UNITED RENTALS, INC. COVID-19
As discussed in note 1 to our condensed 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 ofUnited 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 or become viewed as endemic, 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. We began to experience a decline in revenues inMarch 2020 , which is when theWorld 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 continuing evidence of recovery across our construction and industrial markets, as well as encouraging gains in end-market indicators, as reflected in our 2022 forecast and performance throughSeptember 30, 2022 . In earlyMarch 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 has helped mitigate the impact of COVID-19 on our results. Our previously filed Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q include additional detailed COVID-19 disclosures. The most detailed disclosures addressing COVID-19 are in the filings for 2021 and 2020, when COVID-19 had the most pronounced impact on our business. The impact of COVID-19 on our business is discussed throughout this "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Executive Overview
We are the largest equipment rental company in the world, with an integrated network of 1,402 rental locations. We primarily operate inthe United States andCanada , and have a limited presence inEurope ,Australia and New Zealand . Although the equipment rental industry is highly fragmented and diverse, we believe that we are well positioned to take advantage of this environment because, as a larger company, we have more extensive resources and certain competitive advantages. These include a fleet of rental equipment with a total original equipment cost ("OEC") of$17.4 billion , and a North American branch network that operates in 49 U.S. states and every Canadian province, and serves 99 of the 100 largest metropolitan areas in theU.S. Our size also gives us greater purchasing power, the ability to provide customers with a broader range of equipment and services, the ability to provide customers with equipment that is more consistently well-maintained and therefore more productive and reliable, and the ability to enhance the earning potential of our assets by transferring equipment among branches to satisfy customer needs. We offer approximately 4,500 classes of equipment for rent to a diverse customer base that includes construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. Our revenues are derived from the following sources: equipment rentals, sales of rental equipment, sales of new equipment, contractor supplies sales and service and other revenues. Equipment rentals represented 88 percent of total revenues for the nine months endedSeptember 30, 2022 . For the past several years, we have executed a strategy focused on improving the profitability of our core equipment rental business through revenue growth, margin expansion and operational efficiencies. In particular, we have focused on customer segmentation, customer service differentiation, rate management, fleet management and operational efficiency. 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: •A consistently superior standard of service to customers, often provided through a single lead contactwho can coordinate the cross-selling of the various services we offer throughout our network. We utilize a proprietary software application, Total Control®, which provides our key customers with a single in-house software application that enables them to monitor and manage all their equipment needs. Total Control® is a unique customer offering that enables us to develop strong, long-term relationships with our larger customers. Our digital capabilities, including our Total Control® platform, allow our sales teams to provide contactless end-to-end customer service; •The further optimization of our customer mix and fleet mix, with a dual objective: to enhance our performance in serving our current customer base, and to focus on the accounts and customer types that are best suited to our strategy for profitable growth. We believe these efforts will lead to even better service of our target accounts, 27
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primarily large construction and industrial customers, as well as select local contractors. Our fleet team's analyses are aligned with these objectives to identify trends in equipment categories and define action plans that can generate improved returns;
•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 3 to the condensed consolidated financial statements, as well as our tools and onsite services offerings, will further positionUnited Rentals as a single source provider of total jobsite solutions through our extensive product and service resources and technology offerings; and •The pursuit of strategic acquisitions to continue to expand our core equipment rental business. Strategic acquisitions allow us to invest our capital to expand our business, further driving our ability to accomplish our strategic goals.
Financial Overview
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 have taken the following actions to improve our financial flexibility and liquidity, and to position us to invest the necessary capital in our business:
•Redeemed
•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 inJune 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 inJune 2027 ; and
•Entered into an uncommitted repurchase facility pursuant to which we may obtain
short-term financing in an amount up to
As of
Net income. Net income and diluted earnings per share are presented below.
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net income $ 606 $ 409 $ 1,466 $ 905
Diluted earnings per share $ 8.66 $ 5.63 $ 20.56 $ 12.45 Net income and diluted earnings per share include the after-tax impacts of the items below. The tax rates applied to the items below reflect the statutory rates in the applicable entities.
