What changed in this filing

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Item 1. Business

2021-01-27 compared with 2020-01-29 · 96 added, 38 removed, 217 unchanged (38% of the section changed)

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The data below should be read in conjunction with, and is qualified by reference to, our Management’s Discussion and Analysis and our consolidated financial statements and notes thereto contained elsewhere in this report.

As discussed in note 4 to the consolidated financial statements, we completed the acquisitions of BakerCorp International Holdings, Inc.

(“BakerCorp”) and Vander Holding Corporation and its subsidiaries ("BlueLine") in July 2018 and October 2018, respectively.

The results of BakerCorp and BlueLine subsequent to their acquisition dates are reflected in the table below.

PERFORMANCE MEASURES

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Equipment rental revenue variance components:

Year-over-year change in average OEC

Year-over-year change in average original equipment cost (“OEC”) (2.2)% 17.7%

Assumed year-over-year inflation impact (1) (1.5)% (1.5)%

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National account percent of equipment rental revenue 44% 43%

Fleet original equipment cost (“OEC”) (in billions)

Fleet OEC (in billions) $13.78 $14.63

Equipment classes 4,000 4,000

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Rental locations 1,165 1,175

Approximate number of branches per district

Approximate number of districts per region

Approximate range of branches per district 4-11 4-11

Approximate range of districts per region 5-10 4-9

Hourly employees 12,550 13,400

Salaried employees 5,700 5,700

Total employees 18,250 19,100

Estimated North American market share 13% 13%

Estimated North American equipment rental industry revenue growth

United Rentals equipment pro forma rental revenue increase (4)

Estimated North American equipment rental industry revenue (decline) growth (2) (12)% 5%

2021 projected North American industry equipment rental revenue growth 2% -

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Mix includes the impact of changes in customer, fleet, geographic and segment mix.

The negative fleet productivity for 2020 includes the impact of the novel coronavirus (“COVID-19”), which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions, as discussed further below.

The 2020 decline in North American equipment rental industry revenue also includes the impact of COVID-19 (see "Industry Overview and Economic Outlook" below for further discussion).

(3) Reflects the combined impact of changes in the other types of equipment rentals revenue (see note 3 for further detail), excluding owned equipment rental revenue.

As discussed in note 4 to the consolidated financial statements, we completed the acquisitions of BakerCorp and BlueLine in July 2018 and October 2018, respectively.

Additionally, we completed the acquisition of NES Rentals Holdings II, Inc.

(“NES”) and Neff Corporation ("Neff") in April 2017 and October 2017, respectively.

The pro forma information includes the standalone, pre-acquisition results of NES, Neff, BakerCorp and BlueLine.

As discussed above, we completed the acquisitions of BakerCorp and BlueLine in July 2018 and October 2018, respectively.

Estimated market share as of December 31, 2018 includes the standalone, pre-acquisition revenues of BakerCorp and BlueLine.

(4) We completed the acquisitions of BakerCorp International Holdings, Inc.

(“BakerCorp”) and Vander Holding Corporation and its subsidiaries ("BlueLine") in July 2018 and October 2018, respectively.

The pro forma information includes the standalone, pre-acquisition results of BakerCorp and BlueLine.

The pro forma components are not reflected above for 2020 versus 2019 because BakerCorp and BlueLine are fully reflected in our results for these periods.

COVID-19 was first identified in people in late 2019.

COVID-19 spread rapidly throughout the world and, in March 2020, the World Health Organization characterized COVID-19 as a pandemic.

The COVID-19 pandemic has significantly disrupted supply chains and businesses around the world.

The extent and duration of the COVID-19 impact, on the operations and financial position of United Rentals, and on the global economy, is uncertain.

See "Industry Overview and Economic Outlook" below for a discussion of market performance in 2020.

The health and safety of our employees and customers remains our top priority, and we have also engaged in extensive contingency planning to manage the business impact of the pandemic.

Prior to mid-March 2020, our results were largely in line with expectations.

We began to experience a decline in revenues in March 2020, when rental volume declined in response to shelter-in-place orders and other market restrictions.

COVID-19 is discussed in more detail throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Human Capital

The Company’s key human capital management objectives are to attract, retain and develop talent to deliver on the Company’s strategy.

