What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-01-25 compared with 2022-01-26 · 184 added, 161 removed, 485 unchanged (42% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in millions, except per share data and unless otherwise indicated)

As discussed in note 2 to our consolidated financial statements, in 2021, we adopted SEC guidance that is intended to modernize, simplify, and enhance certain disclosures throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In accordance with this guidance, we have omitted discussions comparing 2020 and 2019 results, as such disclosures were included in our Annual Report on Form 10-K for the year ended December 31, 2020.

As discussed below, in March 2020, we first experienced rental volume declines associated with COVID-19, and the COVID-19 impact was more pronounced in 2020 than 2021.

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 include detailed disclosures addressing the COVID-19 response plan that is summarized below.

As discussed in note 1 to our consolidated financial statements, 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.

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

We began to experience a decline in revenues in March 2020, which is when the World Health Organization characterized COVID-19 as a pandemic and when our rental volume first 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.

In early March 2020, we initiated contingency planning ahead of the impact of COVID-19 on our end-markets.

Our COVID-19 response plan is focused on five work-streams:

1) ensuring the safety and well-being of our employees and customers, 2) leveraging our competitive advantages to support the needs of customers, 3) aggressively managing capital expenditures, 4) controlling core operating expenses and 5) proactively managing the balance sheet with a focus on liquidity.

We believe that this response plan helped mitigate the impact of COVID-19 on our results.

As noted above, 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 include additional detailed COVID-19 disclosures.

The impact of COVID-19 on our business is discussed throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We have omitted discussions comparing 2021 and 2020 results, as such disclosures were included in our Annual Report on Form 10-K for the year ended December 31, 2021.

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 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.

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.

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.

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

Executive Overview

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In 2022, equipment rental revenues represented 87 percent of our total revenues.

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 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, which is discussed above.

Our general strategy focuses on profitability and return on invested capital, and, in particular, calls for:

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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, Inc.

("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.

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 COVID-19.

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

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

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.

Business- Industry Overview and Economic Outlook" for a discussion of our end-markets.

As discussed below, fleet productivity is a comprehensive metric that reflects the combined impact of changes in rental rates, time utilization, and mix that contribute to the variance in owned equipment rental revenue.

For the full year 2022:

• Equipment rentals increased 14.9 percent year-over-year, including the impact of the May 2021 acquisition of General Finance discussed in note 4 to the consolidated financial statements;

• Average OEC increased 4.0 percent year-over-year, including the impact of the General Finance acquisition;

• Fleet productivity increased 10.4 percent, primarily due to improved fleet absorption in 2021.

2020 reflected more pronounced rental volume declines associated with COVID-19, and in 2021, we saw evidence of a continuing recovery of activity across our end-markets;

• Equipment rentals increased 23.3 percent year-over-year, including 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;

• Average OEC increased 13.6 percent year-over-year, including the impact of the General Finance and Ahern Rentals acquisitions;

• Fleet productivity increased 9.4 percent, primarily due to broad-based strength of demand across our end-markets;

• 68 percent of equipment rental revenue was derived from key accounts, as compared to 72 percent in 2021.

Key accounts are each managed by a single point of contact to enhance customer service.

The slight decrease from 2020 includes the impact of the General Finance acquisition, which added revenue from Australia and New Zealand that is not from key accounts.

Financial Overview

Prior to taking actions pertaining to our financial flexibility and liquidity, we consider the impact of COVID-19 on liquidity, and assess our available sources and anticipated uses of cash, including, with respect to sources, cash generated from operations and from the sale of rental equipment.

In 2021, we took the following actions to improve our financial flexibility and liquidity, and to position us to invest the necessary capital in our business:

• Issued $750 principal amount of 3 3 / 4 percent Senior Notes due 2032;

• Redeemed all $1 billion principal amount of our 5 7 / 8 percent Senior Notes due 2026;

• Amended and extended our accounts receivable securitization facility, which expires on June 24, 2022 and may be further extended on a 364-day basis by mutual agreement with the purchasers under the facility, including an increase in the size of the facility from $800 to $900.

Total debt as of December 31, 2021 was flat year-over-year.

In 2021, borrowings under the ABL facility were used to fund most of the cost of the General Finance acquisition discussed above.

2021 debt activity also included the use of cash generated from operations, net of the funds used for capital expenditures, to reduce borrowings under the ABL facility (excluding the impact of the General Finance acquisition) and the net impact of the debt issuance and redemption discussed above.

Prior to taking actions pertaining to our financial flexibility and liquidity, we assess our available sources and anticipated uses of cash, including, with respect to sources, cash generated from operations and from the sale of rental equipment.

In 2022, we took the following actions to improve our financial flexibility and liquidity, and to position us to invest the necessary capital in our business (see note 12 to the consolidated financial statements for further discussion of our debt instruments):

• Redeemed $500 principal amount of our 5 1 / 2 percent Senior Notes due 2027;

• Amended and extended our accounts receivable securitization facility, including an increase in the size of the facility from $900 to $1.1 billion.

The facility expires in June 2024 and may be extended on a 364-day basis by mutual agreement with the purchasers under the facility;

• Amended and extended our ABL facility, including an increase in the size of the facility from $3.75 billion to $4.25 billion.

The facility expires in June 2027;

• Entered into an uncommitted repurchase facility pursuant to which we may obtain short-term financing in an amount up to $100;

• Issued $1.5 billion principal amount of 6 percent Senior Secured Notes due 2029.

The issued debt, together with drawings on our ABL facility, was used to fund the Ahern Rentals acquisition that is discussed in note 4 to the consolidated financial statements.

Total debt as of December 31, 2022 increased by $1.685 billion, or 17.4 percent, from December 31, 2021, primarily due to the $1.5 billion principal amount of debt issued to partially fund the Ahern Rentals acquisition, as discussed above.

As of December 31, 2022, we had available liquidity of $2.896 billion, comprised of cash and cash equivalents, and availability under the ABL and accounts receivable securitization facilities.

