Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of United Rentals, Inc.

We have audited the accompanying consolidated balance sheets of United Rentals, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Rentals, Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), United Rentals, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated January 25, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Stamford, Connecticut

January 25, 2017

UNITED RENTALS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)



	December 31,
	2016			2015
ASSETS
Cash and cash equivalents	$	312		$	179
Accounts receivable, net of allowance for doubtful accounts of $54 at December 31, 2016 and $55 at December 31, 2015	920			930
Inventory	68			69
Prepaid expenses and other assets	61			116
Total current assets	1,361			1,294
Rental equipment, net	6,189			6,186
Property and equipment, net	430			445
Goodwill	3,260			3,243
Other intangible assets, net	742			905
Other long-term assets	6			10
Total assets	$	11,988		$	12,083
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt and current maturities of long-term debt	$	597		$	607
Accounts payable	243			271
Accrued expenses and other liabilities	344			355
Total current liabilities	1,184			1,233
Long-term debt	7,193			7,555
Deferred taxes	1,896			1,765
Other long-term liabilities	67			54
Total liabilities	10,340			10,607
Common stock—$0.01 par value, 500,000,000 shares authorized, 111,985,215 and 84,222,042 shares issued and outstanding, respectively, at December 31, 2016 and 111,586,585 and 91,776,436 shares issued and outstanding, respectively, at December 31, 2015	1			1
Additional paid-in capital	2,288			2,197
Retained earnings	1,654			1,088
Treasury stock at cost—27,763,173 and 19,810,149 shares at December 31, 2016 and December 31, 2015, respectively	(2,077		)	(1,560		)
Accumulated other comprehensive loss	(218		)	(250		)
Total stockholders’ equity	1,648			1,476
Total liabilities and stockholders’ equity	$	11,988		$	12,083

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)



	Year Ended December 31,
	2016			2015			2014
Revenues:
Equipment rentals	$	4,941		$	4,949		$	4,819
Sales of rental equipment	496			538			544
Sales of new equipment	144			157			149
Contractor supplies sales	79			79			85
Service and other revenues	102			94			88
Total revenues	5,762			5,817			5,685
Cost of revenues:
Cost of equipment rentals, excluding depreciation	1,862			1,826			1,806
Depreciation of rental equipment	990			976			921
Cost of rental equipment sales	292			311			315
Cost of new equipment sales	119			131			120
Cost of contractor supplies sales	55			55			59
Cost of service and other revenues	41			38			32
Total cost of revenues	3,359			3,337			3,253
Gross profit	2,403			2,480			2,432
Selling, general and administrative expenses	719			714			758
Merger related costs	—			(26		)	11
Restructuring charge	14			6			(1		)
Non-rental depreciation and amortization	255			268			273
Operating income	1,415			1,518			1,391
Interest expense, net	511			567			555
Other income, net	(5		)	(12		)	(14		)
Income before provision for income taxes	909			963			850
Provision for income taxes	343			378			310
Net income	$	566		$	585		$	540
Basic earnings per share	$	6.49		$	6.14		$	5.54
Diluted earnings per share	$	6.45		$	6.07		$	5.15

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)



	Year Ended December 31,
	2016		2015			2014
Net income	$	566	$	585		$	540
Other comprehensive income (loss):
Foreign currency translation adjustments	28		(174		)	(90		)
Fixed price diesel swaps	4		(2		)	(3		)
Other comprehensive income (loss) (1)	32		(176		)	(93		)
Comprehensive income	$	598	$	409		$	447

(1)There were no material reclassifications from accumulated other comprehensive loss reflected in other comprehensive income (loss) during the years ended December 31, 2016, 2015 or 2014. There is no tax impact related to the foreign currency translation adjustments, as the earnings are considered permanently reinvested. There were no material taxes associated with other comprehensive loss during the years ended December 31, 2016, 2015 or 2014.

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)



	Common Stock				Additional			(Accumulated Deficit)			Treasury Stock				Accumulated Other
	Number of Shares		Amount		Paid-in Capital			Retained Earnings			Number of Shares	Amount			Comprehensive Income (Loss)
Balance at January 1, 2014	93		$	1	$	2,054		$	(37	)	5	$	(209	)	$	19
Net income								540
Foreign currency translation adjustments															(90		)
Fixed price diesel swaps															(3		)
Stock compensation expense, net					74
Exercise of common stock options	—				2
4 percent Convertible Senior Notes (1)	10				58
Shares repurchased and retired					(20		)
Repurchase of common stock	(5	)									5	(593		)
Balance at December 31, 2014	98		$	1	$	2,168		$	503		10	$	(802	)	$	(74	)

(1)Primarily reflects amortization of the original issue discount on our 4 percent Convertible Senior Notes and cash received from the option counterparties to our convertible note hedges associated with conversions of a portion of our 4 percent Convertible Senior Notes. The 4 percent Convertible Senior Notes matured in 2015.

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(In millions)



	Common Stock				Additional					Treasury Stock				Accumulated Other
	Number of Shares		Amount		Paid-in Capital			Retained Earnings		Number of Shares	Amount			Comprehensive Loss
Balance at December 31, 2014	98		$	1	$	2,168		$	503	10	$	(802	)	$	(74	)
Net income								585
Foreign currency translation adjustments														(174		)
Fixed price diesel swaps														(2		)
Stock compensation expense, net					49
Exercise of common stock options	—				1
4 percent Convertible Senior Notes (1)	4				5
Shares repurchased and retired					(31		)
Repurchase of common stock	(10	)								10	(758		)
Excess tax benefits from share-based payment arrangements, net					5
Balance at December 31, 2015	92		$	1	$	2,197		$	1,088	20	$	(1,560	)	$	(250	)

(1)Reflects amortization of the original issue discount on the 4 percent Convertible Senior Notes and the conversion of all outstanding 4 percent Convertible Senior Notes.

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(In millions)



	Common Stock				Additional					Treasury Stock				Accumulated Other
	Number of Shares		Amount		Paid-in Capital			Retained Earnings		Number of Shares	Amount			Comprehensive Loss (1)
Balance at December 31, 2015	92		$	1	$	2,197		$	1,088	20	$	(1,560	)	$	(250	)
Net income								566
Foreign currency translation adjustments														28
Fixed price diesel swaps														4
Stock compensation expense, net					45
Exercise of common stock options	—				1
Shares repurchased and retired					(11		)
Repurchase of common stock	(8	)								8	$	(517	)
Excess tax benefits from share-based payment arrangements, net					56
Balance at December 31, 2016	84		$	1	$	2,288		$	1,654	28	$	(2,077	)	$	(218	)

(1)As of December 31, 2016, 2015 and 2014, the Accumulated Other Comprehensive Loss balance primarily reflects foreign currency translation adjustments.

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Year Ended December 31,
	2016			2015			2014
	(In millions)
Cash Flows From Operating Activities:
Net income	$	566		$	585		$	540
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,245			1,244			1,194
Amortization of deferred financing costs and original issue discounts	9			10			17
Gain on sales of rental equipment	(204		)	(227		)	(229		)
Gain on sales of non-rental equipment	(4		)	(8		)	(11		)
Stock compensation expense, net	45			49			74
Merger related costs	—			(26		)	11
Restructuring charge	14			6			(1		)
Loss on repurchase/redemption of debt securities and amendment of ABL facility	101			123			80
Excess tax benefits from share-based payment arrangements	(58		)	(5		)	—
Increase in deferred taxes	123			336			261
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable	15			(11		)	(101		)
Decrease in inventory	1			8			11
Decrease (increase) in prepaid expenses and other assets	77			(38		)	(52		)
Decrease in accounts payable	(29		)	(8		)	(23		)
Increase (decrease) in accrued expenses and other liabilities	52			(43		)	30
Net cash provided by operating activities	1,953			1,995			1,801
Cash Flows From Investing Activities:
Purchases of rental equipment	(1,246		)	(1,534		)	(1,701		)
Purchases of non-rental equipment	(93		)	(102		)	(120		)
Proceeds from sales of rental equipment	496			538			544
Proceeds from sales of non-rental equipment	14			17			33
Purchases of other companies, net of cash acquired	(28		)	(86		)	(756		)
Purchases of investments	(2		)	(3		)	—
Net cash used in investing activities	(859		)	(1,170		)	(2,000		)
Cash Flows From Financing Activities:
Proceeds from debt	8,752			8,566			7,070
Payments of debt	(9,223		)	(8,482		)	(6,283		)
Payment of contingent consideration	—			(52		)	—
Payments of financing costs	(24		)	(27		)	(22		)
Proceeds from the exercise of common stock options	1			1			2
Common stock repurchased	(528		)	(789		)	(613		)
Cash received in connection with the 4 percent Convertible Senior Notes and related hedge, net	—			3			42
Excess tax benefits from share-based payment arrangements	58			5			—
Net cash (used in) provided by financing activities	(964		)	(775		)	196
Effect of foreign exchange rates	3			(29		)	(14		)
Net increase (decrease) in cash and cash equivalents	133			21			(17		)
Cash and cash equivalents at beginning of year	179			158			175
Cash and cash equivalents at end of year	$	312		$	179		$	158
Supplemental disclosure of cash flow information:
Cash paid for interest	$	415		$	447		$	457
Cash paid for income taxes, net	99			60			100

See accompanying notes.

UNITED RENTALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share data and unless otherwise indicated)

Organization, Description of Business and Consolidation

United Rentals, Inc. ("Holdings") is principally a holding company and conducts its operations primarily through its wholly owned subsidiary, United Rentals (North America), Inc. (“URNA”), and subsidiaries of URNA. Holdings’ primary asset is its sole ownership of all issued and outstanding shares of common stock of URNA. URNA’s various credit agreements and debt instruments place restrictions on its ability to transfer funds to its stockholder. As used in this report, the terms the “Company,” “United Rentals,” “we,” “us,” and “our” refer to United Rentals, Inc. and its subsidiaries, unless otherwise indicated.

We rent equipment to a diverse customer base that includes construction and industrial companies, manufacturers, utilities, municipalities, homeowners and others in the United States and Canada. In addition to renting equipment, we sell new and used rental equipment, as well as related contractor supplies, parts and service.

The accompanying consolidated financial statements include our accounts and those of our controlled subsidiary companies. All significant intercompany accounts and transactions have been eliminated. We consolidate variable interest entities if we are deemed the primary beneficiary of the entity.

Summary of Significant Accounting Policies

Cash Equivalents

We consider all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. Our cash equivalents at December 31, 2016 consist of direct obligations of financial institutions rated A or better.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts. These allowances reflect our estimate of the amount of our receivables that we will be unable to collect based on historical write-off experience. Our estimate could require change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowances. Trade receivables that have contractual maturities of one year or less are written-off when they are determined to be uncollectible based on the criteria necessary to qualify as a deduction for federal tax purposes. Write-offs of such receivables require management approval based on specified dollar thresholds.

Inventory

Inventory consists of new equipment, contractor supplies, tools, parts, fuel and related supply items. Inventory is stated at the lower of cost or market. Cost is determined, depending on the type of inventory, using either a specific identification, weighted-average or first-in, first-out method.

