United Rentals(URI) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial information for United Rentals, Inc. and its subsidiary Item 1. Financial Statements Presents unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and equity, as of September 30, 2024, and December 31, 2023 | Metric | Sep 30, 2024 ($ millions) | Dec 31, 2023 ($ millions) | Change ($ millions) | Change (%) | | :--------------------------------------- | :------------------------ | :------------------------ | :------------------ | :--------- | | Cash and cash equivalents | $479 | $363 | $116 | 31.96% | | Accounts receivable, net | $2,396 | $2,230 | $166 | 7.44% | | Total current assets | $3,321 | $2,933 | $388 | 13.23% | | Rental equipment, net | $15,241 | $14,001 | $1,240 | 8.86% | | Goodwill | $6,853 | $5,940 | $913 | 15.37% | | Total assets | $28,412 | $25,589 | $2,823 | 11.03% | | Short-term debt and current maturities | $1,510 | $1,465 | $45 | 3.07% | | Accounts payable | $1,216 | $905 | $311 | 34.36% | | Total current liabilities | $4,026 | $3,637 | $389 | 10.70% | | Long-term debt | $11,884 | $10,053 | $1,831 | 18.21% | | Total liabilities | $19,831 | $17,459 | $2,372 | 13.59% | - Goodwill increased by $913 million (15.37%) from $5.940 billion at December 31, 2023, to $6.853 billion at September 30, 2024, primarily due to the Yak acquisition[11][141] Condensed Consolidated Statements of Income Presents the company's revenues, expenses, and net income for the three and nine months ended September 30, 2024 and 2023 | Metric | Three Months Ended Sep 30, 2024 ($) | Three Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2024 ($) | Nine Months Ended Sep 30, 2023 ($) | | :------------------------------------ | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Equipment rentals ($ millions) | $3,463 | $3,224 | $9,607 | $8,945 | | Total revenues ($ millions) | $3,992 | $3,765 | $11,250 | $10,604 | | Gross profit ($ millions) | $1,648 | $1,585 | $4,512 | $4,251 | | Operating income ($ millions) | $1,122 | $1,099 | $2,978 | $2,764 | | Net income ($ millions) | $708 | $703 | $1,886 | $1,745 | | Basic earnings per share (per share) | $10.73 | $10.30 | $28.33 | $25.37 | | Diluted earnings per share (per share) | $10.70 | $10.29 | $28.25 | $25.30 | - Total Revenues for Q3 2024 increased by $227 million (6.0%) year-over-year to $3.992 billion, and for YTD Sep 2024 increased by $646 million (6.1%) year-over-year to $11.250 billion[14] - Net Income for Q3 2024 increased by $5 million (0.7%) year-over-year to $708 million, and for YTD Sep 2024 increased by $141 million (8.1%) year-over-year to $1.886 billion[14] Condensed Consolidated Statements of Comprehensive Income Details net income and other comprehensive income components for the three and nine months ended September 30, 2024 and 2023 | Metric | Three Months Ended Sep 30, 2024 ($ millions) | Three Months Ended Sep 30, 2023 ($ millions) | Nine Months Ended Sep 30, 2024 ($ millions) | Nine Months Ended Sep 30, 2023 ($ millions) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income | $708 | $703 | $1,886 | $1,745 | | Foreign currency translation adjustments | $55 | $(27) | $(9) | $(3) | | Comprehensive income | $763 | $676 | $1,877 | $1,741 | - Comprehensive Income for Q3 2024 increased by $87 million (12.9%) year-over-year to $763 million, driven by positive foreign currency translation adjustments[16] Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including net income, dividends, and stock repurchases, for the nine months ended September 30, 2024 | Metric | Balance at Dec 31, 2023 ($) | Net Income (YTD Sep 2024) ($) | Dividends Declared (YTD Sep 2024) ($) | Repurchase of Common Stock (YTD Sep 2024) ($) | Balance at Sep 30, 2024 ($) | | :------------------------------------ | :-------------------------- | :---------------------------- | :------------------------------------ | :-------------------------------------------- | :-------------------------- | | Common Stock Amount (actual) | $1 | — | — | — | $1 | | Additional Paid-in Capital ($ millions) | $2,650 | $79 (stock comp) - $43 (tax