In 2022, we also repurchased $1 billion of common stock, completing the repurchase program that commenced in the first quarter of 2022.

In October 2022, our Board of Directors authorized a $1.25 billion share repurchase program.

No repurchases were made as of December 31, 2022 under this program, which was paused through the initial phase of the integration of the Ahern Rentals acquisition.

We expect to resume repurchases under the program in the first quarter of 2023, and to repurchase $1.0 billion of common stock under the program in 2023.

As discussed in note 19 to the consolidated financial statements, our Board of Directors also approved a quarterly dividend program in January 2023, and the first such dividend under the program is payable in February 2023.

Net income and diluted earnings per share for each of the three years in the period ended December 31, 2022 are presented below.

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Loss on repurchase/redemption of debt securities (7) (13) (0.18) (22) (0.31) (137) (1.88)

(1) This primarily reflects transaction costs associated with the General Finance acquisition discussed above.

(1) This reflects transaction costs associated with the General Finance acquisition discussed in note 4 to the consolidated financial statements.

Merger related costs only include costs associated with major acquisitions completed since 2012 that significantly impact our operations (the "major acquisitions," each of which had annual revenues of over $200 prior to acquisition).

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(4) This reflects additional costs recorded in cost of rental equipment sales associated with the fair value mark-up of rental equipment acquired in certain major acquisitions that was subsequently sold.

(5) As discussed in note 6 to our consolidated financial statements, this primarily reflects severance costs and branch closure charges associated with our restructuring programs.

(5) This primarily reflects severance costs and branch closure charges associated with our restructuring programs.

As of December 31, 2022, there were no open restructuring programs.

For additional information, see "Results of Operations-Other costs/(income)-restructuring charges" below.

(6) This reflects write-offs of leasehold improvements and other fixed assets.

As discussed in note 6 to our consolidated financial statements, the 2020 charges primarily reflect the discontinuation of certain equipment programs, and were not related to COVID-19.

The 2020 charges primarily reflect the discontinuation of certain equipment programs, and were not related to COVID-19.

(7) Reflects the difference between the net carrying amount and the total purchase price of the redeemed notes.

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These items are excluded from adjusted EBITDA internally when evaluating our operating performance and for strategic planning and forecasting purposes, and allow investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies.

net income and adjusted EBITDA margins represent net income or adjusted EBITDA divided by total revenue.

The net income and adjusted EBITDA margins represent net income or adjusted EBITDA divided by total revenue.

Management believes that EBITDA and adjusted EBITDA, when viewed with the Company’s results under U.S.

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(1) This primarily reflects transaction costs associated with the General Finance acquisition discussed above.

(1) This reflects transaction costs associated with the General Finance acquisition discussed in note 4 to the consolidated financial statements.

Merger related costs only include costs associated with major acquisitions that significantly impact our operations.

For additional information, see "Results of Operations-Other costs/(income)-merger related costs" below.

(2) As discussed in note 6 to our consolidated financial statements, this primarily reflects severance costs and branch closure charges associated with our restructuring programs.

(2) This primarily reflects severance costs and branch closure charges associated with our restructuring programs.

As of December 31, 2022, there were no open restructuring programs.

For additional information, see "Results of Operations-Other costs/(income)-restructuring charges" below.

(3) Represents non-cash, share-based payments associated with the granting of equity instruments.

(5) Reflects the difference between the net carrying amount and the total purchase price of the redeemed notes.

(5) This primarily reflects the difference between the net carrying amount and the total purchase price of the redeemed notes.

For additional information, see "Results of Operations-Other costs/(income)-Interest expense, net" below.

For the year ended December 31, 2022, net income increased $719, or 51.9 percent, and net income margin increased 380 basis points to 18.1 percent.

For the year ended December 31, 2021, adjusted EBITDA increased $482, or 12.3 percent, and adjusted EBITDA margin decreased 70 basis points to 45.4 percent.

The year-over-year increase in net income margin primarily reflected a reduction in interest expense, improved gross margins from equipment rentals and sales of rental equipment and decreased non-rental depreciation and amortization as a percentage of revenue, partially offset by higher selling, general and administrative ("SG&A") and income tax expenses.

Net interest expense decreased $245, or 37 percent, year-over-year.

Excluding the impact of debt redemption losses, net interest expense decreased 19 percent year-over-year, primarily due to decreases in both average debt and the average cost of debt.

Equipment rentals gross margin increased year-over-year primarily due to a reduction in depreciation expense as a percentage of revenue, partially offset by higher bonus expense primarily due to improved profitability, and increases in certain operating expenses, including delivery costs, as a percentage of revenue.

Gross margin from sales of rental equipment increased primarily due to improved pricing in a strong used equipment market.

Non-rental depreciation and amortization decreased 4 percent year-over-year, which equated to a significant improvement as a percentage of revenue.

SG&A expense increased year-over-year primarily due to higher bonus and stock compensation expenses, which reflect improved profitability.

Year-over-year, income tax expense increased $211, or 85 percent, and the effective income tax rate increased by 300 basis points, primarily reflecting the release in 2020 of a valuation allowance on foreign tax credits.

The decrease in the adjusted EBITDA margin primarily reflects lower margins from equipment rentals (excluding depreciation) and increased SG&A expense, partially offset by higher margins from sales of rental equipment.

Gross margin from equipment rentals (excluding depreciation) decreased 110 basis points primarily due to a higher bonus accrual, which reflects improved profitability, and increases in certain operating expenses, including delivery costs, as a percentage of revenue.

SG&A expense increased primarily due to increased bonus expense, which reflects improved profitability.

Gross margin from sales of rental equipment increased primarily due to improved pricing in a strong used equipment market.

For the year ended December 31, 2022, adjusted EBITDA increased $1.204 billion, or 27.3 percent, and adjusted EBITDA margin increased 290 basis points to 48.3 percent.

