United Rentals, Inc. · NYSE:URI
United Rentals — Investor Presentation (October 2012)
55 slides from United Rentals's investor presentation, October 2012
Slide 1: Driving Value Creation Investor Presentation Third Quarter 2012
Driving Value Creation Investor Presentation Third Quarter 2012
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 October 17, 2012. We make no commitment to update any such information contained in this presentation
Slide 3: 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 stronger future Driven By These Values Safety First/ Leading By Example/ Continuous Innovation/ Absolute Integrity/ Passion for People and Community Min
Slide 4: Roadmap to Success
Roadmap to Success United Rentals Strategic Pillars Fill Growth Drive Pipeline Specialty Create a New Businesses to Industry Full Potential Standard in Our Operational Grow Execution the Core 4
Slide 5: 2012 Priorities
2012 Priorities Objectives and Goals Creating a New Industry Standard RSC Successful integration to fully capture Combination cost and revenue synergies Customer Drive superior performance through enhanced Relationships services and optimized processes & Business Adjust fleet mix to meet combi
Slide 6: Safety as a Core Value
Safety as a Core Value Annual safety education required for all employees World Class Hazard awareness ―24/7‖ Training and Observation and Intervention training Education Driver Safety: hands-on and e-learning In-house Safety professionals dedicated to industrial Robust support Support for
Slide 7: RSC Combination
RSC Combination Fully Capturing Cost and Revenue Synergies
Slide 8: Combination Overview
Combination Overview United Rentals – RSC Combined Fleet at Original Cost of $7.4 Billion 2011 Revenue of $4.1 Billion Strong Margin and Free Cash Flow Generation Capabilities Best-in-class Management Team Balanced Customer Mix Industry-leading Capabilities Total Synergy Potential of $300 Million Fa
Slide 9: Broadest Branch Footprint: Serving Customers Throughout North America
Broadest Branch Footprint: Serving Customers Throughout North America Large Customers Value Broad Geographic Reach 9
Slide 10: "Best of Both" to Serve Customers Better
“Best of Both” to Serve Customers Better Combined best practices to improve safety culture Safety Enhanced customer safety training resources Strengthened key accounts sales force with deep industry expertise Sales Total Control® to deepen customer relationships Leading CRM technology CO
Slide 11: Integration Accomplishments and Q4 Priorities
Integration Accomplishments and Q4 Priorities 3rd Quarter 4th Quarter Successfully consolidated to a Complete branch consolidations single IT platform in less than and back office functional six weeks with minimal disruption consolidation Executed 187 branch Complete harmonizing customer con
Slide 12: Raising Cost Synergies Target to $230M-$250M
Raising Cost Synergies Target to $230M-$250M Cost Saving Breakdown Increasing Cost Synergy Targets Realized EBITDA Impact Other Branch $300M Efficiencies Consolidation ~20 ~200 $200M 29% 34% ~230 ~100 $100M 28% 10% $0M Regional 2012 2013 2014 Field Corporate Overhead ~$230- Overhead Run Rate ~$180 ~
Slide 13: Best of Both Worlds
Best of Both Worlds Combined Company Rental Revenue Residential Result = Diversified 4% End Market Industrial/ Non-Construction Increased penetration of industrial accounts 46% 50% Improved ability to manage through cycles Non- Residential Surpass previously announced Construction industrial t
Slide 14: Customer Relationships & Business Processes
Customer Relationships & Business Processes Drive Superior Performance Through Enhanced Services and Processes
Slide 15: Providing Solutions
Providing Solutions Emergency Response Innovation Trench, and Safety, Power Technologies and HVAC Market Unmatched Leading Expertise Capacity and Industry Solutions Customer Solutions One Source Industry- Equipment, Leading Tools, Safety Consumables Program and Services 15
Slide 16: Accelerated Focus on Key Accounts
