Financials. Bill Plummer Executive Vice President & Chief Financial Officer Irene Moshouris Senior Vice President, Treasurer December 1, 2016

Transcription

1 Financials Bill Plummer Executive Vice President & Chief Financial Officer Irene Moshouris Senior Vice President, Treasurer December 1, 2016

2 Introduction Irene Moshouris Senior Vice President, Treasurer Joined the company in 2006 Responsibilities include Treasury, Tax and Real Estate Avon Products, Inc. Deputy Treasurer Sterling Winthrop, Inc. and Arthur Andersen & Co. various tax and treasury positions

3 Debt Maturity Management December 31, 2008 (1) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year September 30, 2016 (1) (2) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Principal Unused Facility Average maturity 2 years beyond 2008 levels with strong management of maturities (1) Principal amounts only, no discount, premium, or deferred financing included. (2) As of September 30, 2016 pro forma for the redemption of $850M of 7.625% notes due 2022 announced on October 24, 2016.

4 (1) Interest Rate Management 9.0% 8.0% 7.0% 6.0% 7.3% 7.3% 8.1% 8.1% 6.8% 6.5% 6.1% 5.4% 5.3% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% YTD Q Average weighted cost of debt currently 280 bps below 2011 peak (1) Interest rate reflects annual interest expense excluding gains or losses on redemptions divided by the monthly average debt balance.

5 (1) Net Leverage Management (2) Targeted Net Leverage Range Over the Cycle: 2.5x to 3.5x Q Net leverage ratio trending towards lower end of targeted range (1) Leverage Ratio calculated as total debt and QUIPs, net of cash, excluding original issuance discounts, premiums, and deferred financing divided by adjusted LTM EBITDA. (2) Pro Forma assumes RSC acquisition occurred on January 1, 2012.

6 Share Repurchase Programs Fully Diluted Shares Outstanding (MM) Since October 2013, URI has repurchased 22.9M shares for $1.8B Shares Repurchased (MM) Q Q Q Q Q Q Q Q Q Q Q Q # Share Purchased Under Repurchase Programs (R-Axis) Fully Diluted Shares Outstanding (L-Axis) Fully-diluted share count down 19% since 2013

7 Introduction Bill Plummer Executive Vice President & Chief Financial Officer Joined company in 2008 in current position Responsible for Controllership, FP&A, Treasury, Internal Audit, Investor Relations, Risk Management, Health Environmental & Safety and International Strategy Development 7

8 A few final thoughts Thinking through our Cost of Capital (WACC) Framing ROIC, WACC and economic returns Capital allocation and free cash generation 8

9 Cost of capital management 12% 10% 8% 7.2% 6% 4% 2% 0% Q Q Q Q Q Q Q Q Q Q Q Q WACC Hurdle Rate URI s WACC has declined ~300 bps since 2014 well below our historic hurdle rate 9

10 Cost of capital management 12% 10% 8% 6% 8.3% 7.2% 4% 2% 0% Q Q Q Q Q Q Q Q Q Q Q Q WACC Hurdle Rate WACC Without Share Repurchase Share repurchases have contributed significantly to the reduction in our WACC 10

11 A few thoughts on ROIC You guys report your ROIC as 8.3% but you say your WACC is 10%. So by your own terms, you are destroying economic value with every dollar you invest. Comparing ROIC to WACC is a shortcut around a full DCF calculation but shortcuts can be dangerous when thinking about real returns! 11

12 Comparing ROIC to a Hurdle Rate 12% 10% 8% Negative Economic Profit? 10.0% 8.3% 6% 4% 2% 0% Q Q Q Q Q Q Q Q Q Q Q Q Hurdle Rate ROIC paints the wrong picture about economic profitability/ EVA 12

13 Comparing ROIC to WACC is better 12% 10% 8.3% 8% 6% Negative Economic Profit? Positive Economic Profit? 7.2% 4% 2% 0% Q Q Q Q Q Q Q Q Q Q Q Q ROIC WACC Hurdle Rate but that comparison still has issues 13

14 Issues with ROIC ROIC: Is based on accounting profit Assumes book value weights of debt and equity Is backward looking Covers one period Gives no benefit for growth WACC: Is used to discount cash flows Uses market weights for debt and equity Discounts the future Discounts all of the future Appropriately counts future growth Comparing ROIC to WACC is comparing apples to oranges 14

15 Adjusting ROIC for market weighting 12% 10% 8% 6% 8.3% 7.2% 7.7% 4% 2% 0% Q Q Q Q Q Q Q Q Q Q Q Q ROIC WACC Hurdle Rate Adjusted ROIC paints a truer picture of economic profitability Note: Adjusted ROIC reflects adjustment for market weightings rather than book value weightings. 15

16 Historical capital allocation: Q Q Debt issuance 2% Priorities Cash from operations 98% Net sources of capital Capex Cash acquisitions Share repurchases 100% equals $6.0B 53% 15% 32% Net uses of capital Manage leverage target (2.5x 3.5x) Organic investment Strategic M&A Return to stockholders Note: Net Debt Issuance includes cash from balance sheet and other items. 16

17 Structurally improved free cash flow profile Free Cash Flow ($MM) $1,300 $1,100 $900 $700 $500 $300 $100 $(100) 32.8% $ % $ % $ % $ % 46.7% $ % 48.7% $411 $557 $ % $846 50% 40% 30% 20% 10% Adjusted EBITDA Margin (%) $(300) $(223) YTD Sep YTD Full Year EBITDA Margin (%) 0% while improving margins and economic profitability Note: Dotted text box reflects mid-point of 2016 full-year FCF guidance. 17

18 Summary URI s core Four Pillars strategy has served us well, delivering growth and improved profitability throughout the current cycle Operational excellence and disciplined fleet management have driven structural gains to our margin, return, and FCF profiles, and will remain the foundation of future improvements in our core business Project XL initiatives open new avenues for both growth and returns $200MM in run rate benefit by year-end 2018 Specialty businesses will continue to contribute strong growth and returns, targeting $2 billion in revenue by 2020 Smart M&A represents an opportunity to turbocharge everything we do All will be supported by a sound, efficient capital structure and solid FCF throughout the cycle Margin, Return, and FCF profiles structurally improved with more to come 18