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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, 2019
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 every Interactive Data File required to be submitted 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 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 
x
Accelerated Filer
 
o
Non-Accelerated Filer
 
o
Smaller Reporting Company
 
o
Emerging Growth Company
 
o
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    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 15, 2019, there were 78,624,102 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.


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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, 2019
INDEX
 
 
 
Page
PART I
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
PART II
 
 
 
 
Item 1
 
 
 
Item 1A
 
 
 
Item 2
 
 
 
Item 6
 
 
 
 

3

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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 companies that we have acquired or may acquire, including BakerCorp International Holdings, Inc. (“BakerCorp”) and Vander Holding Corporation and its subsidiaries (“BlueLine”), could have undiscovered liabilities or involve other unexpected costs, may strain our management capabilities or may be difficult to integrate;
the cyclical nature of our business, which is highly sensitive to North American construction and industrial activities; if construction or industrial activity decline, our revenues and, because many of our costs are fixed, our profitability may be adversely affected;
our significant indebtedness (which totaled $11.6 billion at March 31, 2019) 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 on 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 the agreements 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;
overcapacity of fleet in the equipment rental industry;
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;
trends in oil and natural gas could adversely affect the demand for our services and products;
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;
risks related to security breaches, cybersecurity attacks, failure to protect personal information, compliance with data protection laws and other significant disruptions in our information technology systems;
the costs of complying with environmental, safety and foreign law and regulations, as well as other risks associated with non-U.S. operations, including currency exchange risk (including as a result of Brexit), and tariffs;

4

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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;
increases in our maintenance and replacement costs and/or decreases in the residual value of our equipment; and
the effect of changes in tax law.

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, 2018, 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.


5

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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, 2019
 
December 31, 2018
 
(unaudited)
 
ASSETS
 
 
 
Cash and cash equivalents
$
52

 
$
43

Accounts receivable, net of allowance for doubtful accounts of $104 at March 31, 2019 and $93 at December 31, 2018
1,487

 
1,545

Inventory
123

 
109

Prepaid expenses and other assets
58

 
64

Total current assets
1,720

 
1,761

Rental equipment, net
9,438

 
9,600

Property and equipment, net
580

 
614

Goodwill
5,121

 
5,058

Other intangible assets, net
1,089

 
1,084

Operating lease right-of-use assets (note 8)
622

 

Other long-term assets
16

 
16

Total assets
$
18,586

 
$
18,133

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Short-term debt and current maturities of long-term debt
$
930

 
$
903

Accounts payable
557

 
536

Accrued expenses and other liabilities
751

 
677

Total current liabilities
2,238

 
2,116

Long-term debt
10,676

 
10,844

Deferred taxes
1,714

 
1,687

Operating lease liabilities (note 8)
497

 

Other long-term liabilities
86

 
83

Total liabilities
15,211

 
14,730

Common stock—$0.01 par value, 500,000,000 shares authorized, 113,516,258 and 78,812,644 shares issued and outstanding, respectively, at March 31, 2019 and 112,907,209 and 79,872,956 shares issued and outstanding, respectively, at December 31, 2018
1

 
1

Additional paid-in capital
2,394

 
2,408

Retained earnings
4,276

 
4,101

Treasury stock at cost—34,703,614 and 33,034,253 shares at March 31, 2019 and December 31, 2018, respectively
(3,080
)
 
(2,870
)
Accumulated other comprehensive loss
(216
)
 
(237
)
Total stockholders’ equity
3,375

 
3,403

Total liabilities and stockholders’ equity
$
18,586

 
$
18,133

See accompanying notes.

6

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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In millions, except per share amounts)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
Revenues:
 
 
 
Equipment rentals
$
1,795

 
$
1,459

Sales of rental equipment
192

 
181

Sales of new equipment
62

 
42

Contractor supplies sales
24

 
18

Service and other revenues
44

 
34

Total revenues
2,117

 
1,734

Cost of revenues:
 
 
 
Cost of equipment rentals, excluding depreciation
742

 
592

Depreciation of rental equipment
395

 
322

Cost of rental equipment sales
125

 
107

Cost of new equipment sales
54

 
37

Cost of contractor supplies sales
17

 
12

Cost of service and other revenues
23

 
18

Total cost of revenues
1,356

 
1,088

Gross profit
761

 
646

Selling, general and administrative expenses
280

 
232

Merger related costs
1

 
1

Restructuring charge
8

 
2

Non-rental depreciation and amortization
104

 
71

Operating income
368

 
340

Interest expense, net
151

 
109

Other income, net
(3
)
 
(1
)
Income before provision for income taxes
220

 
232

Provision for income taxes
45

 
49

Net income
$
175

 
$
183

Basic earnings per share
$
2.21

 
$
2.18

Diluted earnings per share
$
2.19

 
$
2.15

See accompanying notes.