The year-over-year increase in net income margin primarily reflects improved gross margins from equipment rentals and sales of rental equipment, reductions in SG&A expense, non-rental depreciation and amortization, and net interest expense as a percentage of revenue, partially offset by higher income tax expense as a percentage of revenue.

Gross margin from sales of rental equipment increased year-over-year primarily due to strong pricing and improved channel mix.

The higher gross margin from equipment rentals and the favorable margin impact of SG&A expense and non-rental depreciation and amortization all reflected better fixed cost absorption on higher revenue.

Net interest expense for the years ended December 31, 2022 and 2021 included debt redemption losses of $17 and $30, respectively.

Excluding the impact of these losses, interest expense, net for the year ended December 31, 2022 increased by 8.6 percent year-over-year primarily due to a slight increase in average debt and higher interest rates (as noted above, the weighted average interest rates on our variable debt instruments were 3.3 percent in 2022 and 1.4 percent in 2021).

While income tax expense increased $237, or 51.5 percent, year-over-year, the effective income tax rate was flat.

The increase in the adjusted EBITDA margin primarily reflects higher margins from equipment rentals (excluding depreciation) and sales of rental equipment, reduced SG&A expense as a percentage of revenue and an increase in the proportion of revenue from higher margin (excluding depreciation) equipment rentals.

Gross margin from equipment rentals (excluding depreciation) increased 90 basis points primarily due to better fixed cost absorption on higher revenue.

SG&A expense also benefited from better fixed cost absorption.

Gross margin from sales of rental equipment (excluding the adjustment reflected in the table above for the impact of the fair value mark-up of acquired fleet) increased 13.2 percentage points primarily due to strong pricing and improved channel mix.

Revenues for each of the three years in the period ended December 31, 2022 were as follows:

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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 COVID-19, which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions, as discussed further above.

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 positive fleet productivity for 2021 includes the impact of COVID-19, which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions.

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.

(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.

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Equipment rentals and sales of rental equipment are our largest revenue types (together, they accounted for 95 percent of total revenue for the year ended December 31, 2022).

Equipment rentals increased 14.9 percent, primarily due to a 10.4 percent increase in fleet productivity, which included the more pronounced impact of COVID-19, which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions, in 2020.

COVID-19 began to impact our operations in March 2020.

In 2021, we have seen evidence of a continuing recovery of activity across our end-markets.

Sales of rental equipment increased 12.8 percent, primarily due to improved pricing in a strong used equipment market and the impact of the General Finance acquisition.

Equipment rentals increased 23.3 percent, primarily due to a 13.6 percent increase in average OEC, which includes the impact of the May 2021 acquisition of General Finance and the December 2022 acquisition of Ahern Rentals, and a 9.4 percent increase in fleet productivity, which reflects broad-based strength of demand across our end-markets.

In March 2020, we first experienced rental volume declines, in response to shelter-in-place orders and other market restrictions,

associated with COVID-19, and the COVID-19 impact was most pronounced in 2020.

Beginning in 2021 and continuing through 2022, we have seen evidence of a continuing recovery of activity across our end-markets.

Disciplined management of capital expenditures and fleet capacity is a component of our COVID-19 response plan, which contributed to rental capital expenditures in 2020 that were significantly below historic levels.

While capital expenditures were significantly reduced in 2020 due to COVID-19, capital expenditures in 2021 and 2022 exceeded historic (pre-COVID-19) levels, which contributed to the increased average OEC.

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 primarily due to strong pricing and improved channel mix.

Critical Accounting Policies

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Although actual results may differ from those estimates, we believe the estimates are reasonable and appropriate.

Allowance for Doubtful Accounts .

We maintain allowances for doubtful accounts.

Allowance for Credit Losses .

We maintain allowances for credit losses.

These allowances reflect our estimate of the amount of our receivables that we will be unable to collect based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectibility.

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Rental equipment is valued utilizing either a cost, market or income approach, or a combination of certain of these methods, depending on the asset being valued and the availability of market or income data.

The intangible assets that we have acquired are non-compete agreements, customer relationships and trade names and associated trademarks.

The estimated fair values of these intangible assets reflect various assumptions about discount rates, revenue growth rates, operating margins, terminal values, useful lives and other prospective financial information.

Goodwill is calculated as the excess of the cost of the acquired business over the net of the fair value of the assets acquired and the liabilities assumed.

The intangible assets that we have acquired are non-compete agreements, customer relationships and trade names and associated trademarks.

Non-compete agreements, customer relationships and trade names and associated trademarks are valued based on an excess earnings or income approach based on projected cash flows.

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When conducting the goodwill impairment test, we are required to compare the fair value of our reporting units (which are our regions) with the carrying amount.

As discussed in note 5 to our consolidated financial statements, as of December 31, 2021, our divisions were our operating segments.

As discussed in note 5 to our consolidated financial statements, since December 31, 2021, our divisions have been our operating segments.

We conducted the goodwill impairment test as of October 1, 2022 at the reporting unit level, which is one level below the operating segment level.

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This approach takes two forms:

The first is based on the market value (market capitalization plus interest-bearing liabilities) and operating metrics (e.g., revenue and EBITDA) of companies engaged in the same or similar line of business.

The first is based on the market value (market capitalization plus interest-bearing

liabilities) and operating metrics (e.g., revenue and EBITDA) of companies engaged in the same or similar line of business.

The second form is based on multiples paid in recent acquisitions of companies.

In connection with our goodwill impairment test that was conducted as of October 1, 2022, we bypassed the optional qualitative assessment for each reporting unit and quantitatively compared the fair values of our reporting units with their carrying amounts.

Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Mobile Storage reporting unit, had estimated fair values which exceeded their respective carrying amounts by at least 37 percent.

As discussed in note 4 to the consolidated financial statements, in May 2021, we completed the acquisition of General Finance.

All of the assets in the Mobile Storage reporting unit were acquired in the General Finance acquisition.

The estimated fair value of our Mobile Storage reporting unit exceeded its carrying amounts by eight percent.

