What changed in this filing

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Item 1. Business

2023-01-25 compared with 2022-01-26 · 84 added, 64 removed, 253 unchanged (37% of the section changed)

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Estimated North American market share (5) 17% 15%

Estimated North American equipment rental industry revenue growth (decline) (2) (5) 4% (9)%

Estimated North American equipment rental industry revenue growth (5) 11% 4%

2023 projected North American industry equipment rental revenue growth 4%

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(2) Reflects the combined impact of changes in rental rates, time utilization, and mix that contribute to the variance in owned equipment rental revenue.

See note 3 to the consolidated financial statements for a discussion of the different types of

equipment rentals revenue.

Rental rate changes are calculated based on the year-over-year variance in average contract rates, weighted by the prior period revenue mix.

See note 3 to the consolidated financial statements for a discussion of the different types of equipment rentals revenue.

Rental rate changes are calculated based on the year-over-year variance in average contract

rates, weighted by the prior period revenue mix.

Time utilization is calculated by dividing the amount of time an asset is on rent by the amount of time the asset has been owned during the year.

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

The positive fleet productivity for 2021 and the negative fleet productivity for 2020 include 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 COVID-19 volume declines were more pronounced in 2020 than 2021, and in 2021, we saw evidence of a continuing recovery of activity across our end-markets.

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).

The positive fleet productivity for 2021 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 COVID-19 volume declines were most pronounced in 2020, and in 2021 and 2022, we saw evidence of a continuing recovery of activity across our end-markets.

See "Industry Overview and Economic Outlook" below for further discussion of our end-markets.

(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.

(4) As discussed in note 4 to the consolidated financial statements, in May 2021, we completed the acquisition of General Finance Corporation (“General Finance”), which was a leading provider of mobile storage equipment and modular office space.

Prior to the General Finance acquisition, we did not rent material amounts of such equipment.

(4) The year-over-year increases in rental locations and employees include the impact of the December 2022 acquisition of assets of Ahern Rentals, Inc.

("Ahern Rentals"), which is discussed in note 4 to the consolidated financial statements.

(5) As discussed below (see "Industry Overview and Economic Outlook"), North American equipment rental industry revenue is based on industry estimates from the American Rental Association ("ARA").

Subsequent to our prior disclosure of 2020 industry information, the ARA decreased its estimate of the size of the North American equipment rental industry.

As a result of this change, relative to our prior disclosures, our market share for 2020 increased and the size of the 2020 decline in North American equipment rental industry revenue decreased.

As discussed above, we completed the acquisition of Ahern Rentals in December 2022.

Estimated North American market share as of December 31, 2022 includes the standalone, pre-acquisition revenue of Ahern Rentals.

Estimated North American market share as of December 31, 2021 does not include the pre-acquisition revenue of Ahern Rental because the acquisition was completed in 2022.

If the pre-acquisition revenue of Ahern Rental was included for 2021, estimated North American market share as of December 31, 2021 would have been approximately 16 percent.

Global Economic Conditions and COVID-19

Our operations are impacted by global economic conditions, including inflation, increased interest rates and supply chain constraints, and we take actions to modify our plans to address such economic conditions.

In 2022, for example, we intentionally held back on sales of rental equipment to ensure we had sufficient capacity for our customers.

In 2022, revenue from sales of rental equipment was largely flat year-over-year, however the number of units sold decreased approximately 17 percent year-over-year, as we held on to fleet to serve strong customer demand and to ensure greater fleet availability in the event industry supply chain challenges persist or worsen.

While the volume of sales of rental equipment decreased year-over-year, gross margin from sales of rental equipment increased 14.2 percentage points, which primarily reflected strong pricing and improved channel mix.

To date, our supply chain disruptions have been limited, but we may experience more severe supply chain disruptions in the future.

Interest rates on our debt instruments have increased recently.

For example, in November 2022, URNA issued $1.5 billion aggregate principal amount of senior secured notes at a 6 percent interest rate, while URNA's immediately prior issuance in August 2021 of $750 million aggregate principal amount of senior unsecured notes was at a 3 ¾ percent interest rate.

Additionally, the weighted average interest rates on our variable debt instruments were 3.3 percent in 2022 and 1.4 percent in 2021.