Rental Equipment

Rental equipment, which includes service and delivery vehicles, is recorded at cost and depreciated over the estimated useful life of the equipment using the straight-line method. The range of estimated useful lives for rental equipment is two to 12 years. Rental equipment is depreciated to a salvage value of zero to 10 percent of cost. Rental equipment is depreciated whether or not it is out on rent. Costs we incur in connection with refurbishment programs that extend the life of our equipment are capitalized and amortized over the remaining useful life of the equipment. The costs incurred under these refurbishment programs were $18, $30 and $39 for the years ended December 31, 2016, 2015 and 2014, respectively, and are included in purchases of rental equipment in our consolidated statements of cash flows. Ordinary repair and maintenance costs are charged to operations as incurred. Repair and maintenance costs are included in cost of revenues on our consolidated statements of income. Repair and maintenance expense (including both labor and parts) for our rental equipment was $629, $628 and $604 for the years ended December 31, 2016, 2015 and 2014, respectively.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. The range of estimated useful lives for property and equipment is two to 39 years. Ordinary repair and maintenance costs are charged to expense as incurred. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the remaining life of the lease, whichever is shorter.

Acquisition Accounting

We have made a number of acquisitions in the past and may continue to make acquisitions in the future. The assets acquired and liabilities assumed are recorded based on their respective fair values at the date of acquisition. Long-lived assets (principally rental equipment), goodwill and other intangible assets generally represent the largest components of our acquisitions. The intangible assets that we have acquired are non-compete agreements, customer relationships and trade names and associated trademarks. Goodwill is calculated as the excess of the cost of the acquired entity over the net of the fair value of the assets acquired and the liabilities assumed. 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.

When we make an acquisition, we also acquire other assets and assume liabilities. These other assets and liabilities typically include, but are not limited to, parts inventory, accounts receivable, accounts payable and other working capital items. Because of their short-term nature, the fair values of these other assets and liabilities generally approximate the book values on the acquired entities' balance sheets.

Evaluation of Goodwill Impairment

Goodwill is tested for impairment annually or more frequently if an event or circumstance indicates that an impairment loss may have been incurred. Application of the goodwill impairment test requires judgment, including: the identification of reporting units; assignment of assets and liabilities to reporting units; assignment of goodwill to reporting units; determination of the fair value of each reporting unit; and an assumption as to the form of the transaction in which the reporting unit would be acquired by a market participant (either a taxable or nontaxable transaction).

We estimate the fair value of our reporting units (which are our regions) using a combination of an income approach based on the present value of estimated future cash flows and a market approach based on market price data of shares of our Company and other corporations engaged in similar businesses as well as acquisition multiples paid in recent transactions within our industry (including our own acquisitions). We believe this approach, which utilizes multiple valuation techniques, yields the most appropriate evidence of fair value. We review goodwill for impairment utilizing a two-step process. The first step of the impairment test requires a comparison of the fair value of each of our reporting units' net assets to the respective carrying value of net assets. If the carrying value of a reporting unit's net assets is less than its fair value, no indication of impairment exists and a second step is not performed. If the carrying amount of a reporting unit's net assets is higher than its fair value, there is an indication that an impairment may exist and a second step must be performed. In the second step, the impairment is calculated by comparing the implied fair value of the reporting unit's goodwill (as if purchase accounting were performed on the testing date) with the carrying amount of the goodwill. If the carrying amount of the reporting unit's goodwill is greater than the implied fair value of its goodwill, an impairment loss must be recognized for the excess and charged to operations.

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 as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.

In connection with our goodwill impairment test that was conducted as of October 1, 2015, we bypassed the qualitative assessment for each of our reporting units and proceeded directly to the first step of the goodwill impairment test. Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Pump Solutions reporting unit, had estimated fair values which exceeded their respective carrying amounts by at least 51 percent.

In April 2014, we completed the acquisition of the following entities: National Pump & Compressor, Ltd., Canadian Pump and Compressor Ltd., GulfCo Industrial Equipment, LP and LD Services, LLC (collectively “National Pump”). Most of the assets in the Pump Solutions reporting unit were acquired in the National Pump acquisition. Based on the October 1, 2015 test, the Pump Solutions reporting unit’s estimated fair value exceeded its carrying amount by 3.3 percent. In light of continuing pressures on the Pump Solutions reporting unit related primarily to upstream oil and gas customers, we continued to monitor the Pump Solutions reporting unit for impairment through the end of 2015, and performed another impairment test as of November 30, 2015. As of the November 30, 2015 testing date, the estimated fair value of the Pump Solutions reporting unit exceeded its carrying amount by 1 percent. No additional impairment indicators were noted as of December 31, 2015.

Given the narrow margin by which the estimated fair value of the Pump Solutions reporting unit exceeded its carrying amount, we also performed a sensitivity analysis related to the discount rate and long-term growth rate used in the November 30, 2015 test. Specifically, we performed the sensitivity analysis by: (i) increasing the discount rate by 50 basis points and (ii) reducing the long-term growth rate by 25 basis points. The Pump Solutions reporting unit failed step one of the goodwill impairment test under the sensitivity test, and would have required step two testing to determine potential goodwill impairment. We continued to monitor the Pump Solutions reporting unit for impairment following the November 30, 2015 test.

In connection with our goodwill impairment test that was conducted as of October 1, 2016, we bypassed the qualitative assessment for each reporting unit and proceeded directly to the first step of the goodwill impairment test. Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Pump Solutions reporting unit, had estimated fair values which exceeded their respective carrying amounts by at least 53 percent. The estimated fair value of our Pump Solutions reporting unit exceeded its carrying amount by approximately 15 percent.

For the goodwill impairment test that was conducted as of October 1, 2016 for our Pump Solutions reporting unit, we utilized a discount rate of 14.0 percent and a long-term terminal growth rate of 3.0 percent beyond our planning period. The improvement in the margin by which the Pump Solutions reporting unit’s estimated fair value exceeded its carrying amount in the October 1, 2016 test as compared to the November 30, 2015 test primarily reflects (i) a reduction in the Pump Solutions reporting unit’s carrying value primarily due to the depreciation and amortization of its assets, as well as a reduction in its working capital and (ii) improvement in the Pump Solutions reporting unit’s revenue mix in its long term forecast largely due to having a smaller portion of revenue attributable to upstream oil and gas customers, which have experienced significant volatility in recent years, and a larger portion of revenue attributable to downstream oil and gas, construction, municipality and mining customers. We also performed a sensitivity analysis related to the discount rate and long-term growth rate used in the October 1, 2016 test by: (i) increasing the discount rate by 50 basis points and (ii) reducing the long-term growth rate by 25 basis points. The Pump Solutions reporting unit passed step one of the goodwill impairment test under the sensitivity test. The October 1, 2016 impairment test assumed earnings growth for the Pump Solutions reporting unit over the next 10 years. Should this growth not occur, if the reporting unit otherwise fails to meet its current financial plans, or if there were changes to any other key assumption used in the test, the Pump Solutions reporting unit could fail step one of the goodwill impairment test in a future period. As of December 31, 2016, there was $312 of goodwill in the Pump Solutions reporting unit. We will continue to monitor the Pump Solutions reporting unit for impairment.

Restructuring Charges

Costs associated with exit or disposal activities, including lease termination costs and certain employee severance costs associated with restructuring, branch closings or other activities, are recognized at fair value when they are incurred.

Other Intangible Assets

Other intangible assets consist of non-compete agreements, customer relationships and trade names and associated trademarks. The non-compete agreements are being amortized on a straight-line basis over initial periods of approximately 5 years. The customer relationships are being amortized either using the sum of the years' digits method or on a straight-line basis over initial periods ranging from 7 to 15 years. The trade names and associated trademarks are being amortized using the sum of the years' digits method over an initial period of 5 years. We believe that the amortization methods used reflect the estimated pattern in which the economic benefits will be consumed.

Long-Lived Assets

Long-lived assets are recorded at the lower of amortized cost or fair value. As part of an ongoing review of the valuation of long-lived assets, we assess the carrying value of such assets if facts and circumstances suggest they may be impaired. If this review indicates the carrying value of such an asset may not be recoverable, as determined by an undiscounted cash flow analysis over the remaining useful life, the carrying value would be reduced to its estimated fair value.

Translation of Foreign Currency

Assets and liabilities of our Canadian subsidiaries that have a functional currency other than U.S. dollars are translated into U.S. dollars using exchange rates at the balance sheet date. Revenues and expenses are translated at average exchange rates effective during the year. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive (loss) income within stockholders’ equity.

Revenue Recognition

Our rental contract periods are hourly, daily, weekly or monthly and we recognize revenues from renting equipment on a straight-line basis. As part of this straight-line methodology, when the equipment is returned, we recognize as incremental revenue the excess, if any, between the amount the customer is contractually required to pay over the cumulative amount of revenue recognized to date. We record amounts billed to customers in excess of recognizable revenue as deferred revenue on our balance sheet. We had deferred revenue of $33 and $32 as of December 31, 2016 and 2015, respectively.

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; and for fuel. Delivery and pick-up revenue is recognized when the service is performed. Customers have the option of

purchasing a damage waiver when they rent our equipment to protect against potential loss or damage; we refer to the fee we charge for the waiver as Rental Protection Plan (or "RPP") revenue. RPP revenue is recognized ratably over the contract term. Fees related to the consumption of fuel by our customers are recognized when the equipment is returned by the customer (and consumption, if any, can be measured).

Revenues from the sale of rental equipment and new equipment are recognized at the time of delivery to, or pick-up by, the customer and when collectibility is reasonably assured. Sales of contractor supplies are also recognized at the time of delivery to, or pick-up by, the customer. Service revenue is recognized as the services are performed. Sales tax amounts collected from customers are recorded on a net basis.

Delivery Expense

Equipment rentals include our revenues from fees we charge for equipment delivery. Delivery costs are charged to operations as incurred, and are included in cost of revenues on our consolidated statements of income.

Advertising Expense

We promote our business through local and national advertising in various media, including television, trade publications, branded sponsorships, yellow pages, the Internet, radio and direct mail. Advertising costs are generally expensed as incurred. These costs may include the development costs for branded content and advertising campaigns. Advertising expense, net of the qualified advertising reimbursements discussed below, was immaterial for the years ended December 31, 2016, 2015 and 2014.

We receive reimbursements for advertising that promotes a vendor’s products or services. Such reimbursements that meet the applicable criteria under U.S. generally accepted accounting principles (“GAAP”) are offset against advertising costs in the period in which we recognize the incremental advertising cost. The amounts of qualified advertising reimbursements that reduced advertising expense were $19, $17 and $16 for the years ended December 31, 2016, 2015 and 2014, respectively.

Insurance

We are insured for general liability, workers’ compensation and automobile liability, subject to deductibles or self-insured retentions per occurrence. Losses within the deductible amounts are accrued based upon the aggregate liability for reported claims incurred, as well as an estimated liability for claims incurred but not yet reported. These liabilities are not discounted. The Company is also self-insured for group medical claims but purchases “stop loss” insurance to protect itself from any one significant loss.

Income Taxes

We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities and are measured using the tax rates and laws that are expected to be in effect when the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not to be realized in future periods. The most significant positive evidence that we consider in the recognition of deferred tax assets is the expected reversal of cumulative deferred tax liabilities resulting from book versus tax depreciation of our rental equipment fleet that is well in excess of the deferred tax assets.

We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return regarding uncertainties in income tax positions. The first step is recognition: we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate taxing authority with full knowledge of all relevant information. The second step is measurement: a tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset or an increase in a deferred tax liability.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates impact the calculation of the allowance for doubtful accounts, depreciation and amortization, income taxes, reserves for claims, loss

contingencies (including legal contingencies) and the fair values of financial instruments. Actual results could materially differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk include cash and cash equivalents and accounts receivable. We maintain cash and cash equivalents with high quality financial institutions. Concentration of credit risk with respect to receivables is limited because a large number of geographically diverse customers makes up our customer base. Our largest customer accounted for less than one percent of total revenues in each of 2016, 2015, and 2014. Our customer with the largest receivable balance represented approximately two percent and one percent of total receivables at December 31, 2016 and 2015, respectively. We manage credit risk through credit approvals, credit limits and other monitoring procedures.