withholding) | — | — | $2,686 | | Retained Earnings ($ millions) | $11,672 | $1,886 | $(327) | — | $13,231 | | Treasury Stock Amount ($ millions) | $(5,965) | — | — | $(1,135) | $(7,100) | | Accumulated Other Comprehensive Loss ($ millions) | $(228) | $(9) (FX adj) | — | — | $(237) | - Retained Earnings increased by $1.559 billion from $11.672 billion at December 31, 2023, to $13.231 billion at September 30, 2024[20] - Common stock repurchases totaled $1.135 billion for the nine months ended September 30, 2024[20] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023 | Metric | Nine Months Ended Sep 30, 2024 ($ millions) | Nine Months Ended Sep 30, 2023 ($ millions) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $3,498 | $3,290 | | Payments for purchases of rental equipment | $(3,178) | $(3,078) | | Purchases of other companies, net of cash acquired | $(1,342) | $(406) | | Net cash used in investing activities | $(3,633) | $(2,539) | | Proceeds from debt | $9,729 | $6,718 | | Payments of debt | $(7,964) | $(6,175) | | Common stock repurchased | $(1,168) | $(806) | | Dividends paid | $(326) | $(305) | | Net cash provided by (used in) financing activities | $254 | $(568) | | Net increase in cash and cash equivalents | $116 | $178 | | Cash and cash equivalents at end of period | $479 | $284 | - Net cash provided by operating activities increased by $208 million (6.3%) year-over-year to $3.498 billion for the nine months ended September 30, 2024[23] - Net cash used in investing activities increased significantly by $1.094 billion (43.1%) year-over-year to $3.633 billion, primarily due to a substantial increase in purchases of other companies[23] Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations and disclosures for the financial statements, covering organization, acquisitions, debt, and other significant items - United Rentals, Inc. (Holdings) conducts operations primarily through its wholly-owned subsidiary, United Rentals (North America), Inc. (URNA), renting equipment to diverse customers in construction, industrial, and government sectors across North America, Europe, Australia, and New Zealand[25][26] - On March 15, 2024, the company acquired Yak Access, LLC, Yak Mat, LLC, and New South Access & Environmental Solutions, LLC (collectively, "Yak") for $1.158 billion, providing entry into the matting market and enhancing exposure to energy and power verticals[57][58] - Total debt increased to $13.394 billion at September 30, 2024, from $11.518 billion at December 31, 2023, driven by the issuance of $1.100 billion of 6 1/8% Senior Notes due 2034 and amendments to existing credit facilities[85] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses the company's financial performance, condition, and operational results, covering economic impacts, strategic initiatives, and key financial metrics Global Economic Conditions Examines the impact of global economic factors, such as inflation and interest rates, on the company's operations and financial performance - Operations are impacted by global economic conditions, including inflation, interest rate fluctuations, and supply chain constraints[95] - Interest rates on debt instruments have increased; new senior notes in March 2024 were issued at 6 1/8% compared to 3 ¾% in August 2021. The weighted average interest rate on variable debt was 6.5% for YTD Sep 2024, up from 1.4% for FY 2021[95] Executive Overview Provides a high-level summary of United Rentals' business, strategic focus areas, and operational footprint as the world's largest equipment rental company - United Rentals is the world's largest equipment rental company with 1,666 rental locations, primarily operating in the United States and Canada[97] - Equipment rentals represented 85% of total revenues for the nine months ended September 30, 2024[97] - Strategic focus areas include superior customer service (e.g., Total Control® software), optimization of customer and fleet mix, Lean management techniques, expansion of specialty and services products (e.g., Yak acquisition), and strategic acquisitions[98][100] Financial Overview