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Three Months Ended September 30 , Nine Months Ended September 30,
2022 2021 2022 2021
Tax rate applied to items below 25.4 % 25.2 % 25.3 % 25.3 %
Impact on Impact on Impact on Impact on
Contribution diluted Contribution diluted Contribution diluted diluted
to net income earnings to net income earnings to net income earnings Contribution earnings
(after-tax) per share (after-tax) per share (after-tax) per share to net income (after-tax) per share
Merger related costs (1) $ - $ - $ - $ - $ - $ - $ (2) $ (0.03)
Merger related intangible asset amortization (2) (30) (0.44) (39) (0.53) (99) (1.39) (109)
(1.50)
Impact on depreciation related to acquired fleet and property and equipment (3) (8) (0.12) (1) (0.01) (34) (0.48) (3)
(0.04)
Impact of the fair value mark-up of acquired fleet (4) (4) (0.05) (6) (0.08) (12) (0.17) (21) (0.28) Restructuring charge (5) - 0.01 - - - - (1) (0.02) Asset impairment charge (6) - (0.01) (2) (0.02) (2) (0.03) (5) (0.06) Loss on repurchase/redemption of debt securities (7) - - (22) (0.31) (13) (0.18) (22) (0.31) (1)This reflects transaction costs associated with the General Finance acquisition discussed above. 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. (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. (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 and branch closure charges associated with our restructuring programs. For additional information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Other costs/(income)-restructuring charges" below. (6)This reflects write-offs of leasehold improvements and other fixed assets. (7)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. EBITDA GAAP Reconciliations. EBITDA represents the sum of net income, provision for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the merger related costs, restructuring charges, stock compensation expense, net and the impact of the fair value mark-up of the acquired fleet. 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. 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 GAAP and the accompanying reconciliations, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that EBITDA and adjusted EBITDA help investors gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced. However, EBITDA and adjusted EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. 29
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The table below provides a reconciliation between net income and EBITDA and
adjusted EBITDA:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net income $ 606 $ 409 $ 1,466 $ 905
Provision for income taxes 210 141 441 297
Interest expense, net 106 132 313 331
Depreciation of rental equipment 470 412 1,362 1,172
Non-rental depreciation and amortization 90 98 278 279
EBITDA $ 1,482 $ 1,192 $ 3,860 $ 2,984
Merger related costs (1) - - - 3
Restructuring charge (2) (1) - - 1
Stock compensation expense, net (3) 35 33 95 89
Impact of the fair value mark-up of acquired fleet (4) 5 8 16 28
Adjusted EBITDA $ 1,521 $ 1,233 $ 3,971 $ 3,105
Net income margin 19.9 % 15.8 % 17.6 % 13.0 %
Adjusted EBITDA margin 49.9 % 47.5 % 47.6 % 44.7 %
The table below provides a reconciliation between net cash provided by operating activities and EBITDA and adjusted EBITDA:
Nine Months Ended
September 30,
2022 2021
Net cash provided by operating activities $ 3,182 $ 3,021
Adjustments for items included in net cash provided by operating activities but
excluded from the calculation of EBITDA:
Amortization of deferred financing costs and original issue discounts (9) (9)
Gain on sales of rental equipment 325 271
Gain on sales of non-rental equipment 6 6
Insurance proceeds from damaged equipment 25 19
Merger related costs (1) - (3)
Restructuring charge (2) - (1)
Stock compensation expense, net (3) (95) (89)
Loss on repurchase/redemption of debt securities (5) (17) (30)
Changes in assets and liabilities (191) (714)
Cash paid for interest 339 362
Cash paid for income taxes, net 295 151
EBITDA $ 3,860 $ 2,984
Add back:
Merger related costs (1) - 3
Restructuring charge (2) - 1
Stock compensation expense, net (3) 95 89
Impact of the fair value mark-up of acquired fleet (4) 16 28
Adjusted EBITDA $ 3,971 $ 3,105
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(1)This reflects transaction costs associated with the General Finance acquisition discussed above. Merger related costs only include costs associated with major acquisitions. For additional information, see "Results of Operations-Other costs/(income)-merger related costs" below.
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(2)This primarily reflects severance and branch closure charges associated with our restructuring programs. For additional information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Other costs/(income)-restructuring charges" below.
(3)Represents non-cash, share-based payments associated with the granting of equity instruments.
(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 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 three months endedSeptember 30, 2022 , net income increased$197 , or 48.2 percent, and net income margin increased 410 basis points to 19.9 percent. For the three months endedSeptember 30, 2022 , adjusted EBITDA increased$288 , or 23.4 percent, and adjusted EBITDA margin increased 240 basis points to 49.9 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 selling, general and administrative ("SG&A") expense and non-rental depreciation and amortization as a percentage of revenue and lower net interest expense, partially offset by higher income tax expense as a percentage of revenue. The increased gross margin from sales of rental equipment sales primarily reflected improved pricing. 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 three months endedSeptember 30, 2021 included debt redemption losses of$30 . Net interest expense, excluding these debt redemption losses, did not change significantly year-over-year. While income tax expense increased$69 , or 48.9 percent, year-over-year, the effective income tax rate was largely flat year-over-year. 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 40 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 14.3 percentage points primarily due to improved pricing. For the nine months endedSeptember 30, 2022 , net income increased$561 , or 62.0 percent, and net income margin increased 460 basis points to 17.6 percent. For the nine months endedSeptember 30, 2022 , adjusted EBITDA increased$866 , or 27.9 percent, and adjusted EBITDA margin increased 290 basis points to 47.6 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 and non-rental depreciation and amortization as a percentage of revenue and lower net interest expense, 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 improved pricing. 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 nine months endedSeptember 30, 2022 and 2021 included debt redemption losses of$17 and$30 , respectively. Net interest expense, excluding these debt redemption losses, decreased slightly year-over-year. While income tax expense increased$144 , or 48.5 percent, year-over-year, the effective income tax rate decreased by 160 basis points, primarily due to aligning the legal entity structure inAustralia and New Zealand with our other foreign operations, which resulted in a tax depreciation benefit of$39 in the nine months endedSeptember 30, 2022 . 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 80 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 14.9 percentage points primarily due to improved pricing. Revenues are noted below. Fleet productivity is a comprehensive metric that provides greater insight into the decisions made by our managers in support of equipment rental growth and returns. Specifically, we seek to optimize the interplay of rental rates, time utilization and mix to drive rental revenue. Fleet productivity aggregates, in one metric, the impact of changes in rates, utilization and mix on owned equipment rental revenue. We believe that this metric is useful in assessing the effectiveness of our decisions on rates, time utilization and mix, particularly as they support the creation of shareholder value. 31
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The table below includes the components of the year-over-year change in rental revenue using the fleet productivity methodology.
