United Rentals(URI) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides detailed unaudited condensed consolidated financial statements and management's discussion and analysis for United Rentals, Inc. Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for United Rentals, Inc., including balance sheets, income statements, comprehensive income statements, stockholders' equity statements, and cash flow statements, along with detailed notes on organization, revenue recognition, acquisitions, segment information, goodwill, fair value measurements, debt, legal matters, and earnings per share. Unaudited Condensed Consolidated Financial Statements This subsection provides the core unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, stockholders' equity, and cash flows. United Rentals, Inc. Condensed Consolidated Balance Sheets This statement presents the company's financial position, detailing assets, liabilities, and equity as of specific dates. Balance Sheet Highlights (June 30, 2024 vs. December 31, 2023): | Metric | June 30, 2024 (millions) | December 31, 2023 (millions) | | :--------------------------------------- | :----------------------- | :--------------------------- | | Cash and cash equivalents | $467 | $363 | | Total current assets | $3,219 | $2,933 | | Rental equipment, net | $14,685 | $14,001 | | Goodwill | $6,749 | $5,940 | | Total assets | $27,613 | $25,589 | | Short-term debt & current maturities | $1,369 | $1,465 | | Accounts payable | $1,349 | $905 | | Total current liabilities | $3,969 | $3,637 | | Long-term debt | $11,520 | $10,053 | | Total liabilities | $19,332 | $17,459 | - Goodwill increased by $809 million, or 13.6%, from December 31, 2023, to June 30, 2024, primarily due to the Yak acquisition[8] - Accounts payable increased by $444 million, or 49.1%, from December 31, 2023, to June 30, 2024, mainly due to seasonal increases in capital expenditures and business activities[8] United Rentals, Inc. Condensed Consolidated Statements of Income This statement reports the company's revenues, expenses, and net income over specific periods. Consolidated Statements of Income (Three Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :--------- | | Total revenues | $3,773 | $3,554 | $219 | 6.2% | | Gross profit | $1,518 | $1,425 | $93 | 6.5% | | Operating income | $1,004 | $925 | $79 | 8.5% | | Net income | $636 | $591 | $45 | 7.6% | | Basic earnings per share | $9.56 | $8.60 | $0.96 | 11.2% | | Diluted earnings per share | $9.54 | $8.58 | $0.96 | 11.2% | Consolidated Statements of Income (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :--------- | | Total revenues | $7,258 | $6,839 | $419 | 6.1% | | Gross profit | $2,864 | $2,666 | $198 | 7.4% | | Operating income | $1,856 | $1,665 | $191 | 11.5% | | Net income | $1,178 | $1,042 | $136 | 13.1% | | Basic earnings per share | $17.62 | $15.09 | $2.53 | 16.8% | | Diluted earnings per share | $17.57 | $15.04 | $2.53 | 16.8% | - Net interest expense increased by 7.5% for the three months and 7.1% for the six months ended June 30, 2024, primarily due to increased average debt (including for the Yak acquisition) and higher variable debt interest rates[7] United Rentals, Inc. Condensed Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income items, reflecting changes in equity from non-owner sources. Comprehensive Income (Three Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | | Net income | $636 | $591 | $45 | | Foreign currency translation adjustments | $(13) | $23 | $(36) | | Comprehensive income | $623 | $614 | $9 | Comprehensive Income (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | | Net income | $1,178 | $1,042 | $136 | | Foreign currency translation adjustments | $(64) | $24 | $(88) | | Comprehensive income | $1,114 | $1,065 | $49 | United Rentals, Inc. Condensed Consolidated Statements of Stockholders' Equity This statement details changes in the company's equity accounts, including net income, dividends, and stock repurchases. Stockholders' Equity Changes (Six Months Ended June 30, 2024): | Metric | Amount (millions) | | :------------------------------------ | :---------------- | | Net income | $1,178 | | Dividends declared | $(220) | | Foreign currency translation adjustments | $(64) | | Stock compensation expense, net | $55 | | Tax withholding for share based compensation | $(41) | | Repurchase of common stock | $(757) | - Dividends declared were $3.26 per share for the six months ended June 30, 2024, up from $2.96 per share in the prior year[121] - The company repurchased $757 million of common stock during the six months ended June 30, 2024, compared to $503 million in the same period of 2023[75] United Rentals, Inc. Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities. Cash Flows (Six Months Ended June 30): | Activity | 2024 (millions) | 2023 (millions) | Change (millions) | | :------------------------------------------------ | :-------------- | :-------------- | :---------------- | | Net cash provided by operating activities | $2,294 | $2,228 | $66 | | Net cash used in investing activities | $(2,466) | $(1,828) | $(638) | | Net cash provided by (used in) financing activities | $287 | $(278) | $565 | | Net increase in cash and cash equivalents | $104 | $121 | $(17) | | Cash and cash equivalents at end of period | $467 | $227 | $240 | - Key Cash Uses (Six Months Ended June 30, 2024): * Payments for purchases of rental and non-rental equipment and intangible assets: $2,031 million[2] * Purchases of other companies: $1,234 million[2] * Purchase shares of common stock: $791 million[2] * Pay dividends: $219 million[2] - Free cash flow for the six months ended June 30, 2024, was $1.065 billion, an increase of $247 million (30.2%) compared to $818 million in the prior year, primarily due to lower payments for rental equipment purchases and increased net cash from operating activities[18] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanatory notes supporting the unaudited condensed consolidated financial statements. 1. Organization, Description of Business and Basis of Presentation This note describes the company's structure, business operations, and the accounting principles used in preparing the financial statements. - United Rentals, Inc. (Holdings) is a holding company that conducts operations primarily through its wholly-owned subsidiary, United Rentals (North America), Inc. (URNA), and its subsidiaries[123] - The company rents approximately 4,800 classes of equipment and sells new and used rental equipment, contractor supplies, parts, and services to a diverse customer base[96][221] - Primarily operates in the United States and Canada, with a limited presence in Europe, Australia, and New Zealand[96] - New Accounting Pronouncements: * ASU 2023-07 (Improvements to Reportable Segment Disclosures) effective for fiscal years beginning after December 15, 2023 (annual) and December 15, 2024 (interim), requiring expanded segment expense disclosures[79] * ASU 2023-09 (Improvements to Income Tax Disclosures) effective for fiscal years beginning after December 15, 2024, requiring disaggregated income taxes paid and standard categories for effective tax rate reconciliation[125] 2. Revenue Recognition This note details the company's policies and methods for recognizing revenue from various sources. - Revenue is recognized under two standards: Topic 606 (contracts with customers) and Topic 842 (lease revenue)[126] Revenue Breakdown (Six Months Ended June 30, 2024): | Revenue Type | Topic 842 (millions) | Topic 606 (millions) | Total (millions) | % of Total Revenue | | :------------------------------------ | :------------------- | :------------------- | :--------------- | :----------------- | | Owned equipment rentals | $5,008 | $— | $5,008 | 69.0% | | Re-rent revenue | $113 | $— | $113 | 1.6% | | Ancillary and other rental revenues | $442 | $581 | $1,023 | 14.1% | | Total equipment rentals | $5,563 | $581 | $6,144 | 84.6% | | Sales of rental equipment | $— | $748 | $748 | 10.3% | | Sales of new equipment | $— | $109 | $109 | 1.5% | | Contractor supplies sales | $— | $78 | $78 | 1.1% | | Service and other revenues | $— | $179 | $179 | 2.5% | | Total revenues | $5,563 | $1,695 | $7,258 | 100.0% | - Owned equipment rentals represented 69% of total revenues for the six months ended June 30, 2024, and are accounted for as operating leases under Topic 842[102] - Concentration of credit risk is limited due to a large, geographically diverse customer base. The largest customer accounted for 1% or less of total revenues and receivables[138] Allowance for Credit Losses (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | | :------------------------------------ | :-------------- | :-------------- | | Beginning balance | $174 | $146 | | Charged to costs and expenses | $3 | $2 | | Charged to revenue | $14 | $8 | | Deductions and other | $(15) | $(9) | | Ending balance | $176 | $147 | 3. Acquisitions This note provides information on business acquisitions, including the strategic rationale, financial impact, and preliminary allocation of purchase price. - The acquisition of Yak Access, LLC, Yak Mat, LLC, and New South Access & Environmental Solutions, LLC ('Yak') was completed on March 15, 2024, for $1.156 billion (cash and contingent consideration), funded by senior notes and ABL facility drawings[145] - Strategic