See Item 7A—Quantitative and Qualitative Disclosures About Market Risk for additional information related to interest rate risk.

We have experienced and are continuing to experience inflationary pressures.

A portion of inflationary cost increases is passed on to customers.

The most significant cost increases that are passed on to customers are for fuel and delivery, and there are other costs for which the pass through to customers is less direct, such as repairs and maintenance, and labor.

The impact of inflation and increased interest rates may be significant in the future.

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

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

Uncertainty remains regarding the ongoing impact of existing and emerging variant strains of COVID-19 on the operations and financial position of United Rentals, and on the global economy.

Uncertainty also remains regarding the length of time it will take for the COVID-19 pandemic to ultimately subside, which will be impacted by the effectiveness of vaccines against COVID-19 (including against emerging variant strains), and by measures that may in the future be implemented to protect public health.

See "Industry Overview and Economic Outlook" below for a discussion of market performance in 2021 and 2020.

The health and safety of our employees and customers remains our top priority, and we also implemented a detailed COVID-19 response plan, which is explained in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and which we believe helped mitigate the impact of COVID-19 on our results.

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.

The volume declines were more pronounced in 2020 than 2021, and we have seen recent evidence of recovery across our construction and industrial markets, as well as encouraging gains in end-market indicators, as reflected in our 2022 forecast.

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

Uncertainty remains regarding the potential impact of existing and emerging variant strains of COVID-19 on the operations and financial position of United Rentals, and on the global economy, which will be driven by, among other things, any resurgences in cases, the effectiveness of vaccines against COVID-19 (including against emerging variant strains), and the measures that may in the future be implemented to protect public health.

In March 2020, we first experienced rental volume declines associated with COVID-19, and the COVID-19 impact was most pronounced in 2020.

In 2021 and 2022, we saw evidence of a continuing recovery of activity across our end-markets.

The health and safety of our employees and customers has been, and remains, our top priority, and we also implemented a detailed COVID-19 response plan, which we believe helped mitigate the impact of COVID-19 on our results.

Our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Reports on Form 10-Q filed in 2021 and 2020 include detailed disclosures addressing the COVID-19 impact.

We continue to assess the economic environment in which we operate and any developments relating to the COVID-19 pandemic, and take appropriate actions to address the economic and other challenges we face.

See "Industry Overview and Economic Outlook" below for a discussion of our end-markets, and Item 1A- Risk Factors for further discussion of the risks related to us and our business.

Human Capital

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

keep people safe and healthy;

keep people safe

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

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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 utilize a mixture of indicators to assess the safety performance of our operations, including total recordable injury rate (TRIR), preventable motor vehicle incidents per million miles, corrective actions and near miss frequency and have disclosed a goal to further reduce our TRIR.

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

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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.

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 virtual health challenges to encourage daily activity.

Approximately 50 percent of eligible employees participated in the program in 2022.

• Diversity, equity and inclusion (“DE&I”):

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

The ERGs 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, and there has been positive progress in diverse representation at the Company, as reflected in a four percentage point increase in diverse employees in sales and management roles, which increased from 27 percent in 2018 to 31 percent in 2021.

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 2021, we conducted a Company-wide culture workshop with all employees designed to continue our dialogue on racial justice and social equity by focusing on three important keys of our culture:

safety and wellness, DE&I, and trust and communication.

• Diversity, equity and inclusion (“DEI”) :

We believe that an inclusive and diverse team is key to the success of our culture.

Our commitment to DEI is demonstrated through many efforts including employee-led employee resource groups (“ERGs”);

company-wide DEI goals;

and inclusive volunteering opportunities.

Our four ERGs aim to represent and support the diverse communities that make up our workforce by facilitating:

networking and connecting with peers;

education and awareness efforts;

and leadership and skill development.

The Company has internal goals for overall workforce diversity and for specific positions, and we have disclosed a goal to increase the percentage of diverse employees in sales and management roles, reflecting our commitment to increase diverse representation in our talent pipeline.

There has been positive progress in these goals, as reflected in an over four-percentage point increase in diverse employees in sales and management roles from 29.1 percent in 2019 to 33.5 percent in 2022.

In addition, the Company has made hiring, promotion, and fair inclusion of veterans a priority, through its veterans ERG and external partnerships that support this goal.