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 Change 2022 2021 Change
Equipment rentals* $ 2,732 $ 2,277 20.0 % $ 7,369 $ 5,895 25.0 %
Sales of rental equipment 181 183 (1.1) % 556 644 (13.7) %
Sales of new equipment 32 47 (31.9) % 115 153 (24.8) %
Contractor supplies sales 32 29 10.3 % 94 80 17.5 %
Service and other revenues 74 60 23.3 % 212 168 26.2 %
Total revenues $ 3,051 $ 2,596 17.5 % $ 8,346 $ 6,940 20.3 %
*Equipment rentals variance components:
Year-over-year change in average OEC 10.6 % 13.4 %
Assumed year-over-year inflation impact (1) (1.5) % (1.5) %
Fleet productivity (2) 8.9 % 10.7 %
Contribution from ancillary and re-rent revenue
(3) 2.0 % 2.4 %
Total change in equipment rentals 20.0 % 25.0 %
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(1)Reflects the estimated impact of inflation on the revenue productivity of fleet based on OEC, which is recorded at cost.
(2)Reflects the combined impact of changes in rental rates, time utilization, and mix that contribute to the variance in owned equipment rental revenue. See note 2 to the condensed consolidated financial statements for a discussion of the different types of equipment rentals revenue. Rental rate changes are calculated based on the year-over-year variance in average contract rates, weighted by the prior period revenue mix. Time utilization is calculated by dividing the amount of time an asset is on rent by the amount of time the asset has been owned during the year. Mix includes the impact of changes in customer, fleet, geographic and segment mix.
(3)Reflects the combined impact of changes in the other types of equipment rentals revenue (see note 2 for further detail), excluding owned equipment rental revenue.
Equipment rentals include our revenues from renting equipment, as well as revenue related to the fees we charge customers: for equipment delivery and pick-up; to protect the customer against liability for damage to our equipment while on rent; for fuel; and for environmental and other miscellaneous costs and services. Sales of rental equipment represent our revenues from the sale of used rental equipment. Sales of new equipment represent our revenues from the sale of new equipment. Contractor supplies sales represent our sales of supplies utilized by contractors, which include construction consumables, tools, small equipment and safety supplies. Services and other revenues primarily represent our revenues earned from providing repair and maintenance services on our customers' fleet (including parts sales). See note 2 to the condensed consolidated financial statements for a discussion of our revenue recognition accounting. For the three months endedSeptember 30, 2022 , total revenues of$3.051 billion increased 17.5 percent compared with 2021. Equipment rentals and sales of rental equipment are our largest revenue types (together, they accounted for 95 percent of total revenue for the three months endedSeptember 30, 2022 ). Equipment rentals increased$455 , or 20.0 percent, primarily due to a 10.6 percent increase in average OEC and an 8.9 percent increase in fleet productivity. Following the more pronounced impact of COVID-19 in 2020, beginning in 2021 and continuing throughSeptember 30, 2022 , we have seen evidence of a continuing recovery of activity across our end-markets. As discussed above, 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 exceeded historic (pre-COVID-19) levels, which contributed to the increased average OEC. Capital expenditures for the nine months endedSeptember 30, 2022 have exceeded the expenditures in the same period in 2021, and full year 2022 capital expenditures are expected to exceed the expenditures in 2021. Sales of rental equipment decreased slightly year-over-year. While sales of rental equipment decreased slightly year-over-year, pricing remained strong, as reflected in the 16.0 percentage point increase in gross margin from sales of rental equipment. For the nine months endedSeptember 30, 2022 , total revenues of$8.346 billion increased 20.3 percent compared with 2021. Equipment rentals and sales of rental equipment are our largest revenue types (together, they accounted for 95 percent of total revenue for the nine months endedSeptember 30, 2022 ). Equipment rentals increased$1.474 billion , or 25.0 percent, primarily due to a 13.4 percent increase in average OEC and a 10.7 percent increase in fleet productivity, both of which include 32
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the more pronounced impact of COVID-19 during the nine months endedSeptember 30, 2021 . Beginning in 2021 and continuing throughSeptember 30, 2022 , we have seen evidence of a continuing recovery of activity across our end-markets. The increase in average OEC includes the impact of the acquisition of General Finance that is discussed in note 3 to the condensed consolidated financial statements, as well as increased capital expenditures. As discussed above, 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 exceeded historic (pre-COVID-19) levels, which contributed to the increased average OEC. Capital expenditures for the nine months endedSeptember 30, 2022 have exceeded the expenditures in the same period in 2021, and full year 2022 capital expenditures are expected to exceed the expenditures in 2021. Sales of rental equipment decreased 13.7 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 sales of rental equipment decreased year-over-year, pricing remained strong, as reflected in the 16.4 percentage point increase in gross margin from sales of rental equipment.