Stock-Based Compensation

We measure stock-based compensation at the grant date based on the fair value of the award and recognize stock-based compensation expense over the requisite service period. Determining the fair value of stock option awards requires judgment, including estimating stock price volatility, forfeiture rates and expected option life. Restricted stock awards are valued based on the fair value of the stock on the grant date and the related compensation expense is recognized over the service period. Similarly, for time-based restricted stock awards subject to graded vesting, we recognize compensation cost on a straight-line basis over the requisite service period. For performance-based restricted stock units ("RSUs"), compensation expense is recognized if satisfaction of the performance condition is considered probable. We classify cash flows from tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (“excess tax benefits”) as financing cash flows.

New Accounting Pronouncements

Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to clarify the principles for recognizing revenue. This guidance includes the required steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has agreed to a one-year deferral of the original effective date of this guidance and as a result it will be effective for fiscal years and interim periods beginning after December 15, 2017. The FASB's update allows entities to apply the new guidance as of the original effective date (for fiscal years and interim periods beginning after December 15, 2016). We expect to adopt this guidance when effective, and the impact on our financial statements is not currently estimable.

Leases. In March 2016, the FASB issued guidance (“Topic 842”) to increase transparency and comparability among organizations by requiring i) recognition of lease assets and lease liabilities on the balance sheet and ii) disclosure of key information about leasing arrangements. The accounting applied by lessors under Topic 842 is largely unchanged from previous GAAP. Some changes to the lessor accounting guidance were made to align both of the following: i) the lessor accounting guidance with certain changes made to the lessee accounting guidance and ii) key aspects of the lessor accounting model with revenue recognition guidance. Topic 842 will be effective for fiscal years and interim periods beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required for adoption for all leases that exist at or commence after the date of initial application with an option to use certain practical expedients. We are currently assessing whether we will early adopt, and the impact on our financial statements is not currently estimable.

Improvements to Employee Share-Based Payment Accounting. In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2016, and early adoption is permitted. Different components of the guidance require prospective, retrospective and/or modified retrospective adoption. We expect to adopt this guidance when effective, and do not expect the guidance to have a significant impact on our financial statements.

Statement of Cash Flows. In August 2016, the FASB issued guidance to reduce the diversity in the presentation of certain cash receipts and cash payments presented and classified in the statement of cash flows. The guidance addresses the following specific cash flow issues: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transitions and (8) separately identifiable cash flows and application of predominance principle. The guidance will be effective for fiscal years and interim

periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires retrospective adoption. We expect to adopt this guidance when effective, and do not expect the guidance to have a significant impact on our financial statements. The presentation of insurance proceeds received for damage to our equipment is the primary item that we expect to change as a result of this guidance. For the year ended December 31, 2016, $12 of insurance proceeds received for damage to equipment was included in operating activities on our consolidated statements of cash flows. Under the new guidance, these proceeds would be included in investing activities on our consolidated statements of cash flows.

Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued guidance that will require companies to present assets held at amortized cost and available for sale debt securities net of the amount expected to be collected. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectibility. The new guidance will be effective for fiscal years and interim periods beginning after December 15, 2019 and early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Different components of the guidance require modified retrospective and/or prospective adoption. We are currently assessing whether we will early adopt, and the impact on our financial statements is not currently estimable.

Intra-Entity Transfers of Assets Other Than Inventory. In October 2016, the FASB issued guidance that will require companies to recognize the income tax effects of intra-entity sales and transfers of assets other than inventory in the period in which the transfer occurs. The new guidance will be effective for fiscal years and interim periods beginning after December 15, 2017 and early adoption is permitted. The guidance requires modified retrospective adoption. We expect to adopt this guidance when effective, and do not expect the guidance to have a significant impact on our financial statements.

Segment Information

Our two reportable segments are i) general rentals and ii) trench, power and pump. The general rentals segment includes the rental of i) general construction and industrial equipment, such as backhoes, skid-steer loaders, forklifts, earthmoving equipment and material handling equipment, ii) aerial work platforms, such as boom lifts and scissor lifts and iii) general tools and light equipment, such as pressure washers, water pumps and power tools. The general rentals segment reflects the aggregation of nine geographic regions—Industrial (which serves the geographic Gulf region and has a strong industrial presence), Mid-Atlantic, Midwest, Northeast, Pacific West, South-Central, South, Southeast and Western Canada—and operates throughout the United States and Canada. We periodically review the size and geographic scope of our regions, and have occasionally reorganized the regions to create a more balanced and effective structure.

The trench, power and pump 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 and iii) pumps primarily used by energy and petrochemical customers. The trench, power and pump segment is comprised of the following regions, each of which primarily rents the corresponding equipment type described above: (i) the Trench Safety region, (ii) the Power and HVAC region, and (iii) the Pump Solutions region. The trench, power and pump segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates throughout the United States and in Canada.

The following table presents the percentage of equipment rental revenue by equipment type for the years ended December 31, 2016, 2015 and 2014:



	Year Ended December 31,
	2016		2015		2014
Primarily rented by our general rentals segment:
General construction and industrial equipment	43	%	43	%	43	%
Aerial work platforms	32	%	32	%	33	%
General tools and light equipment	8	%	10	%	10	%
Primarily rented by our trench, power and pump segment:
Power and HVAC equipment	7	%	6	%	6	%
Trench safety equipment	6	%	5	%	5	%
Pumps	4	%	4	%	3	%

These segments align our external segment reporting with how management evaluates business performance and allocates resources. We evaluate segment performance based on segment equipment rentals gross profit.

The accounting policies for our segments are the same as those described in the summary of significant accounting policies in note 2. Certain corporate costs, including those related to selling, finance, legal, risk management, human resources, corporate management and information technology systems, are deemed to be of an operating nature and are allocated to our segments based primarily on rental fleet size.

The following table sets forth financial information by segment as of and for the years ended December 31, 2016, 2015 and 2014:



	General rentals		Trench, power and pump		Total
2016
Equipment rentals	$	4,166	$	775	$	4,941
Sales of rental equipment	459		37		496
Sales of new equipment	128		16		144
Contractor supplies sales	64		15		79
Service and other revenues	91		11		102
Total revenue	4,908		854		5,762
Depreciation and amortization expense	1,066		179		1,245
Equipment rentals gross profit	1,725		364		2,089
Capital expenditures	1,189		150		1,339
Total assets	$	10,496	$	1,492	$	11,988
2015
Equipment rentals	$	4,241	$	708	$	4,949
Sales of rental equipment	504		34		538
Sales of new equipment	137		20		157
Contractor supplies sales	67		12		79
Service and other revenues	83		11		94
Total revenue	5,032		785		5,817
Depreciation and amortization expense	1,071		173		1,244
Equipment rentals gross profit	1,819		328		2,147
Capital expenditures	1,439		197		1,636
Total assets	$	10,561	$	1,522	$	12,083
2014
Equipment rentals	$	4,222	$	597	$	4,819
Sales of rental equipment	519		25		544
Sales of new equipment	113		36		149
Contractor supplies sales	73		12		85
Service and other revenues	75		13		88
Total revenue	5,002		683		5,685
Depreciation and amortization expense	1,060		134		1,194
Equipment rentals gross profit	1,790		302		2,092
Capital expenditures	1,594		227		1,821
Total assets	$	10,597	$	1,532	$	12,129

Equipment rentals gross profit is the primary measure management reviews to make operating decisions and assess segment performance. The following is a reconciliation of equipment rentals gross profit to income before provision for income taxes:



	Year Ended December 31,
	2016			2015			2014
Total equipment rentals gross profit	$	2,089		$	2,147		$	2,092
Gross profit from other lines of business	314			333			340
Selling, general and administrative expenses	(719		)	(714		)	(758		)
Merger related costs	—			26			(11		)
Restructuring charge	(14		)	(6		)	1
Non-rental depreciation and amortization	(255		)	(268		)	(273		)
Interest expense, net	(511		)	(567		)	(555		)
Other income, net	5			12			14
Income before provision for income taxes	$	909		$	963		$	850

We operate in the United States and Canada. The following table presents geographic area information for the years ended December 31, 2016, 2015 and 2014, except for balance sheet information, which is presented as of December 31, 2016 and 2015:



	Domestic		Foreign (Canada)		Total
2016
Equipment rentals	$	4,524	$	417	$	4,941
Sales of rental equipment	444		52		496
Sales of new equipment	129		15		144
Contractor supplies sales	68		11		79
Service and other revenues	87		15		102
Total revenue	5,252		510		5,762
Rental equipment, net	5,709		480		6,189
Property and equipment, net	390		40		430
Goodwill and other intangibles, net	$	3,699	$	303	$	4,002
2015
Equipment rentals	$	4,452	$	497	$	4,949
Sales of rental equipment	480		58		538
Sales of new equipment	137		20		157
Contractor supplies sales	69		10		79
Service and other revenues	80		14		94
Total revenue	5,218		599		5,817
Rental equipment, net	5,657		529		6,186
Property and equipment, net	399		46		445
Goodwill and other intangibles, net	$	3,838	$	310	$	4,148
2014
Equipment rentals	$	4,217	$	602	$	4,819
Sales of rental equipment	478		66		544
Sales of new equipment	124		25		149
Contractor supplies sales	70		15		85
Service and other revenues	73		15		88
Total revenue	$	4,962	$	723	$	5,685

Restructuring Charges

Closed Restructuring Programs

We have two closed restructuring programs. The first was initiated in 2008 in recognition of a challenging economic environment and closed in 2011. The second closed restructuring program was initiated following the April 30, 2012 acquisition of RSC, and was completed in 2013. The restructuring charges under the closed restructuring programs include severance costs associated with headcount reductions, as well as branch closure charges which principally relate to continuing lease obligations at vacant facilities.

The table below provides certain information concerning our restructuring charges under the closed restructuring programs:



Description	Beginning Reserve Balance		Charged to Costs and Expenses (1)			Payments and Other			Ending Reserve Balance
Year ended December 31, 2014:
Branch closure charges	$	33	$	(1	)	$	(12	)	$	20
Severance costs	2		—			(2		)	—
Total	$	35	$	(1	)	$	(14	)	$	20
Year ended December 31, 2015:
Branch closure charges	$	20	$	2		$	(9	)	$	13
Severance costs	—		—			—			—
Total	$	20	$	2		$	(9	)	$	13
Year ended December 31, 2016:
Branch closure charges	$	13	$	—		$	(5	)	$	8
Severance costs	—		—			—			—
Total	$	13	$	—		$	(5	)	$	8


(1)	Reflected in our consolidated statements of income as “Restructuring charge.” The restructuring charges are not allocated to our segments.

As of December 31, 2016, we have incurred total restructuring charges under the closed restructuring programs of $216, comprised of $150 of branch closure charges and $66 of severance costs.

2015-2016 Cost Savings Restructuring Program

In the fourth quarter of 2015, we initiated a restructuring program (the "2015/2016 restructuring program") in response to challenges in our operating environment. In particular, during 2015, we experienced volume and pricing pressure in our general rental business and our Pump Solutions region associated with upstream oil and gas customers. Additionally, our Lean initiatives did not fully generate the anticipated cost savings due to lower than expected growth. Though we expected solid industry growth in 2016, the 2015/2016 restructuring program was initiated in an effort to reduce costs in an environment with continuing pressures on volume and pricing. The program was completed in the fourth quarter of 2016.

