RSC — Q1 2012 Earnings Presentation
51 slides from RSC's earnings presentation, Apr 18, 2012
Slide 1: Ready to Deliver Investor Presentation First Quarter 2012
Ready to Deliver Investor Presentation First Quarter 2012
Slide 2: Introductory Information
Introductory Information Unless otherwise specified, the information in this presentation, including forward looking statements related to our outlook, is as of our most recent earnings call held on April 18, 2012. We make no commitment to update any such information contained in this presentation.
Slide 3: 2012 Priorities
2012 Priorities Objectives and Goals RSC ACQUISITION Rapid deleveraging of balance sheet CAPITAL STRUCTURE Successful integration to fully capture cost and revenue synergies Drive superior performance through enhanced services and processes CUSTOMER RELATIONSHIPS & BUSINESS PROCESSES
Slide 4: Market Dynamics
MARKET DYNAMICS D> 4 p f — ae 4 United Rentals (United Rentals:
Slide 5: Rental Industry Poised For Growth
Rental Industry Poised For Growth* 12% CAGR(1) (2011-2016) Market Growth Forecast Over Next Five Years North American Rental Industry Poised for Growth * As projected by IHS Global Insight forecast IHS Global Insight Forecast (1)CAGR of Construction and Industrial Equipment
Slide 6: Market Dynamics: Indicators Continue to Show Improvement
Market Dynamics* Indicators Continue to Show Improvement Architecture Billings Index (ABI) January 2009-February 2012 Source: The American Institute of Architects Used Prices Top Ten Rental Equipment Categories Fair Market (FMV), Orderly Liquidation (OLV), and Forced Liquidation Values (FLV) as a %
Slide 7: Increased Rental Penetration
Increased Rental Penetration Advantages of Renting vs. Owning Equipment Financial Deleveraging Drives Penetration CONSERVE CAPITAL No large capital outlays needed, which frees up capital to invest elsewhere SAVE ON STORAGE Eliminate the need for large equipment storage areas and buildings RIGHT EQUI
Slide 8: Successful integration to fully capture cost and revenue synergies: RSC Acquisition
Successful integration to fully capture cost and revenue synergies RSC ACQUISITION
Slide 9: Combination Overview United Rentals - RSC
Combination Overview United Rentals - RSC A LEADING NORTH AMERICAN EQUIPMENT RENTAL COMPANY CLOSELY ALIGNED CULTURES STRONG PLATFORM FOR GROWTH SUBSTANTIAL CASH SYNERGY OPPORTUNITY EXPECTED TO BE ACCRETIVE TO CASH EPS IN FIRST FULL YEAR Combined OEC of $7.0 billion 2011 revenue of $4.1 billion Best
Slide 10: Branch Footprint Expands Customer Reach and Offers Consolidation Opportunities
Branch Footprint Expands Customer Reach and Offers Consolidation Opportunities Blue: URI Red: RSC
Slide 11: Synergy Opportunities
Synergy Opportunities Potential $200 million+ annual run-rate cost savings $147 million expected to be achievable within the first 12 months Total expected cost savings represent 5% of combined 2011 revenue, before synergies Additional top-line and cash flow opportunities Efficient use of combined f
Slide 12: Balanced Customer Mix
Balanced Customer Mix URI Rental Revenue Standalone (1) Notes: (1) 2011 equipment rental revenue (2) Includes RSC construction revenue, including certain RSC infrastructure revenue reported therein Industrial Infrastructure Commercial Residential RSC Rental Revenue Standalone (1) Industrial / Non- C
Slide 13: Focused on Successful Integration
Focused on Successful Integration View through customer's eyes Best of both worlds Follow the money Transparent communication Focused operating principles . . . Seamless transition Industry-leading people, processes & systems Significant cost and revenue synergy opportunities Informed internal and e
Slide 14: Integration Management Office and Steering Committee
STEERING COMMITTEE INTEGRATION MANAGEMENT OFFICE (IMO) Significant resources: 80+ person team dedicated to leading integration preparation Breadth of experience: Leaders spanning all business functions (e.g., IT, HR, Finance, and Operations) Joint-planning process: Both companies involved in all asp
Slide 15: Combine "Best of Both" to Better Serve Customers
Combine "Best of Both" to Better Serve Customers SAFETY Combined best practices to improve safety culture Enhanced customer safety training resources SALES Strengthened key accounts salesforce with deep industry expertise Total Control to deepen customer relationships Leading CRM technology CORE pri
Slide 16: Day One Playbooks for the Field
Day One Playbooks for the Field Ensuring a Smooth Transition to One Company
Slide 17: Integration Activities
