URI-3.31.2014-10Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ___________________________________
FORM 10-Q
___________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 1-14387
Commission File Number 1-13663
___________________________________ 
United Rentals, Inc.
United Rentals (North America), Inc.
(Exact Names of Registrants as Specified in Their Charters)
 ___________________________________
Delaware
Delaware
 
06-1522496
86-0933835
(States of Incorporation)
 
(I.R.S. Employer Identification Nos.)
 
 
100 First Stamford Place, Suite 700
Stamford, Connecticut
 
06902
(Address of Principal Executive Offices)
 
(Zip Code)
Registrants’ Telephone Number, Including Area Code: (203) 622-3131 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    o  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 
x
Accelerated Filer
 
o
 
 
Non-Accelerated Filer
 
o
Smaller Reporting Company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes    x   No
As of April 14, 2014, there were 97,270,783 shares of United Rentals, Inc. common stock, $0.01 par value, outstanding. There is no market for the common stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc.
This combined Form 10-Q is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a wholly owned subsidiary of United Rentals, Inc.). United Rentals (North America), Inc. meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format permitted by such instruction.


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UNITED RENTALS, INC.
UNITED RENTALS (NORTH AMERICA), INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014
INDEX
 
 
 
Page
PART I
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
PART II
 
 
 
 
Item 1
 
 
 
Item 1A
 
 
 
Item 2
 
 
 
Item 6
 
 
 
 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,” “plan,” “project,” “forecast,” “intend” or “anticipate,” or the negative thereof or comparable terminology, or by discussions of strategy or outlook. You are cautioned that our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, our actual results may differ materially from those projected.

Factors that could cause actual results to differ materially from those projected include, but are not limited to, the following:

the possibility that RSC Holdings Inc. ("RSC"), National Pump1 or other companies that we have acquired or may acquire, in our specialty business or otherwise, could have undiscovered liabilities or involve other unexpected costs, may strain our management capabilities or may be difficult to integrate;
a change in the pace of the recovery in our end markets; our business is cyclical and highly sensitive to North American construction and industrial activities; although we have recently experienced an upturn in rental activity, there is no certainty this trend will continue; if the pace of the recovery slows or construction activity declines, our revenues and, because many of our costs are fixed, our profitability may be adversely affected;
our significant indebtedness (which totaled $7.0 billion at March 31, 2014) requires us to use a substantial portion of our cash flow for debt service and can constrain our flexibility in responding to unanticipated or adverse business conditions;
inability to refinance our indebtedness at terms that are favorable to us, or at all;
incurrence of additional debt, which could exacerbate the risks associated with our current level of indebtedness;
noncompliance with financial or other covenants in our debt agreements, which could result in our lenders terminating our credit facilities and requiring us to repay outstanding borrowings;
restrictive covenants and amount of borrowings permitted in our debt instruments, which can limit our financial and operational flexibility;
inability to benefit from government spending, including spending associated with infrastructure projects;
fluctuations in the price of our common stock and inability to complete stock repurchases in the time frame and/or on the terms anticipated;
rates we charge and time utilization we achieve being less than anticipated;
inability to manage credit risk adequately or to collect on contracts with a large number of customers;
inability to access the capital that our businesses or growth plans may require;
incurrence of impairment charges;
the fact that our holding company structure requires us to depend in part on distributions from subsidiaries and such distributions could be limited by contractual or legal restrictions;
increases in our loss reserves to address business operations or other claims and any claims that exceed our established levels of reserves;
incurrence of additional expenses (including indemnification obligations) and other costs in connection with litigation, regulatory and investigatory matters;
the outcome or other potential consequences of regulatory matters and commercial litigation;
shortfalls in our insurance coverage;
our charter provisions as well as provisions of certain debt agreements and our significant indebtedness may have the effect of making more difficult or otherwise discouraging, delaying or deterring a takeover or other change of control of us;
turnover in our management team and inability to attract and retain key personnel;
costs we incur being more than anticipated, and the inability to realize expected savings in the amounts or time frames planned;
dependence on key suppliers to obtain equipment and other supplies for our business on acceptable terms;
inability to sell our new or used fleet in the amounts, or at the prices, we expect;
competition from existing and new competitors;
disruptions in our information technology systems;
the costs of complying with environmental, safety and foreign law and regulations;
_______________

1.
In April 2014, we acquired assets of the following four entities: National Pump & Compressor, Ltd., Canadian Pump and Compressor Ltd., GulfCo Industrial Equipment, LP and LD Services, LLC (collectively “National Pump”).

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labor disputes, work stoppages or other labor difficulties, which may impact our productivity, and potential enactment of new legislation or other changes in law affecting our labor relations or operations generally; and
increases in our maintenance and replacement costs and/or decreases in the residual value of our equipment.

For a more complete description of these and other possible risks and uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2013, as well as to our subsequent filings with the SEC. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.


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PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements

UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
 
 
March 31, 2014
 
December 31, 2013
 
(unaudited)
 
ASSETS
 
 
 
Cash and cash equivalents
$
227

 
$
175

Accounts receivable, net of allowance for doubtful accounts of $44 at March 31, 2014 and $49 at December 31, 2013
752

 
804

Inventory
102

 
70

Prepaid expenses and other assets
59

 
53

Deferred taxes
260

 
260

Total current assets
1,400

 
1,362

Rental equipment, net
5,406

 
5,374

Property and equipment, net
408

 
421

Goodwill, net
2,944

 
2,953

Other intangible assets, net
972

 
1,018

Other long-term assets
117

 
103

Total assets
$
11,247

 
$
11,231

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Short-term debt and current maturities of long-term debt
$
265