Rationale for Yak Acquisition: * Entry into the North American matting industry with established scale[145] * Augmented exposure to energy and power verticals[145] * Enhanced 'one-stop-shop' value proposition with cross-selling opportunities[145] Acquired Assets and Liabilities (Preliminary, Yak Acquisition): | Category | Amount (millions) | | :------------------------------------ | :---------------- | | Total identifiable assets acquired | $455 | | Total liabilities assumed | $(109) | | Net identifiable assets acquired | $346 | | Goodwill | $810 | | Net assets acquired | $1,156 | - Goodwill of $810 million was assigned to the specialty segment, primarily reflecting Yak's going-concern value, assembled workforce, and new customer relationships, and is expected to be deductible for income tax purposes[167][147] Pro Forma Revenue (Six Months Ended June 30, 2024): | Metric | United Rentals Historic Revenue (millions) | Yak Historic Revenue (millions) | Pro Forma Revenue (millions) | | :------------------------------------ | :--------------------------------- | :------------------------------ | :--------------------------- | | Six Months Ended June 30, 2024 | $7,258 | $184 | $7,355 | 4. Segment Information This note presents financial data for the company's reportable segments, General Rentals and Specialty, detailing their revenues and gross profits. - The company's reportable segments are General Rentals and Specialty[173] - General Rentals includes general construction and industrial equipment, aerial work platforms, and general tools, operating throughout the U.S. and Canada[152] - The Specialty segment rents trench safety, power and HVAC, fluid solutions, mobile storage, modular office space, and surface protection mats, serving infrastructure projects, municipalities, and industrial companies primarily in the U.S. and Canada, with limited international presence[174] Segment Revenue (Six Months Ended June 30, 2024): | Segment | Equipment Rentals (millions) | Total Revenue (millions) | % of Total Revenue | | :---------------- | :--------------------------- | :----------------------- | :----------------- | | General rentals | $4,279 | $5,199 | 71.6% | | Specialty | $1,865 | $2,059 | 28.4% | | Total | $6,144 | $7,258 | 100.0% | Equipment Rentals Gross Profit (Six Months Ended June 30): | Segment | 2024 (millions) | 2023 (millions) | Change (millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :---------------- | :--------- | | General rentals | $1,483 | $1,451 | $32 | 2.2% | | Specialty | $905 | $725 | $180 | 24.8% | | Total | $2,388 | $2,176 | $212 | 9.7% | - The increase in specialty segment assets primarily reflects the impact of the Yak acquisition[178] 5. Goodwill and Other Intangible Assets This note provides details on the company's goodwill and other intangible assets, including changes and amortization periods. Goodwill Changes (Six Months Ended June 30, 2024): | Category | General Rentals (millions) | Specialty (millions) | Total (millions) | | :------------------------------------ | :------------------------- | :------------------- | :--------------- | | Balance at January 1, 2024 | $4,775 | $1,165 | $5,940 | | Goodwill related to acquisitions | $5 | $820 | $825 | | Foreign currency translation & other | $(7) | $(9) | $(16) | | Balance at June 30, 2024 | $4,773 | $1,976 | $6,749 | Other Intangible Assets (June 30, 2024): | Asset Type | Weighted Average Remaining Amortization Period | Net Carrying Amount (millions) | | :------------------------------------ | :--------------------------------------------- | :----------------------------- | | Non-compete agreements | 3 years | $99 | | Customer relationships | 6 years | $643 | | Trade names and associated trademarks | 2 years | $2 | - Amortization expense for other intangible assets was $126 million for the six months ended June 30, 2024, down from $144 million in the prior year[159] 6. Fair Value Measurements This note describes the company's fair value hierarchy and the valuation methods used for financial instruments. - The company uses a fair value hierarchy with Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[161][209] Fair Value of Senior Notes (June 30, 2024 vs. December 31, 2023): | Instrument | Carrying Amount (millions) | Fair Value (millions) | | :---------------- | :------------------------- | :-------------------- | | Senior notes (June 30, 2024) | $8,817 | $8,459 | | Senior notes (December 31, 2023) | $7,720 | $7,442 | - Carrying amounts for accounts receivable, accounts payable, and accrued expenses approximate fair value due to their immediate to short-term maturity[186] 7. Debt This note provides details on the company's