Integration Activities STABILIZE PLAN INTEGRATE DIFFERENTIATE Prepare for operations post close. Identify "best of both" and synergy opportunities. Complete transition smoothly, with no noticeable difference in eyes of customers. Retain top talent at all levels of organization. Realize quick hits to
Slide 18: Drive superior performance through enhanced services and processes
Drive superior performance through enhanced services and processes CUSTOMER RELATIONSHIPS BUSINESS PROCESSES
Slide 19: Strengthening Core Business through Performance Improvement
Assure ready access to meet customers' fleet needs Strengthening Core Business through Performance Improvement Achieve further rental rate improvement by leveraging improved customer service Grow key accounts and expand cross-selling of all lines of business Expand channel opportunities for sale of
Slide 20: CORE Driving Profitable Growth
CORE Driving Profitable Growth Technology Helps Support Pricing Strategies and Discipline Program ensures consistent pricing across the network Support for customer segmentation and Operation United Improved guidance to sales force Improved negotiations RENTAL RATES
Slide 21: Drivers of Loyalty - Customer Scorecard
Fleet availability On-time delivery Pick-up Invoice accuracy Service call response time Drivers of Loyalty - Customer Scorecard Sharing Results with the Customer RENTAL RATES
Slide 22: Fleet Mix
Fleet Mix $4.3 billion of fleet comprised of 265,000 units Used sales will focus on Aerial fleet, while purchases will concentrate on Earth Moving, Power, Lighting, and Trucks Compaction Compressors Earth Moving Light Welders Trench Other Forks - Industrial Forks - Reach Trucks Power Compaction Aeri
Slide 23: Meeting Our Customers' Fleet Needs
Meeting Our Customers' Fleet Needs 3,100 Equipment Classes with Original Cost of $4.3B Booms And Lifts Earth Moving Forklifts Trench And Other % of 2011 Rental Revenue 39.7% 11.9% 14.4% 34.1% Time Utilization 77.0% 54.3% 75.7% 32.3% Dollar Utilization 37.1% 40.6% 37.6% 80.6% Average Fleet Age* (in m
Slide 24: Managing Fleet with a Life Cycle Approach
Managing Fleet with a Life Cycle Approach Time Utilization Rental Capex and Used Sales ($MM) Selling Oldest Fleet (Age of Used Sales in Months*) *OEC weighted FLEET Age Composition ($MM) ? 1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 >9 Total East 0 998 1416 1649 2117 2752 3422 3911 4077 4124 4243 998 418 233
Slide 25: Accelerated Focus on Key Accounts
Accelerated Focus on Key Accounts THESE CUSTOMERS: Bring more stable relationships and revenue Rent for longer periods, which results in fewer transaction costs Return equipment with less damage Provide opportunity to leverage North American footprint KEY ACCOUNTS Potential equipment rental spend of
Slide 26: Operation United Performance
Operation United Performance Key Accounts Rental Revenue up $53.8MM Q1 2012 vs. Q1 2011 Key Account Dollar Growth KEY ACCOUNTS
Slide 27: Reopening Dormant Accounts
Reopening Dormant Accounts Leveraging technology to expand customer base Advanced analytic tools identify best channel for connecting to customer Closed loop assures customer outreach In Q1 2012, 5K Dormant Customer Accounts were Reopened, Generating $8 million in Rental Revenue KEY ACCOUNTS
Slide 28: Used Equipment Sales
Used Equipment Sales Increased used sales for 2012 Push margins through retail channels Lower cost of repairs and maintenance Offer "United Guard" maintenance program Supported by Rouse Asset Services Extensive experience in the industry Sales Support Website redesign (Internal / External) Customize
Slide 29: FAST: Improving Logistics
FAST Improving logistics Total branches on FAST: 421* Full FAST: 337 FAST Lite: 84 Trucks on FAST: approximately 1,500 Drivers using FAST: approximately 1,200 Sources of expected financial benefits: Fuel Route optimization (less miles driven) Idle time reduction (achieved a 46% reduction) Labor Cost
Slide 30: Safety as a Core Value
Safety as a Core Value Robust Support for Industrial Initiative Hired safety professionals dedicated to industrial support in 2011 Revised and focused company's written safety program on industrial risk World Class Training and Education Annual safety education required for all employees Hazard awar
Slide 31: Trench Safety Provides Revenue Synergies Opportunity
Trench Safety Provides Revenue Synergies Opportunity Largest trench safety rental company in North America RSC currently "re-rents" trench equipment for customers Trench is first on the job and supports cross selling opportunities OSHA requires protection when working more than 5 feet underground Si
Slide 32: What Is Power & HVAC?