As all of the assets in the Mobile Storage reporting unit were recorded at fair value as of the May 2021 acquisition date, we expected the percentage by which the fair value for this reporting unit exceeded the carrying value to be significantly less than the equivalent percentages determined for our other reporting units.

In connection with our goodwill impairment test that was conducted as of October 1, 2021, we bypassed the optional qualitative assessment for each reporting unit and quantitatively compared the fair values of our reporting units with their carrying amounts.

Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Mobile Storage and Mobile Storage International reporting units, had estimated fair values which exceeded their respective carrying amounts by at least 59 percent.

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The estimated fair values of our Mobile Storage and Mobile Storage International reporting units exceeded their carrying amounts by 10 percent and 17 percent, respectively.

As all of the assets in the Mobile Storage and Mobile Storage International reporting units were recorded at fair value as of the May 2021 acquisition date, we

expected the percentages by which the fair values for these reporting units exceeded the carrying values to be significantly less than the equivalent percentages determined for our other reporting units.

In connection with our goodwill impairment test that was conducted as of October 1, 2020, we bypassed the optional qualitative assessment for each reporting unit and quantitatively compared the fair values of our reporting units with their carrying amounts.

We considered the impact of COVID-19 when performing the test, and it did not have a material impact on the test results.

Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Fluid Solutions Europe reporting unit, had estimated fair values which exceeded their respective carrying amounts by at least 42 percent.

As discussed above, in July 2018, we completed the acquisition of BakerCorp.

All of the assets in the Fluid Solutions Europe reporting unit were acquired in the BakerCorp acquisition.

The estimated fair value of our Fluid Solutions Europe reporting unit exceeded its carrying amount by 22 percent.

As all of the assets in the Fluid Solutions Europe reporting unit were recorded at fair value as of the July 2018 acquisition date, we expected the percentage by which the Fluid Solutions Europe reporting unit’s fair value exceeded its carrying value to be significantly less than the equivalent percentages determined for our other reporting units.

As all of the assets in the Mobile Storage and Mobile Storage International reporting units were recorded at fair value as of the May 2021 acquisition date, we expected the percentages by which the fair values for these reporting units exceeded the carrying values to be significantly less than the equivalent percentages determined for our other reporting units.

Impairment of Long-lived Assets (Excluding Goodwill).

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We also conduct impairment reviews in connection with branch consolidations and other changes in our business.

As discussed in note 6 to our consolidated financial statements, during the years ended December 31, 2021, 2020 and 2019, we recorded asset impairment charges of $14, $36 and $5, respectively.

During the years ended December 31, 2022, 2021 and 2020, we recorded asset impairment charges of $3, $14 and $36, respectively, primarily in depreciation of rental equipment in our consolidated statements of income.

These charges were primarily recognized in our general rentals segment.

The 2020 charges principally related to the discontinuation of certain equipment programs, and were not related to COVID-19.

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we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate taxing authority with full knowledge of all relevant information.

The second step is measurement:

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In the fourth quarter of 2020, we identified cash in our foreign operations in excess of near-term working capital needs, and determined that such cash could no longer be considered indefinitely reinvested.

As a result, our prior assertion that all undistributed earnings of our foreign

subsidiaries should be considered indefinitely reinvested changed.

As a result, our prior assertion that all undistributed earnings of our foreign subsidiaries should be considered indefinitely reinvested changed.

In the fourth quarter of 2021, we identified additional cash in our foreign operations in excess of near-term working capital needs, and remitted $203 of cash from foreign operations (such amount represents the cumulative amount of identified cash in our foreign operations in excess of near-term working capital needs).

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state income taxes.

Reserves for Claims .

We are exposed to various claims relating to our business, including those for which we retain portions of the losses through the application of deductibles and self-insured retentions, which we sometimes refer to as “self-insurance.” These claims include (i) workers' compensation claims and (ii) claims by third parties for injury or property damage involving our equipment, vehicles or personnel.

These types of claims may take a substantial amount of time to resolve and, accordingly, the ultimate liability associated with a particular claim may not be known for an extended period of time.

Our methodology for developing self-insurance reserves is based on management estimates, which incorporate periodic actuarial valuations.

Our estimation process considers, among other matters, the cost of known claims over time, cost inflation and incurred but not reported claims.

These estimates may change based on, among other things, changes in our claims history or receipt of additional information relevant to assessing the claims.

Further, these estimates may prove to be inaccurate due to factors such as adverse judicial determinations or settlements at higher than estimated amounts.

Accordingly, we may be required to increase or decrease our reserve levels.

Results of Operations

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Equipment rentals.

2021 equipment rentals of $8.2 billion increased 14.9 percent as compared to 2020, primarily due to a 10.4 percent increase in fleet productivity, which included the more pronounced impact of COVID-19, which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions, in 2020.

COVID-19 began to impact our operations in March 2020.

In 2021, we have seen evidence of a continuing recovery of activity across our end-markets.

2022 equipment rentals of $10.1 billion increased 23.3 percent, primarily due to a 13.6 percent increase in average OEC, which includes the impact of the May 2021 acquisition of General Finance and the December 2022 acquisition of Ahern Rentals, and a 9.4 percent increase in fleet productivity, which reflects broad-based strength of demand across our end-markets.

In March 2020, we first experienced rental volume declines, in response to shelter-in-place orders and other market restrictions, associated with COVID-19, and the COVID-19 impact was most pronounced in 2020.

Beginning in 2021 and continuing through 2022, we have seen evidence of a continuing recovery of activity across our end-markets.

Equipment rentals represented 87 percent of total revenues in 2022.

On a segment basis, equipment rentals represented 86 percent and 91 percent of total revenues for general rentals and specialty, respectively.

General rentals equipment rentals increased 11.0 percent as compared to 2020, primarily due to increased fleet productivity, which included the more pronounced impact of COVID-19 during 2020.

In 2021, we have seen evidence of a continuing recovery of activity across our end-markets.