Results of Operations
As discussed in note 4 to our condensed consolidated financial statements, our reportable segments are general rentals and specialty. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The general rentals segment's customers include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. This segment operates throughoutthe United States andCanada . 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's customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment primarily operates inthe United States andCanada , and has a limited presence inEurope ,Australia and New Zealand . As discussed in note 4 to our condensed consolidated financial statements, we aggregate our four geographic divisions-Central, Northeast, Southeast and West-into our general rentals reporting segment. 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). For the five year period endedSeptember 30, 2022 , there was no general rentals' division with an equipment rentals gross margin that differed materially from the equipment rentals gross margin of the aggregated general rentals' divisions. The rental industry is cyclical, and there historically have occasionally been divisions with equipment rentals gross margins that varied by greater than 10 percent from the equipment rentals gross margins of the aggregated general rentals' divisions, though the specific divisions with margin variances of over 10 percent have fluctuated, and such variances have generally not exceeded 10 percent by a significant amount. We monitor the margin variances and confirm margin similarity between divisions on a quarterly basis. We believe that the divisions that are aggregated into our segments have similar economic characteristics, as each division is capital intensive, offers similar products to similar customers, uses similar methods to distribute its products, and is subject to similar competitive risks. 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. Any such disaggregation would have no impact on our consolidated results of operations. These reporting segments align our external segment reporting with how management evaluates business performance and allocates resources. We evaluate segment performance primarily based on segment equipment rentals gross profit. Our revenues, operating results, and financial condition fluctuate from quarter to quarter reflecting the seasonal rental patterns of our customers, with rental activity tending to be lower in the winter.
Revenues by segment were as follows:
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General
rentals Specialty Total
Three Months EndedSeptember 30, 2022 Equipment rentals$ 1,942 $ 790 $ 2,732 Sales of rental equipment 152 29 181 Sales of new equipment 12 20 32 Contractor supplies sales 20 12 32 Service and other revenues 67 7 74 Total revenue$ 2,193 $ 858 $ 3,051 Three Months EndedSeptember 30, 2021 Equipment rentals$ 1,636 $ 641 $ 2,277 Sales of rental equipment 154 29 183 Sales of new equipment 31 16 47 Contractor supplies sales 19 10 29 Service and other revenues 54 6 60 Total revenue$ 1,894 $ 702 $ 2,596 Nine Months EndedSeptember 30, 2022 Equipment rentals$ 5,322 $ 2,047 $ 7,369 Sales of rental equipment 474 82 556 Sales of new equipment 58 57 115 Contractor supplies sales 60 34 94 Service and other revenues 188 24 212 Total revenue$ 6,102 $ 2,244 $ 8,346 Nine Months EndedSeptember 30, 2021 Equipment rentals$ 4,375 $ 1,520 $ 5,895 Sales of rental equipment 567 77 644 Sales of new equipment 111 42 153 Contractor supplies sales 53 27 80 Service and other revenues 148 20 168 Total revenue$ 5,254 $ 1,686 $ 6,940 Equipment rentals. For the three months endedSeptember 30, 2022 , equipment rentals of$2.732 billion increased$455 , or 20.0 percent, as compared to the same period in 2021, primarily due to a 10.6 percent increase in average OEC and an 8.9 percent increase in fleet productivity. Following the more pronounced impact of COVID-19 in 2020, beginning in 2021 and continuing throughSeptember 30, 2022 , we have seen evidence of a continuing recovery of activity across our end-markets. As discussed above, 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 exceeded historic (pre-COVID-19) levels, which contributed to the increased average OEC. Capital expenditures for the nine months endedSeptember 30, 2022 have exceeded the expenditures in the same period in 2021, and full year 2022 capital expenditures are expected to exceed the expenditures in 2021. Equipment rentals represented 90 percent of total revenues for the three months endedSeptember 30, 2022 . For the nine months endedSeptember 30, 2022 , equipment rentals of$7.369 billion increased$1.474 billion , or 25.0 percent, as compared to the same period in 2021, primarily due to a 13.4 percent increase in average OEC and a 10.7 percent increase in fleet productivity, both of which include the more pronounced impact of COVID-19 during the nine months endedSeptember 30, 2021 . Beginning in 2021 and continuing throughSeptember 30, 2022 , we have seen evidence of a continuing recovery of activity across our end-markets. The increase in average OEC includes the impact of the acquisition of General Finance that is discussed in note 3 to the condensed consolidated financial statements, as well as increased capital expenditures. As discussed above, 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 exceeded historic (pre- 34