The table below provides certain information concerning our restructuring charges under the 2015/2016 restructuring program:



Description	Beginning Reserve Balance		Charged to Costs and Expenses (1)		Payments and Other			Ending Reserve Balance
Year ended December 31, 2015:
Branch closure charges	$	—	$	—	$	—		$	—
Severance costs	—		4		(1		)	3
Total	$	—	$	4	$	(1	)	$	3
Year ended December 31, 2016:
Branch closure charges	$	—	$	10	$	(2	)	$	8
Severance costs	3		4		(6		)	1
Total	$	3	$	14	$	(8	)	$	9


(1)	Reflected in our consolidated statements of income as “Restructuring charge.” The restructuring charges are not allocated to our segments.

As of December 31, 2016, we incurred total restructuring charges under the 2015/2016 restructuring program of $18, comprised of $10 of branch closure charges and $8 of severance costs.

Rental Equipment

Rental equipment consists of the following:



	December 31,
	2016			2015
Rental equipment	$	9,413		$	9,022
Less accumulated depreciation	(3,224		)	(2,836		)
Rental equipment, net	$	6,189		$	6,186

Property and Equipment

Property and equipment consist of the following:



	December 31,
	2016			2015
Land	$	96		$	98
Buildings	212			226
Non-rental vehicles	93			86
Machinery and equipment	87			78
Furniture and fixtures	188			171
Leasehold improvements	221			212
	897			871
Less accumulated depreciation and amortization	(467		)	(426		)
Property and equipment, net	$	430		$	445

Goodwill and Other Intangible Assets

The following table presents the changes in the carrying amount of goodwill for each of the three years in the period ended December 31, 2016:



	General rentals			Trench, power and pump			Total
Balance at January 1, 2014 (1)	$	2,812		$	141		$	2,953
Goodwill related to acquisitions (2)	12			330			342
Foreign currency translation and other adjustments	(20		)	(3		)	(23		)
Balance at December 31, 2014 (1)	2,804			468			3,272
Goodwill related to acquisitions (2)	16			—			16
Foreign currency translation and other adjustments	(34		)	(11		)	(45		)
Balance at December 31, 2015 (1)	2,786			457			3,243
Goodwill related to acquisitions (2)	5			4			9
Foreign currency translation and other adjustments	6			2			8
Balance at December 31, 2016 (1)	$	2,797		$	463		$	3,260


(1)	The total carrying amount of goodwill for all periods in the table above is reflected net of $1,557 of accumulated impairment charges, which were primarily recorded in our general rentals segment.


(2)	Includes goodwill adjustments for the effect on goodwill of changes to net assets acquired during the measurement period, which were not significant to our previously reported operating results or financial condition.

Other intangible assets were comprised of the following at December 31, 2016 and 2015:



	December 31, 2016
	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Non-compete agreements	28 months	$	70	$	57	$	13
Customer relationships	10 years	$	1,465	$	737	$	728
Trade names and associated trademarks	4 months	$	80	$	79	$	1



	December 31, 2015
	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Non-compete agreements	31 months	$	69	$	44	$	25
Customer relationships	11 years	$	1,453	$	583	$	870
Trade names and associated trademarks	16 months	$	80	$	70	$	10

Amortization expense for other intangible assets was $174, $193 and $204 for the years ended December 31, 2016, 2015 and 2014, respectively.

As of December 31, 2016, estimated amortization expense for other intangible assets for each of the next five years and thereafter was as follows:



2017	$	146
2018	126
2019	111
2020	95
2021	80
Thereafter	184
Total	$	742

Accrued Expenses and Other Liabilities and Other Long-Term Liabilities

Accrued expenses and other liabilities consist of the following:



	December 31,
	2016		2015
Self-insurance accruals	$	35	$	43
Accrued compensation and benefit costs	55		41
Property and income taxes payable	23		22
Restructuring reserves (1)	17		16
Interest payable	79		91
Deferred revenue (2)	40		38
National accounts accrual	40		39
Due to seller	2		4
Other (3)	53		61
Accrued expenses and other liabilities	$	344	$	355


(1)	Relates to branch closure charges and severance costs. See note 4 for additional detail.


(2)	Primarily relates to amounts billed to customers in excess of recognizable equipment rental revenue. See note 2 (“Revenue Recognition”) for additional detail.


(3)	Other includes multiple items, none of which are individually significant.

Other long-term liabilities consist of the following:



	December 31,
	2016		2015
Self-insurance accruals	$	59	$	47
Accrued compensation and benefit costs	8		7
Other long-term liabilities	$	67	$	54

Derivatives

We recognize all derivative instruments as either assets or liabilities at fair value, and recognize changes in the fair value of the derivative instruments based on the designation of the derivative. We are exposed to certain risks relating to our ongoing business operations. During the year ended December 31, 2016, the risks we managed using derivative instruments were diesel price risk and foreign currency exchange rate risk. At December 31, 2016, we had outstanding fixed price swap contracts on diesel purchases which were entered into to mitigate the price risk associated with forecasted purchases of diesel. During the year ended December 31, 2016, we entered into forward contracts to purchase Canadian dollars to mitigate the foreign currency exchange rate risk associated with certain Canadian dollar denominated intercompany loans. At December 31, 2016, there were no outstanding forward contracts to purchase Canadian dollars. The outstanding forward contracts on diesel purchases were designated and qualify as cash flow hedges and the forward contracts to purchase Canadian dollars, which were all settled as of December 31, 2016, represented derivative instruments not designated as hedging instruments.

Fixed Price Diesel Swaps

The fixed price swap contracts on diesel purchases that were outstanding at December 31, 2016 were designated and qualify as cash flow hedges and the effective portion of the unrealized gain or loss on these contracts is reported as a component of accumulated other comprehensive income and is reclassified into earnings in the period during which the hedged transaction affects earnings (i.e., when the hedged gallons of diesel are used). The remaining gain or loss on the fixed price swap contracts in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), is recognized in our consolidated statements of income during the current period. As of December 31, 2016, we had outstanding fixed price swap contracts covering 7.0 million gallons of diesel which will be purchased throughout 2017 and 2018.

Foreign Currency Forward Contracts

The forward contracts to purchase Canadian dollars, which were all settled as of December 31, 2016, represented derivative instruments not designated as hedging instruments and gains or losses due to changes in the fair value of the forward contracts were recognized in our consolidated statements of income during the period in which the changes in fair value occurred. During the year ended December 31, 2016, forward contracts were used to purchase $894 Canadian dollars, representing the total amount due at maturity for certain Canadian dollar denominated intercompany loans that were settled during the year ended December 31, 2016. Upon maturity, the proceeds from the forward contracts were used to pay down the Canadian dollar denominated intercompany loans.

Financial Statement Presentation

As of December 31, 2016 and 2015, immaterial amounts ($6 or less) were reflected in prepaid expenses and other assets, accrued expenses and other liabilities, and accumulated other comprehensive income in our consolidated balance sheets associated with the outstanding fixed price swap contracts that were designated and qualify as cash flow hedges. Insignificant amounts (less than $1) were reflected in our consolidated statement of cash flows for the years ended December 31, 2016, 2015 and 2014 associated with the forward contracts to purchase Canadian dollars. Operating cash flows in our consolidated statement of cash flows for the years ended December 31, 2016, 2015 and 2014 include $29, $35 and $41, respectively, associated with the fixed price diesel swaps, comprised of 1) the cost to purchase 10.1 million, 10.6 million and 10.5 million hedged gallons of diesel during the years ended December 31, 2016, 2015 and 2014, respectively, and 2) cash paid to or received from the counterparties to the fixed price swaps.

The effect of our derivative instruments on our consolidated statements of income for the years ended December 31, 2016, 2015 and 2014 was as follows:



	Location of income (expense) recognized on derivative/hedged item	Amount of income (expense) recognized on derivative		Amount of income (expense) recognized on hedged item
Year ended December 31, 2016:
Derivatives designated as hedging instruments:
Fixed price diesel swaps	Other income (expense), net (1)	$ *
	Cost of equipment rentals, excluding depreciation (2), (3)	(6	)	(23	)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other income (expense), net	(3	)	3
Year ended December 31, 2015:
Derivatives designated as hedging instruments:
Fixed price diesel swaps	Other income (expense), net (1)	$ *
	Cost of equipment rentals, excluding depreciation (2), (3)	(7	)	(29	)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other income (expense), net	(5	)	5
Year ended December 31, 2014:
Derivatives designated as hedging instruments:
Fixed price diesel swaps	Other income (expense), net (1)	$ *
	Cost of equipment rentals, excluding depreciation (2), (3)	*		(40	)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other income (expense), net	(7	)	7

Amounts are insignificant (less than $1).


(1)	Represents the ineffective portion of the fixed price diesel swaps.


(2)	Amounts recognized on derivative represent the effective portion of the fixed price diesel swaps.


(3)	Amounts recognized on hedged item reflect the use of 10.1 million, 10.6 million and 10.5 million gallons of diesel covered by the fixed price swaps during the years ended December 31, 2016, 2015 and 2014, respectively.

Fair Value Measurements

We account for certain assets and liabilities at fair value, and categorize each of our fair value measurements in one of the following three levels based on the lowest level input that is significant to the fair value measurement in its entirety:

Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities include:

a) quoted prices for similar assets or liabilities in active markets;

b) quoted prices for identical or similar assets or liabilities in inactive markets;

c) inputs other than quoted prices that are observable for the asset or liability;

d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure.

Assets and Liabilities Measured at Fair Value

As of December 31, 2016 and 2015, our only assets and liabilities measured at fair value were our fixed price diesel swaps contracts, which are Level 2 derivatives measured at fair value on a recurring basis. As of December 31, 2016 and 2015, immaterial amounts ($6 or less) were reflected in prepaid expenses and other assets, and accrued expenses and other liabilities

in our consolidated balance sheets, reflecting the fair values of the fixed price swap contracts. As discussed in note 9 to the consolidated financial statements, we entered into the fixed price swap contracts on diesel purchases to mitigate the price risk associated with forecasted purchases of diesel. Fair value is determined based on observable market data. As of December 31, 2016, we have fixed price swap contracts covering 7.0 million gallons of diesel which we will buy throughout 2017 and 2018 at the average contract price of $2.56 per gallon, while the average forward price for the hedged gallons was $2.73 per gallon as of December 31, 2016.

Fair Value of Financial Instruments

The carrying amounts reported in our consolidated balance sheets for accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value due to the immediate to short-term maturity of these financial instruments. The fair values of our senior secured asset-based revolving credit facility (“ABL facility”) and accounts receivable securitization facility approximate their book values as of December 31, 2016 and 2015. The estimated fair values of our other financial instruments at December 31, 2016 and 2015 have been calculated based upon available market information or an appropriate valuation technique, and are as follows:



	December 31, 2016				December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Level 1:
Senior and senior subordinated notes	$	5,506	$	5,715	$	5,916	$	6,030
Level 3:
Capital leases (1)	71		70		96		95


(1)	The fair value of capital leases reflects the present value of the leases using a 7.0 percent interest rate.

Debt

Debt, net of unamortized original issue discounts or premiums, and unamortized debt issuance costs, consists of the following:



	December 31,
	2016			2015
Accounts Receivable Securitization Facility (1)	$	568		$	571
$2.5 billion ABL Facility (1)	1,645			1,579
7 3/8 percent Senior Notes (2)	—			740
8 1/4 percent Senior Notes (2)	—			315
7 5/8 percent Senior Notes due 2022 (2)	469			1,306
6 1/8 percent Senior Notes due 2023	936			937
4 5/8 percent Senior Secured Notes due 2023	991			989
5 3/4 percent Senior Notes due 2024	839			838
5 1/2 percent Senior Notes due 2025	792			791
5 7/8 percent Senior Notes due 2026 (3)	740			—
5 1/2 percent Senior Notes due 2027 (3)	739			—
Capital leases	71			96
Total debt	7,790			8,162
Less short-term portion	(597		)	(607		)
Total long-term debt	$	7,193		$	7,555


(1)	$809 and $57 were available under our ABL facility and accounts receivable securitization facility, respectively, at December 31, 2016. The ABL facility availability is reflected net of $36 of letters of credit. At December 31, 2016, the interest rates applicable to our ABL facility and accounts receivable securitization facility were 2.3 percent and 1.5 percent, respectively.