 
$
604

Accounts payable
454

 
292

Accrued expenses and other liabilities
382

 
390

Total current liabilities
1,101

 
1,286

Long-term debt
6,774

 
6,569

Deferred taxes
1,481

 
1,459

Other long-term liabilities
67

 
69

Total liabilities
9,423

 
9,383

Temporary equity (note 6)
11

 
20

Common stock—$0.01 par value, 500,000,000 shares authorized, 102,707,899 and 97,527,696 shares issued and outstanding, respectively, at March 31, 2014 and 97,966,802 and 93,288,936 shares issued and outstanding, respectively, at December 31, 2013
1

 
1

Additional paid-in capital
2,061

 
2,054

Retained earnings (accumulated deficit)
23

 
(37
)
Treasury stock at cost—5,180,203 and 4,677,866 shares at March 31, 2014 and December 31, 2013, respectively
(252
)
 
(209
)
Accumulated other comprehensive (loss) income
(20
)
 
19

Total stockholders’ equity
1,813

 
1,828

Total liabilities and stockholders’ equity
$
11,247

 
$
11,231

See accompanying notes.

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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In millions, except per share amounts)
 
 
Three Months Ended
 
March 31,
 
2014

2013
Revenues:
 
 
 
Equipment rentals
$
1,005

 
$
916

Sales of rental equipment
110

 
123

Sales of new equipment
26

 
21

Contractor supplies sales
19

 
20

Service and other revenues
18

 
20

Total revenues
1,178

 
1,100

Cost of revenues:
 
 
 
Cost of equipment rentals, excluding depreciation
409

 
393

Depreciation of rental equipment
217

 
202

Cost of rental equipment sales
65

 
83

Cost of new equipment sales
20

 
17

Cost of contractor supplies sales
13

 
13

Cost of service and other revenues
6

 
7

Total cost of revenues
730

 
715

Gross profit
448

 
385

Selling, general and administrative expenses
168

 
160

Merger related costs
1

 
6

Restructuring charge
1

 
6

Non-rental depreciation and amortization
60

 
64

Operating income
218

 
149

Interest expense, net
125

 
118

Interest expense—subordinated convertible debentures

 
2

Other income, net
(1
)
 
(1
)
Income before provision for income taxes
94

 
30

Provision for income taxes
34

 
9

Net income
$
60

 
$
21

Basic earnings per share
$
0.63

 
$
0.22

Diluted earnings per share
$
0.56

 
$
0.19

See accompanying notes.

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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In millions)
 
 
Three Months Ended
 
March 31,
 
2014
 
2013
 Net income
$
60


$
21

 Other comprehensive loss, net of tax:
 
 
 
 Foreign currency translation adjustments
(38
)

(20
)
 Fixed price diesel swaps
(1
)


 Other comprehensive loss
(39
)
 
(20
)
 Comprehensive income (1)
$
21

 
$
1


(1)There were no material reclassifications from accumulated other comprehensive income (loss) reflected in other comprehensive loss during 2014 or 2013. There is no tax impact related to the foreign currency translation adjustments, as the earnings are considered permanently reinvested. There were no material taxes associated with other comprehensive loss during 2014 or 2013.


See accompanying notes.


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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In millions)
 
 
Common Stock
 
 
 
 
 
Treasury Stock
 
 
 
Number of
Shares (1)
 
Amount
 
Additional Paid-in
Capital
 
(Accumulated
Deficit) Retained Earnings
 
Number of
Shares
 
Amount
 
Accumulated Other Comprehensive
Income (Loss) (3)
Balance at December 31, 2013
93

 
$
1

 
$
2,054

 
$
(37
)
 
5

 
$
(209
)
 
$
19

Net income
 
 
 
 
 
 
60

 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
 
 
 
 
 
(38
)
Fixed price diesel swaps
 
 
 
 
 
 
 
 
 
 
 
 
(1
)
Stock compensation expense, net
 
 
 
 
12

 
 
 
 
 
 
 
 
Exercise of common stock options
 
 
 
 
1

 
 
 
 
 
 
 
 
4 percent Convertible Senior Notes (2)
5

 
 
 
12

 
 
 
 
 
 
 
 
Shares repurchased and retired
 
 
 
 
(18
)
 
 
 
 
 
 
 
 
Repurchase of common stock
 
 
 
 
 
 
 
 
 
 
(43
)
 
 
Balance at March 31, 2014
98

 
$
1

 
$
2,061

 
$
23

 
5

 
$
(252
)
 
$
(20
)
 
(1) An aggregate of less than 1 million net shares were issued during the year ended December 31, 2013.
(2)Reflects amortization of the original issue discount on the 4 percent Convertible Senior Notes (an amount equal to the unamortized portion of the original issue discount is reflected as “temporary equity” in our consolidated balance sheet) and the conversion of a portion of the 4 percent Convertible Senior Notes during the three months ended March 31, 2014, net of cash received from the option counterparties to our convertible note hedges upon the conversion. See note 6 to our condensed consolidated financial statements for additional detail.
(3)The Accumulated Other Comprehensive Income (Loss) balance primarily reflects foreign currency translation adjustments.



See accompanying notes.

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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
 
Three Months Ended
 
March 31,
 
2014
 
2013
Cash Flows From Operating Activities:
 
 
 
Net income
$
60

 
$
21

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
277

 
266

Amortization of deferred financing costs and original issue discounts
5

 
6

Gain on sales of rental equipment
(45
)
 
(40
)
Gain on sales of non-rental equipment
(1
)
 
(1
)
Stock compensation expense, net
12

 
9

Merger related costs
1

 
6

Restructuring charge
1

 
6

Loss on extinguishment of debt securities
11

 

Loss on retirement of subordinated convertible debentures

 
1

Increase in deferred taxes
22

 
3

Changes in operating assets and liabilities, net of amounts acquired:
 
 
 
Decrease in accounts receivable
47

 
65

Increase in inventory
(32
)
 
(34
)
(Increase) decrease in prepaid expenses and other assets
(4
)
 
30

Increase in accounts payable
163

 
121

Decrease in accrued expenses and other liabilities
(9
)
 
