What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-01-24 compared with 2023-01-25 · 169 added, 176 removed, 493 unchanged (41% of the section changed)

1 unchanged sentence

We have omitted discussions comparing 2022 and 2021 results, as such disclosures were included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Global Economic Conditions and COVID-19

Global Economic Conditions

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.

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

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

2 unchanged sentences

Additionally, the weighted average interest rates on our variable debt instruments were 6.3 percent in 2023 and 3.3 percent in 2022.

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.

1 unchanged sentence

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

We also continue to monitor any developments relating to the coronavirus (“COVID-19”).

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.

The COVID-19 impact on our business was most pronounced in 2020, and activity across our end-markets began to recover in 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 and 2020 include detailed disclosures addressing the COVID-19 impact on our business.

We continue to assess the economic environment in which we operate and any developments relating to COVID-19, 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.

28 unchanged sentences

• 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;

We believe that the expansion of our specialty business, as exhibited by our acquisition of General Finance Corporation (“General Finance”) in May 2021, 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.

1 unchanged sentence

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

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 2023:

• 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.

• Equipment rentals increased 19.3 percent year-over-year, including the impact of the Ahern Rentals acquisition that was completed in December 2022, which is discussed in note 4 to the consolidated financial statements.

On a pro forma basis including the standalone, pre-acquisition results of Ahern Rentals, equipment rentals increased 11.3 percent year-over-year;

• Average OEC increased 21.9 percent year-over-year, including the impact of the Ahern Rentals acquisitions.

On the pro forma basis, average OEC increased 10.4 percent year-over-year;

• Fleet productivity decreased 0.7 percent.

On the pro forma basis, fleet productivity increased 2.8 percent;

• 67 percent of equipment rental revenue was derived from key accounts.

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

2 unchanged sentences

In 2023, 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.

• Amended our accounts receivable securitization facility, primarily to increase the size of the facility from $1.1 billion to $1.3 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.

• Amended and extended our uncommitted repurchase facility, pursuant to which we may obtain short-term financing in an amount up to $100.

The facility expires in June 2024 and may be further extended by the mutual consent of the parties to the repurchase facility agreement.

As of December 31, 2023, we had available liquidity of $3.330 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.

This program was paused through the initial phase of the integration of the Ahern Rentals acquisition, and repurchases began in the first quarter of 2023.

We repurchased $1.00 billion under the program in 2023 and expect to complete the program in the first quarter of 2024.

On January 24, 2024, our Board of Directors authorized a new $1.5 billion share repurchase program.

We plan to begin repurchases under the new program following the planned completion of the existing $1.25 billion share repurchase program in the first quarter of 2024, and intend to purchase $1.25 billion under the new program in 2024 and then complete the program by the end of the first quarter of 2025.

A 1 percent excise tax is imposed on “net repurchases” (certain purchases minus certain issuances)

of common stock.

The repurchases above, as well as the total program sizes, do not include the excise tax, which totaled $8 in 2023.

Our Board of Directors also approved our first-ever quarterly dividend program in January 2023, and the first dividend under the program was paid in February 2023.

We did not pay any dividends prior to 2023, and in 2023, we paid dividends totaling $406 ($5.92 per share, which equates to a quarterly dividend per share of $1.48).

On January 24, 2024, our Board of Directors declared a quarterly dividend of $1.63 per share, payable on February 28, 2024 to stockholders of record on February 14, 2024.

Net income and diluted earnings per share for each of the three years in the period ended December 31, 2023 are presented below.

16 unchanged sentences

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

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

(1) This reflects transaction costs associated with the General Finance acquisition that was completed in May 2021.

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).

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

(2) This reflects the amortization of the intangible assets acquired in the major acquisitions.

The increase in 2023 primarily reflects the impact of the Ahern Rentals acquisition.

(3) This reflects the impact of extending the useful lives of equipment acquired in certain major acquisitions, net of the impact of additional depreciation associated with the fair value mark-up of such equipment.

The increase in 2023 primarily reflects the impact of the Ahern Rentals acquisition.