(2)	In 2016, we redeemed all of our 7 3/8 percent Senior Notes and 8 1/4 percent Senior Notes, and $850 principal amount of our 7 5/8 percent Senior Notes due 2022. Upon redemption, we recognized an aggregate loss of $100 in interest expense,

net. The loss represented the difference between the net carrying amount and the total purchase price of the redeemed notes.


(3)	In 2016, URNA issued $750 principal amount of 5 7/8 percent Senior Notes due 2026 and $750 principal amount of 5 1/2 percent Senior Notes due 2027. See below for additional detail.

Short-term debt

As of December 31, 2016, our short-term debt primarily reflects $568 of borrowings under our accounts receivable securitization facility. As discussed below, in 2016, we amended and extended our accounts receivable securitization facility. During the year ended December 31, 2016, the monthly average amount outstanding under the accounts receivable securitization facility was $551 and the weighted-average interest rate thereon was 1.2 percent. The maximum month-end amount outstanding under the accounts receivable securitization facility during the year ended December 31, 2016 was $621.

Accounts Receivable Securitization Facility. In August 2016, we amended and extended our accounts receivable securitization facility. The amended facility expires on August 29, 2017, has a facility size of $625, and may be extended on a 364-day basis by mutual agreement of the Company and the lenders under the facility. Borrowings under the facility are reflected as short-term debt on our consolidated balance sheets. Key provisions of the facility include the following:


•	borrowings are permitted only to the extent that the face amount of the receivables in the collateral pool, net of applicable reserves, exceeds the outstanding loans by a specified amount. As of December 31, 2016, there were $655 of receivables, net of applicable reserves, in the collateral pool;


•	the receivables in the collateral pool are the lenders’ only source of repayment;


•	upon early termination of the facility, no new amounts will be advanced under the facility and collections on the receivables securing the facility will be used to repay the outstanding borrowings; and


•	standard termination events including, without limitation, a change of control of Holdings, URNA or certain of its subsidiaries, a failure to make payments, a failure to comply with standard default, delinquency, dilution and days sales outstanding covenants, or breach of the fixed charge coverage ratio covenant under the ABL facility (if applicable).

ABL Facility. In June 2008, Holdings, URNA, and certain of our subsidiaries entered into a credit agreement providing for a five-year $1.25 billion ABL facility, a portion of which is available for borrowing in Canadian dollars. The ABL facility was subsequently upsized and extended. The size of the ABL facility was $2.5 billion as of December 31, 2016.

The ABL facility is subject to, among other things, the terms of a borrowing base derived from the value of eligible rental equipment and eligible inventory. The borrowing base is subject to certain reserves and caps customary for financings of this type. All amounts borrowed under the credit agreement must be repaid on or before June 2021. Loans under the credit agreement bear interest, at URNA’s option: (i) in the case of loans in U.S. dollars, at a rate equal to the London interbank offered rate or an alternate base rate, in each case plus a spread, or (ii) in the case of loans in Canadian dollars, at a rate equal to the Canadian prime rate or an alternate rate (Bankers' Acceptance Rate), in each case plus a spread. The interest rates under the credit agreement are subject to change based on the availability in the facility. A commitment fee accrues on any unused portion of the commitments under the credit agreement at a fixed rate per annum. Ongoing extensions of credit under the credit agreement are subject to customary conditions, including sufficient availability under the borrowing base. The credit agreement also contains covenants that, unless certain financial and other conditions are satisfied, require URNA to satisfy various financial tests and to maintain certain financial ratios. As discussed below (see “Loan Covenants and Compliance”), the only material financial covenant that currently exists in the ABL facility is the fixed charge coverage ratio. As of December 31, 2016, availability under the ABL facility has exceeded the required threshold and, as a result, this maintenance covenant is inapplicable. In addition, the credit agreement contains customary negative covenants applicable to Holdings, URNA and our subsidiaries, including negative covenants that restrict the ability of such entities to, among other things, (i) incur additional indebtedness or engage in certain other types of financing transactions, (ii) allow certain liens to attach to assets, (iii) repurchase, or pay dividends or make certain other restricted payments on, capital stock and certain other securities, (iv) prepay certain indebtedness and (v) make acquisitions and investments. The U.S. dollar borrowings under the credit agreement are secured by substantially all of our assets and substantially all of the assets of certain of our U.S. subsidiaries (other than real property and certain accounts receivable). The U.S. dollar borrowings under the credit agreement are guaranteed by Holdings and by URNA and, subject to certain exceptions, our domestic subsidiaries. Borrowings under the credit agreement by URNA’s Canadian subsidiaries are also secured by substantially all the assets of URNA’s Canadian subsidiaries and supported by guarantees from the Canadian subsidiaries and from Holdings and URNA, and, subject to certain exceptions, our domestic subsidiaries. Under the ABL facility, a change of control (as defined in the credit agreement) constitutes an event of default, entitling our lenders, among other things, to terminate our ABL facility and to require us to repay outstanding borrowings.

As of December 31, 2016, the ABL facility was our only long-term variable rate debt instrument. During the year ended December 31, 2016, the monthly average amount outstanding under the ABL facility was $1.4 billion and the weighted-average interest rate thereon was 2.1 percent. The maximum month-end amount outstanding under the ABL facility during the year ended December 31, 2016 was $1.7 billion.

7 5/8 percent Senior Notes due 2022. In March 2012, Funding SPV issued $1.325 billion aggregate principal amount of 7 5/8 percent Senior Notes (the “7 5/8 percent Notes”), which are due April 15, 2022. The net proceeds from the sale of the 7 5/8 percent Notes were approximately $1.295 billion (after deducting the initial purchasers' fees and offering expenses). Upon consummation of the RSC merger, URNA assumed the 7 5/8 percent Notes. The 7 5/8 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. As of December 31, 2016, after the redemption of $850 principal amount of the 7 5/8 percent Notes in 2016, the outstanding principal amount of the notes was $475.The 7 5/8 percent Notes may be redeemed on or after April 15, 2017, at specified redemption prices that range from 103.813 percent in 2017, to 100 percent in 2020 and thereafter, plus accrued and unpaid interest. The indenture governing the 7 5/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (vii) dividends, other payments and other matters affecting subsidiaries; (viii) transactions with affiliates; and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of these covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 7 5/8 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.

6 1/8 percent Senior Notes due 2023. In October 2012, URNA issued $400 aggregate principal amount of 6 1/8 percent Senior Notes (the “6 1/8 percent Notes”), which are due June 15, 2023. In March 2014, URNA issued $525 principal amount of 6 1/8 percent Notes as an add on to the existing 6 1/8 percent Notes. The notes issued in March 2014 have identical terms, and are fungible, with the existing 6 1/8 percent Notes. The net proceeds from the issuances of the 6 1/8 percent Notes were $939 (after deducting offering expenses). The 6 1/8 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 6 1/8 percent Notes may be redeemed by URNA on or after December 15, 2017, at specified redemption prices that range from 103.063 percent in 2017 to 100 percent in 2020 and thereafter. The indenture governing the 6 1/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) additional indebtedness; (ii) restricted payments; (iii) liens; (iv) asset sales; (v) preferred stock of certain subsidiaries; (vi) transactions with affiliates; (vii) dividends and other payments; (viii) designations of unrestricted subsidiaries; (ix) additional subsidiary guarantees and (x) mergers, consolidations or sales of substantially all of our assets. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 6 1/8 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof plus accrued and unpaid interest, if any, thereon. The carrying value of the 6 1/8 percent Notes includes the $21 unamortized portion of the original issue premium recognized in conjunction with the March 2014 issuance, which is being amortized through the maturity date in 2023. The effective interest rate on the 6 1/8 percent Senior Notes is 5.7 percent.

4 5/8 percent Senior Secured Notes due 2023. In March 2015, URNA issued $1.0 billion aggregate principal amount of 4 5/8 percent Senior Secured Notes (the “4 5/8 percent Notes”), which are due July 15, 2023. The net proceeds from the issuance were approximately $990 (after deducting offering expenses). The 4 5/8 percent Notes are guaranteed by Holdings and certain domestic subsidiaries of URNA and are secured on a second-priority basis by liens on substantially all of URNA’s and the guarantors’ assets that secure the ABL facility, subject to certain exceptions. The 4 5/8 percent Notes may be redeemed on or after July 15, 2018, at specified redemption prices that range from 103.469 percent in 2018, to 100 percent in 2021 and thereafter, plus accrued and unpaid interest, if any. The indenture governing the 4 5/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with affiliates and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. The indenture also includes covenants relating to the grant of and maintenance of liens for the benefit of the notes collateral agent. Each of the restrictive covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then-outstanding 4 5/8 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.

5 3/4 percent Senior Notes due 2024. In March 2014, URNA issued $850 aggregate principal amount of 5 3/4 percent Senior Notes (the “5 3/4 percent Notes”), which are due November 15, 2024. The net proceeds from the issuance were $837

(after deducting offering expenses). The 5 3/4 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 5 3/4 percent Notes may be redeemed on or after May 15, 2019, at specified redemption prices that range from 102.875 percent in the 12-month period commencing on May 15, 2019, to 100 percent in the 12-month period commencing on May 15, 2022 and thereafter, plus accrued and unpaid interest. The indenture governing the 5 3/4 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with affiliates and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of these covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 5 3/4 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.

5 1/2 percent Senior Notes due 2025. In March 2015, URNA issued $800 aggregate principal amount of 5 1/2 percent Senior Notes which are due July 15, 2025 (the “2025 5 1/2 percent Notes”). The net proceeds from the issuance were approximately $792 (after deducting offering expenses). The 2025 5 1/2 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 2025 5 1/2 percent Notes may be redeemed on or after July 15, 2020, at specified redemption prices that range from 102.75 percent in 2020, to 100 percent in 2023 and thereafter, plus accrued and unpaid interest, if any. The indenture governing the 2025 5 1/2 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with affiliates and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of the restrictive covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then-outstanding 2025 5 1/2 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.

5 7/8 percent Senior Notes due 2026. In May 2016, URNA issued $750 aggregate principal amount of 5 7/8 percent Senior Notes (the “5 7/8 percent Notes”) which are due September 15, 2026. The net proceeds from the issuance were approximately $741 (after deducting offering expenses). The 5 7/8 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 5 7/8 percent Notes may be redeemed on or after September 15, 2021, at specified redemption prices that range from 102.938 percent in 2021, to 100 percent in 2024 and thereafter, plus accrued and unpaid interest, if any. The indenture governing the 5 7/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with affiliates; and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of the restrictive covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then-outstanding 5 7/8 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.

5 1/2 percent Senior Notes due 2027. In November 2016, URNA issued $750 aggregate principal amount of 5 1/2 percent Senior Notes which are due May 15, 2027 (the “2027 5 1/2 percent Notes”). The net proceeds from the issuance were approximately $741 (after deducting offering expenses). The 2027 5 1/2 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 2027 5 1/2 percent Notes may be redeemed on or after May 15, 2022, at specified redemption prices that range from 102.75 percent in 2022, to 100 percent in 2025 and thereafter, plus accrued and unpaid interest, if any. The indenture governing the 2027 5 1/2 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) additional indebtedness; (iii) mergers, consolidations and acquisitions; (iv) sales, transfers and other dispositions of assets; (v) loans and other investments; (vi) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (vii) restrictions affecting subsidiaries; (viii) transactions with affiliates; and (ix) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of the restrictive covenants is subject to important exceptions and qualifications that would allow URNA and its subsidiaries to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then-outstanding 2027 5 1/2 percent Notes

tendered at a purchase price in cash equal to 101 percent of the principal amount thereof, plus accrued and unpaid interest, if any, thereon.