(50
)
Net cash provided by operating activities
508

 
409

Cash Flows From Investing Activities:
 
 
 
Purchases of rental equipment
(333
)
 
(289
)
Purchases of non-rental equipment
(18
)
 
(14
)
Proceeds from sales of rental equipment
110

 
123

Proceeds from sales of non-rental equipment
11

 
5

Purchases of other companies, net of cash acquired
(1
)
 

Net cash used in investing activities
(231
)
 
(175
)
Cash Flows From Financing Activities:
 
 
 
Proceeds from debt
2,398

 
631

Payments of debt, including subordinated convertible debentures
(2,543
)
 
(795
)
Proceeds from the exercise of common stock options
1

 
3

Common stock repurchased
(61
)
 
(30
)
Payments of financing costs
(20
)
 

Cash received in connection with the 4 percent Convertible Senior Notes and related hedge, net
7

 

Net cash used in financing activities
(218
)
 
(191
)
Effect of foreign exchange rates
(7
)
 
(2
)
Net increase in cash and cash equivalents
52

 
41

Cash and cash equivalents at beginning of period
175

 
106

Cash and cash equivalents at end of period
$
227

 
$
147

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for income taxes, net
$
9

 
$
15

Cash paid for interest, including subordinated convertible debentures
84

 
90

See accompanying notes.

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data, unless otherwise indicated)
1. Organization, Description of Business and Basis of Presentation
United Rentals, Inc. (“Holdings,” “URI” or the “Company”) is principally a holding company and conducts its operations primarily through its wholly owned subsidiary, United Rentals (North America), Inc. (“URNA”), and subsidiaries of URNA. Holdings’ primary asset is its sole ownership of all issued and outstanding shares of common stock of URNA. URNA’s various credit agreements and debt instruments place restrictions on its ability to transfer funds to its shareholder.
We rent equipment to a diverse customer base that includes construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities in the United States and Canada. In addition to renting equipment, we sell new and used rental equipment, as well as related contractor supplies, parts and service.
We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the accounting policies described in our annual report on Form 10-K for the year ended December 31, 2013 (the “2013 Form 10-K”) and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the 2013 Form 10-K.
In our opinion, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of financial condition, operating results and cash flows for the interim periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year. Certain reclassifications of prior year's amounts have been made to conform to the current year’s presentation.
2. Segment Information
Our reportable segments are general rentals and trench safety, power and HVAC (“heating, ventilating and air conditioning”). The general rentals segment includes the rental of construction, infrastructure, industrial and homeowner equipment and related services and activities. The general rentals segment’s customers include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. The general rentals segment comprises 12 geographic regions—Eastern Canada, Gulf South, Industrial (which serves the geographic Gulf region and has a strong industrial presence), Mid-Atlantic, Mid-Central, Midwest, Mountain West, Northeast, Pacific West, South, Southeast and Western Canada—and operates throughout the United States and Canada. The trench safety, power and HVAC segment includes the rental of specialty construction products and related services. The trench safety, power and HVAC segment is comprised of the Trench Safety region, which rents trench safety equipment such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers and line testing equipment for underground work, and the Power and HVAC region, which rents power and HVAC equipment such as portable diesel generators, electrical distribution equipment, and temperature control equipment including heating and cooling equipment. The trench safety, power and HVAC segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates throughout the United States and in Canada. These segments align our external segment reporting with how management evaluates and allocates resources. We evaluate segment performance based on segment equipment rentals gross profit.
 
The following tables set forth financial information by segment.  

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


 
General
rentals
 
Trench safety,
power and  HVAC
 
Total
Three Months Ended March 31, 2014
 
 
 
 
 
Equipment rentals
$
924

 
$
81

 
$
1,005

Sales of rental equipment
106

 
4

 
110

Sales of new equipment
24

 
2

 
26

Contractor supplies sales
17

 
2

 
19

Service and other revenues
17

 
1

 
18

Total revenue
1,088

 
90

 
1,178

Depreciation and amortization expense
259

 
18

 
277

Equipment rentals gross profit
344

 
35

 
379

Capital expenditures
331

 
20

 
351

Three Months Ended March 31, 2013
 
 
 
 
 
Equipment rentals
$
854

 
$
62

 
$
916

Sales of rental equipment
119

 
4

 
123

Sales of new equipment
20

 
1

 
21

Contractor supplies sales
18

 
2

 
20

Service and other revenues
19

 
1

 
20

Total revenue
1,030

 
70

 
1,100

Depreciation and amortization expense
252

 
14

 
266

Equipment rentals gross profit
295

 
26

 
321

Capital expenditures
288

 
15

 
303

 
March 31,
2014
 
December 31,
2013
Total reportable segment assets
 
 
 
General rentals
$
10,696

 
$
10,677

Trench safety, power and HVAC
551

 
554

Total assets
$
11,247

 
$
11,231

 
Equipment rentals gross profit is the primary measure management reviews to make operating decisions and assess segment performance. The following is a reconciliation of equipment rentals gross profit to income before provision for income taxes: 

Three Months Ended
 
March 31,
 
2014

2013
Total equipment rentals gross profit
$
379

 
$
321

Gross profit from other lines of business
69

 
64

Selling, general and administrative expenses
(168
)
 
(160
)
Merger related costs
(1
)
 
(6
)
Restructuring charge
(1
)
 
(6
)
Non-rental depreciation and amortization
(60
)
 
(64
)
Interest expense, net
(125
)
 
(118
)
Interest expense- subordinated convertible debentures

 
(2
)
Other income, net
1

 
1

Income before provision for income taxes
$
94

 
$
30


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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