Accelerated Focus on Key Accounts Potential equipment rental spend of $500K or National more annually or do business in multiple locations Potential equipment rental spend of $100K or Key Strategic more annually or do business in limited Accounts geographic areas Smaller accounts with the ability to
Slide 17: Targeting Key Accounts & Industrial Segments
Targeting Key Accounts & Industrial Segments Key Accounts and Industrial Customers Smooth Out Cyclicality % of Revenue Q3 YOY growth Unassigned Residential – Key Accounts +17% Accounts Non- 4% – Unassigned Accounts +8% Residential 38% 46% Value proposition driving accelerated growth from 62% 50%
Slide 18: Total Control: Helping Customers Manage Rental Activity
Total Control®: Helping Customers Manage Rental Activity Embeds United as Rental Company of Choice Equipment Utilization 43.0% Software eliminates waste with enhanced visibility/accountability – Increase equipment utilization 20.5% – Less duplication – Conserve capital through rental 6.0% – Elimin
Slide 19: UR4 Customer Engagement Strategy
UR4 Customer Engagement Strategy Sales Focus Value Proposition Implementation Cross Sell Safety Rep Training Key Accounts Total Control® Sales Force Large Projects Tool Management Effectiveness: Tools & Processes Industry Verticals Trench Safety Marketing: Strategy, Power & T
Slide 20: Tools & Industrial Solutions
Tools & Industrial Solutions Provides Custom Tool Solutions in Hoisting, Welding, and Tools to Industrial Customers High margin business Large growth potential: $2B market – current share 3.4% Tools OEC: $74M – 3,400 defined cat-classes (410,000 units) Q3 dollar utilization: 76.9% Focus to
Slide 21: Trench Safety Provides Revenue Synergies Opportunity
Trench Safety Provides Revenue Synergies Opportunity Largest trench safety rental company in North America Trench is first on the job and supports cross-selling opportunities OSHA requires protection when working more than 5 feet underground Since 2006, United Rentals has trained more than 6
Slide 22: Power & HVAC Offers Growth Opportunity
Power & HVAC Offers Growth Opportunity Combination with RSC provides revenue synergy opportunity Historically high margin business Business specializes in turn-key services and solutions Provides custom engineered products and services Power & HVAC Rental Revenue Rose 24% YTD 100% 90% 88% 80
Slide 23: CORE
CORE Technology Helps Support Pricing Strategies and Discipline Improves guidance to sales force for negotiations Ensures consistent pricing across the network Supports customer segmentation CORE System Used by Combined Sales Force 23
Slide 24: Drivers of Loyalty – Measuring Key Service Metrics
Drivers of Loyalty – Measuring Key Service Metrics Customers told us what mattered: Fleet availability On-time delivery Pick-up Invoice accuracy Service call response time Sharing Results with the Customer 24
Slide 25: FAST Improving Logistics
FAST Improving Logistics Sources of Expected Total Branches on FAST: Financial Benefits: 486 Fuel Labor Cost Full FAST: FAST Lite: Savings Savings 405 81 OEC Paperless Trucks: Drivers: Scheduled Delivery ~1,700 ~1,500 for Pick-up Process FAST Implementation at Legacy RSC Locations was Initiated in Q
Slide 26: Introducing Metro Model – Improving Efficiency and Service Response Time
Introducing Metro Model – Improving Efficiency and Service Response Time Current Model Metro Model Each branch dispatches Logistics and field their own trucks and service is managed field service techs centrally to improve efficiency and response time Individual branches Dedicated repair con
Slide 27: Fleet
Fleet
Slide 28: Fleet Mix
Fleet Mix Customers Know We Have the Fleet They Need Trucks Welders Trench 1% 1% Power Other 4% 5% Light 2% 6% Forks – Rough <1% Aerial $7.4 Billion of Fleet 43% Forks – Reach Comprised of Over 16% 410,000 Units 3% Forks – Industrial 14% 2% 3% Earth Moving Compaction Compressors Serves Diverse Custo
Slide 29: Fleet Shift to Earth Moving and Less Emphasis on Aerial