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

The increase in 2023 primarily reflects the impact of the Ahern Rentals acquisition.

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

For additional information on the restructuring charges, which generally involve the closure of a large number of branches over a short period of time, often in periods following a major acquisition, see "Results of Operations-Other costs/(income)-restructuring charges" below.

The increase in 2023 reflects charges associated with a restructuring program initiated following the closing of the Ahern Rentals acquisition.

As of December 31, 2023, 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.

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.

3 unchanged sentences

Adjusted EBITDA represents EBITDA plus the sum of the merger related costs, restructuring charge, stock compensation expense, net, and the impact of the fair value mark-up of acquired fleet.

See below for further detail on each adjusting item.

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.

43 unchanged sentences

_________________

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

(1) This reflects transaction costs associated with the General Finance acquisition that was completed in May 2021.

Merger related costs only include costs associated with major acquisitions completed since 2012 that significantly impact our operations.

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

The increase in 2023 reflects charges associated with a restructuring program initiated following the closing of the Ahern Rentals acquisition.

As of December 31, 2023, 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.

The increase in 2023 primarily reflects the impact of the Ahern Rentals acquisition.

(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, 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.

For the year ended December 31, 2023, net income increased $319, or 15.2 percent, and net income margin decreased 120 basis points to 16.9 percent.

For the year ended December 31, 2023, adjusted EBITDA increased $1.239 billion, or 22.1 percent, and adjusted EBITDA margin decreased 50 basis points to 47.8 percent.

The year-over-year decrease in net income margin primarily reflects the impact of the Ahern Rentals acquisition on gross margins from equipment rentals and sales of rental equipment, increased restructuring charges associated with the Ahern Rentals acquisition, and increased interest expense, partially offset by reductions in selling, general and administrative ("SG&A") and income tax expenses as a percentage of revenue.

Depreciation and repairs and maintenance expenses for the rental equipment acquired in the Ahern Rentals acquisition were higher than for our other rental equipment, which negatively impacted equipment rentals gross margin year-over-year.

In addition to the impact of the Ahern Rentals acquisition, the decreased gross margin from sales of rental equipment reflects the normalization of the used equipment market and the expanded use of wholesale channels.

Net interest expense for the year ended December 31, 2022 included debt redemption losses of $17.

Excluding the impact of these losses, interest expense, net for the year ended December 31, 2023 increased by

48.4 percent year-over-year primarily due to increased average debt, including the debt issued to partially fund the Ahern Rentals acquisition, and higher interest rates (the weighted average interest rates on our variable debt instruments were 6.3 percent in 2023 and 3.3 percent in 2022).

The favorable margin impact of SG&A expense reflects better fixed cost absorption on higher revenue.

While income tax expense increased $90, or 12.9 percent, year-over-year, the effective income tax rate decreased slightly, from 24.9 percent to 24.5 percent.

The decrease in the adjusted EBITDA margin primarily reflects an 80 basis point decrease in equipment rentals gross margin (excluding depreciation and stock compensation expense) and a 470 basis point decrease in 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), partially offset by reduced SG&A expense as a percentage of revenue.

The decreased gross margin from equipment rentals (excluding depreciation and stock compensation expense) primarily reflects the impact of the Ahern Rentals acquisition (in particular, repairs and maintenance expense for the rental equipment acquired in the Ahern Rentals acquisition was higher than for our other rental equipment, which negatively impacted equipment rentals gross margin year-over-year).

The decreased gross margin from sales of rental equipment (excluding the adjustment for the impact of the fair value mark-up of acquired fleet) primarily reflects the normalization of the used equipment market, the expanded use of wholesale channels, and the impact of the Ahern Rentals acquisition.

The favorable margin impact of SG&A expense reflects better fixed cost absorption on higher revenue.

Revenues for each of the three years in the period ended December 31, 2023 were as follows:

13 unchanged sentences

Total change in equipment rentals 19.3% 23.3%

*Pro forma equipment rentals variance components (4):

Year-over-year change in average OEC 10.4%

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

Fleet productivity (2) 2.8%

Contribution from ancillary and re-rent revenue (3) (0.4)%

Total change in equipment rentals 11.3%

_________________

5 unchanged sentences

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

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.