General rentals equipment rentals increased 20.9 percent as compared to 2021, primarily due to broad-based strength of demand across our end-markets and increased average OEC.

As noted above, the impact of COVID-19 was most pronounced in 2020 and the broad recovery we saw as 2021 progressed continued through 2022.

As discussed above, capital expenditures were significantly reduced in 2020 due to COVID-19 and then increased in 2021 and 2022, which contributed to the year-over-year increase in average OEC, which also includes the impact of the December 2022 acquisition of Ahern Rentals.

Specialty rentals increased 29.9 percent as compared to 2021, including the impact of the General Finance acquisition.

On a pro forma basis including the standalone, pre-acquisition revenues of General Finance, equipment rentals increased 25 percent.

The increase in equipment rentals reflects increased fleet productivity, which included the more pronounced impact of COVID-19 during 2020, as well as a slight increase in average OEC.

The increase in equipment rentals reflects broad-based strength of demand across our end-markets, as well as increased average OEC, both of which are discussed above.

Sales of rental equipment .

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Our general rentals segment accounted for most of these sales.

2021 sales of rental equipment increased 12.8 percent from 2020 primarily due to improved pricing in a strong used equipment market and the impact of the General Finance acquisition.

Sales of new equipment .

For the three years in the period ended December 31, 2022, sales of new equipment represented approximately 2 percent of our total revenues.

Our general rentals segment accounted for most of these sales.

2021 sales of new equipment of $203 decreased 17.8 percent from 2020 primarily due to supply chain challenges.

2022 sales of new equipment of $154 decreased 24.1 percent from 2021 primarily due to supply chain constraints.

For a discussion of the risks associated with supply chain disruptions, see Item 1A- Risk Factors (“Operational Risks- Disruptions in our supply chain could result in adverse effects on our results of operations and financial performance ").

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Our general rentals segment accounted for most of these sales.

2021 service and other revenues increased 22.5 percent from 2020 primarily due to the more pronounced impact of COVID-19 in 2020.

2022 service and other revenues increased 22.7 percent from 2021 primarily due to growth initiatives.

Fourth Quarter Items .

As discussed in note 12 to the consolidated financial statements, in the fourth quarter of 2022, we issued $1.5 billion principal amount of 6 percent Senior Secured Notes due 2029.

The issued debt, together with drawings on our ABL facility, was used to fund the December 2022 Ahern Rentals acquisition that is discussed in note 4 to the consolidated financial statements.

There were no unusual or infrequently occurring items recognized in the fourth quarter of 2021 that had a material impact on our financial statements.

In the fourth quarter of 2020, we redeemed all of our 4 5 / 8 percent Senior Notes due 2025 using borrowings available under our ABL facility.

Upon redemption, we recognized a loss of $24 in interest expense, net, reflecting the difference between the net carrying amount and the total purchase price of the redeemed notes.

Segment Equipment Rentals Gross Profit

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This contribution percentage is consistent with general rentals’ equipment rental revenue contribution over the same period.

For the year ended December 31, 2021, general rentals’ equipment rentals gross profit increased by $315, and equipment rentals gross margin increased by 170 basis points, from 2020, which included a $26 asset impairment charge that primarily reflected the discontinuation of certain equipment programs and was not related to COVID-19.

Excluding the impact of asset impairment charges, equipment rentals gross margin increased 130 basis points year-over-year, primarily due to a reduction in depreciation expense as a percentage of revenue, partially offset by a higher bonus accrual, which reflects improved profitability, and increases in certain operating expenses, including delivery costs, as a percentage of revenue.

For the year ended December 31, 2022, general rentals’ equipment rentals gross profit increased by $636, and equipment rentals gross margin increased by 220 basis points, from 2021, primarily due to better fixed cost absorption on higher revenue.

As discussed above, equipment rental revenue increased 20.9 percent from 2021, primarily due to increased average OEC, which included the impact of the December 2022 acquisition of Ahern Rentals, and broad-based strength of demand across our end-markets.

For the year ended December 31, 2022, equipment rentals gross profit increased by $342, and equipment rentals gross margin increased by 160 basis points from 2021.

Gross margin increased primarily due to decreases in depreciation and labor expenses as a percentage of revenue, partially offset by a higher proportion of revenue from certain lower margin ancillary fees in 2021 and increases in certain operating expenses, including delivery costs, as a percentage of revenue.

Gross margin increased primarily due to better cost performance and fixed cost absorption on higher revenue.

As discussed above, equipment rental revenue increased 29.9 percent from 2021, including the impact of the May 2021 General Finance acquisition, primarily due to increased average OEC and broad-based strength of demand across our end-markets.

Gross Margin .

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2022 gross margin of 42.9 percent increased 320 basis points from 2021.

Equipment rentals gross margin increased 170 basis points from 2020, which included a $30 asset impairment charge that primarily reflected the discontinuation of certain equipment programs and was not related to COVID-19.

Excluding the impact of asset impairment charges, equipment rentals

gross margin increased 150 basis points year-over-year, primarily due to a reduction in depreciation expense as a percentage of revenue, partially offset by higher bonus expense, which reflects improved profitability, and increases in certain operating expenses, including delivery costs, as a percentage of revenue.

Gross margin from sales of rental equipment increased 580 basis points from 2020 primarily due to improved pricing in a strong used equipment market.

The gross margin fluctuations from sales of new equipment, contractor supplies sales and service and other revenues generally reflect normal variability, the more pronounced impact of COVID-19 in 2020 and the impact of the General Finance acquisition, and such revenue types did not account for a significant portion of total gross profit (gross profit for these revenue types represented 4 percent of total gross profit for the year ended December 31, 2021).

Equipment rentals gross margin increased 220 basis points from 2021, primarily due to better fixed cost absorption on higher revenue.

As discussed above, equipment rentals increased 23.3 percent from 2021, including the impact of the May 2021 acquisition of General Finance and the December 2022 acquisition of Ahern Rentals, primarily due to increased average OEC and broad-based strength of demand across our end-markets.