Fleet Shift to Earth Moving and Less Emphasis on Aerial Better Serves Customers LTM AVG 2009 LTM AVG 2012 Forklifts Other 19% 19% Aerial 44% 47% Aerial 14% Earthmoving 13% Earthmoving 20% 23% Forklifts Other Current Fleet Mix Weighs on Time Utilization by 0.5 ppts 29
Slide 30: Meeting Our Customers' Fleet Needs
Meeting Our Customers’ Fleet Needs 3,400 Equipment Classes with Original Cost of $7.4B* Booms Earth Trench and Lifts Moving Forklifts and Other % of Q3 2012 39.0% 13.6% 17.4% 30.0% Rental Revenue Time Utilization 74.8% 63.2% 80.3% 56.0% Dollar Utilization 42.4% 44.3% 42.2% 59.7% Average Fleet Age**
Slide 31: Managing Fleet with a Life Cycle Approach
Managing Fleet with a Life Cycle Approach Selling Oldest Fleet Rental Capex and Used Sales ($MM) (Age of Used Sales in Months*) 84 84 1,390 1,321 83 883 673 74 306 72 ($269) ($363) ($322) ($389) ($387) 2009 2010 2011 Q3 2011 Q3 2012 2008 2009 2010 2011 YTD 2012 Age Composition Time Utilization ($MM)
Slide 32: Used Equipment Sales
Used Equipment Sales Push margins through retail channels Increased Lower repair & Used Sales maintenance costs for 2012 Offer ―United Guard‖ maintenance program Extensive industry Supported experience by Rouse Sales support Asset Website redesign Services Customized marketing material
Slide 33: Market Overview
Driving Value Creation Market Overview CD Renzi.
Slide 34: Rental Market Forecasts Growth 8% CAGR Expected from 2012–2015
Rental Market Forecasts Growth 8% CAGR Expected from 2012–2015 US and Canada Rental Opportunity ($ Millions) 2011 2012 2013 2014 2015 Infrastructure $5,053 $5,063 $4,990 $5,162 $5,314 Non-residential $4,823 $5,003 $5,289 $5,736 $6,247 Residential $4,687 $4,992 $5,751 $7,231 $8,628 Oil & Gas $3,007 $
Slide 35: Large Customer Sentiment Remains Bullish
Large Customer Sentiment Remains Bullish 52% of key customers expect growth over the next 12 months1 100% 90% 80% 70% 60% 50% 40% 30% NA* 20% 10% 0% Mar Apr May Jun Jul Aug Sep Down Same Up Less than 10% Expect Activity to Decline 1 Survey of NA/SA accounts only. N = 2,117 completes between March an
Slide 36: Financial Overview
Financial Overview Delivering Strong Sustainable Results
Slide 37: Q3 '12 Results
Q3 ’12 Results Pro Forma Rates +7.5% 69.8% Time Utilization -2.0 pts $570M or 46.8% Adjusted EBITDA1 +$124M or 700 bps Adjusted EBITDA 126.5% Flow-Through1 Delivering Strong Adjusted EBITDA Flow-Through 1 Includes the reversal of purchase accounting impact on used sales 37
Slide 38: Q3 '12 Results
Q3 ’12 Results Pro Forma $1,051M Rental Revenue +8.9% $1,219M Total Revenue +8.7% $570M Adjusted EBITDA 46.8% $7,410M Average OEC +11.0% $5,171M Average OEC-on-Rent +7.9% Adjusted EBITDA Grew in Q3 27.8% YOY 38
Slide 39: Consistent Free Cash Flow Generation Over Cycle
Consistent Free Cash Flow Generation Over Cycle Cash Flow 2006–2012 ($M) Qtr 3 2012 2006 2007* 2008 2009 2010** 2011 YTD*** EBITDA $1,084 $1,265 $(117) $589 $649 $879 $1,219 Cash Interest (213) (203) (218) (234) (229) (203) (219) Cash Taxes (17) (84) (46) (3) 49 (24) (31) Gain on Sale of Equipment (
Slide 40: 2012 Outlook
2012 Outlook Pro Forma Outlook Total Revenue $4.6B to $4.7B Adjusted EBITDA $1.95B to $2.0B Guidance Rental Rates An increase of approximately 7.0% over 2011 Time Utilization Approximately 67.5%, down about 0.5 pts vs. prior year Net capex expenditures of between $1,075M and $1,125M, Renta
Slide 41: Debt Maturity Profile
Debt Maturity Profile(1) $2,400 $683 ABL Unused $1,500 $1,325 $1,217(2) ABL Used $750 7.375% Senior Unsecured Notes 7.625% $750 $700 Senior Unsecured $650 Notes $200 10.25% Unsecured Senior Notes $475 5.75% $750 8.25% $500 Senior $500 8.375% Unsecured $5 $55 $0 A/R $168 10.875% Secured 9.25% Senior
Slide 42: Pro Forma Leverage Ratio Set to Decline Rapidly
Pro Forma Leverage Ratio Set to Decline Rapidly(1) 4.6(2) 3.6(3)(4) 3.3 2.8 3.0(5)(6) 2.2 2011 2012 2013 URI Standalone Combined Companies 2.5x – 3.5x Debt to EBITDA Target Range 1 Leverage Ratio calculated as total debt and QuIPs excluding original issuance discounts and premiums divided by adjuste
Slide 43: Appendix
Driving Value Creation N) 7g. ms J ra 3 ae cs ——— e . Me ? ;..C a = : ; a * eS oe Z yr DQ] Appendix F CD Renzi.