The positive fleet productivity for 2022 reflected strong demand across our end-markets.

COVID-19, which resulted in rental volume declines in response to shelter-in-place orders and other market restrictions, had the most pronounced on our business in 2020.

Beginning in 2021 and continuing through 2023, we have experienced broad-based strength of demand 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.

(4) We completed the acquisition of Ahern Rentals in December 2022.

The pro forma information includes the standalone, pre-acquisition results of Ahern Rentals.

The pro forma components are not reflected above for 2022 versus 2021 because of the December 2022 acquisition date (Ahern Rentals did not materially impact the comparison of 2022 and 2021 equipment rentals).

The Ahern Rentals acquisition is discussed further in note 4 to the consolidated financial statements.

Equipment rentals include our revenues from renting equipment, as well as revenue related to the fees we charge customers:

11 unchanged sentences

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, 2023).

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.

Equipment rentals increased 19.3 percent, primarily due to a 21.9 percent increase in average OEC, partially offset by a 0.7 percent decrease in fleet productivity.

The increase in average OEC includes the impact of the acquisition of Ahern Rentals that is discussed in note 4 to the consolidated financial statements.

On a pro forma basis including the pre-acquisition results of Ahern Rentals, year-over-year, equipment rentals increased 11.3 percent, primarily reflecting an increase in average OEC of 10.4 percent and increased fleet productivity of 2.8 percent.

Beginning in 2021 and continuing through December 31, 2023, we have experienced broad-based strength of demand across our end-markets.

Sales of rental equipment increased 63.1 percent year-over-year, primarily reflecting the normalization of volumes, after we intentionally held back on sales of rental equipment in 2022 to ensure sufficient rental capacity for our customers, as well as the impact of sales of rental equipment acquired in the Ahern Rentals acquisition.

Pricing on sales of rental equipment remains strong.

Critical Accounting Policies

34 unchanged sentences

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

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.

19 unchanged sentences

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, 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.

We conducted the goodwill impairment test as of October 1, 2021 at the same reporting unit level, although at that time, the reporting unit was also the operating segment (see note 5 for further discussion of our segment structure).

As discussed in note 5 to our consolidated financial statements, our divisions are our operating segments.

We conduct the goodwill impairment test at the reporting unit level, which is one level below the operating segment level.

Financial Accounting Standards Board ("FASB") guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

15 unchanged sentences

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.

1 unchanged sentence

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 54 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.

We completed the acquisition of General Finance in May 2021, and 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 amount 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, 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 and Mobile Storage International reporting units, had estimated fair values which exceeded their respective carrying amounts by at least 59 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 and Mobile Storage International reporting units were acquired in the General Finance acquisition.

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.

We completed the acquisition of General Finance in May 2021, and 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 amount by eight percent.

Impairment of Long-lived Assets (Excluding Goodwill).

We review the recoverability of our rental equipment, property and equipment and lease assets when events or changes in circumstances occur that indicate that the carrying value of the assets may not be recoverable.

We review the recoverability of our rental equipment, property and equipment, lease assets and other intangible assets when events or changes in circumstances occur that indicate that the carrying value of the assets may not be recoverable.

If there are such indications, we assess our ability to recover the carrying value of the assets from their expected future pre-tax cash flows (undiscounted and without interest charges).

1 unchanged sentence

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

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.

There were no asset impairment charges recognized in 2023, and during the years ended December 31, 2022 and 2021, we recorded asset impairment charges of $3 and $14, 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.

In support of our review for indicators of impairment, we perform a review of all assets at the district level relative to district performance and conclude whether indicators of impairment exist associated with our long-lived assets, including rental equipment.

2 unchanged sentences

Additionally, we estimate when the assets are expected to be removed or retired from our rental fleet as well as the expected proceeds to be realized upon disposition.

Based on our most recently completed quarterly reviews, there were no indications of impairment associated with our rental equipment, property and equipment or lease assets.