What Is Power & HVAC? Combination with RSC provides revenue synergy opportunity Historically high margin business Business specializes in turn-key services and solutions Provides custom engineered products and services Power & HVAC Rental Revenue Increased 39% in Q1 YOY SPECIALTY FLEET
Slide 33: Rapid deleveraging of balance sheet: Capital Structure
Rapid deleveraging of balance sheet CAPITAL STRUCTURE
Slide 34: Q1 Results
Q1 Results * Rental rate changes are calculated based on the year-over-year variance in average contract rates, weighted by the prior period revenue mix. Q1 2012 RESULTS Q1 2012 RENTAL REVENUE Rental revenue: Increased 20.5% to $523MM, compared with $434MM for the same period last year Rates* +6.3%
Slide 35: Consistent Free Cash Flow Generation Over Cycle
Consistent Free Cash Flow Generation Over Cycle *2007 includes merger termination benefit of $91MM ** 2010 includes a $55MM federal tax refund Cash Flow 2006-2012 ($MM) 2006 2007* 2008 2009 2010** 2011 Qtr 1 2012 EBITDA $1,084 $1,265 $(117) $589 $649 $879 $217 Cash Interest (213) (203) (218) (234) (
Slide 36: 2012 Standalone Outlook
2012 Standalone Outlook(1) STANDALONE OUTLOOK RENTAL RATES An increase in rental rates of 5% TIME UTILIZATION An increase of approximately 0.5 percentage points year-over-year CAPEX Net rental capital expenditures of between $700 million and $750 million, after gross purchases of approximately $1.0
Slide 37: Pro Forma Financial Overview
Pro Forma Financial Overview Year ended as of December 31, 2011 Year ended as of December 31, 2011 Year ended as of December 31, 2011 URI (%) RSC (3) Pro Forma Total Revenue 2,611 1,522 4,133 Rental Revenue 2,151 1,307 3,458 Gross Profit (1) 898 483 1,381 Operating Profit (1) 415 207 622 Adjusted EB
Slide 38: Pro Forma Debt Maturity Profile
$255 A/R Used 6.50% QuIPS $750 8.375 % Senior Sub Notes $500 10.875% Senior Unsecured Notes $45 A/R Unused $300 4.00% Convert. Notes $168 $750 5.75% Senior Secured Notes 1.875% Convertible Notes $22 $55 $1,180(2) ABL Used $886 ABL Unused $2,400 $500 9.25% Senior Unsecured Notes $700 7.625% Senior Un
Slide 39: Pro Forma Leverage Ratio Set to Decline
Pro Forma Leverage Ratio Set to Decline(1) (3)(4) 1 Assuming transaction on January 1, 2012. 2 Pro Forma 2011 leverage excludes synergies. 3 Pro Forma 2012 leverage includes $147MM of run rate synergies, pro-rated for 8 months. 4 Pro Forma 2012 leverage would be 4.1 after giving effect for a $200MM
Slide 40: Appendix
United’ Rentals 4 laze ES Appendix
Slide 41: Adjusted Earnings Per Share GAAP Reconciliation
Adjusted Earnings Per Share GAAP Reconciliation We define "Earnings (loss) per share - adjusted" as the sum of (i) earnings (loss) per share - GAAP, as reported plus the after-tax impacts of (ii) RSC merger related costs, (iii) restructuring charge, (iv) loss on retirement of subordinated convertibl
Slide 42: EBITDA and Adjusted EBITDA GAAP Reconciliation
EBITDA and Adjusted EBITDA GAAP Reconciliation EBITDA represents the sum of net income (loss), provision (benefit) for income taxes, interest expense, net, interest expense-subordinated convertible debentures, depreciation of rental equipment, and non-rental depreciation and amortization. Adjusted E
Slide 43: Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
Slide 44: Free Cash Flow GAAP Reconciliation
Free Cash Flow GAAP Reconciliation
Slide 45: ARA Rental Market Metrics Standardization
In September 2011, the American Rental Association (ARA) released Rental Market Metrics whitepaper Standardization of metrics provides consistent way for calculating and reporting critical performance metrics. Publication provides definitions and calculations for original equipment cost (OEC), time
Slide 46: ARA Metrics Comparison
ARA Metrics Comparison (Q United Rentals: «
Slide 47: Corporate Governance
Corporate Governance Focus on Best Practices 10 of 11 directors are independent Roles of Chairman and CEO are separated and the Chairman is an independent director Each of the Compensation, Audit and Nominating & Corporate Governance Committees is comprised solely of independent directors Board elec
Slide 48: Convertible Senior Notes
Convertible Senior Notes In November 2009, URI issued $172.5MM of convertible senior notes due 2015. Notes carry a 4.0% coupon and are convertible at an initial conversion price of $11.11 per share Net share settlement election means par amount paid in cash, in-the-money portion settled in stock or
Slide 49: Mechanics of Convert and Hedge
Mechanics of Convert and Hedge Share Delivery at Conversion for $168MM ASSUMED STOCK PRICE $9 United Rentals Net 0 New Shares Issued 0 Shares 0 Shares Investors $12 United Rentals Net 0 New Shares Issued 1.1MM Shares 1.1MM Shares Investors $35 United Rentals Net 8.4MM New Shares Issued 1.9MM Shares
Slide 50: Glossary of Terms
Glossary of Terms Capex: Capital expenditures represent the amount reported in our statements of cash flows for the purchase of rental and non-rental equipment. Dollar Utilization: Annualized rental revenue, excluding re-rent and ancillary revenue, divided by the average original equipment cost. EBI
Slide 51: Glossary of Terms
Glossary of Terms Fleet Age: The OEC weighted age of the entire fleet, excluding the benefit of refurbishments. OEC: Original Equipment Cost; the cost of an asset at the time it was originally purchased. Rental Rate: The percentage change in the rate/price that is charged for equipment on rent. Over