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COVID-19) levels, which contributed to the increased average OEC. Capital expenditures for the nine months endedSeptember 30, 2022 have exceeded the expenditures in the same period in 2021, and full year 2022 capital expenditures are expected to exceed the expenditures in 2021. Equipment rentals represented 88 percent of total revenues for the nine months endedSeptember 30, 2022 . For the three months endedSeptember 30, 2022 , general rentals equipment rentals increased$306 , or 18.7 percent, as compared to the same period in 2021, primarily due to the continuing recovery of activity across our end-markets and increased average OEC. As noted above, the broad recovery we saw as 2021 progressed has continued throughSeptember 30, 2022 . As discussed above, capital expenditures were significantly reduced in 2020 due to COVID-19 and then increased in 2021, which contributed to the year-over-year increase in average OEC. For the three months endedSeptember 30, 2022 , equipment rentals represented 89 percent of total revenues for the general rentals segment. For the nine months endedSeptember 30, 2022 , general rentals equipment rentals increased$947 , or 21.6 percent, as compared to the same period in 2021, primarily due to the continuing recovery of activity across our end-markets and increased average OEC. As noted above, the impact of COVID-19 was more pronounced in 2021 and the broad recovery we saw as 2021 progressed has continued throughSeptember 30, 2022 . As discussed above, capital expenditures were significantly reduced in 2020 due to COVID-19 and then increased in 2021, which contributed to the year-over-year increase in average OEC. For the nine months endedSeptember 30, 2022 , equipment rentals represented 87 percent of total revenues for the general rentals segment.
For the three months ended
For the nine months endedSeptember 30, 2022 , specialty equipment rentals increased$527 , or 34.7 percent, as compared to the same period in 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 27 percent. The increase in equipment rentals reflects the continuing recovery of activity across our end-markets, as well as increased average OEC, both of which are discussed above. For the nine months endedSeptember 30, 2022 , equipment rentals represented 91 percent of total revenues for the specialty segment. Sales of rental equipment. For the nine months endedSeptember 30, 2022 , sales of rental equipment represented approximately 7 percent of our total revenues. For the three and nine months endedSeptember 30, 2022 , sales of rental equipment decreased 1.1 percent and 13.7 percent year-over-year, respectively, 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 sales of rental equipment decreased year-over-year, pricing remained strong, as reflected in the increases in gross margin from sales of rental equipment of 16.0 percentage points and 16.4 percentage points for the three and nine months endedSeptember 30, 2022 , respectively. Sales of new equipment. For the nine months endedSeptember 30, 2022 , sales of new equipment represented approximately 1 percent of our total revenues. For the three and nine months endedSeptember 30, 2022 , sales of new equipment decreased 31.9 percent and 24.8 percent year-over-year, respectively, primarily due to supply chain constraints. Contractor supplies sales. Contractor supplies sales represent our revenues associated with selling a variety of supplies, including construction consumables, tools, small equipment and safety supplies. For the nine months endedSeptember 30, 2022 , contractor supplies sales represented approximately 1 percent of our total revenues. For the three and nine months endedSeptember 30, 2022 , contractor supplies sales increased slightly year-over-year. Service and other revenues. Service and other revenues primarily represent our revenues earned from providing repair and maintenance services on our customers' fleet (including parts sales). For the nine months endedSeptember 30, 2022 , service and other revenues represented approximately 3 percent of our total revenues. For the three and nine months endedSeptember 30, 2022 , service and other revenues increased 23.3 percent and 26.2 percent year-over-year, respectively, primarily due to growth initiatives.
Segment Equipment Rentals Gross Profit
Segment equipment rentals gross profit and gross margin were as follows:
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General
rentals Specialty Total
Three Months EndedSeptember 30, 2022 Equipment Rentals Gross Profit$ 797 $ 412 $
1,209
Equipment Rentals Gross Margin 41.0 % 52.2 % 44.3 % Three Months EndedSeptember 30, 2021 Equipment Rentals Gross Profit$ 649 $ 330 $
979
Equipment Rentals Gross Margin 39.7 % 51.5 % 43.0 % Nine Months EndedSeptember 30, 2022 Equipment Rentals Gross Profit$ 2,063 $ 983 $
3,046
Equipment Rentals Gross Margin 38.8 % 48.0 % 41.3 % Nine Months EndedSeptember 30, 2021 Equipment Rentals Gross Profit$ 1,586 $ 721 $
2,307
Equipment Rentals Gross Margin 36.3 % 47.4 %
39.1 %
General rentals. For the three months ended
For the nine months endedSeptember 30, 2022 , equipment rentals gross profit increased by$477 , and equipment rentals gross margin increased 250 basis points, from 2021, primarily due to better fixed cost absorption on higher revenue. As discussed above, equipment rental revenue increased 21.6 percent from 2021, primarily due to increased average OEC and the continuing recovery of activity across our end-markets. Specialty. For the three months endedSeptember 30, 2022 , equipment rentals gross profit increased by$82 , and equipment rentals gross margin increased by 70 basis points, from 2021. Gross margin increased primarily due to better fixed cost absorption on higher revenue, partially offset by a higher proportion of revenue from certain lower margin ancillary fees in 2022. As discussed above, equipment rental revenue increased 23.2 percent from 2021, primarily due to increased average OEC and the continuing recovery of activity across our end-markets. For the nine months endedSeptember 30, 2022 , equipment rentals gross profit increased by$262 , and equipment rentals gross margin increased by 60 basis points, from 2021. Gross margin increased primarily due to better fixed cost absorption on higher revenue, partially offset by a higher proportion of revenue from certain lower margin ancillary fees in 2022 and a depreciation adjustment associated with the finalization of purchase accounting for the General Finance acquisition, which included a one-time impact of$10 in 2022. As discussed above, equipment rental revenue increased 34.7 percent from 2021, including the impact of the General Finance acquisition, primarily due to increased average OEC and the continuing recovery of activity across our end-markets.