Based on our most recently completed quarterly reviews, there were no indications of impairment associated with our rental equipment, property and equipment, lease assets or other intangible assets.

Income Taxes .

7 unchanged sentences

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

The second step is measurement:

5 unchanged sentences

We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, no taxes were provided on such earnings prior to the fourth quarter of 2020.

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.

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).

The taxes recorded associated with the remitted cash were immaterial in both 2020 and 2021.

In 2021, we remitted the cumulative amount of identified cash in our foreign operations in excess of near-term working capital needs.

The taxes recorded associated with the remitted cash were immaterial.

We continue to expect that the remaining balance of our undistributed foreign earnings will be indefinitely reinvested.

6 unchanged sentences

This segment operates throughout the United States and Canada.

The specialty segment includes the rental of specialty construction products such as i) trench safety equipment, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers and line testing equipment for underground work, ii) power and HVAC equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment, iii) fluid solutions equipment primarily used for fluid containment, transfer and treatment, and iv) mobile storage equipment and modular office space.

The specialty segment rents products (and provides setup and other services on such rented equipment) including i) trench safety equipment, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers and line testing equipment for underground work, ii) power and HVAC equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment, iii) fluid solutions equipment primarily used for fluid containment, transfer and treatment, and iv) mobile storage equipment and modular office space.

The specialty segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies.

This segment primarily operates in the United States and Canada, and has a limited presence in Europe, Australia and New Zealand.

As discussed in note 5 to our consolidated financial statements, we aggregate our four geographic divisions—Central, Northeast, Southeast and West—into our general rentals reporting segment.

As discussed in note 5 to our consolidated financial statements, our general rentals reporting segment reflects the aggregation of four geographic divisions—Central, Northeast, Southeast and West.

Historically, there have occasionally been variances in the levels of equipment rentals gross margins achieved by these divisions, though such variances have generally been small (close to or less than 10 percent, measured versus the equipment rentals gross margins of the aggregated general rentals' divisions).

4 unchanged sentences

The aggregation of our divisions also reflects the management structure that we use for making operating decisions and assessing performance.

Although we believe aggregating these divisions into our reporting segments for segment reporting purposes is appropriate, to the extent that there are significant margin variances that do not converge, we may be required to disaggregate the divisions into separate reporting segments.

Although we believe aggregating these divisions into our reporting segments for segment reporting purposes is appropriate, to the extent that there are significant margin variances that do not

converge, we may be required to disaggregate the divisions into separate reporting segments.

Any such disaggregation would have no impact on our consolidated results of operations.

26 unchanged sentences

Equipment rentals.

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.

2023 equipment rentals of $12.1 billion increased 19.3 percent, primarily due to a 21.9 percent increase in average OEC, partially offset by a 0.7 percent decrease in fleet productivity.

The increase in average OEC includes the impact of the acquisition of Ahern Rentals that is discussed in note 4 to the consolidated financial statements.

Beginning in 2021 and continuing through December 31, 2023, we have experienced broad-based strength of demand across our end-markets.

On a segment basis, equipment rentals represented 82 percent and 90 percent of total revenues for general rentals and specialty, respectively.

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 broad-based strength of demand across our end-markets, as well as increased average OEC, both of which are discussed above.

General rentals equipment rentals increased 19.9 percent as compared to 2022, primarily due to strong demand across our end-markets and increased average OEC, which includes the impact of the Ahern Rentals acquisition.

On a pro forma basis including the pre-acquisition results of Ahern Rentals, year-over-year, equipment rentals increased 9.1 percent, primarily reflecting increases in average OEC and fleet productivity.

Specialty rentals increased 17.7 percent as compared to 2022, primarily due to strong demand across our end-markets and increased average OEC.

As noted above, beginning in 2021 and continuing through December 31, 2023, we have experienced broad-based strength of demand across our end-markets.

Sales of rental equipment .

For the three years in the period ended December 31, 2023, sales of rental equipment represented approximately 10 percent of our total revenues.

Our general rentals segment accounted for most of these sales.