Loan Covenants and Compliance

As of December 31, 2016, we were in compliance with the covenants and other provisions of the ABL facility, the accounts receivable securitization facility 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 of December 31, 2016, specified availability under the ABL facility exceeded the required threshold and, as a result, this maintenance covenant is 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.

Maturities

Maturities of the Company’s debt (exclusive of any unamortized original issue discounts or premiums, and unamortized debt issuance costs) for each of the next five years and thereafter at December 31, 2016 are as follows:



2017	$	597
2018	21
2019	12
2020	4
2021	1,656
Thereafter	5,553
Total	$	7,843

Income Taxes

The components of the provision for income taxes for each of the three years in the period ended December 31, 2016 are as follows:



	Year ended December 31,
	2016			2015		2014
Current
Federal	$	186		$	13	$	2
Foreign	10			15		42
State and local	24			14		5
	220			42		49
Deferred
Federal	119			300		240
Foreign	(1		)	5		2
State and local	5			31		19
	123			336		261
Total	$	343		$	378	$	310

A reconciliation of the provision for income taxes and the amount computed by applying the statutory federal income tax rate of 35 percent to the income before provision for income taxes for each of the three years in the period ended December 31, 2016 is as follows:



	Year ended December 31,
	2016			2015			2014
Computed tax at statutory tax rate	$	318		$	337		$	297
State income taxes, net of federal tax benefit	21			41			22
Non-deductible expenses and other	9			8			8
Foreign taxes	(5		)	(8		)	(17		)
Total	$	343		$	378		$	310

The components of deferred income tax assets (liabilities) are as follows:



	December 31, 2016			December 31, 2015
Reserves and allowances	$	103		$	112
Debt cancellation and other	33			48
Net operating loss and credit carryforwards	28			73
Total deferred tax assets	164			233
Property and equipment	(1,820		)	(1,714		)
Intangibles	(231		)	(272		)
Valuation allowance	(9		)	(12		)
Total deferred tax liability	(2,060		)	(1,998		)
Total deferred income tax liability	$	(1,896	)	$	(1,765	)

The following table summarizes the activity related to unrecognized tax benefits, some of which would impact our effective tax rate if recognized:



	2016		2015
Balance at January 1	$	3	$	7
Additions for tax positions of prior years	1		1
Reductions for tax positions of prior years	—		(1		)
Settlements	—		(4		)
Balance at December 31	$	4	$	3

We include interest accrued on the underpayment of income taxes in interest expense, and penalties, if any, related to unrecognized tax benefits in selling, general and administrative expense. Interest expense of less than $1 related to income tax was reflected in our consolidated statements of income for each of the years ended December 31, 2016, 2015 and 2014.

We file income tax returns in the United States and in Canada. With few exceptions, we have completed our domestic and international income tax examinations, or the statute of limitations has expired in the respective jurisdictions, for years prior to 2010. The Internal Revenue Service (“IRS”) has completed audits for periods prior to 2010. Canadian authorities have concluded income tax audits for periods through 2010. Included in the balance of unrecognized tax benefits at December 31, 2016 are certain tax positions associated with Canadian transfer pricing and U.S. state inter-company royalty related issues. The Company has submitted a request to the Canadian Competent Authority for an Advanced Pricing Arrangement ("APA") associated with our intercompany transactions. The process has been delayed due to changes in the management and staff in the Canadian Revenue Agency ("CRA"). The latest communication received from the CRA indicated that the CRA's position on this matter should be expected within the next 12 months. It is not possible to estimate the amount of the change, if any, to the previously recorded uncertain tax positions.

For financial reporting purposes, income before provision for income taxes for our foreign subsidiaries was $29, $70 and $168 for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016, unremitted earnings of foreign subsidiaries were approximately $382. Since it is our intention to indefinitely reinvest these earnings, no U.S. taxes

have been provided for these amounts. If we changed our reinvestment policy and decided to remit earnings as a dividend, a deferred tax liability would arise. Determination of the amount of unrecognized deferred tax liability on these unremitted taxes is not practicable.

We have net operating loss carryforwards (“NOLs”) of $527 for state income tax purposes that expire from 2016 through 2036. We have recorded valuation allowances against this deferred asset of $9 and $12 as of December 31, 2016 and 2015, respectively. We have no NOLs recorded for federal income tax purposes. In 2016, the Company utilized $155 of existing NOLs to offset tax liabilities.

Commitments and Contingencies

We are subject to a number of claims and proceedings that generally arise in the ordinary conduct of our business. These matters include, but are not limited to, general liability claims (including personal injury, product liability, and property and automobile claims), indemnification and guarantee obligations, employee injuries and employment-related claims, self-insurance obligations and contract and real estate matters. Based on advice of counsel and available information, including current status or stage of proceeding, and taking into account accruals included in our consolidated balance sheets for matters where we have established them, we currently believe that any liabilities ultimately resulting from these ordinary course claims and proceedings will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Indemnification

The Company indemnifies its officers and directors pursuant to indemnification agreements and may in addition indemnify these individuals as permitted by Delaware law.

Operating Leases

We lease rental equipment, real estate and certain office equipment under operating leases. Certain real estate leases require us to pay maintenance, insurance, taxes and certain other expenses in addition to the stated rental payments. Future minimum lease payments by year and in the aggregate, for non-cancelable operating leases with initial or remaining terms of one year or more are as follows at December 31, 2016:



	Real Estate Leases		Non-Rental Equipment Leases
2017	$	99	$	41
2018	82		30
2019	63		22
2020	44		15
2021	28		8
Thereafter	39		2
Total	$	355	$	118

Our real estate leases provide for varying terms, including customary escalation clauses. We evaluate our operating leases in accordance with GAAP. Our leases generally include default provisions that are customary, and do not contain material adverse change clauses, cross-default provisions or subjective default provisions. In these leases, the occurrence of an event of default is objectively determinable based on predefined criteria. Based on the facts and circumstances that existed at lease inception and with consideration of our history as a lessee, we believe that it is reasonable to assume that an event of default will not occur.

Rent expense under all non-cancelable real estate, rental equipment and other equipment operating leases totaled $149, $139 and $131 for the years ended December 31, 2016, 2015 and 2014, respectively.

Capital Leases

Capital lease obligations consist primarily of vehicle and building leases with periods expiring at various dates through 2028. Capital lease obligations were $71 and $96 at December 31, 2016 and 2015, respectively. The following table presents capital lease financial statement information for the years ended December 31, 2016, 2015 and 2014, except for balance sheet information, which is presented as of December 31, 2016 and 2015:



	2016			2015			2014
Depreciation of rental equipment	$	20		$	20		$	20
Non-rental depreciation and amortization	3			3			4
Rental equipment	190			186
Less accumulated depreciation	(70		)	(56		)
Rental equipment, net	120			130
Property and equipment, net:
Non-rental vehicles	7			8
Buildings	21			21
Less accumulated depreciation and amortization	(16		)	(16		)
Property and equipment, net	$	12		$	13

Future minimum lease payments for capital leases for each of the next five years and thereafter at December 31, 2016 are as follows:



2017	$	32
2018	23
2019	13
2020	4
2021	2
Thereafter	3
Total	77
Less amount representing interest (1)	(6		)
Capital lease obligations	$	71


(1)	The weighted average interest rate on our capital lease obligations as of December 31, 2016 was approximately 5.7 percent.

Employee Benefit Plans

We currently sponsor a defined contribution 401(k) retirement plan, which is subject to the provisions of the Employee Retirement Income Security Act of 1974. We also sponsor a deferred profit sharing plan for the benefit of the full-time employees of our Canadian subsidiaries. Under these plans, we match a percentage of the participants’ contributions up to a specified amount. Company contributions to the plans were $23, $22 and $19 in the years ended December 31, 2016, 2015 and 2014, respectively.

Environmental Matters

The Company and its operations are subject to various laws and related regulations governing environmental matters. Under such laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in, or emanating from, such property, as well as investigation of property damage. We incur ongoing expenses associated with the performance of appropriate remediation at certain locations.

Common Stock

We have 500 million authorized shares of common stock, $0.01 par value. At December 31, 2016 and 2015, there were 0.5 million and 0.6 million shares of common stock reserved for issuance pursuant to options granted under our stock option plans, respectively.

As of December 31, 2016, there were an aggregate of 1.1 million outstanding time and performance-based RSUs and 3.7 million shares available for grant of stock and options under our 2010 Long Term Incentive Plan.

A summary of the transactions within the Company’s stock option plans follows (shares in thousands):



	Shares		Weighted-Average Exercise Price
Outstanding at January 1, 2014	875		$	17.85
Granted	—		—
Exercised	(213	)	11.21
Canceled	(10	)	19.98
Outstanding at December 31, 2014	652		19.99
Granted	—		—
Exercised	(87	)	13.54
Canceled	(4	)	20.29
Outstanding at December 31, 2015	561		20.99
Granted	—		—
Exercised	(54	)	17.42
Canceled	—		—
Outstanding at December 31, 2016	507		21.37
Exercisable at December 31, 2014	564		$	16.18
Exercisable at December 31, 2015	537		$	19.49
Exercisable at December 31, 2016	507		$	21.37

As of December 31, 2016 (options in thousands):



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Amount Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Amount Exercisable	Weighted Average Exercise Price
$0.01-5.00	100	2.2	$	3.38	100	$	3.38
5.01-10.00	169	3.2	8.32		169	8.32
10.01-15.00	12	2.1	14.50		12	14.50
15.01-20.00	12	2.8	15.22		12	15.22
25.01-30.00	27	3.2	26.01		27	26.01
30.01-35.00	62	4.2	31.49		62	31.49
40.01-45.00	51	5.1	41.25		51	41.25
50.01-55.00	74	6.2	53.78		74	53.78
	507		$	21.37	507	$	21.37

The following table presents information associated with options as of December 31, 2016 and 2015, and for the years ended December 31, 2016, 2015 and 2014:



	2016		2015		2014
Intrinsic value of options outstanding as of December 31	$	43	$	29
Intrinsic value of options exercisable as of December 31	43		28
Intrinsic value of options exercised	4		7		17
Weighted-average grant date fair value per option	$	—	$	—	$	—

In addition to stock options, the Company issues time-based and performance-based RSUs to certain officers and key executives under various plans. The RSUs automatically convert to shares of common stock on a one-for-one basis as the awards vest. The time-based RSUs typically vest over a three year vesting period beginning 12 months from the grant date and thereafter annually on the anniversary of the grant date. The performance-based RSUs vest over the performance period which is currently the calendar year. There were 346 thousand shares of common stock issued upon vesting of RSUs during 2016, net of 190 thousand shares surrendered to satisfy tax obligations. The Company measures the value of RSUs at fair value based on

the closing price of the underlying common stock on the grant date. The Company amortizes the fair value of outstanding RSUs as stock-based compensation expense over the requisite service period on a straight-line basis, or sooner if the employee effectively vests upon termination of employment under certain circumstances. For performance-based RSUs, compensation expense is recognized to the extent that the satisfaction of the performance condition is considered probable.