3. Restructuring Charges
Closed Restructuring Program
Between 2008 and 2011 and in recognition of the very challenging economic environment, we were intensely focused on reducing our operating costs. During this period, we reduced our employee headcount from approximately 10,900 at January 1, 2008 (the beginning of the restructuring period) to approximately 7,500 at December 31, 2011 (the end of the restructuring period). Additionally, we reduced our branch network from 697 locations at January 1, 2008 to 529 locations at December 31, 2011.
RSC Merger Related Restructuring Program
In the second quarter of 2012, we initiated a restructuring program related to severance costs and branch closure charges associated with the April 2012 acquisition of RSC Holdings Inc. ("RSC"). The branch closure charges principally relate to continuing lease obligations at vacant facilities closed subsequent to the RSC acquisition. As of March 31, 2014, our employee headcount is approximately 11,800 and our branch network has 839 rental locations. We do not expect to incur significant additional charges in connection with the restructuring, which was complete as of June 30, 2013 (the end of the restructuring period).
The table below provides certain information concerning our restructuring charges for the three months ended March 31, 2014:
 
 
 
Reserve Balance at
 
Charged to
Costs and
Expenses(1)
 
Payments
and Other
 
Reserve Balance at
Description 
 
December 31, 2013
 
 
 
March 31, 2014
Closed Restructuring Program
 
 
 
 
 
 
 
 
Branch closure charges
 
$
13

 
$

 
$
(1
)
 
$
12

Severance costs
 

 

 

 

Total
 
$
13

 
$

 
$
(1
)
 
$
12

RSC Merger Related Restructuring Program
 
 
 
 
 
 
 
 
Branch closure charges
 
$
20

 
$
1

 
$
(3
)
 
$
18

Severance costs
 
2

 

 
(1
)
 
1

Total
 
$
22

 
$
1

 
$
(4
)
 
$
19

Total
 
 
 
 
 
 
 
 
Branch closure charges
 
$
33

 
$
1

 
$
(4
)
 
$
30

Severance costs
 
2

 

 
(1
)
 
1

Total
 
$
35

 
$
1

 
$
(5
)
 
$
31

 
_________________
(1)
Reflected in our condensed consolidated statements of income as “Restructuring charge.” These charges are not allocated to our reportable segments. 
4. Derivatives
We recognize all derivative instruments as either assets or liabilities at fair value, and recognize changes in the fair value of the derivative instruments based on the designation of the derivative. For derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure being hedged, as either a fair value hedge or a cash flow hedge. As of March 31, 2014, we do not have any outstanding derivative instruments designated as fair value hedges. The effective portion of the changes in fair value of derivatives that are designated as cash flow hedges is recorded as a component of accumulated other comprehensive income. Amounts included in accumulated other comprehensive income for cash flow hedges are reclassified into earnings in the same period that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of derivatives designated as cash flow hedges is recorded currently in earnings. For derivative instruments that do not qualify for hedge accounting, we recognize gains or losses due to changes in fair value in our condensed consolidated statements of income during the period in which the changes in fair value occur.
We are exposed to certain risks related to our ongoing business operations. During the three months ended March 31, 2014 and 2013, the primary risks we managed using derivative instruments were diesel price risk and foreign currency

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


exchange rate risk. At March 31, 2014, we had outstanding fixed price swap contracts on diesel purchases which were entered into to mitigate the price risk associated with forecasted purchases of diesel. During the three months ended March 31, 2013, we entered into forward contracts to purchase Canadian dollars to mitigate the foreign currency exchange rate risk associated with certain Canadian dollar denominated intercompany loans. At March 31, 2014 and December 31, 2013, there were no outstanding forward contracts to purchase Canadian dollars. The outstanding forward contracts on diesel purchases were designated and qualify as cash flow hedges and the forward contracts to purchase Canadian dollars represented derivative instruments not designated as hedging instruments.
Fixed Price Diesel Swaps
The fixed price swap contracts on diesel purchases that were outstanding at March 31, 2014 were designated and qualify as cash flow hedges and the effective portion of the gain or loss on these contracts is reported as a component of accumulated other comprehensive income and is reclassified into earnings in the period during which the hedged transaction affects earnings (i.e., when the hedged gallons of diesel are used). The remaining gain or loss on the fixed price swap contracts in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), is recognized in our condensed consolidated statements of income during the current period. As of March 31, 2014, we had outstanding fixed price swap contracts covering 6.4 million gallons of diesel which will be purchased throughout 2014 and 2015.
Foreign Currency Forward Contracts
The forward contracts to purchase Canadian dollars represent derivative instruments not designated as hedging instruments and gains or losses due to changes in the fair value of the forward contracts are recognized in our condensed consolidated statements of income during the period in which the changes in fair value occur.
Financial Statement Presentation
As of March 31, 2014 and December 31, 2013, immaterial amounts ($1 or less) were reflected in prepaid expenses and other assets, accrued expenses and other liabilities, and accumulated other comprehensive income in our condensed consolidated balance sheets associated with the outstanding fixed price swap contracts that were designated and qualify as cash flow hedges.
The effect of our derivative instruments on our condensed consolidated statements of income for the three months ended March 31, 2014 and 2013 was as follows:
 
 
 
 
Three Months Ended March 31, 2014
 
Three Months Ended March 31, 2013
 
Location of income
(expense)
recognized on
derivative/hedged item
 
Amount of  income
(expense)
recognized
on derivative
 
Amount of  income
(expense)
recognized
on hedged item
 
Amount of  income
(expense)
recognized
on derivative
 
Amount of  income
(expense)
recognized
on hedged item
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
Fixed price diesel swaps
Other income
(expense), net (1)
 
 $ *

 
 
 
 $ *

 
 
 
Cost of equipment
rentals, excluding
depreciation (2),
(3)
 
 *

 
$
(10
)
 
*

 
$
(9
)
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts (4)
Other income
(expense), net
 

 

 
(2
)
 