The Company also engaged in a Company-wide volunteering initiative in 2022 for employees to make a positive impact for their teams, communities and customers.

• Compensation programs and employee benefits:

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

Additionally, we have conducted three company-wide stock grant programs for employees since 2014 – the most recent grant was in recognition of our employees’ special efforts during the COVID-19 pandemic, and initially took place in 2020, with an update in 2021 recognizing the contributions of newly hired employees since the 2020 grant date.

Additionally, we have conducted four company-wide stock grant programs for employees since 2014 – the most recent grant took place in 2022 and was in honor of our 25 th anniversary.

• 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.

For example, total employee turnover, which represents voluntary and involuntary terminations during the year divided by average headcount during the year, was 15.4 percent, 11.9 percent and 14.4 percent for 2021, 2020 and 2019, respectively.

For example, voluntary employee turnover, which represents voluntary terminations during the year divided by average headcount during the year, was 13.1 percent, 13.5 percent and 9.1 percent for 2022, 2021 and 2020, respectively.

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

Our 2021 employee experience survey showed year-over-year increases in most categories and no declines in any category.

Additionally, when we asked employees how likely they are to continue with the Company beyond 6 months, the average response was 9.2 out of 10, which was consistent with the average response in 2020.

We believe this question assesses our employees’ commitment to United Rentals, and that the response is consistent with our strong employee retention.

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 to engage with our full team.

In 2022, we switched survey administration to Peakon (a Workday company).

Our 2022 employee experience survey showed strong results with average responses ranging from 8.4 to 9.2 out of 10 in each of our four survey categories:

Engagement (8.5), Diversity & Inclusion (8.7), Health & Wellbeing (8.4) and Safety Commitment (9.2), which placed us in the top 10 percent of the Peakon Benchmark for Commercial and Professional Services Companies for each survey category.

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, a virtual collaboration platform for our employees, 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 2021, employees voluntarily donated approximately $1.3 million to the fund, and employees received 403 grants totaling approximately $875,000.

In 2022, employees voluntarily donated approximately $1.2 million to the fund, and employees received 338 grants totaling approximately $1.0 million.

• Training and development:

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In 2022, our employees enhanced their skills through approximately 645,000 hours of training, including safety training, sales and leadership training and equipment-related training from our suppliers.

The majority of our training was delivered virtually during 2021 and 2020.

Although we still deliver some training virtually, we pivoted back to in-person training in 2022 (most training was delivered virtually during 2021 and 2020, primarily due to COVID-19).

Our performance process encourages employee check-ins throughout the year to discuss performance and career goals, as well as development opportunities 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.

For the past several years, as we continued to manage the impact of global economic conditions and COVID-19, we 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.

We are continuing to manage 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:

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.

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

We continue to implement Lean kaizen processes across our branch network, with the objectives of:

reducing the cycle time associated with renting our equipment to customers;

improving invoice accuracy and service quality;

reducing the elapsed time for equipment pickup and delivery;

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

• The continued expansion of our specialty 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 specialty business, as exhibited by our acquisition of General Finance discussed in note 4 to the consolidated financial statements, 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 .

We have a dedicated team responsible for reducing waste in our operational processes, with the objectives of:

condensing the cycle time associated with preparing equipment for rent;

optimizing our resources for delivery and pickup of equipment;

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

and implementing customer service best practices;

• The continued expansion and cross-selling of adjacent specialty and services products, which enables us to provide a "one-stop" shop for our customers .

We believe that the expansion of our specialty business, as exhibited by our acquisition of General Finance Corporation (“General Finance”), which is discussed in note 4 to the consolidated financial statements, 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, as exhibited by our recently completed acquisition of assets of Ahern Rentals, which is discussed in note 4 to the consolidated financial statements.

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.

In July 2018, we completed the acquisition of BakerCorp International Holdings, Inc.

(“BakerCorp”), which allowed for our entry into select European markets.

As discussed in note 4 to the consolidated financial statements, in May 2021, we completed the acquisition of General Finance, which allowed for our entry into select markets in Australia and New Zealand.

We also have a limited presence in Europe, Australia and New Zealand.

See Item 2—Properties for further geographical detail on our rental network.