A summary of RSUs granted follows (RSUs in thousands):



	Year Ended December 31,
	2016		2015		2014
RSUs granted	901		463		805
Weighted-average grant date price per unit	$	60.55	$	86.84	$	92.28

As of December 31, 2016, the total pretax compensation cost not yet recognized by the Company with regard to unvested RSUs was $32. The weighted-average period over which this compensation cost is expected to be recognized is 1.9 years.

A summary of RSU activity for the year ended December 31, 2016 follows (RSUs in thousands):



	Stock Units		Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2015	530		$	81.94
Granted	901		60.55
Vested	(645	)	64.62
Forfeited	(35	)	79.19
Nonvested as of December 31, 2016	751		$	71.29

The total fair value of RSUs vested during the fiscal years ended December 31, 2016, 2015 and 2014 was $39, $84, and $54, respectively.

Stockholders’ Rights Plan. Our stockholders' rights plan expired in accordance with its terms on September 27, 2011. Our board of directors elected not to renew or extend the plan.

Quarterly Financial Information (Unaudited)



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
For the year ended December 31, 2016 (1):
Total revenues	$	1,310	$	1,421	$	1,508	$	1,523	$	5,762
Gross profit	500		590		656		657		2,403
Operating income	254		347		412		402		1,415
Net income	92		134		187		153		566
Earnings per share—basic	1.01		1.52		2.18		1.82		6.49
Earnings per share—diluted (3)	1.01		1.52		2.16		1.80		6.45
For the year ended December 31, 2015 (2):
Total revenues	$	1,315	$	1,429	$	1,550	$	1,523	$	5,817
Gross profit	524		618		690		648		2,480
Operating income	300		375		446		397		1,518
Net income	115		86		215		169		585
Earnings per share—basic	1.19		0.89		2.28		1.82		6.14
Earnings per share—diluted (3)	1.16		0.88		2.25		1.81		6.07


(1)	The fourth quarter of 2016 includes $6 of restructuring charges associated with the restructuring program we initiated in the fourth quarter of 2015 and closed in the fourth quarter of 2016, which is discussed further in note 4 to our consolidated financial statements. Additionally, as discussed in note 11 to our consolidated financial statements, in the

fourth quarter of 2016, we redeemed $850 principal amount of our 7 5/8 percent Senior Notes due 2022 and issued $750 principal amount of 5 1/2 percent Senior Notes due 2027. Upon the partial redemption of the 7 5/8 percent Senior Notes due 2022, we recognized a loss of $65 in interest expense, net. The loss represented the difference between the net carrying amount and the total purchase price of the redeemed notes.

(2)

The fourth quarter of 2015 included a decrease in stock compensation, net of $14 as compared to the fourth quarter of 2014 primarily due to lower than expected revenue and profitability. Additionally, as discussed in note 4 to our consolidated financial statements, in the fourth quarter of 2015, we initiated a restructuring program in response to recent challenges in our operating environment. Though we expected solid industry growth in 2016, the restructuring program was initiated in an effort to reduce costs in an environment with continuing pressures on volume and pricing. We recognized $4 of costs for the program in the fourth quarter of 2015. The program was completed in the fourth quarter of 2016. Additionally, during the fourth quarter of 2015, we reached agreement on a settlement that provided us with a $5 refund on previously paid property taxes. We recognized a reduction of $5 in cost of equipment rentals, excluding depreciation, associated with the settlement during the fourth quarter of 2015. Additionally, our provision for income taxes for the fourth quarter of 2015 includes the impact of a $5 increase in valuation allowances resulting from the enactment of Connecticut state limitations on net operating loss utilization.


(3)	Diluted earnings per share includes the after-tax impacts of the following:



	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
For the year ended December 31, 2016:
Merger related intangible asset amortization (5)	$	(0.30	)	$	(0.28	)	$	(0.28	)	$	(0.29	)	$	(1.12	)
Impact of the fair value mark-up of acquired RSC fleet (7)	(0.06		)	(0.06		)	(0.05		)	(0.06		)	(0.25		)
Impact on interest expense related to fair value adjustment of acquired RSC indebtedness (8)	—			—			—			—			0.01
Restructuring charge (9)	(0.01		)	(0.02		)	(0.02		)	(0.05		)	(0.11		)
Asset impairment charge (11)	(0.02		)	—			—			—			(0.03		)
Loss on extinguishment of debt securities and amendment of ABL facility	—			(0.18		)	(0.07		)	(0.47		)	(0.70		)
For the year ended December 31, 2015:
Merger related costs (4)	$	0.17		$	—		$	—		$	—		$	0.17
Merger related intangible asset amortization (5)	(0.32		)	(0.27		)	(0.28		)	(0.28		)	(1.15		)
Impact on depreciation related to acquired RSC fleet and property and equipment (6)	0.01			—			—			—			0.02
Impact of the fair value mark-up of acquired RSC fleet (7)	(0.04		)	(0.04		)	(0.04		)	(0.07		)	(0.19		)
Impact on interest expense related to fair value adjustment of acquired RSC indebtedness (8)	0.01			—			—			—			0.02
Restructuring charge (9)	—			—			—			(0.03		)	(0.04		)
Loss on extinguishment of debt securities	(0.01		)	(0.76		)	—			—			(0.78		)


(4)	This reflects transaction costs associated with the National Pump acquisition discussed above. The income during the year ended December 31, 2015 reflects a decline in the fair value of the contingent cash consideration component of the National Pump purchase price.


(5)	This reflects the amortization of the intangible assets acquired in the RSC and National Pump acquisitions.


(6)	This reflects the impact of extending the useful lives of equipment acquired in the RSC acquisition, net of the impact of additional depreciation associated with the fair value mark-up of such equipment.


(7)	This reflects additional costs recorded in cost of rental equipment sales associated with the fair value mark-up of rental equipment acquired in the RSC acquisition and subsequently sold.


(8)	This reflects a reduction of interest expense associated with the fair value mark-up of debt acquired in the RSC acquisition.


(9)	As discussed in note 4 to our consolidated financial statements, this reflects severance costs and branch closure charges associated with our restructuring programs.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares plus the effect of dilutive potential common shares

outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share (shares in thousands):



	Year Ended December 31,
	2016		2015		2014
Numerator:
Net income available to common stockholders	$	566	$	585	$	540
Denominator:
Denominator for basic earnings per share—weighted-average common shares	87,217		95,170		97,489
Effect of dilutive securities:
Employee stock options and warrants	277		300		394
4 percent Convertible Senior Notes	—		660		6,386
Restricted stock units	281		249		687
Denominator for diluted earnings per share—adjusted weighted-average common shares	87,775		96,379		104,956
Basic earnings per share	$	6.49	$	6.14	$	5.54
Diluted earnings per share	$	6.45	$	6.07	$	5.15

Condensed Consolidating Financial Information of Guarantor Subsidiaries

URNA is 100 percent owned by Holdings (“Parent”) and, as of December 31, 2016 and/or December 31, 2015, had outstanding (i) certain indebtedness that is guaranteed by both Parent 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”), all of URNA’s U.S. subsidiaries (the “guarantor subsidiaries”) and (ii) certain indebtedness that was guaranteed only by the guarantor subsidiaries (specifically, the 8 1/4 percent Senior Notes). As discussed in note 11 to the consolidated financial statements, in 2016, all of the 8 1/4 percent Senior Notes were redeemed. Other than the guarantee by certain Canadian subsidiaries of URNA's indebtedness under the ABL facility, none of URNA’s indebtedness is guaranteed by URNA's foreign subsidiaries or the SPV (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 Parent’s other subsidiaries. The guarantor subsidiaries are all 100 percent-owned and the guarantees are made on a joint and several basis. The guarantees 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 or designating the guarantor subsidiary as an unrestricted subsidiary for purposes of the applicable covenants. The 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 each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws. Based on our understanding of Rule 3-10 of Regulation S-X ("Rule 3-10"), we believe that the guarantees of the guarantor subsidiaries comply with the conditions set forth in Rule 3-10 and therefore continue to utilize Rule 3-10 to present condensed consolidating financial information for Holdings, URNA, the guarantor subsidiaries and the non-guarantor subsidiaries. Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors. However, condensed consolidating financial information is presented.

URNA covenants in the ABL facility, accounts receivable securitization facility and the other agreements governing our debt impose operating and financial restrictions on URNA, Parent and the guarantor subsidiaries, including limitations on the ability to make share repurchases and dividend payments. As of December 31, 2016, the amount available for distribution under the most restrictive of these covenants was $377. The Company’s total available capacity for making share repurchases and dividend payments includes the intercompany receivable balance of Parent. As of December 31, 2016, 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 Parent, was $713.

The condensed consolidating financial information of Parent and its subsidiaries is as follows:

CONDENSED CONSOLIDATING BALANCE SHEETS

December 31, 2016



									Non-Guarantor Subsidiaries
	Parent		URNA			Guarantor Subsidiaries			Foreign			SPV		Eliminations			Total
ASSETS
Cash and cash equivalents	$	—	$	21		$	—		$	291		$	—	$	—		$	312
Accounts receivable, net	—		38			—			96			786		—			920
Intercompany receivable (payable)	336		(137		)	(188		)	(115		)	—		104			—
Inventory	—		61			—			7			—		—			68
Prepaid expenses and other assets	5		51			—			5			—		—			61
Total current assets	341		34			(188		)	284			786		104			1,361
Rental equipment, net	—		5,709			—			480			—		—			6,189
Property and equipment, net	38		326			26			40			—		—			430
Investments in subsidiaries	1,292		1,013			978			—			—		(3,283		)	—
Goodwill	—		3,013			—			247			—		—			3,260
Other intangibles, net	—		686			—			56			—		—			742
Other long-term assets	—		6			—			—			—		—			6
Total assets	$	1,671	$	10,787		$	816		$	1,107		$	786	$	(3,179	)	$	11,988
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Short-term debt and current maturities of long-term debt	$	1	$	25		$	—		$	3		$	568	$	—		$	597
Accounts payable	—		217			—			26			—		—			243
Accrued expenses and other liabilities	—		305			13			25			1		—			344
Total current liabilities	1		547			13			54			569		—			1,184
Long-term debt	2		7,076			111			4			—		—			7,193
Deferred taxes	20		1,805			—			71			—		—			1,896
Other long-term liabilities	—		67			—			—			—		—			67
Total liabilities	23		9,495			124			129			569		—			10,340
Total stockholders’ equity (deficit)	1,648		1,292			692			978			217		(3,179		)	1,648
Total liabilities and stockholders’ equity (deficit)	$	1,671	$	10,787		$	816		$	1,107		$	786	$	(3,179	)	$	11,988

CONDENSED CONSOLIDATING BALANCE SHEETS

December 31, 2015



								Non-Guarantor Subsidiaries
	Parent		URNA		Guarantor Subsidiaries			Foreign			SPV		Eliminations			Total
ASSETS
Cash and cash equivalents	$	—	$	18	$	—		$	161		$	—	$	—		$	179
Accounts receivable, net	—		41		—			104			785		—			930
Intercompany receivable (payable)	144		40		(176		)	(109		)	—		101			—
Inventory	—		62		—			7			—		—			69
Prepaid expenses and other assets	—		98		—			18			—		—			116
Total current assets	144		259		(176		)	181			785		101			1,294
Rental equipment, net	—		5,657		—			529			—		—			6,186
Property and equipment, net	45		334		20			46			—		—			445
Investments in subsidiaries	1,307		958		924			—			—		(3,189		)	—
Goodwill	—		3,000		—			243			—		—			3,243
Other intangibles, net	—		838		—			67			—		—			905
Other long-term assets	3		7		—			—			—		—			10
Total assets	$	1,499	$	11,053	$	768		$	1,066		$	785	$	(3,088	)	$	12,083
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Short-term debt and current maturities of long-term debt	$	1	$	34	$	—		$	—		$	572	$	—		$	607
Accounts payable	—		237		—			34			—		—			271
Accrued expenses and other liabilities	—		314		14			27			—		—			355
Total current liabilities	1		585		14			61			572		—			1,233
Long-term debt	4		7,430		110			11			—		—			7,555
Deferred taxes	18		1,677		—			70			—		—			1,765
Other long-term liabilities	—		54		—			—			—		—			54
Total liabilities	23		9,746		124			142			572		—			10,607
Total stockholders’ equity (deficit)	1,476		1,307		644			924			213		(3,088		)	1,476
Total liabilities and stockholders’ equity (deficit)	$	1,499	$	11,053	$	768		$	1,066		$	785	$	(3,088	)	$	12,083