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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In millions)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
 Net income
$
175

 
$
183

 Other comprehensive income (loss), net of tax:
 
 
 
 Foreign currency translation adjustments (1)
20

 
(25
)
 Fixed price diesel swaps
1

 

 Other comprehensive income (loss)
21

 
(25
)
 Comprehensive income (1)
$
196

 
$
158


(1)There were no material reclassifications from accumulated other comprehensive loss reflected in other comprehensive income (loss) during 2019 or 2018. There is no tax impact related to the foreign currency translation adjustments, as the earnings are considered permanently reinvested. We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. We have not repatriated funds to the U.S. to satisfy domestic liquidity needs, nor do we anticipate the need to do so. If we determine that all or a portion of our foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. There were no material taxes associated with other comprehensive income (loss) during 2019 or 2018.


See accompanying notes.


8

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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In millions)
 
 
Three Months Ended March 31, 2019
 
Common Stock
 
 
 
 
 
Treasury Stock
 
 
 
Number of
Shares (1)
 
Amount
 
Additional Paid-in
Capital
 
Retained Earnings
 
Number of
Shares
 
Amount
 
Accumulated Other Comprehensive Loss (2)
Balance at December 31, 2018
80

 
$
1

 
$
2,408

 
$
4,101

 
33

 
$
(2,870
)
 
$
(237
)
Net income
 
 
 
 
 
 
175

 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
 
 
 
 
 
20

Fixed price diesel swaps
 
 
 
 
 
 
 
 
 
 
 
 
1

Stock compensation expense, net
1

 
 
 
15

 
 
 
 
 
 
 
 
Exercise of common stock options
 
 
 
 
4

 
 
 
 
 
 
 
 
Shares repurchased and retired
 
 
 
 
(33
)
 
 
 
 
 
 
 
 
Repurchase of common stock
(2
)
 
 
 
 
 
 
 
2

 
(210
)
 
 
Balance at March 31, 2019
79

 
$
1

 
$
2,394

 
$
4,276

 
35

 
$
(3,080
)
 
$
(216
)

 
Three Months Ended March 31, 2018
 
Common Stock
 
 
 
 
 
Treasury Stock
 
 
 
Number of
Shares (1)
 
Amount
 
Additional Paid-in
Capital
 
Retained Earnings
 
Number of
Shares
 
Amount
 
Accumulated Other Comprehensive Loss (2)
Balance at December 31, 2017
84

 
$
1

 
$
2,356

 
$
3,005

 
28

 
$
(2,105
)
 
$
(151
)
Net income
 
 
 
 
 
 
183

 
 
 
 
 
 
Foreign currency translation adjustments
 
 
 
 
 
 
 
 
 
 
 
 
(25
)
Stock compensation expense, net
1

 
 
 
19

 
 
 
 
 
 
 
 
Exercise of common stock options
 
 
 
 
1

 
 
 
 
 
 
 
 
Shares repurchased and retired
 
 
 
 
(49
)
 
 
 
 
 
 
 
 
Repurchase of common stock
(1
)
 
 
 
 
 
 
 
1

 
(177
)
 
 
Balance at March 31, 2018
84

 
$
1

 
$
2,327

 
$
3,188

 
29

 
$
(2,282
)
 
$
(176
)
 
(1)Common stock outstanding decreased by less than 5 million net shares during the year ended December 31, 2018.
(2)The Accumulated Other Comprehensive Loss balance primarily reflects foreign currency translation adjustments.

See accompanying notes.

9

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UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Cash Flows From Operating Activities:
 
 
 
Net income
$
175

 
$
183

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
499

 
393

Amortization of deferred financing costs and original issue discounts
4

 
3

Gain on sales of rental equipment
(67
)
 
(74
)
Gain on sales of non-rental equipment
(2
)
 
(1
)
Gain on insurance proceeds from damaged equipment
(7
)
 
(2
)
Stock compensation expense, net
15

 
19

Merger related costs
1

 
1

Restructuring charge
8

 
2

Increase in deferred taxes
21

 
37

Changes in operating assets and liabilities, net of amounts acquired:
 
 
 
Decrease in accounts receivable
73

 
80

Increase in inventory
(9
)
 
(9
)
Decrease in prepaid expenses and other assets
12

 
42

Increase in accounts payable
18

 
103

Decrease in accrued expenses and other liabilities
(74
)
 
(135
)
Net cash provided by operating activities
667

 
642

Cash Flows From Investing Activities:
 
 
 
Purchases of rental equipment
(257
)
 
(280
)
Purchases of non-rental equipment
(42
)
 
(33
)
Proceeds from sales of rental equipment
192

 
181

Proceeds from sales of non-rental equipment
8

 
4

Insurance proceeds from damaged equipment
7

 
2

Purchases of other companies, net of cash acquired
(173
)
 