Gross Margin. Gross margins by revenue classification were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 Change 2022 2021 Change
Total gross margin 44.8 % 42.5 % 230 bps 42.0% 38.8% 320 bps
Equipment rentals 44.3 % 43.0 % 130 bps 41.3% 39.1% 220 bps
Sales of rental equipment 61.9 % 45.9 % 1,600 bps 58.5% 42.1% 1,640 bps
Sales of new equipment 21.9 % 19.1 % 280 bps 19.1% 16.3% 280 bps
Contractor supplies sales 28.1 % 27.6 % 50 bps 29.8% 28.8% 100 bps
Service and other revenues 39.2 % 38.3 % 90 bps 41.0% 39.3% 170 bps
For the three months endedSeptember 30, 2022 , total gross margin increased 230 basis points from the same period in 2021. Equipment rentals gross margin increased 130 basis points from 2021, primarily due to better fixed cost absorption on higher revenue. As discussed above, equipment rentals increased 20.0 percent from 2021, primarily due to increased average OEC and the continuing recovery of activity across our end-markets. Gross margin from sales of rental equipment increased 16.0 percentage points from the same period in 2021 primarily due to improved pricing. The gross margin fluctuations from sales of new equipment, contractor supplies sales and service and other revenues generally reflect normal variability, and such 36
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revenue types did not account for a significant portion of total gross profit
(gross profit for these revenue types represented 3 percent of total gross
profit for the three months ended
For the nine months endedSeptember 30, 2022 , total gross margin increased 320 basis points from the same period in 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 25.0 percent from 2021, primarily due to increased average OEC and the continuing recovery of activity across our end-markets. Gross margin from sales of rental equipment increased 16.4 percentage points from the same period in 2021 primarily due to improved pricing. 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 nine months endedSeptember 30, 2022 ).
Other costs/(income)
The table below includes the other costs/(income) in our condensed consolidated statements of income, as well as key associated metrics:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 Change 2022 2021 Change
Selling, general and
administrative ("SG&A") expense $356 $326 9.2% $1,022 $877 16.5%
SG&A expense as a percentage of revenue 11.7% 12.6% (90) bps 12.2% 12.6% (40) bps Merger related costs - - -% - 3 (100.0)% Restructuring charge (1) - -% - 1 (100.0)% Non-rental depreciation and amortization 90 98 (8.2)% 278 279 (0.4)% Interest expense, net 106 132 (19.7)% 313 331 (5.4)% Other income, net (1) (3) (66.7)% (12) (1) 1,100.0% Provision for income taxes 210 141 48.9% 441 297 48.5% Effective tax rate 25.7% 25.6% 10 bps 23.1% 24.7% (160) bps 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. SG&A expense as a percentage of revenue for the three and nine months endedSeptember 30, 2022 decreased from the same periods in 2021 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 has continued throughSeptember 30, 2022 ). The merger related costs reflect transaction costs associated with the General Finance acquisition that was completed inMay 2021 , as discussed in note 3 to the condensed 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 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 ofSeptember 30, 2022 , there were no open restructuring programs, and the total liability associated with the closed restructuring programs was$7 . 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 three and nine months endedSeptember 30, 2022 decreased 19.7 percent and 5.4 percent year-over-year, respectively. Interest expense, net included debt redemption losses of$17 for the nine months endedSeptember 30, 2022 and$30 for the three and nine months endedSeptember 30, 2021 . The debt redemption losses primarily 37
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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 three and nine months ended
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. The effective tax rates for 2022 and 2021 differed from the federal statutory rate of 21 percent primarily due to the geographical mix of income between foreign and domestic operations, the impact of state and local taxes, stock compensation, other deductible and nondeductible charges, the release in 2021 of a valuation allowance on state tax credits and a 2022 realignment of the legal entity structure inAustralia and New Zealand as discussed below. The year-over-year decrease in the effective income tax rate for the nine months endedSeptember 30, 2022 primarily reflected the impact of aligning the legal entity structure inAustralia and New Zealand with our other foreign operations, which resulted in a tax depreciation benefit of$39 in the nine months endedSeptember 30, 2022 , partially offset by the release in 2021 of a valuation allowance on state tax credits. InMarch 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 2021, and is not expected to impact our effective tax rate in 2022. As ofSeptember 30, 2022 , we had deferred employer payroll taxes of$27 under the CARES Act, all of which is due in 2022. Balance sheet. Accounts receivable, net increased by$257 , or 15.3 percent, fromDecember 31, 2021 toSeptember 30, 2022 , primarily due to increased revenue. Accounts payable increased by$320 , or 39.2 percent, fromDecember 31, 2021 toSeptember 30, 2022 , primarily due to increased business activity, which reflected seasonality and improved economic conditions. See the condensed consolidated statements of cash flows for further information on changes in cash and cash equivalents, the condensed consolidated statements of stockholders' equity for further information on changes in stockholders' equity and note 6 to the condensed consolidated financial statements for further information on debt changes. 38