Gross margin from sales of rental equipment increased 14.2 percentage points from 2021, primarily due to strong pricing and improved channel mix.

The gross margin fluctuations from sales of new equipment, contractor supplies sales and service and other revenues generally reflect normal variability, and such revenue types did not account for a significant portion of total gross profit (gross profit for these revenue types represented 4 percent of total gross profit for the year ended December 31, 2022).

Other costs/(income)

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Interest expense, net 445 424 669 5.0% (36.6)%

Other expense (income), net 7 (8) (10) (187.5)% (20.0)%

Other (income) expense, net (15) 7 (8) (314.3)% (187.5)%

Provision for income taxes 697 460 249 51.5% 84.7%

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SG&A expense primarily includes sales force compensation, information technology costs, third party professional fees, management salaries, bad debt expense and clerical and administrative overhead.

The increase in SG&A expense as a percentage of revenue for the year ended December 31, 2021 was primarily due to higher bonus and stock compensation expenses, which reflect improved profitability.

The merger related costs primarily reflect transaction costs associated with the General Finance acquisition that was completed in May 2021, as discussed in note 4 to the consolidated financial statements.

The year-over-year decrease in SG&A expense as a percentage of revenue for the year ended December 31, 2022 was primarily due to better fixed cost absorption on higher revenue, partially offset by increases in certain discretionary expenses, including travel and entertainment.

Certain discretionary expenses were reduced significantly in 2020 and early 2021 due to COVID-19, and have increased more recently as rental volume has increased (as noted above, the broad recovery we saw across our end-markets as 2021 progressed continued through 2022).

The merger related costs reflect transaction costs associated with the General Finance acquisition that was completed in May 2021, as discussed in note 4 to the consolidated financial statements.

We have made a number of acquisitions in the past and may continue to make acquisitions in the future.

Merger related costs only include costs associated with major acquisitions, each of which had annual revenues of over $200 prior to acquisition, that significantly impact our operations.

The restructuring charges for the years ended December 31, 2021, 2020 and 2019 primarily reflect severance costs and branch closure charges associated with our restructuring programs.

See note 6 to our consolidated financial statements for additional information.

The restructuring charges primarily reflect severance and branch closure charges associated with our restructuring programs.

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 program was initiated in 2008, we have completed six restructuring programs and have incurred total restructuring charges of $352.

As of December 31, 2022, there were no open restructuring programs, and the total liability associated with the closed restructuring programs was $6.

Non-rental depreciation and amortization includes (i) the amortization of other intangible assets and (ii) depreciation expense associated with equipment that is not offered for rent (such as computers and office equipment) and amortization expense associated with leasehold improvements.

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Interest expense, net for the years ended December 31, 2022 and 2021 included aggregate debt redemption losses of $17 and $30, respectively.

The debt redemption losses reflect the difference between the net carrying amount and the total purchase price of the redeemed notes.

Excluding the impact of these losses, interest expense, net for the year ended December 31, 2021 decreased by 18.9 percent year-over-year primarily due to decreases in average debt and the average cost of debt.

Other expense (income), net primarily includes (i) currency gains and losses, (ii) finance charges, (iii) gains and losses on sales of non-rental equipment and (iv) other miscellaneous items.

The debt redemption losses primarily reflect the difference between the net carrying amount and the total purchase price of the redeemed notes.

Other (income) expense, net primarily includes (i) currency gains and losses, (ii) finance charges, (iii) gains and losses on sales of non-rental equipment and (iv) other miscellaneous items.

A detailed reconciliation of the effective tax rates to the U.S.

federal statutory income tax rate is included in note 14 to our consolidated financial statements.

The effective income tax rate for the year ended December 31, 2021 increased year-over-year primarily due to the release in 2020 of a valuation allowance on foreign tax credits.

In March 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act”) was enacted.

The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, technical corrections to tax depreciation methods for qualified improvement property and deferral of employer payroll taxes.

The CARES Act did not materially impact our effective tax rate for the year ended December 31, 2021.

As of December 31, 2021, we have deferred employer payroll taxes of $27 under the CARES Act, all of which is due in 2022.

The effective income tax rate for the year ended December 31, 2022 was flat year-over-year.

Balance sheet .

Accounts receivable, net increased by $327, or 19.5 percent, from December 31, 2021 to December 31, 2022 primarily due to increased revenue.

Prepaid expenses and other assets decreased by $209, or 55.7 percent, from December 31, 2020 to December 31, 2021, primarily due to refundable deposits on expected purchases, primarily of rental equipment, pursuant to advanced purchase agreements, as discussed further in note 7 to our consolidated financial statements.

Rental equipment, net increased by $1.855 billion, or 21.3 percent, from December 31, 2020 to December 31, 2021 primarily due to the impact of the General Finance acquisition and increased capital expenditures.

As discussed above, capital expenditures were significantly reduced in 2020 due to COVID-19, while capital expenditures in 2021 have exceeded historic (pre-COVID-19) levels.

Accounts payable increased by $350, or 75.1 percent, from December 31, 2020 to December 31, 2021, primarily due to increased business activity.

Accrued expenses and other liabilities increased $161, or 22.4 percent, from December 31, 2020 to December 31, 2021, primarily due to a higher bonus accrual, which reflects increased profitability, and the impact of the General Finance acquisition.

See note 11 to our consolidated financial statements for further detail on accrued expenses and other liabilities.

Deferred taxes increased by $386, or 21.8 percent, from December 31, 2020 to December 31, 2021 primarily due to the impact of the General Finance acquisition and increased capital expenditures.

See note 15 to our consolidated financial statements for further detail on deferred taxes.

Prepaid expenses and other assets increased by $215, or 129.5 percent, from December 31, 2021 to December 31, 2022, primarily due to tax depreciation benefits associated with the Ahern Rentals acquisition (see note 6 to the consolidated financial statements for further detail).