debt structure, including variable and fixed-rate indebtedness, facility amendments, and covenant compliance. - Total debt was $12.889 billion as of June 30, 2024[187] - Variable rate indebtedness totaled $3.8 billion as of June 30, 2024, comprising borrowings under ABL, accounts receivable securitization, and term loan facilities[23] - Fixed rate indebtedness totaled $9.0 billion as of June 30, 2024[24] - Debt Facility Amendments in 2024: * Accounts Receivable Securitization Facility: Amended in May 2024 to increase size to $1.5 billion and extend maturity to June 24, 2025[188] * Term Loan Facility: Amended in February 2024 to extend maturity to February 14, 2031, and increase size to $1.0 billion[188] - Issued $1.100 billion aggregate principal amount of 6 1/8% Senior Notes due March 15, 2034, in March 2024, used to partially fund the Yak acquisition[188] - As of June 30, 2024, the company was in compliance with all covenants and provisions of its ABL, accounts receivable securitization, term loan facilities, and senior notes[66][189][215] 8. Legal and Regulatory Matters This note discusses the company's involvement in legal claims and regulatory proceedings, assessing their potential financial impact. - The company is subject to various ordinary course legal claims and proceedings, including general liability, indemnification, employee injuries, employment-related claims, self-insurance obligations, and contract/real estate matters[191] - Management believes that any liabilities ultimately resulting from these ordinary course claims and proceedings will not, individually or in the aggregate, have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[191] 9. Earnings Per Share This note presents the basic and diluted earnings per share calculations for the reported periods. Basic and Diluted EPS (Three Months Ended June 30): | Metric | 2024 | 2023 | | :------------------------------------ | :----- | :----- | | Basic earnings per share | $9.56 | $8.60 | | Diluted earnings per share | $9.54 | $8.58 | Basic and Diluted EPS (Six Months Ended June 30): | Metric | 2024 | 2023 | | :------------------------------------ | :----- | :----- | | Basic earnings per share | $17.62 | $15.09 | | Diluted earnings per share | $17.57 | $15.04 | - Weighted-average common shares for diluted EPS were 67,064 thousand for the six months ended June 30, 2024[193] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, discussing global economic impacts, strategic initiatives, financial overview, net income, EBITDA reconciliations, revenue trends, segment performance, and liquidity and capital resources for the periods ended June 30, 2024. Global Economic Conditions This section discusses the impact of global economic factors, such as inflation and interest rates, on the company's operations. - Operations are impacted by global economic conditions, including inflation, increased interest rates, and supply chain constraints[194] - A portion of inflationary cost increases is passed on to customers, most significantly for fuel and delivery[194] - Weighted average interest rates on variable debt instruments increased to 6.6% for the six months ended June 30, 2024, from 1.4% for the year ended December 31, 2021[194] Executive Overview This section provides a high-level summary of the company's business, strategic focus, and operational priorities. - The company is the largest equipment rental company globally, with an integrated network of 1,647 rental locations and a fleet with a total original equipment cost (OEC) of $21.3 billion[195] - Strategic Focus: * Improving profitability through revenue growth, margin expansion, and operational efficiencies[195] * Consistently superior customer service, utilizing proprietary software (Total Control®)[195] * Optimization of customer and fleet mix, targeting large construction and industrial customers[195] * Continued focus on 'Lean' management techniques and continuous improvement[195] * Expansion and cross-selling of specialty and services products, exemplified by the Yak acquisition[195][223] * Pursuit of strategic acquisitions to expand core equipment rental business[195] Financial Overview This section summarizes key financial actions, liquidity, share repurchase programs, and dividend payments. - Financial Flexibility Actions in 2024: * Issued $1.1 billion of 6 1/8% Senior Notes due 2034 to fund the Yak acquisition[197] * Amended term loan facility to extend maturity to February 2031 and increase size to $1.0 billion[197] * Amended accounts receivable securitization facility to extend maturity and increase size from $1.3 billion to $1.5 billion[197] - Available liquidity was $3.267 billion