2023 sales of rental equipment of $1.6 billion increased 63.1 percent from 2022, primarily reflecting the normalization of volumes, after we intentionally held back on sales of rental equipment in 2022 to ensure sufficient rental capacity for our customers, as well as the impact of sales of rental equipment acquired in the Ahern Rentals acquisition.

Pricing on sales of rental equipment remains strong.

Sales of new equipment .

For the three years in the period ended December 31, 2023, sales of new equipment represented approximately 2 percent of our total revenues.

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 ").

Sales of contractor supplies .

2023 sales of new equipment of $218 increased 41.6 percent from 2022, primarily reflecting some individually significant sales in 2023 and normal variability.

Contractor supplies sales .

For the three years in the period ended December 31, 2023, sales of contractor supplies represented approximately 1 percent of our total revenues.

Our general rentals segment accounted for most of these sales.

2023 sales of contractor supplies did not change materially from 2022.

1 unchanged sentence

For the three years in the period ended December 31, 2023, service and other revenues represented approximately 2 percent of our total revenues.

Our general rentals segment accounted for most of these sales.

2023 service and other revenues increased 17.4 percent from 2022 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 2023 that had a material impact on our 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.

Segment Equipment Rentals Gross Profit

10 unchanged sentences

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

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, 2023, general rentals’ equipment rentals gross profit increased by $314, and equipment rentals gross margin decreased by 300 basis points, from 2022, primarily due to the impact of the Ahern Rentals acquisition.

As a percentage of revenue, depreciation and repairs and maintenance expenses for the rental equipment acquired in the Ahern Rentals acquisition were higher than for our other rental equipment, which negatively impacted equipment rentals gross margin year-over-year.

For the year ended December 31, 2023, equipment rentals gross profit increased by $255, and equipment rentals gross margin increased by 50 basis points from 2022.

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 .

8 unchanged sentences

Service and other revenues 38.5% 40.2% 39.3% (170) bps 90 bps

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

2023 gross margin of 40.6 percent decreased 230 basis points from 2022.

Equipment rentals gross margin decreased 210 basis points from 2022, primarily due to the impact of the Ahern Rentals acquisition.

Gross margin from sales of rental equipment decreased 880 basis points from 2022, primarily due to the normalization of the used equipment market, the expanded use of wholesale channels, and the impact of the Ahern Rentals acquisition.

The equipment acquired in the Ahern Rentals acquisition was recorded at fair value as of the December 2022 acquisition date, and the gross margins on the sale of such acquired equipment were less than the gross margins achieved upon the sale of other rental equipment.

As reflected in the above gross margin, pricing on sales of rental equipment remains strong.

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, 2023).

13 unchanged sentences

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 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.

The year-over-year decrease in SG&A expense as a percentage of revenue for the year ended December 31, 2023 was primarily due to better fixed cost absorption on higher revenue (in particular, salaries and benefits declined as a percentage of revenue).

The merger related costs reflect transaction costs associated with the General Finance acquisition that was completed in May 2021.

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

3 unchanged sentences

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.

The designated restructuring programs generally involve the closure of a large number of branches over a short period of time, often in periods following a major acquisition, and result in significant costs that we would not normally incur absent a major acquisition or other triggering event that results in the initiation of a restructuring program.

Since the first such program was initiated in 2008, we have completed seven restructuring programs and have incurred total restructuring charges of $380.

In the first quarter of 2023, we initiated a restructuring program following the closing of the Ahern Rentals acquisition discussed above (such program is the reason for the year-over-year restructuring charge increase for the year ended December 31, 2023).

This restructuring program was completed in the fourth quarter of 2023, and we currently have no open restructuring programs.

As of December 31, 2023, the total liability associated with our restructuring programs was $21.

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.

Our other intangible assets consist of customer relationships, non-compete agreements and trade names and associated trademarks.

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

Our other intangible assets consist of customer relationships, non-compete

agreements and trade names and associated trademarks.

The year-over-year increase in non-rental depreciation and amortization for the year ended December 31, 2023 primarily reflects the impact of the Ahern Rentals acquisition.

Interest expense, net for the year ended 2022 included aggregate debt redemption losses of $17.