Presents key financial metrics, including net income, EPS, EBITDA, and revenue breakdown, for the periods ended September 30, 2024 and 2023 - In 2024, the company issued $1.1 billion in senior notes, amended its term loan facility to increase size and extend maturity, and amended its accounts receivable securitization facility to increase size and extend maturity, enhancing financial flexibility and liquidity[101] - Available liquidity as of September 30, 2024, was $2.866 billion[101] | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income ($ millions) | $708 | $703 | $1,886 | $1,745 | | Diluted earnings per share (per share) | $10.70 | $10.29 | $28.25 | $25.30 | | EBITDA ($ millions) | $1,865 | $1,801 | $5,131 | $4,867 | | Adjusted EBITDA ($ millions) | $1,904 | $1,850 | $5,260 | $5,048 | | Net income margin (%) | 17.7% | 18.7% | 16.8% | 16.5% | | Adjusted EBITDA margin (%) | 47.7% | 49.1% | 46.8% | 47.6% | | Revenue Type | Q3 2024 ($ millions) | Q3 2023 ($ millions) | Q3 Change (%) | YTD 2024 ($ millions) | YTD 2023 ($ millions) | YTD Change (%) | | :-------------------------- | :------------------- | :------------------- | :------------ | :-------------------- | :-------------------- | :------------- | | Equipment rentals | $3,463 | $3,224 | 7.4% | $9,607 | $8,945 | 7.4% | | Sales of rental equipment | $321 | $366 | (12.3)% | $1,069 | $1,136 | (5.9)% | | Sales of new equipment | $77 | $52 | 48.1% | $186 | $166 | 12.0% | | Contractor supplies sales | $38 | $39 | (2.6)% | $116 | $110 | 5.5% | | Service and other revenues | $93 | $84 | 10.7% | $272 | $247 | 10.1% | | Total revenues | $3,992 | $3,765 | 6.0% | $11,250 | $10,604 | 6.1% | | Equipment rentals variance components: | | | | | | | | Year-over-year change in average OEC | | | 3.8% | | | 3.3% | | Assumed year-over-year inflation impact | | | (1.5)% | | | (1.5)% | | Fleet productivity | | | 3.5% | | | 4.1% | | Contribution from ancillary and re-rent revenue | | | 1.6% | | | 1.5% | | Total change in equipment rentals | | | 7.4% | | | 7.4% | Results of Operations Analyzes the company's revenues, segment performance, gross margins, and operating expenses for the periods ended September 30, 2024 and 2023 - For Q3 2024, General Rentals equipment rentals increased 0.9% year-over-year, while Specialty equipment rentals increased 23.9% (14.8% excluding the Yak acquisition)[126][127] - For YTD Sep 2024, General Rentals equipment rentals increased 1.4% year-over-year, and Specialty equipment rentals increased 23.4% (16.6% excluding the Yak acquisition)[128] - Sales of new equipment increased 48.1% for Q3 2024 and 12.0% for YTD Sep 2024, primarily due to the Yak acquisition[129] | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total gross margin (%) | 41.3% | 42.1% | 40.1% | 40.1% | | Equipment rentals gross margin (%) | 41.6% | 41.9% | 39.9% | 39.4% | | Sales of rental equipment gross margin (%) | 45.2% | 49.5% | 47.2% | 49.9% | | SG&A expense as a percentage of revenue (%) | 10.4% | 9.9% | 10.7% | 10.7% | | Restructuring charge ($ millions) | $1 | $5 | $3 | $24 | | Interest expense, net ($ millions) | $178 | $163 | $511 | $474 | - Restructuring charges decreased significantly by 87.5% year-over-year for YTD Sep 2024 to $3 million, reflecting reduced charges from the Ahern Rentals acquisition restructuring program, with no open programs as of September 30, 2024[136][139] Liquidity and Capital Resources Discusses the company's liquidity position, capital structure, debt obligations, share repurchase programs, and dividend payments - Available liquidity as of September 30, 2024, was $2.866 billion, comprising cash and cash equivalents, and availability under the ABL and accounts receivable securitization facilities[101][144] - The company completed a $1.25 billion share repurchase program in Q1 2024 and initiated a new $1.5 billion program in January 2024, repurchasing $875 million through September 30, 2024[143] - Dividends paid for YTD Sep 2024 totaled $326 million ($4.89 per share), and a Q4 2024 dividend of $1.63 per share was declared[143] - The company was in compliance