(52
)
Net cash used in investing activities
(265
)
 
(178
)
Cash Flows From Financing Activities:
 
 
 
Proceeds from debt
1,427

 
2,256

Payments of debt
(1,572
)
 
(2,563
)
Proceeds from the exercise of common stock options
4

 
1

Common stock repurchased
(243
)
 
(226
)
Payments of financing costs
(9
)
 

Net cash used in financing activities
(393
)
 
(532
)
Effect of foreign exchange rates

 
(6
)
Net increase (decrease) in cash and cash equivalents
9

 
(74
)
Cash and cash equivalents at beginning of period
43

 
352

Cash and cash equivalents at end of period
$
52

 
$
278

Supplemental disclosure of cash flow information:
 
 
 
Cash paid for income taxes, net
$
4

 
$
10

Cash paid for interest
179

 
153


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, Canada and Europe. 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, 2018 (the “2018 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 2018 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.

New Accounting Pronouncements
Measurement of Credit Losses on Financial Instruments. In June 2016, the Financial Accounting Standards Board ("FASB") issued guidance that will require companies to present assets held at amortized cost and available for sale debt securities net of the amount expected to be collected. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectibility. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2019 and early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Different components of the guidance require modified retrospective or prospective adoption. This guidance does not apply to receivables arising from operating leases. As discussed in note 2 to the condensed consolidated financial statements, most of our equipment rental revenue is accounted for as lease revenue (such revenue represented 78 percent of our total revenues for the three months ended March 31, 2019). We are currently assessing whether we will early adopt this guidance, and the impact on our financial statements, while limited to our non-operating lease receivables, is not currently estimable, as it will depend on market conditions and our forecast expectations upon, and following, adoption.
Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued guidance intended to simplify the subsequent accounting for goodwill acquired in a business combination. Prior guidance required utilizing a two-step process to review goodwill for impairment. A second step was required if there was an indication that an impairment may exist, and the second step required calculating the potential impairment by comparing the implied fair value of the reporting unit's goodwill (as if purchase accounting were performed on the testing date) with the carrying amount of the goodwill. The new guidance eliminates the second step from the goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss should not exceed the total amount of goodwill allocated to the reporting unit). The guidance requires prospective adoption and will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption of this guidance is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently assessing whether we will early adopt. The guidance is not expected to have a significant impact on our financial statements.
Guidance Adopted in 2019
Leases. See note 8 to our condensed consolidated financial statements for a discussion of our lease accounting following our adoption of an updated FASB lease accounting standard in the first quarter of 2019.

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Derivatives and Hedging. In 2019, we prospectively adopted guidance intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The guidance is additionally intended to simplify hedge accounting, and no longer requires separate measurement and reporting of hedge ineffectiveness. For cash flow and net investment hedges existing at the date of adoption, the guidance requires entities to apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings. Our use of derivative instruments is limited, and we did not recognize an adjustment to retained earnings upon adoption. Given our limited use of derivative instruments, adoption of this guidance did not have a significant impact on our financial statements.
2. Revenue Recognition

Revenue Recognition Accounting Standards
In May 2014, and in subsequent updates, the FASB issued guidance ("Topic 606") to clarify the principles for recognizing revenue. We adopted Topic 606 on January 1, 2018. Topic 606 includes the required steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
In March 2016, the FASB issued updated lease accounting guidance ("Topic 842"), as explained further in note 8 to the condensed consolidated financial statements. We adopted Topic 842 on January 1, 2019. Topic 842 is an update to Topic 840, which was the lease accounting standard in place through December 31, 2018. As reflected below, most of our revenue is accounted for under Topic 842 (Topic 840 for 2018). There were no significant changes to our revenue accounting upon adoption of Topic 842.
We recognize revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Topic 842. Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under Topic 606. As reflected below, most of our revenue is accounted for under Topic 842. Our contracts with customers generally do not include multiple performance obligations. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services.

Nature of goods and services
In the following table, revenue is summarized by type and by the applicable accounting standard.
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
 
2019
 
 
 
 
 
2018
 
 
 
Topic 842
 
Topic 606
 
Total
 
Topic 840
 
Topic 606
 
Total
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Owned equipment rentals
$
1,530

 
$

 
$
1,530

 
$
1,265

 
$

 
$
1,265

Re-rent revenue
35

 

 
35

 
25

 

 
25

Ancillary and other rental revenues:
 
 
 
 
 
 
 
 
 
 
 
Delivery and pick-up

 
119

 
119

 

 
92

 
92

Other
80

 
31

 
111

 
56

 
21

 
77

Total ancillary and other rental revenues
80

 
150

 
230

 
56

 
113

 
169

Total equipment rentals
1,645

 
150

 
1,795

 
1,346

 
113

 
1,459

Sales of rental equipment

 
192

 
192

 

