for Shared Equipment – Lower Equipment Cost On-Time Delivery “Guaranteed” On Site Mechanic = No Downtime Reduction of Traffic = Safety Better meeting customer’s equipment needs High Volume, High Utilization, Lower
Slide 43: Fleet
Fleet ) United Rentals:
Slide 44: Fleet Mix
Fleet Mix Customers Know We Have the Fleet They Need Trucks Welders 1% Trench 1% Power 5% 4% Other 10% $8.4 Billion of Fleet Light 2% 39% Aerial Comprised of Approximately Forks – Rough <1% 17% 425,000 Units Forks – Reach 2% 3% 3% Forks – Industrial 13% Compaction Earth Moving Compressors Serves Div
Slide 45: 3,300 Equipment Classes with Original Cost of $8.4B
3,300 Equipment Classes with Original Cost of $8.4B Booms and Earth Moving Forklifts Trench and Lifts Other Total (Average) % of Q1 2015 34.6% 11.8% 17.7% 35.9% Rental Revenue Time 68.8% 57.3% 75.8% 52.6% 64.2% Utilization* Dollar 38.6% 38.7% 38.6% 56.5% 43.6% Utilization** Average Fleet Age*** 54.5
Slide 46: Managing Fleet with a Life Cycle Approach
Managing Fleet with a Life Cycle Approach Selling Oldest Fleet Rental Capex and Used Sales ($MM)* Age of Used Sales in Months 1,580 1,701 89 1,390 1,321 88 88 85 323 83 83 ($116) ($363) ($490) ($463) ($544) 2011 2012 2013 2014 Q1 2014 Q1 2015 2011 2012 2013 2014 Q1 2015 Age Composition Time Utilizat
Slide 47: Rent vs. Buy Impact Of Tier IV
Rent vs. Buy Impact Of Tier IV $30,000 +14.8% $25,000 +25.2% +9.7% $20,000 48 months term 10% finance charge $15,000 50% time utilization 3% rate increase yearly $10,000 for 6 years for future calculation $5,000 2% inflation on new equipment price $0 Today Tier IV Future (6 years) Rent Buy
Slide 48: Attractive Asset Economics
Attractive Asset Economics Sample Asset Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Purchase Price (6,500) Rental Revenue 5,187 5,503 5,668 5,838 6,013 Ancillary Revenue 447 474 488 503 518 Operational Costs (2,061) (2,130) (2,184) (2,240) (2,298) Selling Price $3,233 Total Cash Flow (6,500) 2,709 3,1
Slide 49: Total Cost of Ownership – Buying Smart
Total Cost of Ownership – Buying Smart $ Thousands Brand A Brand B Brand C Acquisition cost 93 95 89 Maintenance cost over life (parts) 7.5 9 8 Maintenance cost 9 9 10 over life (labor) Resale value (50) (53) (52) after 7 years (retail) Total Cost of 59.5 60 55 Ownership Gap vs. Best of Best +8% +9%
Slide 50: Rental Useful Life Evaluation
Rental Useful Life Evaluation Rental Revenue % of Average R&M Cost % of Replace Cost (Est.) 120% 2.5% 100% 2.0% 80% 1.5% 60% 1.0% 40% 20% 0.5% 0% 0.0% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 Years in Service Years in Service Resale Value % of Replacement Cost 140% Rental useful life
Slide 51: Maintenance and Growth CapEx
Maintenance and Growth CapEx 2011 2012 Combined 2015 Combined 2013 2014 Pro- Forecast Pro-forma forma OEC Sold** $752 $933 $941 $1,016 $1,000 Inflation Factor* 13.8% 13.8% 14.2% 14% 14% Inflation Uplift 104 129 133 142 140 Total Maintenance $856 $1,062 $1,074 $1,158 $1,140 CapEx Growth CapEx $534 $4
Slide 52: Financial Overview
Financial Overview Delivering Strong Sustainable Results
Slide 53: Q1 2015 Results
Q1 2015 Results Rates +2.9% 64.2%, excluding Pump 64.5% Time Utilization -40 bps, excluding Pump -10 bps $602M or 45.8% Adjusted EBITDA $83M or 1.7 pp Adjusted EBITDA 60.6% Flow-Through LTM ROIC 9.0%, increase of 1.2 pp Adjusted EBITDA of 45.8%, a First Quarter Record 53
Slide 54: 2015 Updated Outlook
2015 Updated Outlook Total Revenue $6.0B to $6.1B Adjusted EBITDA $2.95B to $3.00B Increase in Rental Rates (year- Approximately 3.0% over-year) Time Utilization Approximately 69% Net Rental Capital Expenditures Approximately $1.2B, after gross after Gross Purchases purchases of approximat
Slide 55: Our Principles: Maximizing Financial Flexibility
Our Principles: Maximizing Financial Flexibility Valuable asset base supports reasonable amount of debt – High operating margins generate significant cash flow/dollar of revenue – Asset base can be monetized to support cash flow requirements Debt maturities timed to avoid excessive refinancing n
Slide 56: Debt Maturity Profile After Recent Capital Market Transactions
Debt Maturity Profile After Recent Capital Market Transactions $ Millions $750 $3,250 7.375% Senior Unsecured Notes $897 ABL Unused 5.75% 5.75% Senior Senior Secured Notes $1,925 Secured Notes $750 7.375% $1,603* Senior $1,000 ABL Used Unsecured 4.625% Notes $1,325 Senior Secured Notes $850 $800 $55
Slide 57: Expect to Generate about $2.5B in Free Cash Flow
Expect to Generate about $2.5B in Free Cash Flow* $ Millions $1,000+ ̴ $800+ $725 - $775 $574 $421 2013 2014 2015 2016 2017 Actual Forecast End Market Strength and Fleet Discipline Contributing to Powerful FCF *Excludes merger and restructuring expenses. Merger and restructuring expenses were $38M i