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Liquidity and Capital Resources
We manage our liquidity using internal cash management practices, which are subject to (i) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services, (ii) the terms and other requirements of the agreements to which we are a party and (iii) the statutes, regulations and practices of each of the local jurisdictions in which we operate. See "Financial Overview" above for a summary of the 2022 capital structure actions taken to improve our financial flexibility and liquidity. OnJanuary 25, 2022 , our Board of Directors authorized a$1 billion share repurchase program, which commenced in the first quarter of 2022. We completed this program in the third quarter of 2022. 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, including the program that commenced and was completed in 2022). OnOctober 24, 2022 , our Board authorized a$1.25 billion share repurchase program, which is expected to commence in the fourth quarter of 2022 and be completed in 2023. Our principal existing sources of cash are cash generated from operations and from the sale of rental equipment, and borrowings available under our ABL facility and accounts receivable securitization facility. As ofSeptember 30, 2022 , we had cash and cash equivalents of$76 . Cash equivalents atSeptember 30, 2022 consist of direct obligations of financial institutions rated A or better. We believe that our existing sources of cash will be sufficient to support our existing operations over the next 12 months. The table below presents financial information associated with our principal sources of cash as of and for the nine months endedSeptember 30, 2022 :
ABL facility:
Borrowing capacity, net of letters of credit $ 2,764
Outstanding debt, net of debt issuance costs 1,409
Interest rate at September 30, 2022 4.2 %
Average month-end principal amount of debt outstanding (1) 1,152
Weighted-average interest rate on average debt outstanding 2.7 %
Maximum month-end principal amount of debt outstanding (1) 1,621
Accounts receivable securitization facility:
Borrowing capacity 3
Outstanding debt, net of debt issuance costs 1,096
Interest rate at September 30, 2022 3.4 %
Average month-end principal amount of debt outstanding 946
Weighted-average interest rate on average debt outstanding 2.1 %Maximum month-end principal amount of debt outstanding 1,097
___________________ (1)As discussed in note 6 to the condensed 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 expect that our principal needs for cash relating to our operations over the next 12 months 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. We plan to fund such cash requirements from our existing sources of cash. In addition, we may seek additional financing through the securitization of some of our real estate, the use of additional operating leases or other financing sources as market conditions permit. To access the capital markets, we rely on credit rating agencies to assign ratings to our securities as an indicator of credit quality. Lower credit ratings generally result in higher borrowing costs and reduced access to debt capital markets. 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. Our credit ratings as ofOctober 24, 2022 were as follows: Corporate Rating Outlook Moody's Ba1 Stable Standard & Poor's BB+ Stable 39
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A security rating is not a recommendation to buy, sell or hold securities. There is no assurance that any rating will remain in effect for a given period of time or that any rating will not be revised or withdrawn by a rating agency in the future. Loan Covenants and Compliance. As ofSeptember 30, 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. The only financial covenant that currently exists under the ABL facility is the fixed charge coverage ratio. Subject to certain limited exceptions specified in the ABL facility, the fixed charge coverage ratio covenant under the ABL facility will only apply in the future if specified availability under the ABL facility falls below 10 percent of the maximum revolver amount under the ABL facility. When certain conditions are met, cash and cash equivalents and borrowing base collateral in excess of the ABL facility size may be included when calculating specified availability under the ABL facility. As ofSeptember 30, 2022 , specified availability under the ABL facility exceeded the required threshold and, as a result, this financial covenant was inapplicable. Under our accounts receivable securitization facility, we are required, among other things, to maintain certain financial tests relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales outstanding. 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.