2

*
Amounts are insignificant (less than $1).
(1)
Represents the ineffective portion of the fixed price diesel swaps.
(2)
Amounts recognized on derivative represent the effective portion of the fixed price diesel swaps.
(3)
Amounts recognized on hedged item reflect the use of 2.6 million and 2.2 million gallons of diesel covered by the fixed price swaps during the three months ended March 31, 2014 and 2013, respectively. These amounts are reflected, net of

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


cash received from the counterparties to the fixed price swaps, in operating cash flows in our condensed consolidated statement of cash flows.
(4)
Insignificant amounts were reflected in our condensed consolidated statement of cash flows associated with the forward contracts to purchase Canadian dollars, as the cash impact of the gains/losses recognized on the derivatives were offset by the gains/losses recognized on the hedged items.
5. Fair Value Measurements
We account for certain assets and liabilities at fair value. We categorize each of our fair value measurements in one of the following three levels based on the lowest level input that is significant to the fair value measurement in its entirety:
Level 1- Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets.
Level 2- Observable inputs other than quoted prices in active markets for identical assets and liabilities include:
a)
quoted prices for similar assets in active markets;
b)
quoted prices for identical or similar assets in inactive markets;
c)
inputs other than quoted prices that are observable for the asset;
d)
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset.
Level 3- Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure.
Assets and Liabilities Measured at Fair Value
As of March 31, 2014 and December 31, 2013, our only assets and liabilities measured at fair value were our fixed price diesel swaps contracts, which are Level 2 derivatives measured at fair value on a recurring basis. As of March 31, 2014 and December 31, 2013, immaterial amounts ($1 or less) were reflected in prepaid expenses and other assets, and accrued expenses and other liabilities in our condensed consolidated balance sheets, reflecting the fair values of the fixed price diesel swaps contracts.
As discussed in note 4 to the condensed consolidated financial statements, we entered into the fixed price swap contracts on diesel purchases to mitigate the price risk associated with forecasted purchases of diesel. Fair value is determined based on observable market data. As of March 31, 2014, we have fixed price swap contracts that mature throughout 2014 and 2015 covering 6.4 million gallons of diesel which we will buy at the average contract price of $3.89 per gallon, while the average forward price for the hedged gallons was $3.88 per gallon as of March 31, 2014.
 
Fair Value of Financial Instruments
The carrying amounts reported in our condensed consolidated balance sheets for accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value due to the immediate to short-term maturity of these financial instruments. The fair values of our ABL facility, accounts receivable securitization facility and capital leases approximate their book values as of March 31, 2014 and December 31, 2013. The estimated fair values of our financial instruments as of March 31, 2014 and December 31, 2013 have been calculated based upon available market information, and are presented below by level in the fair value hierarchy: 
 
March 31, 2014
 
December 31, 2013
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Level 1:
 
 
 
 
 
 
 
Senior and senior subordinated notes
$
6,563

 
$
7,051

 
$
5,381

 
$
5,848

Level 2:
 
 
 
 
 
 
 
4 percent Convertible Senior Notes (1)
89

 
96

 
136

 
149

___________________ 

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


(1)
The fair value of the 4 percent Convertible Senior Notes is based on the market value of comparable notes. Consistent with the carrying amount, the fair value excludes the equity component of the notes. To exclude the equity component and calculate the fair value, we used an effective interest rate of 6.6 percent. As discussed below (see Item 3- Quantitative and Qualitative Disclosures about Market Risk), the total cost to settle the notes based on the closing price of our common stock on March 31, 2014 would be $857.
6. Debt and Subordinated Convertible Debentures
Debt consists of the following: 
 
March 31, 2014
 
December 31, 2013
URNA and subsidiaries debt:
 
 
 
Accounts Receivable Securitization Facility (1)
$
140

 
$
430

$2.3 billion ABL Facility (2)
135

 
1,106

3/4 percent Senior Secured Notes
750

 
750

10 1/4 percent Senior Notes (3)

 
220

9 1/4 percent Senior Notes (4)
494

 
494

3/8 percent Senior Notes
750

 
750

8 3/8 percent Senior Subordinated Notes
750

 
750

8 1/4 percent Senior Notes
691

 
692

7 5/8 percent Senior Notes
1,325

 
1,325

6 1/8 percent Senior Notes (5)
953

 
400

3/4 percent Senior Notes (6)
850

 

Capital leases
112

 
120

Total URNA and subsidiaries debt
6,950

 
7,037

Holdings:
 
 
 
4 percent Convertible Senior Notes (7)
89

 
136

Total debt
7,039

 
7,173

Less short-term portion (8)
(265
)
 
(604
)
Total long-term debt
$
6,774

 
$
6,569

 ___________________

(1)
At March 31, 2014, $313 was available under our accounts receivable securitization facility. The interest rate applicable to the accounts receivable securitization facility was 0.8 percent at March 31, 2014. During the three months ended March 31, 2014, the monthly average amount outstanding under the accounts receivable securitization facility was $331, and the weighted-average interest rate thereon was 0.8 percent. The maximum month-end amount outstanding under the accounts receivable securitization facility during the three months ended March 31, 2014 was $427. Borrowings under the accounts receivable securitization facility are permitted only to the extent that the face amount of the receivables in the collateral pool, net of applicable reserves, exceeds the outstanding loans. As of March 31, 2014, there were $453 of receivables, net of applicable reserves, in the collateral pool.
(2)
At March 31, 2014, $2.1 billion was available under our ABL facility, net of $52 of letters of credit. The interest rate applicable to the ABL facility was 3.4 percent at March 31, 2014. During the three months ended March 31, 2014, the monthly average amount outstanding under the ABL facility was $873, and the weighted-average interest rate thereon was 2.5 percent. The maximum month-end amount outstanding under the ABL facility during the three months ended March 31, 2014 was $1.3 billion.
(3)
In January 2014, we redeemed all of our 10 1/4 percent Senior Notes. We paid a call premium of $26 in connection with the redemption, and recognized a loss of approximately $6 in interest expense, net upon redemption. The loss represented the difference between the net carrying amount and the total purchase price of the notes.
(4)
As discussed in note 10 to the condensed consolidated financial statements, in March 2014, we announced that we were acquiring assets of the following four entities: National Pump & Compressor, Ltd., Canadian Pump and Compressor Ltd., GulfCo Industrial Equipment, LP and LD Services, LLC (collectively “National Pump”). Using proceeds from debt issued contemporaneous with the National Pump acquisition, as discussed below, and cash on hand, we redeemed all the