Slide 44: Timeline
Timeline Forbes Names New Strategy Expands One of ―400 Refocuses Industrial Best Big Company on Core Power & HVAC Companies‖ Equipment Rental Footprint with Acquisition and Business Cold-starts Branch Network Grows to 500 Locations in North America National Company’s First Earns National Accounts Ce
Slide 45: Why Customers Rent?
Why Customers Rent? No large capital outlays needed, which frees up capital Conserve Capital to invest elsewhere Eliminate the need for large equipment storage areas Save on Storage and buildings Right Equipment for Rent the right equipment to fit the needs of any job the Right Job or applicat
Slide 46: Adjusted Earnings Per Share GAAP Reconciliation
Adjusted Earnings Per Share GAAP Reconciliation We define ―Earnings per share from continuing operations – adjusted‖ as the sum of earnings per share from continuing operations – GAAP, as reported plus the impact of the following special items: RSC merger related costs, RSC merger related intangible
Slide 47: EBITDA and Adjusted EBITDA GAAP Reconciliation
EBITDA and Adjusted EBITDA GAAP Reconciliation EBITDA represents the sum of net income, loss from discontinued operation, net of taxes, provision for income taxes, interest expense, net, interest expense-subordinated convertible debentures, depreciation of rental equipment, and non-rental depreciati
Slide 48: Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA Three Months Ended Six Months Ended September 30, September 30, 2012 2011 2012 2011 Net cash provided by operating activities $ 153 $ 157 $ 495 $ 453 Adjustments for items included in net cash provided by opera
Slide 49: Free Cash Flow GAAP Reconciliation
Free Cash Flow GAAP Reconciliation We define free cash (usage) 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,
Slide 50: ARA Metrics
ARA Metrics In September 2011, the American Rental Association (ARA) released Rental Market Metrics whitepaper – Standardization of metrics provides consistent way for calculating and reporting critical performance metrics – Publication provides definitions and calculations for original equipment
Slide 51: ARA Metrics Comparison
ARA Metrics Comparison Year Year Year Ended Ended Ended 12/31/ 12/31/ 12/31/ 2009 2010 2011 OEC New basis 3,528 3,575 4,046 Old basis 3,763 3,791 4,290 Fleet age New basis 45.5 51.6 50.3 Old basis 42.4 47.7 46.4 Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Quarter Year Quarter Quarte
Slide 52: 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 53: Convertible Senior Notes
Convertible Senior Notes How the Convertible Works In November 2009, URI issued $172.5MM of convertible senior notes due 2015. Notes carry a 4.0% coupon and are convertible at an initial conversion price of $11.11 per share – Net share settlement election means par amount paid in cash, in-the-mone
Slide 54: Mechanics of Convert and Hedge
Mechanics of Convert and Hedge Share Delivery at Conversion for $168MM Assumed Stock Price United Hedge Rentals $9 Investors Counterparties 0 Shares Net 0 0 Shares New Shares Issued United Hedge Rentals $12 Counterparties Investors 1.1MM Shares Net 0 1.1MM Shares New Shares Issued United $35 Hedge R
Slide 55: 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
United Rentals — Investor Presentation (October 2012) on 6ix