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United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
FinancialsBill Plummer – Executive Vice President & Chief Financial OfficerIrene Moshouris – Senior Vice President, TreasurerDecember 1, 2016
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Introduction
Irene MoshourisSenior Vice President, Treasurer
• Joined the company in 2006• Responsibilities include Treasury, Tax and Real Estate• Avon Products, Inc. – Deputy Treasurer• Sterling Winthrop, Inc. and Arthur Andersen & Co. –
various tax and treasury positions
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
(1) Principal amounts only, no discount, premium, or deferred financing included.(2) As of September 30, 2016 pro forma for the redemption of $850M of 7.625% notes due 2022 announced on October 24, 2016.
Debt Maturity Management
144 325
980
1806
569146
Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12+
625
2500
475
1925
850 800 750 750
Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12
Principal UnusedFacility
December 31, 2008 (1)
September 30, 2016 (1) (2)
Average maturity 2 years beyond 2008 levels with strong management of maturities
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Interest Rate Management
7.3% 7.3%
8.1% 8.1%
6.8%6.5%
6.1%
5.4% 5.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2008 2009 2010 2011 2012 2013 2014 2015 YTDQ3-2016
(1) Interest rate reflects annual interest expense excluding gains or losses on redemptions divided by the monthly average debt balance.
(1)
Average weighted cost of debt currently 280 bps below 2011 peak
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
3.1
4.8
4.0
3.33.6
3.0 2.9 2.8 2.8
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2008 2009 2010 2011 2012 2013 2014 2015 Q3-2016
Net Leverage Management
(1) Leverage Ratio calculated as total debt and QUIPs, net of cash, excluding original issuance discounts, premiums, and deferred financing divided by adjusted LTM EBITDA. (2) Pro Forma assumes RSC acquisition occurred on January 1, 2012.
(1)
(2)
TargetedNetLeverageRangeOvertheCycle:
2.5xto3.5x
Net leverage ratio trending towards lower end of targeted range
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Share Repurchase Programs
0.1
0.5
1.9
1.4
2.0
3.5
1.7
2.6
1.7
2.7 2.7
2.1
106 106 106 104 10399 98
95 9491
8886
0
1
2
3
4
5
50
60
70
80
90
100
110
Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016
SharesRep
urchased
(MM)
FullyDilu
tedSharesOutstan
ding(M
M)
#SharePurchasedUnderRepurchasePrograms(R-Axis) FullyDilutedSharesOutstanding(L-Axis)
SinceOctober2013,URIhasrepurchased
22.9Msharesfor$1.8B
Fully-diluted share count down 19% since 2013
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Introduction
7
Bill PlummerExecutive Vice President & Chief Financial Officer
• Joined company in 2008 in current position• Responsible for Controllership, FP&A, Treasury,
Internal Audit, Investor Relations, Risk Management, Health Environmental & Safety and International Strategy Development
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
A few final thoughts
8
• Thinking through our Cost of Capital (WACC)• Framing ROIC, WACC and economic returns• Capital allocation and free cash generation
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
7.2%
0%
2%
4%
6%
8%
10%
12%
Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016
WACC Hurdle Rate
Cost of capital management
URI’s WACC has declined ~300 bps since 2014 – well below our historic hurdle rate
9
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
7.2%
8.3%
0%
2%
4%
6%
8%
10%
12%
Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016
WACC Hurdle Rate WACC Without Share Repurchase
Cost of capital management
Share repurchases have contributed significantly to the reduction in our WACC
10
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
“You guys report your ROIC as 8.3% but you say your WACC is 10%. So by your own terms,
you are destroying economic value with every dollar you invest.”
A few thoughts on ROIC
Comparing ROIC to WACC is a “shortcut” around a full DCF calculation…but “shortcuts” can be dangerous when thinking about real returns!
11
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Comparing ROIC to a Hurdle Rate…
…paints the wrong picture about economic profitability/ EVA
10.0%
8.3%
0%
2%
4%
6%
8%
10%
12%
Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016
Hurdle Rate ROIC
Negative Economic Profit?
12
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Comparing ROIC to WACC is better…
…but that comparison still has issues
8.3%
7.2%
0%
2%
4%
6%
8%
10%
12%
Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016
ROIC WACC Hurdle Rate
Negative Economic Profit? Positive Economic Profit?
13
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Issues with ROIC
Comparing ROIC to WACC is comparing “apples to oranges”
ROIC:• Is based on accounting profit
WACC:
• Assumes book value weights of debt and equity
• Is backward looking
• Covers one period
• Gives no benefit for growth
• Is used to discount cash flows
• Uses market weights for debt and equity
• Discounts the future
• Discounts all of the future
• Appropriately counts future growth
14
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Adjusting ROIC for market weighting…
…paints a truer picture of economic profitability
8.3%
7.2%
7.7%
0%
2%
4%
6%
8%
10%
12%
Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016
ROIC WACC Hurdle Rate Adjusted ROIC
15
Note: Adjusted ROIC reflects adjustment for market weightings rather than book value weightings.
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Net usesof capital
53%
15%
Net sourcesof capital
98%
2%
Historical capital allocation: Q3 2013–Q3 2016
Note: Net Debt Issuance includes cash from balance sheet and other items.
Organic investment
Strategic M&A
Return to stockholdersM
anag
e le
vera
ge ta
rget
(2
.5x–
3.5x
)
Priorities
Cash from operations
Debt issuance
Capex
Cash acquisitions
32%Share repurchases
100% equals $6.0B
16
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
$508
$846 $335 $367
$227
$23
$(223)
$383
$557 $411
32.8%26.6%
30.9%
35.6%
42.6%46.7% 47.8% 48.7% 47.4%
0%
10%
20%
30%
40%
50%
$(300)
$(100)
$100
$300
$500
$700
$900
$1,100
$1,300
2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
Sep YTD Full Year EBITDA Margin (%)
Free
Cas
h Fl
ow ($
MM
)
Adju
sted
EBI
TDA
Mar
gin
(%)
Structurally improved free cash flow profile
…while improving margins and economic profitability
17
Note: Dotted text box reflects mid-point of 2016 full-year FCF guidance.
United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.
Summary• URI’s core “Four Pillars” strategy has
served us well, delivering growth and improved profitability throughout the current cycle
• Operational excellence and disciplined fleet management have driven structural gains to our margin, return, and FCF profiles, and will remain the foundation of future improvements in our core business
• Project XL initiatives open new avenues for both growth and returns – $200MM in run rate benefit by year-end 2018
• Specialty businesses will continue to contribute strong growth and returns, targeting $2 billion in revenue by 2020
• Smart M&A represents an opportunity to turbocharge everything we do
• All will be supported by a sound, efficient capital structure and solid FCF throughout the cycle
Margin, Return, and FCF profiles structurally improved with more to come
18