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


outstanding 9 1/4 percent Senior Notes in April 2014. We paid a call premium of approximately $52 in connection with the redemption and recognized a loss of approximately $65 in interest expense upon redemption. The loss represented the difference between the net carrying amount and the total purchase price of the notes.
(5)
Contemporaneous with the National Pump acquisition described in note 10 to the condensed consolidated financial statements, in March 2014, URNA issued $525 principal amount of 6 1/8 percent Senior Notes as an add on to our existing 6 1/8 percent Senior Notes. The net proceeds from the issuance were $546 (after deducting offering expenses). The newly issued notes have identical terms, and are fungible, with the 6 1/8 percent Senior Notes outstanding at December 31, 2013. The difference between the carrying value of the 6 1/8 percent Senior Notes and the $925 principal amount relates to the $28 unamortized portion of the original issue premium recognized in conjunction with the March 2014 issuance, which is being amortized through the maturity date in 2023. The effective interest rate on the 6 1/8 percent Senior Notes is 5.7 percent.
(6)
In connection with the National Pump acquisition described in note 10 to the condensed consolidated financial statements, in March 2014, URNA issued $850 principal amount of 5 3/4 percent Senior Notes which are due November 15, 2024. The net proceeds from the issuance were $837 (after deducting offering expenses). The net proceeds were used to finance in part the cash purchase price of the National Pump acquisition which closed in April 2014. The 5 3/4 percent Senior Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 5 3/4 percent Senior Notes may be redeemed on or after May 15, 2019, at specified redemption prices that range from 102.875 percent in the 12-month period commencing on May 15, 2019, to 100 percent in the 12-month period commencing on May 15, 2022 and thereafter, plus accrued and unpaid interest. The indenture governing the 5 3/4 percent Senior Notes contains certain restrictive covenants, including, among others, limitations on (1) liens; (2) additional indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of these covenants is subject to important exceptions and qualifications that would allow URI to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URI must make an offer to purchase all of the then-outstanding 5 3/4 percent Senior Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.
(7)
The difference between the March 31, 2014 carrying value of the 4 percent Convertible Senior Notes and the $100 principal amount reflects the $11 unamortized portion of the original issue discount recognized upon issuance of the notes, which is being amortized through the maturity date of November 15, 2015. Because the 4 percent Convertible Senior Notes were redeemable at March 31, 2014, an amount equal to the $11 unamortized portion of the original issue discount is separately classified in our condensed consolidated balance sheets and referred to as “temporary equity.” During the three months ended March 31, 2014, $56 of our 4 percent Convertible Notes were redeemed. We recognized a loss of approximately $5 in interest expense, net upon redemption. The loss represented the difference between the net carrying amount and the fair value of the debt component of the notes. Based on the price of our common stock during the first quarter of 2014, holders of the 4 percent Convertible Senior Notes have the right to redeem the notes during the second quarter of 2014 at a conversion price of $11.11 per share of common stock. Since April 1, 2014 (the beginning of the second quarter), $4 of the 4 percent Convertible Senior Notes were redeemed.
(8)
As of March 31, 2014, our short-term debt primarily reflects $140 of borrowings under our accounts receivable securitization facility and $89 of 4 percent Convertible Senior Notes. The 4 percent Convertible Senior Notes mature in November 2015, but are reflected as short-term debt because they are redeemable at March 31, 2014.
Convertible Note Hedge Transactions
In connection with the November 2009 issuance of $173 aggregate principal amount of 4 percent Convertible Senior Notes, Holdings entered into convertible note hedge transactions with option counterparties. The convertible note hedge transactions cost $26, and decreased additional paid-in capital by $17, net of taxes, in our accompanying condensed consolidated statements of stockholders’ equity. The convertible note hedge transactions cover, subject to anti-dilution adjustments, 8.7 million shares of our common stock. The convertible note hedge transactions are intended to reduce, subject to a limit, the potential dilution with respect to our common stock upon conversion of the 4 percent Convertible Senior Notes. The effect of the convertible note hedge transactions is to increase the effective conversion price to $15.56 per share, equal to an approximately 75 percent premium over the $8.89 closing price of our common stock at issuance. The effective conversion price is subject to change in certain circumstances, such as if the 4 percent Convertible Senior Notes are converted prior to May 15, 2015. In the event the market value of our common stock exceeds the effective conversion price per share, the settlement amount received from such transactions will only partially offset the potential dilution. For example, if, at the time of exercise