with all debt covenants as of September 30, 2024, and was not restricted in its ability to make share repurchases and dividend payments[149][151] | Year | Debt and Finance Leases ($ millions) | Interest Due on Debt ($ millions) | Operating Leases ($ millions) | Purchase Obligations ($ millions) | Total ($ millions) | | :--------- | :--------------------------------- | :-------------------------------- | :---------------------------- | :-------------------------------- | :----------------- | | 2024 | $24 | $178 | $86 | $765 | $1,053 | | 2025 | $1,508 | $669 | $328 | $337 | $2,842 | | 2026 | $70 | $627 | $290 | $9 | $996 | | 2027 | $3,226 | $545 | $238 | — | $4,009 | | 2028 | $1,699 | $368 | $184 | — | $2,251 | | Thereafter | $6,939 | $845 | $381 | — | $8,165 | | Total | $13,466 | $3,232 | $1,507 | $1,111 | $19,316 | - Free cash flow for the nine months ended September 30, 2024, was $1.211 billion, a slight increase from $1.157 billion in the prior year period[154] Item 3. Quantitative and Qualitative Disclosures about Market Risk Details the company's exposure to market risks, primarily interest rate and foreign currency exchange rate fluctuations, and their potential financial impact - As of September 30, 2024, $4.3 billion of indebtedness bears variable interest rates. A one percentage point increase in these rates would decrease annual after-tax earnings by approximately $32 million[164] - Foreign subsidiaries accounted for 9% of total revenue ($987 million) and 7% of total pretax income ($178 million) for the nine months ended September 30, 2024. A 10% change in exchange rates is not expected to have a material impact on earnings[166] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2024[169] - There were no material changes in internal control over financial reporting during the quarter ended September 30, 2024[170] PART II. OTHER INFORMATION Presents additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Refers to legal and regulatory matters discussed in financial statement notes, indicating no expected material adverse effect from ordinary course claims - Information on legal proceedings is incorporated by reference from Note 8 to the unaudited condensed consolidated financial statements[172] Item 1A. Risk Factors Refers to comprehensive risk factors detailed in the company's Annual Report on Form 10-K, to be considered with the current report - Risk factors are described in the Annual Report on Form 10-K for the year ended December 31, 2023, and are incorporated by reference[173] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Provides details on common stock repurchases during Q3 2024 under the authorized share repurchase program - During Q3 2024, the company repurchased 539,888 shares of common stock at an average price of $697.76 per share, with $625 million remaining under the current $1.5 billion program[174] - The company intends to repurchase a total of $1.25 billion under the $1.5 billion program in 2024 and complete the program by the end of Q1 2025[174] Item 5. Other Information Notes that officers or directors may engage in non-Rule 10b5-1 trading arrangements for tax withholding related to stock awards - Officers or directors may make elections to have shares withheld or sold back to Holdings to cover withholding taxes, which may constitute non-Rule 10b5-1 trading arrangements[175] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including various agreements, corporate documents, certifications, and XBRL data files - Exhibits include Asset Purchase Agreements, Merger Agreements, Certificates of Incorporation, By-Laws, Subsidiary Guarantors list, Rule 13a-14(a) Certifications by CEO and CFO, Section 1350 Certifications by CEO and CFO, and XBRL Instance Document and Taxonomy Extensions[177][178] Signatures Contains official signatures of authorized representatives, confirming the filing of the report - The report was signed by Andrew B. Limoges, Vice President, Controller and Principal Accounting Officer for both United Rentals, Inc. and United Rentals (North America), Inc. on October 23, 2024[180]