as of June 30, 2024, comprising cash and cash equivalents, and availability under ABL and accounts receivable securitization facilities[197] - Share Repurchase Programs: * Completed a $1.25 billion program in Q1 2024[197] * Authorized a new $1.5 billion program in January 2024, with $500 million repurchased by June 30, 2024[197] * Intends to repurchase $1.25 billion under the new program in 2024[197] - Dividends Paid: * Six months ended June 30, 2024: $219 million ($3.26 per share)[197] * Six months ended June 30, 2023: $205 million ($2.96 per share)[197] Net Income and Diluted EPS (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | | :------------------------------------ | :-------------- | :-------------- | | Net income | $1,178 | $1,042 | | Diluted earnings per share | $17.57 | $15.04 | EBITDA GAAP Reconciliations This section reconciles net income to EBITDA and Adjusted EBITDA, explaining key adjustments and margin changes. EBITDA and Adjusted EBITDA (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :--------- | | Net income | $1,178 | $1,042 | $136 | 13.1% | | EBITDA | $3,266 | $3,066 | $200 | 6.5% | | Adjusted EBITDA | $3,356 | $3,198 | $158 | 4.9% | - Net income margin increased to 16.2% for the six months ended June 30, 2024 (from 15.2% in 2023), primarily due to a 90 basis point increase in equipment rentals gross margin and reduced restructuring charges[202][205] - Adjusted EBITDA margin decreased to 46.2% for the six months ended June 30, 2024 (from 46.8% in 2023), primarily reflecting a 590 basis point decrease in gross margin from sales of rental equipment due to normalization of the used equipment market[202][251] Adjustments to Net Income for Diluted EPS (Six Months Ended June 30, 2024): | Item | After-tax Impact (millions) | Impact on Diluted EPS | | :------------------------------------ | :-------------------------- | :-------------------- | | Merger related intangible asset amortization | $(72) | $(1.07) | | Impact on depreciation related to acquired fleet | $(53) | $(0.79) | | Impact of fair value mark-up of acquired fleet | $(25) | $(0.37) | | Restructuring charge | $(1) | $(0.02) | | Loss on repurchase/redemption/amendment of debt securities | $(1) | $(0.01) | Results of Operations This section analyzes the company's financial performance, focusing on revenue, gross profit, and other costs. Revenues This subsection details the company's total revenues and the contributing factors to equipment rental revenue changes. Total Revenues (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :--------- | | Equipment rentals | $6,144 | $5,721 | $423 | 7.4% | | Sales of rental equipment | $748 | $770 | $(22) | (2.9)% | | Sales of new equipment | $109 | $114 | $(5) | (4.4)% | | Contractor supplies sales | $78 | $71 | $7 | 9.9% | | Service and other revenues | $179 | $163 | $16 | 9.8% | | Total revenues | $7,258 | $6,839 | $419 | 6.1% | Equipment Rentals Variance Components (Six Months Ended June 30, 2024): | Component | Change (%) | | :------------------------------------ | :--------- | | Year-over-year change in average OEC | 3.1% | | Fleet productivity (rates, utilization, mix) | 4.3% | | Contribution from ancillary and re-rent revenue | 1.5% | | Total change in equipment rentals | 7.4% | - Specialty equipment rentals increased by $351 million, or 23.2%, for the six months ended June 30, 2024, primarily due to strong demand, the Yak acquisition, and increased average OEC. Excluding Yak, specialty equipment rentals increased 17.7%[242] - General rentals equipment rentals increased by $72 million, or 1.7%, for the six months ended June 30, 2024[242] Gross Profit This subsection analyzes the company's gross profit and gross margins across different revenue streams and segments. Total Gross Margin (Six Months Ended June 30): | Metric | 2024 | 2023 | Change (bps) | | :------------------------------------ | :----- | :----- | :----------- | | Total gross margin | 39.5% | 39.0% | 50 bps | | Equipment rentals | 38.9% | 38.0% | 90 bps | | Sales of rental equipment | 48.1% | 50.1% | (200) bps | | Sales of new equipment | 20.2% | 17.5% | 270 bps | | Contractor supplies sales | 30.8% | 29.6% | 120 bps | | Service and other revenues | 39.1% | 38.7% | 40 bps | - Equipment rentals gross margin increased primarily due to decreased depreciation expense as a percentage of revenue[37] - Gross margin from sales of rental equipment decreased primarily reflecting the continued normalization of the used equipment market, including pricing[37] - Specialty segment gross margin for the six months ended June 30, 2024, increased by 60 basis points, primarily due to better cost performance and fixed cost