 
181

 
181

Sales of new equipment

 
62

 
62

 

 
42

 
42

Contractor supplies sales

 
24

 
24

 

 
18

 
18

Service and other revenues

 
44

 
44

 

 
34

 
34

Total revenues
$
1,645

 
$
472

 
$
2,117

 
$
1,346

 
$
388

 
$
1,734


Revenues by reportable segment and geographical market are presented in notes 4 and 11 of the condensed consolidated financial statements, respectively, using the revenue captions reflected in our condensed consolidated statements of operations. The majority of our revenue is recognized in our general rentals segment and in the U.S. (for the three months ended March 31,

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2019, 81 percent and 91 percent of total revenues, respectively). We believe that the disaggregation of our revenue from contracts to customers as reflected above, coupled with the further discussion below and the reportable segment and geographical market disclosures in notes 4 and 11, depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Lease revenues (Topic 842)
The accounting for the types of revenue that are accounted for under Topic 842 is discussed below.
Owned equipment rentals represent our most significant revenue type (they accounted for 72 percent of total revenues for the three months ended March 31, 2019) and are governed by our standard rental contract. We account for such rentals as operating leases. The lease terms are included in our contracts, and the determination of whether our contracts contain leases generally does not require significant assumptions or judgments. Our lease revenues do not include material amounts of variable payments.
Owned equipment rentals: Owned equipment rentals represent revenues from renting equipment that we own. We do not generally provide an option for the lessee to purchase the rented equipment at the end of the lease, and do not generate material revenue from sales of equipment under such options.
We recognize revenues from renting equipment on a straight-line basis. Our rental contract periods are hourly, daily, weekly or monthly. By way of example, if a customer were to rent a piece of equipment and the daily, weekly and monthly rental rates for that particular piece were (in actual dollars) $100, $300 and $900, respectively, we would recognize revenue of $32.14 per day. The daily rate for recognition purposes is calculated by dividing the monthly rate of $900 by the monthly term of 28 days. This daily rate assumes that the equipment will be on rent for the full 28 days, as we are unsure of when the customer will return the equipment and therefore unsure of which rental contract period will apply.
As part of this straight-line methodology, when the equipment is returned, we recognize as incremental revenue the excess, if any, between the amount the customer is contractually required to pay, which is based on the rental contract period applicable to the actual number of days the equipment was out on rent, over the cumulative amount of revenue recognized to date. In any given accounting period, we will have customers return equipment and be contractually required to pay us more than the cumulative amount of revenue recognized to date under the straight-line methodology. For instance, continuing the above example, if the customer rented the above piece of equipment on December 29 and returned it at the close of business on January 1, we would recognize incremental revenue on January 1 of $171.44 (in actual dollars, representing the difference between the amount the customer is contractually required to pay, or $300 at the weekly rate, and the cumulative amount recognized to date on a straight-line basis, or $128.56, which represents four days at $32.14 per day).
We record amounts billed to customers in excess of recognizable revenue as deferred revenue on our balance sheet. We had deferred revenue (associated with both Topic 842/840 and Topic 606) of $54 and $56 as of March 31, 2019 and December 31, 2018, respectively.
As noted above, we are unsure of when the customer will return rented equipment. As such, we do not know how much the customer will owe us upon return of the equipment and cannot provide a maturity analysis of future lease payments. Our equipment is generally rented for short periods of time. Lessees do not provide residual value guarantees on rented equipment.
We expect to derive significant future benefits from our equipment following the end of the rental term. Our rentals are generally short-term in nature, and our equipment is typically rented for the majority of the time that we own it. We additionally recognize revenue from sales of rental equipment when we dispose of the equipment.
Re-rent revenue: Re-rent revenue reflects revenues from equipment that we rent from vendors and then rent to our customers. We account for such rentals as subleases. The accounting for re-rent revenue is the same as the accounting for owned equipment rentals described above.
“Other” equipment rental revenue is primarily comprised of 1) Rental Protection Plan (or "RPP") revenue associated with the damage waiver customers can purchase when they rent our equipment to protect against potential loss or damage, 2) environmental charges associated with the rental of equipment, and 3) charges for rented equipment that is damaged by our customers.
Revenues from contracts with customers (Topic 606)
The accounting for the types of revenue that are accounted for under Topic 606 is discussed below. Substantially all of our revenues under Topic 606 are recognized at a point-in-time rather than over time.

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Delivery and pick-up: Delivery and pick-up revenue associated with renting equipment is recognized when the service is performed.
“Other” equipment rental revenue is primarily comprised of revenues associated with the consumption of fuel by our customers which are recognized when the equipment is returned by the customer (and consumption, if any, can be measured).
Sales of rental equipment, new equipment and contractor supplies are recognized at the time of delivery to, or pick-up by, the customer and when collectibility is reasonably assured.
Service and other revenues primarily represent revenues earned from providing repair and maintenance services on our customers’ fleet (including parts sales). Service revenue is recognized as the services are performed.