Rental equipment, net increased by $2.717 billion, or 25.7 percent, from December 31, 2021 to December 31, 2022 primarily due to the impact of the Ahern Rentals acquisition and increased net rental capital expenditures (purchases of rental equipment less the proceeds from sales of rental equipment).

As discussed above, capital expenditures were significantly reduced in 2020 due to COVID-19, while capital expenditures in 2021 and 2022 have exceeded historic (pre-COVID-19) levels.

Property and equipment, net increased by $227, or 37.1 percent, from December 31, 2021 to December 31, 2022 primarily due to the impact of the Ahern Rentals acquisition.

Accounts payable increased by $323, or 39.6 percent, from December 31, 2021 to December 31, 2022, primarily due to increased business activity, which included the impact of improved economic conditions.

Accrued expenses and other liabilities increased $264, or 30.0 percent, from December 31, 2021 to December 31, 2022, primarily due to the impact of increased business activity (see note 10 to the consolidated financial statements for further detail on accrued expenses and other liabilities).

See note 12 to the consolidated financial statements for further detail on short-term and long-term debt.

Deferred taxes increased by $517, or 24.0 percent, from December 31, 2021 to December 31, 2022 primarily due to the impact of increased capital expenditures and the equipment acquired in the Ahern Rentals acquisition.

See note 14 to the consolidated financial statements for further detail on deferred taxes.

Liquidity and Capital Resources.

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See "Financial Overview" above for a summary of the 2022 capital structure actions taken to improve our financial flexibility and liquidity.

Since 2012, we have repurchased a total of $3.7 billion of Holdings' common stock under five completed share repurchase programs.

On January 28, 2020, our Board of Directors authorized a $500 share repurchase program, which commenced in the first quarter of 2020 and was intended to run for 12 months.

Through March 2020, when the program was paused due to the COVID-19 pandemic, we repurchased $257 of common stock under the program.

On January 25, 2022, our Board authorized a $1 billion share repurchase program, which is expected to commence in the first quarter of 2022 and be completed in 2022.

This program replaces the prior $500 program.

On October 24, 2022, our Board of Directors authorized a $1.25 billion share repurchase program.

No repurchases were made as of December 31, 2022 under this program, which was paused through the initial phase of the integration of the Ahern Rentals acquisition.

We expect to resume repurchases under the program in the first quarter of 2023, and to repurchase $1.0 billion of common stock under the program in 2023.

Since 2012, we have repurchased a total of $4.957 billion of Holdings' common stock under our share repurchase programs (comprised of seven programs that have ended).

Our principal existing sources of cash are cash generated from operations and from the sale of rental equipment, and borrowings available under our ABL and accounts receivable securitization facilities.

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(1) The maximum outstanding debt under the ABL facility exceeded the average outstanding debt primarily due to the use of borrowings under the ABL facility to fund most of the cost of the General Finance acquisition discussed in note 4 to the consolidated financial statements.

(2) As discussed in note 13 to the consolidated financial statements, the accounts receivable securitization facility expires on June 24, 2022 and may be further extended on a 364-day basis by mutual agreement with the purchasers under the facility.

We expect that our principal short-term (over the next 12 months) and long-term needs for cash relating to our operations will be to fund (i) operating activities and working capital, (ii) the purchase of rental equipment and inventory items offered for sale, (iii) payments due under operating leases, (iv) debt service, (v) share repurchases and (vi) acquisitions.

(1) As discussed in note 12 to the consolidated financial statements, in May 2022, we redeemed $500 principal amount of our 5 1 / 2 percent Senior Notes, using cash and borrowings under the ABL facility.

The maximum outstanding amount of debt under the ABL facility exceeded the average outstanding amount primarily due to the use of borrowings under the ABL facility to fund the partial redemption of the 5 1 / 2 percent Senior Notes.

We plan to fund such cash requirements from our existing sources of cash.

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These purchase orders can generally be cancelled by us without cancellation penalties.

The equipment and inventory receipts from the suppliers pursuant to these purchase orders and the related payments to the suppliers are expected to be completed throughout 2022 and 2023.

The equipment and inventory receipts from the suppliers pursuant to these purchase orders and the related payments to the suppliers are expected to be completed primarily throughout 2023 and 2024.

The amount of our future capital expenditures will depend on a number of factors, including general economic conditions and growth prospects.

We expect that we will fund such expenditures from cash generated from operations, proceeds from the sale of rental and non-rental equipment and, if required, borrowings available under the ABL facility and accounts receivable securitization facility.

Net rental capital expenditures (defined as purchases of rental equipment less the proceeds from sales of rental equipment) were $2.030 billion and $103 in 2021 and 2020, respectively.

As discussed above, disciplined management of capital expenditures and fleet capacity is a component of our COVID-19 response plan, which contributed to net rental capital expenditures in 2020 that were significantly below historic levels.

Net rental capital expenditures (defined as purchases of rental equipment less the proceeds from sales of rental equipment) were $2.471 billion, $2.030 billion and $103 in 2022, 2021 and 2020, respectively.

Disciplined management of capital expenditures and fleet capacity is a component of our COVID-19 response plan, which contributed to net rental capital expenditures in 2020 that were significantly below historic levels.

While capital expenditures were significantly reduced in 2020 due to COVID-19, capital expenditures in 2021 and 2022 exceeded historic (pre-COVID-19) levels.

To access the capital markets, we rely on credit rating agencies to assign ratings to our securities as an indicator of credit quality.

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Loan Covenants and Compliance.

As of December 31, 2021, we were in compliance with the covenants and other provisions of the ABL, accounts receivable securitization and term loan facilities and the senior notes.

As of December 31, 2022, we were in compliance with the covenants and other provisions of the ABL, accounts receivable securitization, term loan and repurchase facilities and the senior notes.

Any failure to be in compliance with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

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Sources and Uses of Cash .

During 2022, we (i) generated cash from operating activities of $4.433 billion, (ii) generated cash from the sale of rental and non-rental equipment of $989 and (iii) received cash from debt proceeds, net of payments, of $1.644 billion.