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


of the conversion right, the price of our common stock was $90.00 or $95.00 per share, assuming an effective conversion price of $15.56 per share, on a net basis, we would issue 7.5 million or 7.6 million shares, respectively.
Loan Covenants and Compliance
As of March 31, 2014, we were in compliance with the covenants and other provisions of the ABL facility, the accounts receivable securitization facility and the senior notes. Any failure to be in compliance with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.
In October 2011, we amended the ABL facility. The only material financial covenants which currently exist relate to the fixed charge coverage ratio and the senior secured leverage ratio under the ABL facility. Since the October 2011 amendment of the ABL facility and through March 31, 2014, availability under the ABL facility has exceeded the required threshold and, as a result, these maintenance covenants have been inapplicable. Subject to certain limited exceptions specified in the amended ABL facility, the fixed charge coverage ratio and the senior secured leverage ratio under the amended ABL facility will only apply in the future if availability under the amended ABL facility falls below the greater of 10 percent of the maximum revolver amount under the amended ABL facility and $150. Under our accounts receivable securitization facility, we are required, among other things, to maintain certain financial tests relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales outstanding.
7. Legal and Regulatory Matters
In addition to the disclosures provided in note 14 to our consolidated financial statements for the year ended December 31, 2013 filed on Form 10-K on January 22, 2014, we are also subject to a number of claims and proceedings that generally arise in the ordinary conduct of our business. These matters include, but are not limited to, general liability claims (including personal injury, product liability, and property and auto claims), indemnification and guarantee obligations, employee injuries and employment-related claims, self-insurance obligations and contract and real estate matters. Based on advice of counsel and available information, including current status or stage of proceeding, and taking into account accruals for matters where we have established them, we currently believe 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 our consolidated financial condition, results of operations or cash flows.
8. Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period. Diluted earnings per share for the three months ended March 31, 2013 excludes the impact of approximately 1.2 million common stock equivalents since the effect of including these securities would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share (shares in thousands): 
 
Three Months Ended
 
March 31,
 
2014
 
2013
Numerator:
 
 
 
Net income available to common stockholders
$
60

 
$
21

Denominator:
 
 
 
Denominator for basic earnings per share—weighted-average common shares
95,225

 
93,310

Effect of dilutive securities:
 
 
 
Employee stock options and warrants
435

 
619

Convertible subordinated notes—4 percent
10,224

 
11,866

Restricted stock units
540

 
585

Denominator for diluted earnings per share—adjusted weighted-average common shares
106,424

 
106,380

Basic earnings per share
$
0.63

 
$
0.22

Diluted earnings per share
$
0.56

 
$
0.19



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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


9. Condensed Consolidating Financial Information of Guarantor Subsidiaries
URNA is 100 percent owned by Holdings (“Parent”) and has outstanding (i) certain indebtedness that is guaranteed by Parent, (ii) certain indebtedness that is guaranteed by both Parent and, with the exception of its U.S. special purpose vehicle which holds receivable assets relating to the Company’s accounts receivable securitization (the “SPV”), all of URNA’s U.S. subsidiaries (the “guarantor subsidiaries”) and (iii) certain indebtedness that is guaranteed only by the guarantor subsidiaries (specifically, the 10 1/4 percent Senior Notes and the 8 1/4 percent Senior Notes). However, this indebtedness is not guaranteed by URNA’s foreign subsidiaries and the SPV (together, the “non-guarantor subsidiaries”). The guarantor subsidiaries are all 100 percent-owned and the guarantees are made on a joint and several basis. The guarantees are not full and unconditional because a guarantor subsidiary can be automatically released and relieved of its obligations under certain circumstances, including sale of the subsidiary guarantor, the sale of all or substantially all of the subsidiary guarantor's assets, the requirements for legal defeasance or covenant defeasance under the applicable indenture being met or designating the subsidiary guarantor as an unrestricted subsidiary for purposes of the applicable covenants. The guarantees are also subject to subordination provisions (to the same extent that the obligations of the issuer under the relevant notes are subordinated to other debt of the issuer) and to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws. Based on our understanding of Rule 3-10 of Regulation S-X ("Rule 3-10"), we believe that the guarantees of the guarantor subsidiaries comply with the conditions set forth in Rule 3-10 and therefore continue to utilize Rule 3-10 to present condensed consolidating financial information for Holdings, URNA, the guarantor subsidiaries and the non-guarantor subsidiaries. Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors. However, condensed consolidating financial information is presented. Certain reclassifications of prior year's amounts have been made to conform to the current year’s presentation.
URNA covenants in the ABL facility, accounts receivable securitization facility and the other agreements governing our debt impose operating and financial restrictions on URNA, Parent and the guarantor subsidiaries, including limitations on the ability to pay dividends. As of March 31, 2014, the amount available for distribution under the most restrictive of these covenants was $448.
The condensed consolidating financial information of Parent and its subsidiaries is as follows:

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)


CONDENSED CONSOLIDATING BALANCE SHEET
March 31, 2014  
 
Parent
 
URNA
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
 
Foreign
 
SPV
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
23

 
$

 
$
204

 
$

 
$

 
$
227

Accounts receivable, net

 
37

 

 
126

 
589

 

 
752

Intercompany receivable (payable)
261

 
(199
)
 
(55
)
 
(135
)
 

 
128

 

Inventory

 
92

 

 
10

 

 

 
102

Prepaid expenses and other assets

 
48

 
2

 
9

 

 

 
59

Deferred taxes

 
258

 

 
2

 

 

 
260

Total current assets
261

 
259

 
(53
)
 
216

 
589

 
128

 
1,400

Rental equipment, net

 
4,838

 

 
568

 

 

 
5,406

Property and equipment, net
46

 
302

 
20

 
40

 

 

 
408

Investments in subsidiaries
1,629

 
1,372

 
984

 

 

 
(3,985
)
 

Goodwill, net

 
2,708

 

 
236

 

 

 
2,944

Other intangible assets, net

 
892

 

 
80

 

 

 
972

Other long-term assets
1

 
116

 

 

 

 

 
117

Total assets
$
1,937

 
$
10,487

 
$
951

 
$
1,140

 
$
589

 
$
(3,857
)
 
$
11,247

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term debt and current maturities of long-term debt
$
89

 
$
36

 
$

 
$

 
$
140

 
$

 
$
265

Accounts payable

 
413

 

 
41

 

 

 
454

Accrued expenses and other liabilities
2

 
329

 
21

 
30

 

 

 
382

Total current liabilities
91

 
778

 
21

 
71

 
140

 

 
1,101

Long-term debt

 
6,632

 
135

 
7

 

 

 
6,774

Deferred taxes
22

 
1,381

 

 
78

 

 