Receivables and contract assets and liabilities
As reflected above, most of our equipment rental revenue is accounted for under Topic 842 (such revenue represented 78 percent of our total revenues for the three months ended March 31, 2019). The customers that are responsible for the remaining revenue that is accounted for under Topic 606 are generally the same customers that rent our equipment. We manage credit risk associated with our accounts receivables at the customer level. Because the same customers generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and our allowances for doubtful accounts address receivables arising from revenues from both Topic 606 and Topic 842 (Topic 840 for 2018).
Concentration of credit risk with respect to our receivables is limited because a large number of geographically diverse customers makes up our customer base. Our largest customer accounted for less than one percent of total revenues for the three months ended March 31, 2019, and for each of the last three full years. Our customer with the largest receivable balance represented approximately one percent of total receivables at March 31, 2019 and December 31, 2018. We manage credit risk through credit approvals, credit limits and other monitoring procedures.
Our allowances for doubtful accounts reflect our estimate of the amount of our receivables that we will be unable to collect based on historical write-off experience. Our estimate could require change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowances. Trade receivables that have contractual maturities of one year or less are written-off when they are determined to be uncollectible based on the criteria necessary to qualify as a deduction for federal tax purposes. Write-offs of such receivables require management approval based on specified dollar thresholds. During the three months ended March 31, 2019 and 2018, we recognized total additions, excluding acquisitions, to our allowances for doubtful accounts of $15 and $6, respectively, primarily 1) as a reduction to equipment rental revenue or 2) as bad debt expense within selling, general and administrative expenses in our condensed consolidated statements of income.
We do not have material contract assets, or impairment losses associated therewith, or material contract liabilities, associated with contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers in excess of recognizable revenue. We did not recognize material revenue during the three months ended March 31, 2019 or 2018 that was included in the contract liability balance as of the beginning of such periods.

Performance obligations
Most of our Topic 606 revenue is recognized at a point-in-time, rather than over time. Accordingly, in any particular period, we do not generally recognize a significant amount of revenue from performance obligations satisfied (or partially satisfied) in previous periods, and the amounts of such revenue recognized during the three months ended March 31, 2019 and 2018 were not material. We also do not expect to recognize material revenue in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2019.

Payment terms
Our Topic 606 revenues do not include material amounts of variable consideration. Our payment terms vary by the type and location of our customer and the products or services offered. The time between invoicing and when payment is due is not significant. Our contracts do not generally include a significant financing component. For certain products or services and customer types, we require payment before the products or services are delivered to the customer. Our contracts with customers do not generally result in significant obligations associated with returns, refunds or warranties. See above for a discussion of how we manage credit risk.
Revenue is recognized net of taxes collected from customers, which are subsequently remitted to governmental authorities.

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Contract costs
We do not recognize any assets associated with the incremental costs of obtaining a contract with a customer (for example, a sales commission) that we expect to recover. Most of our revenue is recognized at a point-in-time or over a period of one year or less, and we use the practical expedient that allows us to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less.

Contract estimates and judgments
Our revenues accounted for under Topic 606 generally do not require significant estimates or judgments, primarily for the following reasons:
The transaction price is generally fixed and stated on our contracts;
As noted above, our contracts generally do not include multiple performance obligations, and accordingly do not generally require estimates of the standalone selling price for each performance obligation;
Our revenues do not include material amounts of variable consideration, or result in significant obligations associated with returns, refunds or warranties; and
Most of our revenue is recognized as of a point-in-time and the timing of the satisfaction of the applicable performance obligations is readily determinable. As noted above, our Topic 606 revenue is generally recognized at the time of delivery to, or pick-up by, the customer.
We monitor and review our estimated standalone selling prices on a regular basis.

3. Acquisitions
BakerCorp Acquisition
In July 2018, we completed the acquisition of BakerCorp. BakerCorp was a leading multinational provider of tank, pump, filtration and trench shoring rental solutions for a broad range of industrial and construction applications. BakerCorp had approximately 950 employees, and its operations were primarily concentrated in the United States and Canada, where it had 46 locations. BakerCorp also had 11 locations in France, Germany, the United Kingdom and the Netherlands. BakerCorp had annual revenues of approximately $295. The acquisition:
Augmented our bundled solutions for fluid storage, transfer and treatment;
Expanded our strategic account base; and
Provided a significant opportunity to increase revenue and enhance customer service by cross-selling to our broader customer base.
The aggregate consideration paid was approximately $720. The acquisition and related fees and expenses were funded through drawings on our ABL facility.
The following table summarizes the fair values of the assets acquired and liabilities assumed. The purchase price allocations for these assets and liabilities are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period.