In 2021, based on an analysis of our charge account customers’ Standard Industrial Classification (“SIC”) codes:

In 2022, based on our classification of the vertical market segments in which our equipment was used:

• Industrial and other non-construction rentals represented approximately 48 percent of our rental revenue, primarily reflecting rentals to manufacturers, energy companies, chemical companies, paper mills, railroads, shipbuilders, utilities, retailers and infrastructure entities;

• Commercial construction rentals represented approximately 47 percent of our rental revenue, primarily reflecting rentals related to the construction and remodeling of facilities for office space, lodging, healthcare, entertainment and other commercial purposes;

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

• Residential rentals represented approximately five 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 ARA, 2022 North American equipment rental industry revenue grew approximately 11 percent year-over-year.

In 2021, our full year rental revenue increased by 14.9 percent year-over-year, which included the impact of the General Finance acquisition that was completed in May 2021 and is discussed in note 4 to the consolidated financial statements.

As discussed in more detail throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the increase in rental revenue includes the significant impact in 2020 of COVID-19, which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions.

Our estimated North American market share of approximately 15 percent in 2021 increased from 14 percent in 2020.

In 2022, based on our analyses of industry forecasts and macroeconomic indicators, we expect a continuation of the market recovery experienced in 2021, following a market decline in 2020, which included the pronounced impact of

Specifically, we expect that North American industry equipment rental revenue will increase approximately 10 percent in 2022.

In 2022, our full year rental revenue increased by 23.3 percent year-over-year, which included the impact of the General Finance acquisition that was completed in May 2021 and the Ahern Rentals acquisition that was completed in December 2022, both of which are discussed in note 4 to the consolidated financial statements.

The impact of these acquisitions on our equipment rentals revenue is primarily reflected in the year-over-year increase in average OEC of 13.6 percent for the year ended December 31, 2022.

Our estimated North American market share of approximately 17 percent as of December 31, 2022, which included the standalone, pre-acquisition revenue of Ahern Rentals, increased from 15 percent as of December 31, 2021,which did not include the pre-acquisition revenue of Ahern Rentals, as the acquisition was completed in 2022.

In 2023, based on our analyses of industry forecasts and macroeconomic indicators, we expect that North American industry equipment rental revenue will increase approximately 4 percent.

Competitive Advantages

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• allow our mobile sales and service team members to support our customers efficiently while in the field;

• permit customers to access their accounts online;

• permit customers to access and manage their accounts online;

• allow management to obtain a wide range of operational and financial data.

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Segment Information

We have two reportable segments– general rentals and specialty (formerly "trench, power and fluid solutions").

We have two reportable segments– general rentals and specialty.

Segment financial information is presented in note 5 to our consolidated financial statements.

The general rentals segment includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and activities.

The general rentals segment’s customers include construction and industrial companies, manufacturers, utilities, municipalities and homeowners.

The general rentals segment’s customers include construction and industrial

companies, manufacturers, utilities, municipalities and homeowners.

The general rentals segment is comprised of four geographic divisions—Central, Northeast, Southeast and West—and operates throughout the United States and Canada.

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The North American equipment rental industry is highly fragmented and competitive.

As the largest equipment rental company in the industry, we estimate that we have an approximate 15 percent market share in North America based on 2021 total equipment rental industry revenues as measured by the ARA.

Estimated market share is calculated by dividing our total 2021 North American rental revenue by ARA’s forecasted 2021 industry revenue.

As the largest equipment rental company in the industry, we estimate that we have an approximate 17 percent market share, which includes the standalone, pre-acquisition revenue of Ahern Rentals, in North America based on 2022 total equipment rental industry revenues as measured by the ARA.

Estimated market share is calculated by dividing our total 2022 North American rental revenue, plus the standalone, pre-acquisition revenue of Ahern Rentals, by ARA’s forecasted 2022 industry revenue.

Our competitors primarily include small, independent businesses with one or two rental locations;

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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 2021 and 2020, which included the pronounced impact of COVID-19, as well as projected performance in 2022.

See "Industry Overview and Economic Outlook" above for a discussion of our end-markets, as well as projected market performance in 2023.

Environmental and Safety Regulations

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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 storage tanks at certain 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.

(ii) fines and penalties for non-compliance.

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

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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