 
1,481

Other long-term liabilities

 
67

 

 

 

 

 
67

Total liabilities
113

 
8,858

 
156

 
156

 
140

 

 
9,423

Temporary equity (note 6)
11

 

 

 

 

 

 
11

Total stockholders’ equity (deficit)
1,813

 
1,629

 
795

 
984

 
449

 
(3,857
)
 
1,813

Total liabilities and stockholders’ equity (deficit)
$
1,937

 
$
10,487

 
$
951

 
$
1,140

 
$
589

 
$
(3,857
)
 
$
11,247






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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)



CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2013
 
 
Parent
 
URNA
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
 
Foreign
 
SPV
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
17

 
$

 
$
158

 
$

 
$

 
$
175

Accounts receivable, net

 
36

 

 
140

 
628

 

 
804

Intercompany receivable (payable)
308

 
(257
)
 
(51
)
 
(132
)
 

 
132

 

Inventory

 
62

 

 
8

 

 

 
70

Prepaid expenses and other assets

 
42

 
1

 
10

 

 

 
53

Deferred taxes

 
258

 

 
2

 

 

 
260

Total current assets
308

 
158

 
(50
)
 
186

 
628

 
132

 
1,362

Rental equipment, net

 
4,768

 

 
606

 

 

 
5,374

Property and equipment, net
48

 
313

 
20

 
40

 

 

 
421

Investments in subsidiaries
1,648

 
1,132

 
997

 

 

 
(3,777
)
 

Goodwill, net

 
2,708

 

 
245

 

 

 
2,953

Other intangible assets, net

 
931

 

 
87

 

 

 
1,018

Other long-term assets
2

 
100

 

 

 
1

 

 
103

Total assets
$
2,006

 
$
10,110

 
$
967

 
$
1,164

 
$
629

 
$
(3,645
)
 
$
11,231

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term debt and current maturities of long-term debt
$
136

 
$
38

 
$

 
$

 
$
430

 
$

 
$
604

Accounts payable

 
254

 

 
38

 

 

 
292

Accrued expenses and other liabilities
1

 
327

 
25

 
36

 
1

 

 
390

Total current liabilities
137

 
619

 
25

 
74

 
431

 

 
1,286

Long-term debt

 
6,421

 
140

 
8

 

 

 
6,569

Deferred taxes
21

 
1,357

 

 
81

 

 

 
1,459

Other long-term liabilities

 
65

 

 
4

 

 

 
69

Total liabilities
158

 
8,462

 
165

 
167

 
431

 

 
9,383

Temporary equity (note 6)
20

 

 

 

 

 

 
20

Total stockholders’ equity (deficit)
1,828

 
1,648

 
802

 
997

 
198

 
(3,645
)
 
1,828

Total liabilities and stockholders’ equity (deficit)
$
2,006

 
$
10,110

 
$
967

 
$
1,164

 
$
629

 
$
(3,645
)
 
$
11,231

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)



CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent
 
URNA
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Foreign
 
SPV
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Equipment rentals
$

 
$
872

 
$

 
$
133

 
$

 
$

 
$
1,005

Sales of rental equipment

 
100

 

 
10

 

 

 
110

Sales of new equipment

 
21

 

 
5

 

 

 
26

Contractor supplies sales

 
15

 

 
4

 

 

 
19

Service and other revenues

 
15

 

 
3

 

 

 
18

Total revenues

 
1,023

 

 
155

 

 

 
1,178

Cost of revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of equipment rentals, excluding depreciation

 
354

 

 
55

 

 

 
409

Depreciation of rental equipment

 
193

 

 
24

 

 

 
217

Cost of rental equipment sales

 
60

 

 
5

 

 

 
65

Cost of new equipment sales

 
16

 

 
4

 

 

 
20

Cost of contractor supplies sales

 
10

 

 
3

 

 

 
13

Cost of service and other revenues

 
5

 

 
1

 

 

 
6

Total cost of revenues

 
638

 

 
92

 

 

 
730

Gross profit

 
385

 

 
63

 

 

 
448

Selling, general and administrative expenses
25

 
123

 

 
20

 

 

 
168

Merger related costs

 
1

 

 

 

 

 
1

Restructuring charge

 
1

 

 

 

 

 
1

Non-rental depreciation and amortization
4

 
51

 

 
5

 

 

 
60

Operating (loss) income
(29
)
 
209

 

 
38

 

 

 
218

Interest expense (income), net
6

 
118

 
1

 
1

 
1

 
(2
)
 
125

Other (income) expense, net
(32
)
 
46

 
2

 
3

 
(20
)
 

 
(1
)
(Loss) income before provision for income taxes
(3
)
 
45

 
(3
)
 
34

 
19

 
2

 
94

Provision for income taxes

 
18

 

 
9

 
7

 

 
34

(Loss) income before equity in net earnings (loss) of subsidiaries
(3
)
 
27

 
(3
)
 
25

 
12

 
2

 
60

Equity in net earnings (loss) of subsidiaries
63

 
36

 
25

 

 

 
(124
)
 

Net income (loss)
60

 
63

 
22

 
25

 
12

 
(122
)
 
60

Other comprehensive (loss) income
(39
)
 
(39
)
 
(38
)
 
(30
)
 

 
107

 
(39
)
Comprehensive income (loss)
$
21

 
$
24

 
$
(16
)
 
$
(5
)
 
$
12

 
$
(15
)
 
$
21




 

21

Table of Contents
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)



CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent
 
URNA
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
 
Foreign
 
SPV
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Equipment rentals
$

 
$
781

 
$

 
$
135

 
$

 
$

 
$
916

Sales of rental equipment

 
112

 

 
11

 

 

 
123

Sales of new equipment

 
16

 

 
5

 

 

 
21

Contractor supplies sales

 
16

 

 
4

 

 

 
20

Service and other revenues

 
15

 

 
5