The debt redemption losses primarily reflected 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, 2023 increased by 48.4 percent year-over-year primarily due to increased average debt, including the debt issued to partially fund the Ahern Rentals acquisition discussed above, and higher variable debt interest rates (the weighted average interest rates on our variable debt instruments were 6.3 percent in 2023 and 3.3 percent in 2022).

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.

1 unchanged sentence

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, 2022 was flat year-over-year.

Balance sheet .

Accounts receivable, net increased by $226, or 11.3 percent, from December 31, 2022 to December 31, 2023 primarily due to increased revenue.

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.

Prepaid expenses and other assets decreased by $246, or 64.6 percent, from December 31, 2022 to December 31, 2023, primarily due to the use of a portion of a tax receivable associated with the Ahern Rentals acquisition to reduce cash paid for income taxes (see note 6 to the consolidated financial statements for further detail).

Operating lease right-of-use assets increased by $280, or 34.2 percent, and operating lease liabilities increased by $253, or 39.4 percent, from December 31, 2022 to December 31, 2023, and both increases primarily reflected the impact of the Ahern Rentals acquisition, as discussed in note 4 to the consolidated financial statements.

Accounts payable decreased by $234, or 20.5 percent, from December 31, 2022 to December 31, 2023, primarily reflecting normal variability in business activity and the timing of payments.

See the consolidated statements of cash flows for further information on changes in cash and cash equivalents, the consolidated statements of stockholders’ equity for further information on changes in stockholders’ equity and note 12 to the consolidated financial statements for further detail on short-term and long-term debt.

Liquidity and Capital Resources.

2 unchanged sentences

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).

This program was paused through the initial phase of the integration of the Ahern Rentals acquisition, and repurchases began in the first quarter of 2023.

We have repurchased $1.00 billion under the program through December 31, 2023 and expect to complete the program in the first quarter of 2024.

On January 24, 2024, our Board of Directors authorized a new $1.5 billion share repurchase program.

A 1 percent excise tax is imposed on “net repurchases” (certain purchases minus certain issuances) of common stock.

The repurchases above, as well as the total program sizes, do not include the excise tax, which totaled $8 in 2023.

Since 2012, we have repurchased a total of $5.965 billion (inclusive of immaterial excise taxes, which were first imposed in 2023) of Holdings' common stock under our share repurchase programs (comprised of seven programs that have ended and the current program).

Our Board of Directors also approved our first-ever quarterly dividend program in January 2023, and the first dividend under the program was paid in February 2023.

We did not pay any dividends prior to 2023, and during 2023, we paid dividends totaling $406 ($5.92 per share, which equates to a quarterly dividend per share of $1.48).

On January 24, 2024, our Board of Directors declared a quarterly dividend of $1.63 per share, payable on February 28, 2024 to stockholders of record on February 14, 2024.

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.

18 unchanged sentences

_________________

(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.

(1) As discussed in note 12 to the consolidated financial statements, the accounts receivable securitization facility expires on June 24, 2024 and may be 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, (vi) dividends and (vii) acquisitions.

13 unchanged sentences

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 primarily throughout 2023 and 2024.

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 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 and accounts receivable securitization facilities.

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.

Net payments for rental capital expenditures (defined as payments for purchases of rental equipment less the proceeds from sales of rental equipment) were $2.140 billion, $2.471 billion and $2.030 billion in 2023, 2022 and 2021, respectively.

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

1 unchanged sentence

Credit ratings also affect the costs of derivative transactions, including interest rate and foreign currency derivative transactions.

As a result, negative changes in our credit ratings could adversely impact our costs of funding.

result, negative changes in our credit ratings could adversely impact our costs of funding.

Our credit ratings as of January 22, 2024 were as follows:

14 unchanged sentences

The accounts receivable securitization facility also requires us to comply with the fixed charge coverage ratio under the ABL facility, to the extent the ratio is applicable under the ABL facility.

URNA’s payment capacity is restricted under the covenants in the ABL and term loan facilities and the indentures governing its outstanding indebtedness.