To support these objectives, the Company’s human resources programs are designed to:

keep people safe and healthy;

enhance the Company’s culture through efforts aimed at making the workplace more inclusive;

acquire and retain diverse talent;

reward and support employees through competitive pay and benefit programs;

develop talent to prepare them for critical roles and leadership positions;

and facilitate internal talent mobility to create a high-performing workforce.

See “Locations/Personnel” in the table above for information on employee counts.

The Company focuses on the following in managing its human capital:

• Health and safety:

We have a safety program that focuses on implementing management systems, policies and training programs and performing assessments to see that workers are trained properly and that injuries and incidents are prevented.

All of our employees are empowered with stop-work authority which enables them to immediately stop any unsafe or potentially hazardous working condition or behavior they may observe.

We utilize a mixture of indicators to assess the safety performance of our operations, including total recordable injury rate, preventable motor vehicle incidents per million miles, corrective actions and near miss frequency.

We also recognize outstanding safety behaviors through our annual awards program.

Importantly, during the COVID-19 pandemic, our continuing focus on health and safety enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues safe.

• Employee wellness:

The Company’s Live Well, Safe & Healthy program is a comprehensive approach to wellness that encourages healthy behaviors and is intended to raise morale, productivity and overall employee engagement.

The program includes a biometric screening at work or off-site, a health assessment, a paid day off to be used for a wellness exam or day of service, tobacco cessation support, and participation incentives.

Additionally, employees and family members can participate in biannual virtual health challenges to encourage daily activity.

Approximately 46 percent of eligible employees participated in the program in 2020.

• Inclusion and diversity (“I&D”):

We believe that an inclusive and diverse team is key to the success of our culture and aim to drive I&D initiatives through many efforts, including sponsoring three employee-led employee resource groups (“ERGs”) that represent and support the diverse communities that make up our workforce.

facilitate networking and connecting with peers, outreach and mentoring, and leadership and skill development.

The Company has internal goals for overall workforce diversity and additional goals for specific positions at the Company.

In addition, the Company has made hiring and supporting veterans a priority through its veterans ERG and working with organizations that support the veteran community.

Importantly, in 2020, one of our ERGs co-hosted a series of internal conversations with senior leadership that focused on racial inequality and injustice to spark dialogue among employees and leaders in an effort to build a more inclusive, diverse and empowered culture at the Company.

• Compensation programs and employee benefits:

Our compensation and benefits programs provide a package designed to attract, retain and motivate employees.

In addition to competitive base salaries, the Company provides a variety of short-term, long-term and commission-based incentive compensation programs to reward performance relative to key financial, human capital and customer experience metrics.

We offer comprehensive benefit options including retirement savings plans, medical insurance, prescription drug benefits, dental insurance, vision insurance, accident and critical illness insurance, life and disability insurance, health savings accounts, flexible spending accounts, legal insurance, auto/home insurance and identity theft insurance.

Additionally, we have conducted three company-wide stock grant programs for employees since 2014 – the most recent grant program took place in 2020 and was in recognition of our employees’ special efforts during the COVID-19 pandemic.

• Employee experience and retention:

To evaluate our employee experience and retention efforts, we monitor a number of employee measures, such as employee retention, internal promotions and referrals.

We also conduct an annual employee experience survey, which provides valuable information on drivers of engagement and areas where we can improve.

For instance, we learned through our 2020 survey process that 92 percent of our team members intend to stay with the Company to continue building and growing their careers.

To provide an open and frequent line of communication for all employees, we host town hall meetings and quarterly all employee conference calls, and utilize Workplace by Facebook to engage with our full team.

The Company also sponsors the United Compassion Fund, an employee-funded 501(c)(3) charity that provides financial assistance to fellow employees in need.

In 2020, employees voluntarily donated over $1.4 million to the fund, and employees received 356 grants totaling over $750,000.

• Training and development:

The Company is committed to the continued development of its people.

We aim for all applicable new hires to attend Center of Excellence training within 90 days of hire, which training was delivered virtually during most of 2020.

Additionally, we offer a wide array of training solutions (classroom, hands-on and e-learning) for our people.

In 2020, our employees enhanced their skills through approximately 370,000 hours of training, including safety training, sales and leadership training and equipment-related training from our suppliers.

Our employee training hours declined significantly relative to prior years because we paused in-person trainings beginning in March 2020 due to the COVID-19 pandemic.