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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)



 Accounts receivable, net of allowance for doubtful accounts (1)
$
74

 Inventory
5

 Rental equipment
268

 Property and equipment
25

 Intangibles (2)
171

 Other assets
4

 Total identifiable assets acquired
547

 Current liabilities
(61
)
 Deferred taxes
(15
)
 Total liabilities assumed
(76
)
 Net identifiable assets acquired
471

 Goodwill (3)
249

 Net assets acquired
$
720

(1) The fair value of accounts receivables acquired was $74, and the gross contractual amount was $81. We estimated that $7 would be uncollectible.
(2) The following table reflects the fair values and useful lives of the acquired intangible assets identified based on our purchase accounting assessments:
 
Fair value
 Life (years)
 Customer relationships
$
166

8
 Trade names and associated trademarks
5

5
 Total
$
171

 

(3) All of the goodwill was assigned to our trench, power and fluid solutions segment. The level of goodwill that resulted from the acquisition is primarily reflective of BakerCorp's going-concern value, the value of BakerCorp's assembled workforce, new customer relationships expected to arise from the acquisition, and operational synergies that we expect to achieve that are not associated with the identifiable assets. $6 of goodwill is expected to be deductible for income tax purposes.
The three months ended March 31, 2019 include BakerCorp acquisition-related costs which are included in “Merger related costs” in our condensed consolidated statements of income.
Since the acquisition date, significant amounts of fleet have been moved between URI locations and the acquired BakerCorp locations, and it is not practicable to reasonably estimate the amounts of revenue and earnings of BakerCorp since the acquisition date. The impact of the BakerCorp acquisition on our equipment rentals revenue is primarily reflected in the increase in average OEC of 23.7 percent for the three months ended March 31, 2019. Such increase includes the impact of the acquisition of Vander Holding Corporation and its subsidiaries (“BlueLine”) discussed below.
BlueLine Acquisition
In October 2018, we completed the acquisition of BlueLine. BlueLine was one of the ten largest equipment rental companies in North America and served customers in the construction and industrial sectors with a focus on mid-sized and local accounts. BlueLine had 114 locations and over 1,700 employees based in 25 U.S. states, Canada and Puerto Rico. BlueLine had annual revenues of approximately $786. The acquisition is expected to:
Expand our equipment rental capacity in many of the largest metropolitan areas in North America, including both U.S. coasts, the Gulf South and Ontario;
Provide a well-diversified customer base with a balanced mix of commercial construction and industrial accounts;
Add more mid-sized and local accounts to our customer base; and
Provide a significant opportunity to increase revenue and enhance customer service by cross-selling to our broader customer base.

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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)



The aggregate consideration paid was approximately $2.072 billion. The acquisition and related fees and expenses were funded through borrowings under a new $1 billion senior secured term loan credit facility (the “term loan facility”) and the issuance of $1.1 billion principal amount of 6 1/2 percent Senior Notes due 2026.
The following table summarizes the fair values of the assets acquired and liabilities assumed. The purchase price allocations for these assets and liabilities are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period.
 Accounts receivable, net of allowance for doubtful accounts (1)
$
117

 Inventory
7

 Rental equipment
1,078

 Property and equipment
71

 Intangibles (customer relationships) (2)
230

 Other assets
41

 Total identifiable assets acquired
1,544

 Short-term debt and current maturities of long-term debt (3)
(12
)
 Current liabilities
(129
)
 Deferred taxes
(7
)
 Long-term debt (3)
(25
)
 Other long-term liabilities
(4
)
 Total liabilities assumed
(177
)
 Net identifiable assets acquired
1,367

 Goodwill (4)
705

 Net assets acquired
$
2,072

(1) The fair value of accounts receivables acquired was $117, and the gross contractual amount was $125. We estimated that $8 would be uncollectible.
(2) The customer relationships are being amortized over a 5 year life.
(3) The acquired debt reflects finance lease obligations.
(4) All of the goodwill was assigned to our general rentals segment. The level of goodwill that resulted from the acquisition is primarily reflective of BlueLine's going-concern value, the value of BlueLine's assembled workforce, new customer relationships expected to arise from the acquisition, and operational synergies that we expect to achieve that are not associated with the identifiable assets. $25 of goodwill is expected to be deductible for income tax purposes.
The three months ended March 31, 2019 include BlueLine acquisition-related costs which are included in “Merger related costs” in our condensed consolidated statements of income. In addition to the acquisition-related costs reflected in our consolidated statements of income, the debt issuance costs associated with the issuance of debt to fund the acquisition are reflected, net of amortization subsequent to the acquisition date, in long-term debt in our consolidated balance sheets.
Since the acquisition date, significant amounts of fleet have been moved between URI locations and the acquired BlueLine locations, and it is not practicable to reasonably estimate the amounts of revenue and earnings of BlueLine since the acquisition date. The impact of the BlueLine acquisition on our equipment rentals revenue is primarily reflected in the increase in average OEC of 23.7 percent for the three months ended March 31, 2019. Such increase includes the impact of the acquisition of BakerCorp discussed above.
Pro forma financial information
The pro forma information below gives effect to the BakerCorp and BlueLine acquisitions as if they had been completed on January 1, 2018 (“the pro forma acquisition date”). The pro forma information is not necessarily indicative of our results of operations had the acquisitions been completed on the above date, nor is it necessarily indicative of our future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisitions, and also does not reflect additional revenue opportunities following the acquisitions. The pro forma information includes adjustments to record the assets and liabilities of BakerCorp and BlueLine at their respective fair values based on available information and to give effect to the financing for the acquisitions and related transactions. The pro forma adjustments