Slide 58: Assumptions Driving FCF Outlook
Assumptions Driving FCF Outlook Gross rental CapEx spend of about $1.7B; net rental CapEx spend of $1.2B for the next 3 years About 3.0% rental rate growth in 2015 and 3% thereafter Cash Taxes – Remaining Federal NOLs utilized in 2015 – About $100M cash taxes in 2015 – About $475M cash taxes i
Slide 59: Capital Allocation Strategy
Capital Allocation Strategy Invest in Growth Return Cash Managing to Leverage Organic M&A Stockholders Target leverage Continued organic Balanced strategy Initiated new $750M range over the cycle investments to creates flexibility to share repurchase of 2.5x–3.5x support growth and pursue st
Slide 60: Leverage Ratio Continues Decline
Leverage Ratio Continues Decline1 2 4.6 3 3.6 “Dry Powder” 3.0 2.9 2.6 2011 2012 2013 2014 2015 2016 2017 Actual Forecast 2.5x – 3.5x Target Leverage Range of the Cycle Lower End of Target Range in 2015 (1) Leverage Ratio calculated as total debt and QUIPs, net of cash, excluding original issuance d
Slide 61: Building a Bridge to Higher Returns
Building a Bridge to Higher Returns* 14% (2.4%) 0.3% 2.1% 10% 12% 0.3% Internal 2.3% 11.0% Hurdle Rate 10% March 2015 8.4% WACC Range 9.0% 8% 6% 4% 2% 0% 5 Sep-14 Rate 1 Fleet Lean 4 Fleet and Cost Business Approx 2017 2 Growth and Inflation 6 Mix/Other Utilization 3 *Illustrative – After tax and in
Slide 62: Consistent Free Cash Flow Generation Over Cycle
Consistent Free Cash Flow Generation Over Cycle Cash Flow 2008–2015 ($M) 2008 2009 20101 2011 20122 20133 20144 20155 YTD EBITDA ($117) $589 $649 $879 $1,772 $2,181 $2,599 $607 Cash Interest (218) (234) (229) (203) (371) (461) (457) (91) Cash Taxes (46) (3) 49 (24) (40) (48) (100) 35 Gain on Sale of
Slide 63: Historical Capital Allocation 2010– Q1 2015
Historical Capital Allocation 2010– Q1 2015 Priorities Share Organic Investment Repurchases 15% Debt Issuance 25% Cash Acquisitions 28% Manage Leverage Targets (2.5x–3.5x) Cash from 75% CapEx 57% Operations Strategic M&A Return to Net Sources Net Uses Stockholders of Capital of Capital 100% Equals $
Slide 64: Appendix
Appendix © United
Slide 65: Timeline
Timeline Forbes Names One Expands New Strategy Industrial Power of “400 Best Big Refocuses Company Companies” & HVAC on Core Equipment Footprint with Rental Business Acquisition and Cold-starts Branch Network Company’s First Earns National Grows to 500 Centralized Customer Recognitions Acquires Loca
Slide 66: Performance Goals for Senior Executives Align with Creating Stockholder Value
Performance Goals for Senior Executives Align with Creating Stockholder Value Short Term Incentive Plan Long Term Incentive Plan Measures: Measures: 2015 Performance EBITDA Dollar Growth Revenue Growth Measures Focus on Profitable Growth Economic Profit Improvement Economic Profit Improvemen
Slide 67: Adjusted Earnings Per Share GAAP Reconciliation
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
Slide 68: EBITDA and Adjusted EBITDA GAAP Reconciliation
EBITDA and Adjusted EBITDA GAAP Reconciliation 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, restr
Slide 69: Reconciliation of Net Cash Provided by Operating Activities to EBITDA
Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA Three Months Ended March 31, 2015 2014 Net cash provided by operating activities $ 675 $ 508 Adjustments for items included in net cash provided by operating activities but excluded from the calculation of EBIT
Slide 70: Free Cash Flow GAAP Reconciliation
Free Cash Flow GAAP Reconciliation We define free cash flow as (i) net cash provided by operating activities less (ii) purchases of rental and non-rental equipment plus (iii) proceeds from sales of rental and non-rental equipment. Management believes that free cash flow provides useful additional in
Slide 71: Corporate Governance
Corporate Governance Focus on Best Practices Amended Company charter to eliminate Board classes Roles of Chairman and CEO are separated and the Chairman is an independent director 12 of 13 directors are independent Board and each committee have express authority to retain outside advisors
Slide 72: Glossary of Terms
Glossary of Terms 1. Capex: Capital expenditures represent the amount reported in our statements of cash flows for the purchase of rental and non-rental equipment. 2. Dollar Utilization: Annualized rental revenue, excluding re-rent and ancillary revenue, divided by the average original equipment cos
Slide 73: Glossary of Terms
Glossary of Terms 5. Fleet Age: The OEC weighted age of the entire fleet, excluding the benefit of refurbishments. 6. OEC: Original Equipment Cost; the cost of an asset at the time it was originally purchased. 7. Rental Rate: The percentage change in the rate/price that is charged for equipment on r