While we were able to resume with virtual trainings in some cases, we did not resume many of those trainings until June and we were unable to provide certain types of training in a virtual format.

Additionally, we had fewer new hires and did not gain employees through acquisitions, reducing the need for new hire and acquisition training.

We also offer an undergraduate tuition assistance program.

Our performance process encourages performance and development check-ins throughout the year to provide for development at all levels across the Company.

For the past several years, we have executed a strategy focused on improving the profitability of our core equipment rental business through revenue growth, margin expansion and operational efficiencies.

In particular, we have focused on customer segmentation, customer service differentiation, rate management, fleet management and operational efficiency.

In 2020 , we expect to continue our disciplined focus on increasing our profitability and return on invested capital.

In particular, our strategy calls for:

A consistently superior standard of service to customers , often provided through a single point of contact;

We are currently managing the impact of COVID-19, as discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our general strategy focuses on profitability and return on invested capital, and, in particular, calls for:

• A consistently superior standard of service to customers , often provided through a single lead contact who can coordinate the cross-selling of the various services we offer throughout our network.

We utilize a proprietary software application, Total Control ® , which provides our key customers with a single in-house software application that enables them to monitor and manage all their equipment needs.

Total Control ® is a unique customer offering that enables us to develop strong, long-term relationships with our larger customers.

Our digital capabilities, including our Total Control ® platform, allow our sales teams to provide contactless end-to-end customer service;

• The further optimization of our customer mix and fleet mix, with a dual objective:

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We believe these efforts will lead to even better service of our target accounts, primarily large construction and industrial customers, as well as select local contractors.

Our fleet team's analyses are aligned with these objectives to identify trends in equipment categories and define action plans that can generate improved returns;

Our fleet team's analyses

are aligned with these objectives to identify trends in equipment categories and define action plans that can generate improved returns;

• A continued focus on “Lean” management techniques, including kaizen processes focused on continuous improvement .

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and improving the effectiveness and efficiency of our repair and maintenance operations;

A continued focus on Project XL, which is a set of eight specific work streams focused on driving profitable growth through revenue opportunities and generating incremental profitability through cost savings across our business;

The continued expansion of our trench, power and fluid solutions footprint, as well as our tools and onsite services offerings, and the cross-selling of these services throughout our network, as exhibited by our recent acquisition of BakerCorp discussed above.

We plan to open at least 25 specialty rental branches/tool hubs/onsite services locations in 2020 and continue to invest in specialty rental fleet to further position United Rentals as a single source provider of total jobsite solutions through our extensive product and service resources and technology offerings;

The pursuit of strategic acquisitions to continue to expand our core equipment rental business , as exhibited by our recently completed acquisitions of NES, Neff and BlueLine.

• The continued expansion of our trench, power and fluid solutions footprint, as well as our tools and onsite services offerings, and the cross-selling of these services throughout our network .

We believe that the expansion of our trench, power and fluid solutions business, as well as our tools and onsite services offerings, will further position United Rentals as a single source provider of total jobsite solutions through our extensive product and service resources and technology offerings;

• The pursuit of strategic acquisitions to continue to expand our core equipment rental business .

Strategic acquisitions allow us to invest our capital to expand our business, further driving our ability to accomplish our strategic goals.

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and residential construction, which includes remodeling.

As discussed in note 4 to the consolidated financial statements, in July 2018, we completed the acquisition of BakerCorp, which allowed for our entry into select European markets (the acquisition added 11 European locations in France,

Germany, the United Kingdom and the Netherlands to our branch network).

In July 2018, we completed the acquisition of BakerCorp, which allowed for our entry into select European markets (the acquisition added 11 European locations in France, Germany, the United Kingdom and the Netherlands to our branch network).

In 2020, based on an analysis of our charge account customers’ Standard Industrial Classification (“SIC”) codes:

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• Residential rentals represented approximately four percent of our rental revenue, primarily reflecting rentals of equipment for the construction and renovation of homes.

We estimate that, based on industry estimates from the American Rental Association ("ARA"), 2019 North American equipment rental industry revenue grew approximately 5 percent year-over-year, with higher growth in the U.S.

In 2019 , our full year rental revenue increased by 14.8 percent year-over-year, including the impact of the BakerCorp and BlueLine acquisitions.