Although this restricted capacity limits our ability to move operating cash flows to Holdings, because of certain intercompany arrangements, we do not expect any material adverse impact on Holdings’ ability to meet its cash obligations.

Covenants in the agreements governing our ABL facility, term loan facility and certain other debt instruments impose limitations on our ability to make share repurchases and dividend payments, subject to important exceptions that would allow us to make such repurchases or payments under certain conditions.

Based on our current total indebtedness leverage ratio (as defined in the applicable debt agreements) and usage of the ABL facility as of December 31, 2023, we met the criteria under the applicable debt agreements for these exceptions, and as a result we were not restricted in our ability to make share repurchases and dividend payments.

Sources and Uses of Cash .

During 2023, we (i) generated cash from operating activities of $4.704 billion and (ii) generated cash from the sale of rental and non-rental equipment of $1.634 billion.

We used cash during this period principally to (i) make payments for purchases of rental and non-rental equipment and intangible assets of $4.070 billion, (ii) purchase other companies for $574, (iii) purchase shares of our common stock for $1.070 billion and (iv) pay dividends of $406.

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.

We used cash during this period principally to (i) make payments for purchases of 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.

Free Cash Flow GAAP Reconciliation

We define “free cash flow” as net cash provided by operating activities less purchases of, and plus proceeds from, equipment and intangible assets.

The equipment and intangible asset purchases and proceeds are included in cash flows from investing activities.

We define “free cash flow” as net cash provided by operating activities less payments for purchases of, and plus proceeds from, equipment and intangible assets.

The equipment and intangible asset items are included in cash flows from investing activities.

Management believes that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements.

5 unchanged sentences

Net cash provided by operating activities $ 4,704 $ 4,433 $ 3,689

Purchases of rental equipment (3,436) (2,998) (961)

Purchases of non-rental equipment and intangible assets (254) (200) (197)

Payments for purchases of rental equipment (3,714) (3,436) (2,998)

Payments for purchases of non-rental equipment and intangible assets (356) (254) (200)

Proceeds from sales of rental equipment 1,574 965 968

3 unchanged sentences

Free cash flow for the year ended December 31, 2023 was $2.306 billion, an increase of $542 as compared to $1.764 billion for the year ended December 31, 2022.

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.

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 (pre-COVID-19) levels, while capital expenditures in 2021 and 2022 have exceeded historic levels.

Free cash flow increased primarily due to lower payments for net rental capital expenditures (payments for purchases of rental equipment less the proceeds from sales of rental equipment), which decreased $331, or 13 percent, year-over-year, and increased net cash provided by operating activities.

Relationship between Holdings and URNA .

11 unchanged sentences

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 subsidiary 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”) and a foreign subsidiary holding company 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 subsidiary 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, or the foreign subsidiary holding company 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.

9 unchanged sentences

Future guarantees of subordinated indebtedness will rank junior to any existing and future senior indebtedness of the guarantors.

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, 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.

As of December 31, 2022, the amount available for distribution under the most restrictive of these covenants was $1.392 billion.

The Company’s total available capacity for making share repurchases and dividend payments includes the intercompany receivable balance of Holdings.

As of December 31, 2022, our total available capacity for making share repurchases and dividend payments, which includes URNA’s capacity to make restricted payments and the intercompany receivable balance of Holdings, was $6.153 billion.

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 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, 2023, the indebtedness of our non-guarantors was comprised of (i) $1.300 billion of outstanding borrowings by the SPV in connection with the Company’s accounts receivable securitization facility, (ii) $99 of outstanding borrowings under the ABL facility by non-guarantor subsidiaries and (iii) $9 of finance leases of our non-guarantor subsidiaries.

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 enables 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 the financial information of the non-guarantor subsidiaries.

3 unchanged sentences

December 31, 2023

Current receivable from non-guarantor subsidiaries $26

Other current assets 615

Total current assets $364

3 unchanged sentences

Total assets 21,033

Current liabilities 2,139

Payable to non-guarantor subsidiaries 1

Other current liabilities 2,093

Total current liabilities 2,094

Long-term liabilities 13,464

5 unchanged sentences

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