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

For the Year Ended December 31, 2016



									Non-Guarantor Subsidiaries
	Parent			URNA		Guarantor Subsidiaries			Foreign		SPV			Eliminations			Total
Revenues:
Equipment rentals	$	—		$	4,524	$	—		$	417	$	—		$	—		$	4,941
Sales of rental equipment	—			444		—			52		—			—			496
Sales of new equipment	—			129		—			15		—			—			144
Contractor supplies sales	—			68		—			11		—			—			79
Service and other revenues	—			87		—			15		—			—			102
Total revenues	—			5,252		—			510		—			—			5,762
Cost of revenues:
Cost of equipment rentals, excluding depreciation	—			1,669		—			193		—			—			1,862
Depreciation of rental equipment	—			900		—			90		—			—			990
Cost of rental equipment sales	—			265		—			27		—			—			292
Cost of new equipment sales	—			107		—			12		—			—			119
Cost of contractor supplies sales	—			47		—			8		—			—			55
Cost of service and other revenues	—			35		—			6		—			—			41
Total cost of revenues	—			3,023		—			336		—			—			3,359
Gross profit	—			2,229		—			174		—			—			2,403
Selling, general and administrative expenses	43			579		—			72		25			—			719
Restructuring charge	—			7		—			7		—			—			14
Non-rental depreciation and amortization	15			216		—			24		—			—			255
Operating (loss) income	(58		)	1,427		—			71		(25		)	—			1,415
Interest (income) expense, net	(6		)	509		3			2		8			(5		)	511
Other (income) expense, net	(471		)	521		—			40		(95		)	—			(5		)
Income (loss) before provision for income taxes	419			397		(3		)	29		62			5			909
Provision for income taxes	154			157		—			8		24			—			343
Income (loss) before equity in net earnings (loss) of subsidiaries	265			240		(3		)	21		38			5			566
Equity in net earnings (loss) of subsidiaries	301			61		21			—		—			(383		)	—
Net income (loss)	566			301		18			21		38			(378		)	566
Other comprehensive income (loss)	32			32		28			22		—			(82		)	32
Comprehensive income (loss)	$	598		$	333	$	46		$	43	$	38		$	(460	)	$	598

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

For the Year Ended December 31, 2015



										Non-Guarantor Subsidiaries
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations			Total
Revenues:
Equipment rentals	$	—		$	4,452		$	—		$	497		$	—		$	—		$	4,949
Sales of rental equipment	—			480			—			58			—			—			538
Sales of new equipment	—			137			—			20			—			—			157
Contractor supplies sales	—			69			—			10			—			—			79
Service and other revenues	—			80			—			14			—			—			94
Total revenues	—			5,218			—			599			—			—			5,817
Cost of revenues:
Cost of equipment rentals, excluding depreciation	—			1,603			—			223			—			—			1,826
Depreciation of rental equipment	—			881			—			95			—			—			976
Cost of rental equipment sales	—			279			—			32			—			—			311
Cost of new equipment sales	—			115			—			16			—			—			131
Cost of contractor supplies sales	—			48			—			7			—			—			55
Cost of service and other revenues	—			33			—			5			—			—			38
Total cost of revenues	—			2,959			—			378			—			—			3,337
Gross profit	—			2,259			—			221			—			—			2,480
Selling, general and administrative expenses	5			596			1			79			33			—			714
Merger related costs	—			(26		)	—			—			—			—			(26		)
Restructuring charge	—			5			—			1			—			—			6
Non-rental depreciation and amortization	15			228			1			24			—			—			268
Operating (loss) income	(20		)	1,456			(2		)	117			(33		)	—			1,518
Interest (income) expense, net	(3		)	559			8			3			5			(5		)	567
Other (income) expense, net	(471		)	513			—			44			(98		)	—			(12		)
Income (loss) before provision (benefit) for income taxes	454			384			(10		)	70			60			5			963
Provision (benefit) for income taxes	201			141			(5		)	18			23			—			378
Income (loss) before equity in net earnings (loss) of subsidiaries	253			243			(5		)	52			37			5			585
Equity in net earnings (loss) of subsidiaries	332			89			52			—			—			(473		)	—
Net income (loss)	585			332			47			52			37			(468		)	585
Other comprehensive (loss) income	(176		)	(176		)	(175		)	(139		)	—			490			(176		)
Comprehensive income (loss)	$	409		$	156		$	(128	)	$	(87	)	$	37		$	22		$	409

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

For the Year Ended December 31, 2014



										Non-Guarantor Subsidiaries
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations			Total
Revenues:
Equipment rentals	$	—		$	4,217		$	—		$	602		$	—		$	—		$	4,819
Sales of rental equipment	—			478			—			66			—			—			544
Sales of new equipment	—			124			—			25			—			—			149
Contractor supplies sales	—			70			—			15			—			—			85
Service and other revenues	—			73			—			15			—			—			88
Total revenues	—			4,962			—			723			—			—			5,685
Cost of revenues:
Cost of equipment rentals, excluding depreciation	—			1,558			—			248			—			—			1,806
Depreciation of rental equipment	—			820			—			101			—			—			921
Cost of rental equipment sales	—			277			—			38			—			—			315
Cost of new equipment sales	—			101			—			19			—			—			120
Cost of contractor supplies sales	—			49			—			10			—			—			59
Cost of service and other revenues	—			27			—			5			—			—			32
Total cost of revenues	—			2,832			—			421			—			—			3,253
Gross profit	—			2,130			—			302			—			—			2,432
Selling, general and administrative expenses	55			607			3			84			9			—			758
Merger related costs	—			11			—			—			—			—			11
Restructuring charge	—			(1		)	—			—			—			—			(1		)
Non-rental depreciation and amortization	17			226			1			29			—			—			273
Operating (loss) income	(72		)	1,287			(4		)	189			(9		)	—			1,391
Interest expense (income), net	9			538			5			4			5			(6		)	555
Other (income) expense, net (1)	(149		)	212			(3		)	17			(91		)	—			(14		)
Income (loss) before provision for income taxes	68			537			(6		)	168			77			6			850
Provision for income taxes	1			236			—			43			30			—			310
Income (loss) before equity in net earnings (loss) of subsidiaries	67			301			(6		)	125			47			6			540
Equity in net earnings (loss) of subsidiaries	473			172			125			—			—			(770		)	—
Net income (loss)	540			473			119			125			47			(764		)	540
Other comprehensive (loss) income	(93		)	(93		)	(90		)	(72		)	—			255			(93		)
Comprehensive income (loss)	$	447		$	380		$	29		$	53		$	47		$	(509	)	$	447


(1)	In 2015, the amount of royalties Holdings receives from URNA and its subsidiaries was adjusted as discussed above (see Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources- Relationship between Holdings and URNA). Other (income) expense, net for 2014 reflects the lower royalty rate that was used in 2014.

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Year Ended December 31, 2016



										Non-Guarantor Subsidiaries
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations		Total
Net cash provided by (used in) operating activities	$	9		$	1,774		$	(3	)	$	136		$	37		$	—	$	1,953
Net cash used in investing activities	(9		)	(844		)	—			(6		)	—			—		(859		)
Net cash (used in) provided by financing activities	—			(927		)	3			(3		)	(37		)	—		(964		)
Effect of foreign exchange rates	—			—			—			3			—			—		3
Net increase in cash and cash equivalents	—			3			—			130			—			—		133
Cash and cash equivalents at beginning of period	—			18			—			161			—			—		179
Cash and cash equivalents at end of period	$	—		$	21		$	—		$	291		$	—		$	—	$	312

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Year Ended December 31, 2015



										Non-Guarantor Subsidiaries
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations		Total
Net cash provided by (used in) operating activities	$	13		$	1,804		$	(3	)	$	170		$	11		$	—	$	1,995
Net cash used in investing activities	(13		)	(1,035		)	—			(122		)	—			—		(1,170		)
Net cash (used in) provided by financing activities	—			(759		)	3			(8		)	(11		)	—		(775		)
Effect of foreign exchange rates	—			—			—			(29		)	—			—		(29		)
Net increase in cash and cash equivalents	—			10			—			11			—			—		21
Cash and cash equivalents at beginning of period	—			8			—			150			—			—		158
Cash and cash equivalents at end of period	$	—		$	18		$	—		$	161		$	—		$	—	$	179

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Year Ended December 31, 2014



										Non-Guarantor Subsidiaries
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations		Total
Net cash provided by (used in) operating activities	$	13		$	1,644		$	4		$	223		$	(83	)	$	—	$	1,801
Net cash used in investing activities	(13		)	(1,773		)	—			(214		)	—			—		(2,000		)
Net cash provided by (used in) financing activities	—			120			(4		)	(3		)	83			—		196
Effect of foreign exchange rate	—			—			—			(14		)	—			—		(14		)
Net decrease in cash and cash equivalents	—			(9		)	—			(8		)	—			—		(17		)
Cash and cash equivalents at beginning of period	—			17			—			158			—			—		175
Cash and cash equivalents at end of period	$	—		$	8		$	—		$	150		$	—		$	—	$	158

Subsequent Events

On January 25, 2017, we entered into a definitive merger agreement with NES Rentals Holdings II, Inc. (“NES ”), pursuant to which we have agreed to acquire NES in an all cash transaction. The aggregate merger consideration paid to holders of NES common stock and options is expected to be approximately $965. The merger and related fees and expenses will be funded through available cash, drawings on current debt facilities and new debt issuances. NES is a provider of rental equipment with 73 branches located throughout the eastern half of the U.S., and had approximately 1,100 employees and approximately $900 of rental assets at original equipment cost as of December 31, 2016. NES has annual revenues of approximately $369. The proposed merger is subject to Hart-Scott-Rodino antitrust clearance and customary conditions. We expect the merger to close early in the second quarter of 2017.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

UNITED RENTALS, INC.

(In millions)



Description	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions			Balance at End of Period
Year ended December 31, 2016:
Allowance for doubtful accounts	$	55	$	24	$	25	(a)	$	54
Reserve for obsolescence and shrinkage	4		17		18		(b)	3
Self-insurance reserve	90		108		104		(c)	94
Year ended December 31, 2015:
Allowance for doubtful accounts	$	43	$	32	$	20	(a)	$	55
Reserve for obsolescence and shrinkage	3		18		17		(b)	4
Self-insurance reserve	92		110		112		(c)	90
Year ended December 31, 2014:
Allowance for doubtful accounts	$	49	$	13	$	19	(a)	$	43
Reserve for obsolescence and shrinkage	3		18		18		(b)	3
Self-insurance reserve	94		105		107		(c)	92

The above information reflects the continuing operations of the Company for the periods presented. Additionally, because the Company has retained certain self-insurance liabilities associated with the discontinued traffic control business, those amounts have been included as well.


(a)	Represents write-offs of accounts, net of recoveries.


(b)	Represents write-offs.


(c)	Represents payments.

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