On a pro forma basis including the standalone, pre-acquisition results of BakerCorp and BlueLine, equipment rental revenue increased 4.1 percent year-over-year.

In 2020 , based on our analyses of industry forecasts and macroeconomic indicators, we expect that the majority of our end markets will continue to experience solid demand for equipment rental services.

Specifically, we expect that North American industry equipment rental revenue will increase approximately 3 percent, with similar growth expected in the U.S.

We estimate that, based on industry estimates from the American Rental Association ("ARA"), 2020 North American equipment rental industry revenue decreased approximately 12 percent year-over-year, with similar declines in the U.S.

In 2020, our full year rental revenue decreased by 10.3 percent year-over-year.

We estimate that our North American market share of approximately 13 percent increased slightly in 2020.

As discussed in more detail throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the decline in rental revenue includes the impact of the novel coronavirus (“COVID-19”), which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions.

In 2021, based on our analyses of industry forecasts and macroeconomic indicators, we expect modest market recovery following the declines experienced in 2020, which included the pronounced impact of COVID-19.

Specifically, we expect that North American industry equipment rental revenue will increase approximately 2 percent, with higher growth expected in Canada than the U.S.

Competitive Advantages

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• Customer Care Center .

We have a Customer Care Center ("CCC") with locations in Tampa, Florida and Charlotte, North Carolina that handles all telephone calls to our customer service telephone line, 1-800-UR-RENTS.

We have a Customer Care Center ("CCC") in Charlotte, North Carolina that handles all telephone calls to our customer service telephone line, 1-800-UR-RENTS.

The CCC handles many of the 1-800-UR-RENTS telephone calls without having to route them to individual branches, and allows us to provide a more uniform quality experience to customers, manage fleet sharing more effectively and free up branch employee time.

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states and every Canadian province, and serves customers that range from Fortune 500 companies to small businesses and homeowners.

The recently completed BakerCorp acquisition added 11 European locations in France, Germany, the United Kingdom and the Netherlands to our branch network.

The acquisition of BakerCorp in July 2018 added 11 European locations in France, Germany, the United Kingdom and the Netherlands to our branch network.

We believe that our geographic and customer diversity provides us with many advantages including:

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Each regional office has a management team that monitors branch, district and regional performance with extensive systems and controls, including performance benchmarks and detailed monthly operating reviews.

Employee Training Programs .

We are dedicated to providing training and development opportunities to our employees.

In 2019 , our employees enhanced their skills through over 700,000 hours of training, including safety training, sales and leadership training, equipment-related training from our suppliers and online courses covering a variety of relevant subjects.

Risk Management and Safety Programs .

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Our strategic approach with respect to our suppliers is to maintain the minimum number of suppliers per category of equipment that can satisfy our anticipated volume and business requirements.

This approach is designed to ensure that the terms we negotiate are competitive and that there is sufficient product available to meet anticipated customer demand.

This approach is designed to ensure that the terms

we negotiate are competitive and that there is sufficient product available to meet anticipated customer demand.

We utilize a comprehensive selection process to determine our equipment vendors.

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The fragmented nature of the industry and our relatively small market share, however, may adversely impact our ability to mitigate rental rate pressure.

See "Industry Overview and Economic Outlook" above for a discussion of market performance in 2020, which included the pronounced impact of COVID-19, as well as projected performance in 2021.

Environmental and Safety Regulations

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These laws regulate issues such as wastewater, stormwater, solid and hazardous wastes and materials, and air quality.

Our operations generally do not raise significant environmental risks, but we use and store hazardous materials as part of maintaining our rental equipment fleet and the overall operations of our business, dispose of solid and hazardous waste and wastewater from equipment washing, and store and dispense petroleum products from above-ground storage tanks located at certain of our locations.

Under environmental and safety laws, we may be liable for, among other things, (i) the costs of investigating and remediating contamination at our sites as well as sites to which we send hazardous wastes for disposal or treatment, regardless of fault, and (ii) fines and penalties for non-compliance.

We incur ongoing expenses associated with the performance of appropriate investigation and remediation activities at certain of our locations.

We incur ongoing expenses associated with the performance of appropriate investigation and remediation activities at certain locations.

Approximately 5,700 of our employees are salaried and approximately 12,550 are hourly.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business