Sources and Uses of Cash. During the nine months endedSeptember 30, 2022 , we (i) generated cash from operating activities of$3.182 billion , (ii) generated cash from the sale of rental and non-rental equipment of$571 and (iii) received cash from debt proceeds, net of payments, of$193 . We used cash during this period principally to (i) purchase rental and non-rental equipment and intangible assets of$2.638 billion , (ii) purchase other companies for$323 and (iii) purchase shares of our common stock for$1.058 billion . During the nine months endedSeptember 30, 2021 , we (i) generated cash from operating activities of$3.021 billion , (ii) generated cash from the sale of rental and non-rental equipment of$664 and (iii) received cash from debt proceeds, net of payments, of$336 . We used cash during this period principally to (i) purchase rental and non-rental equipment and intangible assets of$2.450 billion and (ii) purchase other companies for$1.435 billion . Free Cash Flow GAAP Reconciliation. We define "free cash flow" as net cash provided by operating activities less purchases of, and plus proceeds from, equipment and intangible assets. The equipment and intangible asset purchases and proceeds are included in cash flows from investing activities. Management believes that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. However, free cash flow is not a measure of financial performance or liquidity under GAAP. Accordingly, free cash flow should not be considered an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. The table below provides a reconciliation between net cash provided by operating activities and free cash flow. Nine Months Ended September 30, 2022 2021 Net cash provided by operating activities$ 3,182 $
3,021
Purchases of rental equipment (2,456)
(2,308)
Purchases of non-rental equipment and intangible assets (182)
(142)
Proceeds from sales of rental equipment 556
644
Proceeds from sales of non-rental equipment 15
20
Insurance proceeds from damaged equipment 25 19 Free cash flow$ 1,140 $ 1,254 Free cash flow for the nine months endedSeptember 30, 2022 was$1.140 billion , a decrease of$114 as compared to$1.254 billion for the nine months endedSeptember 30, 2021 . Free cash flow decreased primarily due to 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, partially offset by increased net cash provided by operating activities. Net rental capital expenditures increased$236 year-over-year. 40
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Relationship between Holdings and URNA. Holdings is principally a holding company and primarily conducts its operations through its wholly owned subsidiary, URNA, and subsidiaries of URNA. Holdings licenses its tradename and other intangibles and provides certain services to URNA in connection with its operations. These services principally include: (i) senior management services; (ii) finance and tax-related services and support; (iii) information technology systems and support; (iv) acquisition-related services; (v) legal services; and (vi) human resource support. In addition, Holdings leases certain equipment and real property that are made available for use by URNA and its subsidiaries.
Information Regarding Guarantors of URNA Indebtedness
URNA is 100 percent owned by Holdings and has certain outstanding indebtedness that is guaranteed by both Holdings and, with the exception of itsU.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'sU.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"). 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. Holdings consolidates each of URNA and the guarantor subsidiaries in its consolidated financial statements. URNA and the guarantor subsidiaries are all 100 percent-owned and controlled by Holdings. Holdings' guarantees of URNA's indebtedness are full and unconditional, except that the guarantees may be automatically released and relieved upon satisfaction of the requirements for legal defeasance or covenant defeasance under the applicable indenture being met. The Holdings guarantees are also subject to subordination provisions (to the same extent that the obligations of the issuer under the relevant notes are subordinated to other debt of the issuer) and to a standard limitation which provides that the maximum amount guaranteed by Holdings will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws. The guarantees of Holdings and the guarantor subsidiaries are made on a joint and several basis. The guarantees of the guarantor subsidiaries are not full and unconditional because a guarantor subsidiary can be automatically released and relieved of its obligations under certain circumstances, including sale of the guarantor subsidiary, the sale of all or substantially all of the guarantor subsidiary's assets, the requirements for legal defeasance or covenant defeasance under the applicable indenture being met, designating the guarantor subsidiary as an unrestricted subsidiary for purposes of the applicable covenants or the notes being rated investment grade by bothStandard & Poor's Ratings Services and Moody's Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA. Like the Holdings guarantees, the guarantees of the guarantor subsidiaries are subject to subordination provisions (to the same extent that the obligations of the issuer under the relevant notes are subordinated to other debt of the issuer) and to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws. All of the existing guarantees by Holdings and the guarantor subsidiaries rank equally in right of payment with all of the guarantors' existing and future senior indebtedness. The secured indebtedness of Holdings and the guarantor subsidiaries (including guarantees of URNA's existing and future secured indebtedness) will rank effectively senior to guarantees of any unsecured indebtedness to the extent of the value of the assets securing such indebtedness. 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 ofSeptember 30, 2022 , the indebtedness of our non-guarantors was comprised of (i)$1.096 billion of outstanding borrowings by the SPV in connection with the Company's accounts receivable securitization facility, (ii)$159 of outstanding borrowings under the ABL facility by non-guarantor subsidiaries and (iii)$10 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 ofSeptember 30, 2022 , the amount available for distribution under the most restrictive of these covenants was$1.171 billion . The Company's total available capacity for making share repurchases and dividend payments includes the intercompany receivable balance of Holdings. As ofSeptember 30, 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$5.666 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 summarized financial information excludes the financial information of the non-guarantor subsidiaries. In accordance with 41
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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:
September 30, 2022 Current receivable from non-guarantor subsidiaries$36 Other current assets 278 Total current assets 314 Long-term receivable from non-guarantor subsidiaries 100 Other long-term assets 17,379 Total long-term assets 17,479 Total assets 17,793 Current liabilities 2,034 Long-term liabilities 11,329 Total liabilities 13,363 Nine Months EndedSeptember 30, 2022 Total revenues$7,494 Gross profit 3,179 Net income 1,255 42
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