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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)



reflected in the table below are subject to change as additional analysis is performed. The opening balance sheet values assigned to the assets acquired and liabilities assumed are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period. Increases or decreases in the estimated fair values of the net assets acquired may impact our statements of income in future periods. The tables below present unaudited pro forma consolidated income statement information as if BakerCorp and BlueLine had been included in our consolidated results for the entire period reflected.
 
Three Months Ended
 
 
March 31, 2018
 
 
United Rentals
 
BlueLine
 
BakerCorp
 
Total
 
Historic/pro forma revenues
$
1,734

 
$
188

 
$
74

 
$
1,996

 
Historic/combined pretax income (loss)
232

 
(22
)
 
(13
)
 
197

 
Pro forma adjustments to pretax income (loss):
 
 
 
 
 
 
 
 
Impact of fair value mark-ups/useful life changes on depreciation (1)
 
 
(18
)
 
(3
)
 
(21
)
 
Impact of the fair value mark-up of acquired fleet on cost of rental equipment sales (2)
 
 
(7
)
 

 
(7
)
 
Intangible asset amortization (3)
 
 
(19
)
 
(10
)
 
(29
)
 
Interest expense (4)
 
 
(27
)
 
(6
)
 
(33
)
 
Elimination of historic interest (5)
 
 
31

 
10

 
41

 
Restructuring charges (6)
 
 
(13
)
 
(6
)
 
(19
)
 
Pro forma pretax income
 
 
 
 
 
 
$
129

 
(1) Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups, and the changes in useful lives and salvage values, of the equipment acquired in the BakerCorp and BlueLine acquisitions.
(2) Cost of rental equipment sales was adjusted for the fair value mark-ups of rental equipment acquired in the BlueLine acquisition. BakerCorp did not historically recognize a material amount of rental equipment sales, and accordingly no adjustment was required for BakerCorp.
(3) The intangible assets acquired in the BakerCorp and BlueLine acquisitions were amortized.
(4) As discussed above, we issued debt to fund the BakerCorp and BlueLine acquisitions. Interest expense was adjusted to reflect these changes in our debt portfolio.
(5) Historic interest on debt that is not part of the combined entity was eliminated.
(6) We expect to recognize restructuring charges primarily comprised of severance costs and branch closure charges associated with the acquisitions over a period of approximately one year following the acquisition dates, which, for the pro forma presentation, was January 1, 2018. The adjustments above reflect the timing of the actual restructuring charges following the acquisitions (the pro forma restructuring charges above for the three months ended March 31, 2018 reflect the actual restructuring charges recognized during the three months following the acquisitions). We expect to incur additional restructuring charges for BakerCorp and BlueLine, however the remaining costs are not currently estimable, as we are still identifying the actions that will be undertaken.

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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)



4. Segment Information
Our reportable segments are i) general rentals and ii) trench, power and fluid solutions. The general rentals segment includes the rental of i) general construction and industrial equipment, such as backhoes, skid-steer loaders, forklifts, earthmoving equipment and material handling equipment, ii) aerial work platforms, such as boom lifts and scissor lifts and iii) general tools and light equipment, such as pressure washers, water pumps and power tools. The general rentals segment reflects the aggregation of 11 geographic regions—Carolinas, Gulf South, Industrial (which serves the geographic Gulf region and has a strong industrial presence), Mid-Atlantic, Mid Central, Midwest, Northeast, Pacific West, South, Southeast and Western Canada—and operates throughout the United States and Canada.
The trench, power and fluid solutions segment includes the rental of specialty construction products such as i) trench safety equipment, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers and line testing equipment for underground work, ii) power and HVAC equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment and iii) fluid solutions equipment primarily used for fluid containment, transfer and treatment. The trench, power and fluid solutions segment is comprised of the following regions, each of which primarily rents the corresponding equipment type described above: i) the Trench Safety region, ii) the Power and HVAC region, iii) the Fluid Solutions region and iv) the Fluid Solutions Europe region. The trench, power and fluid solutions segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates throughout the United States and in Canada and Europe.
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.  
 