We used cash during this period principally to (i) purchase rental and non-rental equipment and intangible assets of $3.690 billion, (ii) purchase other companies for $2.340 billion and (iii) purchase shares of our common stock for $1.068 billion.

During 2021, we (i) generated cash from operating activities of $3.689 billion and (ii) generated cash from the sale of rental and non-rental equipment of $998.

We used cash during this period principally to (i) purchase rental and non-rental equipment and intangible assets of $3.198 billion, (ii) purchase other companies for $1.436 billion and (iii) make debt payments, net of proceeds, of $98.

During 2020, we (i) generated cash from operating activities of $2.658 billion, which included $300 of cash outflow for refundable deposits on expected rental equipment purchases, as discussed further in note 7 to the consolidated financial statements, and (ii) generated cash from the sale of rental and non-rental equipment of $900.

We used cash during this period principally to (i) purchase rental and non-rental equipment of $1.158 billion, (ii) make debt payments, net of proceeds, of $1.985 billion and (iii) purchase shares of our common stock for $286.

Free Cash Flow GAAP Reconciliation

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Free cash flow $ 1,764 $ 1,514 $ 2,440

Free cash flow for the year ended December 31, 2021 was $1.514 billion, a decrease of $926 as compared to $2.440 billion for the year ended December 31, 2020.

Free cash flow decreased primarily due to increased net rental capital expenditures (purchases of rental equipment less the proceeds from sales of rental equipment), partially offset by increased net cash provided by operating activities.

Net rental capital expenditures increased $1.927 billion, or 1,871 percent, year-over-year.

Free cash flow for the year ended December 31, 2022 was $1.764 billion, an increase of $250 as compared to $1.514 billion for the year ended December 31, 2021.

Free cash flow increased primarily due to increased net cash provided by operating activities, partially offset by increased net rental capital expenditures (purchases of rental equipment less the proceeds from sales of rental equipment) and increased purchases of non-rental equipment and intangible assets.

Net rental capital expenditures increased $441, or 22 percent, year-over-year.

Relationship between Holdings and URNA .

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(ii) finance and tax-related services and support;

(iii) information technology systems and

(iii) information technology systems and support;

(iv) acquisition-related services;

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URNA is 100 percent owned by Holdings and has certain outstanding indebtedness that is guaranteed by both Holdings and, with the exception of its U.S.

special purpose vehicle which holds receivable assets relating to the Company’s accounts receivable securitization facility (the “SPV”), captive insurance subsidiaries and immaterial subsidiaries acquired in connection with the General Finance acquisition, all of URNA’s U.S.

special purpose vehicle which holds receivable assets relating to the Company’s accounts receivable securitization facility (the “SPV”), captive insurance subsidiary and immaterial subsidiaries acquired in connection with the General Finance acquisition, all of URNA’s U.S.

subsidiaries (the “guarantor subsidiaries”).

Other than the guarantee by our Canadian subsidiary of URNA's indebtedness under the ABL facility, none of URNA’s indebtedness is guaranteed by URNA's foreign subsidiaries, the SPV, captive insurance subsidiaries or immaterial subsidiaries acquired in connection with the General Finance acquisition (together, the “non-guarantor subsidiaries”).

Other than the guarantee by our Canadian subsidiary of URNA's indebtedness under the ABL facility, none of URNA’s indebtedness is guaranteed by URNA's foreign subsidiaries, the SPV, captive insurance subsidiary or immaterial subsidiaries acquired in connection with the General Finance acquisition (together, the “non-guarantor subsidiaries”).

The receivable assets owned by the SPV have been sold or contributed by URNA to the SPV and are not available to satisfy the obligations of URNA or Holdings’ other subsidiaries.

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The guarantees of URNA’s indebtedness are effectively junior to any indebtedness of our subsidiaries that are not guarantors, including our foreign subsidiaries.

As of December 31, 2021, indebtedness of our non-guarantors included (i) $843 of outstanding borrowings by the SPV in connection with the Company’s accounts receivable securitization facility, (ii) $141 of outstanding borrowings under the ABL facility by non-guarantor subsidiaries and (iii) $9 of finance leases of our non-guarantor subsidiaries.

As of December 31, 2022, the indebtedness of our non-guarantors was comprised of (i) $959 of outstanding borrowings by the SPV in connection with the Company’s accounts receivable securitization facility, (ii) $133 of outstanding borrowings under the ABL facility by non-guarantor subsidiaries and (iii) $9 of finance leases of our non-guarantor subsidiaries.

Covenants in the ABL facility, accounts receivable securitization and term loan facilities, and the other agreements governing our debt, impose operating and financial restrictions on URNA, Holdings and the guarantor subsidiaries, including limitations on the ability to make share repurchases and dividend payments.

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Based on our understanding of Rule 3-10 of Regulation S-X ("Rule 3-10"), we believe that Holdings’ guarantees of URNA indebtedness comply with the conditions set forth in Rule 3-10, which enable us to present summarized financial information for Holdings, URNA and the consolidated guarantor subsidiaries in accordance with Rule 13-01 of Regulation S-X.

The summarized financial information excludes information regarding the non-guarantor subsidiaries.

The summarized financial information excludes the financial information of the non-guarantor subsidiaries.

In accordance with Rule 3-10, separate financial statements of the guarantor subsidiaries have not been presented.

Our presentation below excludes the investment in the non-guarantor subsidiaries and the related income from the non-guarantor subsidiaries.

The summarized financial information of Holdings, URNA and the guarantor subsidiaries on a combined basis is as follows:

December 31, 2022

Current assets $417

Long-term assets 18,423

Current receivable from non-guarantor subsidiaries $26

Other current assets 615

Total current assets 641

Long-term receivable from non-guarantor subsidiaries 100

Other long-term assets 19,618

Total long-term assets 19,718

Total assets 20,359

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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 7. Management’s Discussion and Analysis