absorption on higher revenue, partially offset by increased depreciation expense from the Yak acquisition[35] Other costs/(income) This subsection examines selling, general and administrative expenses, restructuring charges, depreciation, interest, and tax provisions. Other Costs/(Income) (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :--------- | | Selling, general and administrative ("SG&A") expense | $793 | $760 | $33 | 4.3% | | SG&A expense as a percentage of revenue | 10.9% | 11.1% | (20) bps | (1.8)% | | Restructuring charge | $2 | $19 | $(17) | (89.5)% | | Non-rental depreciation and amortization | $213 | $222 | $(9) | (4.1)% | | Interest expense, net | $333 | $311 | $22 | 7.1% | | Other income, net | $(7) | $(12) | $5 | (41.7)% | | Provision for income taxes | $352 | $324 | $28 | 8.6% | | Effective tax rate | 23.0% | 23.7% | (70) bps | (3.0)% | - Restructuring charges decreased significantly (89.5% for six months) primarily reflecting 2023 charges associated with the restructuring program initiated following the December 2022 acquisition of Ahern Rentals. No open restructuring programs as of June 30, 2024[5] - Interest expense increased by 7.1% for the six months ended June 30, 2024, primarily due to increased average debt (including for the Yak acquisition) and higher variable debt interest rates[7] - The effective tax rates for 2024 and 2023 differed from the federal statutory rate of 21% primarily due to geographical mix of income, state and local taxes, stock compensation, and other charges[8] Liquidity and Capital Resources This section discusses the company's cash flows, available liquidity, debt facilities, and capital allocation strategies. Sources and Uses of Cash This subsection outlines the primary sources and applications of cash, including operating, investing, and financing activities. - Cash Generated (Six Months Ended June 30, 2024): * Operating activities: $2.294 billion[2] * Sale of rental and non-rental equipment: $778 million[2] * Debt proceeds, net of payments: $1.314 billion[2] - Cash Used (Six Months Ended June 30, 2024): * Purchases of rental and non-rental equipment and intangible assets: $2.031 billion[2] * Purchases of other companies: $1.234 billion[2] * Purchase shares of common stock: $791 million[2] * Dividends paid: $219 million[2] - Principal short-term and long-term cash needs include funding operating activities, rental equipment purchases, operating lease payments, debt service, share repurchases, dividends, and acquisitions[11] Future Payments Due (as of June 30, 2024): | Category | 2024 (millions) | 2025 (millions) | 2026 (millions) | 2027 (millions) | 2028 (millions) | Thereafter (millions) | Total (millions) | | :-------------------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------------- | :--------------- | | Debt and finance leases | $41 | $1,363 | $59 | $2,872 | $1,691 | $6,937 | $12,963 | | Interest due on debt | $350 | $655 | $615 | $541 | $372 | $854 | $3,387 | | Operating leases | $164 | $306 | $267 | $216 | $163 | $347 | $1,463 | | Purchase obligations | $2,067 | $73 | $— | $— | $— | $— | $2,140 | | Total | $2,622 | $2,397 | $941 | $3,629 | $2,226 | $8,138 | $19,953 | Share Repurchases and Dividends This subsection details the company's share repurchase programs and dividend payments. - Share Repurchase Programs: * A $1.25 billion program was completed in Q1 2024[62] * A new $1.5 billion program was authorized in January 2024, with $500 million repurchased by June 30, 2024[62] * The company intends to repurchase a total of $1.25 billion under the new program in 2024[62] - Dividends Paid: * Six months ended June 30, 2024: $219 million ($3.26 per share)[62] * Six months ended June 30, 2023: $205 million ($2.96 per share)[62] * A quarterly dividend of $1.63 per share was declared on July 24, 2024[62] - The company met criteria under applicable debt agreements, allowing share repurchases and dividend payments without restriction as of June 30, 2024[1][14] Available Liquidity and Debt Facilities This subsection provides information on the company's cash position, available credit, and debt ratings. - Cash and cash equivalents were $467 million as of June 30, 2024[63] - Available liquidity was $3.267 billion as of June 30, 2024 (cash + ABL + accounts receivable securitization availability)[197] ABL Facility (June 30, 2024): | Metric | Amount (millions) | | :------------------------------------ | :---------------- | | Borrowing capacity, net of letters of credit | $2,653 | | Outstanding debt, net of debt issuance costs | $1,571 | | Interest rate at June 30, 2024 | 6.5% | Accounts Receivable Securitization Facility (June 30, 2024): | Metric | Amount (millions) | | :------------------------------------ | :---------------- | | Borrowing capacity | $147 | | Outstanding debt, net of debt issuance costs | $1,289 | | Interest rate at June 30, 2024 | 6.3% | Credit Ratings (as of July 22, 2024): | Agency | Corporate Rating | Outlook | | :-------------------- | :--------------- | :------ | | Moody's | Ba1 | Stable | | Standard & Poor's | BB+ | Stable | - The company was in compliance with all covenants and other provisions of its ABL, accounts receivable securitization, term loan facilities, and senior notes as of June 30, 2024[66] Free Cash Flow GAAP Reconciliation This subsection reconciles net cash provided by operating activities to free cash flow, highlighting key components. Free Cash Flow (Six Months Ended June 30): | Metric | 2024 (millions) | 2023 (millions) | Change (millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :--------- | | Net cash provided by operating activities | $2,294 | $2,228 | $66 | 3.0% | | Payments for purchases of rental equipment | $(1,866) | $(2,048) | $182 | (8.9)% | | Payments for purchases of non-rental equipment and intangible assets | $(165) | $(179) | $14 | (7.8)% | | Proceeds from sales of rental equipment | $748 | $770 | $(22) | (2.9)% | | Proceeds from sales of non-rental equipment | $30 | $28 | $2 | 7.1% | | Insurance proceeds from damaged equipment | $24 | $19 | $5 | 26.3% | | Free cash flow | $1,065 | $818 | $247 | 30.2% | - The increase in free cash flow primarily reflected lower payments for purchases of rental equipment (decreased $182 million, or 9% year-over-year) and increased net cash provided by operating activities[18] Relationship between Holdings and URNA This subsection describes the organizational structure and financial relationship between United Rentals, Inc. (Holdings) and its subsidiary URNA. - Holdings (United Rentals, Inc.) is principally a holding company, operating through its wholly-owned subsidiary URNA (United Rentals (North America), Inc.) and URNA's subsidiaries[19] - Holdings provides various services to URNA, including senior management, finance and tax, IT systems, acquisition-related, legal, and human resource support, and leases equipment and real property for URNA's use[19] - URNA's indebtedness is guaranteed by Holdings and most URNA U.S. subsidiaries (guarantor subsidiaries), but not by foreign subsidiaries, the SPV (accounts receivable securitization facility), or a foreign subsidiary holding company[20] Non-Guarantor Indebtedness (June 30, 2024): | Category | Amount (millions) | | :------------------------------------ | :---------------- | | SPV borrowings | $1,289 | | ABL facility borrowings by non-guarantor subsidiaries | $138 | | Finance leases of non-guarantor subsidiaries | $10 | Summarized Financial Information (Holdings, URNA, and Guarantor Subsidiaries, Combined Basis, Six Months Ended June 30, 2024): | Metric | Amount (millions) | | :------------------------------------ | :---------------- | | Total assets | $22,778 | | Total liabilities | $17,381 | | Total revenues | $6,614 | | Gross profit | $2,637 | | Net income | $1,059 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's primary market risks: interest rate risk associated with variable and fixed-rate debt, and foreign currency exchange rate risk from international operations. It quantifies the potential impact of interest rate changes on earnings and fair value of debt, and assesses the materiality of foreign currency risk. Interest Rate Risk This section assesses the company's exposure to interest rate fluctuations on its variable and fixed-rate debt. - Variable rate indebtedness totaled $3.8 billion as of June 30, 2024 (ABL, accounts receivable securitization, term loan facilities)[23] - A one percentage point increase in variable interest rates would decrease annual after-tax earnings by approximately $29 million[23] - Fixed rate indebtedness totaled $9.0 billion as of June 30, 2024[24] - A one percentage point decrease in market interest rates would increase the fair value of fixed-rate indebtedness by approximately 4%[24] Currency Exchange Risk This section evaluates the potential impact of foreign currency exchange rate changes on the company's financial results. - The company primarily operates in the U.S. and Canada, with a limited presence in Europe, Australia, and New Zealand[25] - Foreign subsidiary contribution for the six months ended June 30, 2024: * Revenue: $643 million (9% of total revenue of $7.258 billion)[25] * Pretax income: $114 million (7% of total pretax income of $1.530 billion)[25] - The company does not believe a 10% change in exchange rates would have a material impact on its earnings and does not engage in purchasing forward exchange contracts for speculative purposes[25] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2024, based on an evaluation by the CEO and CFO. It also states that there were no material changes in internal control over financial reporting during the quarter. Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures. - The company maintains disclosure controls and procedures designed to ensure timely and accurate reporting of information required by the Exchange Act[259] - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[260] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the quarter. - There were no changes in the company's internal control over financial reporting during the quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[244] PART II. OTHER INFORMATION This section includes information on legal proceedings, risk factors, equity security sales, and a list of exhibits filed with the report. Item 1. Legal Proceedings This section incorporates by reference the information on legal proceedings from note 8 to the unaudited condensed consolidated financial statements, which states that the company is subject to ordinary course claims and believes any resulting liabilities will not have a material adverse effect. - Information on legal proceedings is incorporated by reference from note 8 to the unaudited condensed consolidated financial statements[274] - Management believes that liabilities from ordinary course claims and proceedings will not have a material adverse effect on consolidated financial position, results of operations, or cash flows[191] Item 1A. Risk Factors This section incorporates by reference the risk factors described in the company's Annual Report on Form 10-K for the year ended December 31, 2023, emphasizing that actual results may differ materially from projections due to various risks and uncertainties. - Risk factors are incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2023[245] - The company's business and operations are subject to various risks and uncertainties, many beyond its control, which could cause actual results to differ materially from those projected[59][41] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on purchases of Holdings' common stock during the second quarter of 2024, detailing shares purchased under the publicly announced program and shares withheld for tax obligations upon restricted stock unit vesting. Common Stock Purchases (Q2 2024): | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Program | | :------------------------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------------- | :------------------------------------------------------------ | | April 1 - April 30, 2024 | 263,595 | $665.00 | 263,183 | | | May 1 - May 31, 2024 | 143,180 | $676.63 | 142,499 | | | June 1 - June 30, 2024 | 163,701 | $634.80 | 163,189 | | | Total | 570,476 | $659.25 | 568,871 | $999,999,872 | - In Q2 2024, 412, 681, and 512 shares were withheld in April, May, and June respectively, to satisfy tax withholding obligations upon vesting of restricted stock units, which were not acquired pursuant to any repurchase plan or program[276] - A $1.5 billion share repurchase program was authorized in January 2024, with $1.25 billion intended for repurchase in 2024[276] Item 5. Other Information This section is a placeholder and does not contain specific additional information beyond its title. Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including XBRL taxonomy documents, certifications by the CEO and CFO, and various agreements and amendments related to asset purchases, credit facilities, and corporate governance documents. - Key Exhibits Listed: * XBRL Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[266][280][278] * Rule 13a-14(a) Certifications by Chief Executive Officer and Chief Financial Officer[266][280][278] * Section 1350 Certifications by Chief Executive Officer and Chief Financial Officer[266][280][278] * Indenture for the 6 1/8% Senior Notes due 2034[266][280][278] * Amendment No. 16 to Third Amended and Restated Receivables Purchase Agreement[266][280][278] * Amendment No. 1 to the Fourth Amended and Restated Credit Agreement[266][280][278] Signatures This section contains the signatures of authorized representatives for United Rentals, Inc. and United Rentals (North America), Inc., certifying the filing of the report on July 24, 2024. - The report is signed by Andrew B. Limoges, Vice President, Controller and Principal Accounting Officer, for both United Rentals, Inc. and United Rentals (North America), Inc.[270][281] - The report was dated July 24, 2024[270][281]