General
rentals
 
Trench, power and fluid solutions
 
Total
Three Months Ended March 31, 2019
 
 
 
 
 
Equipment rentals
$
1,423

 
$
372

 
$
1,795

Sales of rental equipment
178

 
14

 
192

Sales of new equipment
55

 
7

 
62

Contractor supplies sales
17

 
7

 
24

Service and other revenues
37

 
7

 
44

Total revenue
1,710

 
407

 
2,117

Depreciation and amortization expense
412

 
87

 
499

Equipment rentals gross profit
501

 
157

 
658

Capital expenditures
236

 
63

 
299

Three Months Ended March 31, 2018
 
 
 
 
 
Equipment rentals
$
1,201

 
$
258

 
$
1,459

Sales of rental equipment
171

 
10

 
181

Sales of new equipment
37

 
5

 
42

Contractor supplies sales
14

 
4

 
18

Service and other revenues
30

 
4

 
34

Total revenue
1,453

 
281

 
1,734

Depreciation and amortization expense
337

 
56

 
393

Equipment rentals gross profit
426

 
119

 
545

Capital expenditures
267

 
46

 
313


19

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



 
March 31,
2019
 
December 31,
2018
Total reportable segment assets
 
 
 
General rentals
$
15,750

 
$
15,597

Trench, power and fluid solutions
2,836

 
2,536

Total assets
$
18,586

 
$
18,133


 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,
 
2019

2018
Total equipment rentals gross profit
$
658

 
$
545

Gross profit from other lines of business
103

 
101

Selling, general and administrative expenses
(280
)
 
(232
)
Merger related costs
(1
)

(1
)
Restructuring charge
(8
)
 
(2
)
Non-rental depreciation and amortization
(104
)
 
(71
)
Interest expense, net
(151
)
 
(109
)
Other income, net
3

 
1

Income before provision for income taxes
$
220


$
232


5. Restructuring Charges
Restructuring charges primarily include severance costs associated with headcount reductions, as well as branch closure charges. We incur severance costs and branch closure charges in the ordinary course of our business. We only include such costs that are part of a restructuring program as restructuring charges. Since the first such restructuring program was initiated in 2008, we have completed four restructuring programs and have incurred total restructuring charges of $323.
Closed Restructuring Programs
Our closed restructuring programs were initiated either in recognition of a challenging economic environment or following the completion of certain significant acquisitions. As of March 31, 2019, the total liability associated with the closed restructuring programs was $15.
BakerCorp/BlueLine Restructuring Program
In the third quarter of 2018, we initiated a restructuring program following the closing of the BakerCorp acquisition discussed in note 3 to the condensed consolidated financial statements. The restructuring program also includes actions undertaken associated with the BlueLine acquisition discussed in note 3 to the condensed consolidated financial statements. We expect to complete the restructuring program in 2019. The total costs expected to be incurred in connection with the program are not currently estimable, as we are still identifying the actions that will be undertaken.
The table below provides certain information concerning restructuring activity under the BakerCorp/BlueLine restructuring program during the three months ended March 31, 2019:
 
Reserve Balance at
 
Charged to
Costs and
Expenses (1)
 
Payments
and Other
 
Reserve Balance at
 
December 31, 2018
 
 
 
March 31, 2019
Branch closure charges
$
3

 
$
7

 
$
(1
)
 
$
9

Severance and other
9

 
4

 
(7
)
 
6

Total
$
12

 
$
11

 
$
(8
)
 
$
15

 

20

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



_________________
(1)    Reflected in our condensed consolidated statements of income as “Restructuring charge” (such charge also includes activity under our closed restructuring programs). These charges are not allocated to our reportable segments. 

6. Fair Value Measurements
As of March 31, 2019 and December 31, 2018, the amounts of our assets and liabilities that were accounted for at fair value were immaterial.
Fair value measurements are categorized 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 or liabilities.
Level 2- Observable inputs other than quoted prices in active markets for identical assets or liabilities include:
a)
quoted prices for similar assets or liabilities in active markets;
b)
quoted prices for identical or similar assets or liabilities in inactive markets;
c)
inputs other than quoted prices that are observable for the asset or liability;
d)
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
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.
 
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, accounts receivable securitization and term loan facilities and finance/capital leases (the classification of such leases changed upon adoption of a new lease accounting standard, as explained further in note 8 to the condensed consolidated financial statements) approximated their book values as of March 31, 2019 and December 31, 2018. The estimated fair values of our financial instruments, all of which are categorized in Level 1 of the fair value hierarchy, as of March 31, 2019 and December 31, 2018 have been calculated based upon available market information, and were as follows: 
 
March 31, 2019
 
December 31, 2018
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Senior notes
$
8,104

 
$