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

To the Stockholders and the Board of Directors of United Rentals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of United Rentals, Inc. (the “Company”) as of December 31, 2021 and 2020, 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, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, 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 26, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.


			Valuation of Goodwill
Description of the Matter			At December 31, 2021, the Company’s goodwill was $5.5 billion. As discussed in Note 2 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level. Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the significant estimations required to determine the fair value of the reporting units. In particular, the fair value estimates were sensitive to significant assumptions, including the discount rates, revenue growth rates, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) margin, capital expenditures, long-term growth rates and market multiples, all of which are affected by expectations about future operational, rental industry market or economic conditions.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s development and review of the significant assumptions described above and review of the reasonableness of the data utilized in the Company’s valuation analysis. To test the fair value of the Company’s reporting units, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We compared the significant assumptions used by management to current industry and economic trends, including key performance indicators, and evaluated whether changes in the company’s business would affect the significant assumptions. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. In performing our testing, we utilized internal valuation specialists to assist us in evaluating the Company’s valuation model and related significant assumptions. In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1997.

Stamford, Connecticut

January 26, 2022

UNITED RENTALS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	December 31,
	2021		2020
ASSETS
Cash and cash equivalents	$	144	$	202
Accounts receivable, net of allowance for doubtful accounts of $112 at December 31, 2021 and $108 at December 31, 2020	1,677		1,315
Inventory	164		125
Prepaid expenses and other assets	166		375

Total current assets	2,151		2,017
Rental equipment, net	10,560		8,705
Property and equipment, net	612		604
Goodwill	5,528		5,168
Other intangible assets, net	615		648
Operating lease right-of-use assets	784		688
Other long-term assets	42		38
Total assets	$	20,292	$	17,868
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt and current maturities of long-term debt	$	906	$	704
Accounts payable	816		466
Accrued expenses and other liabilities	881		720
Total current liabilities	2,603		1,890
Long-term debt	8,779		8,978

Deferred taxes	2,154		1,768
Operating lease liabilities	621		549
Other long-term liabilities	144		138
Total liabilities	14,301		13,323

Common stock—$0.01 par value, 500,000,000 shares authorized, 114,434,075 and 72,420,566 shares issued and outstanding, respectively, at December 31, 2021 and 114,210,157 and 72,196,648 shares issued and outstanding, respectively, at December 31, 2020	1		1
Additional paid-in capital	2,567		2,482
Retained earnings	7,551		6,165
Treasury stock at cost—42,013,509 shares at December 31, 2021 and December 31, 2020	(3,957)		(3,957)
Accumulated other comprehensive loss	(171)		(146)
Total stockholders’ equity	5,991		4,545
Total liabilities and stockholders’ equity	$	20,292	$	17,868

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)


	Year Ended December 31,
	2021		2020		2019
Revenues:
Equipment rentals	$	8,207	$	7,140	$	7,964
Sales of rental equipment	968		858		831
Sales of new equipment	203		247		268
Contractor supplies sales	109		98		104
Service and other revenues	229		187		184
Total revenues	9,716		8,530		9,351
Cost of revenues:
Cost of equipment rentals, excluding depreciation	3,329		2,820		3,126
Depreciation of rental equipment	1,611		1,601		1,631
Cost of rental equipment sales	537		526		518
Cost of new equipment sales	169		214		231
Cost of contractor supplies sales	78		69		73
Cost of service and other revenues	139		117		102
Total cost of revenues	5,863		5,347		5,681
Gross profit	3,853		3,183		3,670
Selling, general and administrative expenses	1,199		979		1,092
Merger related costs	3		—		1
Restructuring charge	2		17		18
Non-rental depreciation and amortization	372		387		407
Operating income	2,277		1,800		2,152
Interest expense, net	424		669		648

Other expense (income), net	7		(8)		(10)
Income before provision for income taxes	1,846		1,139		1,514
Provision for income taxes	460		249		340


Net income	$	1,386	$	890	$	1,174



Basic earnings per share	$	19.14	$	12.24	$	15.18



Diluted earnings per share	$	19.04	$	12.20	$	15.11

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)


	Year Ended December 31,
	2021		2020		2019
Net income	$	1,386	$	890	$	1,174
Other comprehensive income (loss):
Foreign currency translation adjustments (1)	(26)		40		49
Fixed price diesel swaps	1		—		2
Other comprehensive income (loss) (1)	(25)		40		51
Comprehensive income	$	1,361	$	930	$	1,225

(1)There were no material reclassifications from accumulated other comprehensive loss reflected in other comprehensive income (loss) during the years ended December 31, 2021, 2020 or 2019. There was no material tax impact related to the foreign currency translation adjustments during the years ended December 31, 2021, 2020 or 2019. See note 15 to the consolidated financial statements for a discussion addressing our determination pertaining to the permanent reinvestment of unremitted foreign earnings. There were no material taxes associated with other comprehensive income (loss) during the years ended December 31, 2021, 2020 or 2019.

See accompanying notes.

UNITED RENTALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)


	Common Stock			Additional				Treasury Stock			Accumulated Other
	Number of Shares	Amount		Paid-in Capital		Retained Earnings		Number of Shares	Amount		Comprehensive (Loss) Income
Balance at January 1, 2019	80	$	1	$	2,408	$	4,101	33	$	(2,870)	$	(237)
Net income						1,174
Foreign currency translation adjustments											49
Fixed price diesel swaps											2

Stock compensation expense, net	—			61
Exercise of common stock options	—			11


Shares repurchased and retired				(40)
Repurchase of common stock	(6)							6	(830)

Balance at December 31, 2019	74	$	1	$	2,440	$	5,275	39	$	(3,700)	$	(186)

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) Income
Balance at December 31, 2019	74	$	1	$	2,440	$	5,275	39	$	(3,700)	$	(186)
Net income						890
Foreign currency translation adjustments											40


Stock compensation expense, net	1			70
Exercise of common stock options	—			1



Shares repurchased and retired				(29)
Repurchase of common stock	(3)							3	(257)

Balance at December 31, 2020	72	$	1	$	2,482	$	6,165	42	$	(3,957)	$	(146)

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) Income (1)
Balance at December 31, 2020	72	$	1	$	2,482	$	6,165	42	$	(3,957)	$	(146)
Net income						1,386
Foreign currency translation adjustments											(26)
Fixed price diesel swaps											1

Stock compensation expense, net	—			119



Shares repurchased and retired				(34)


Balance at December 31, 2021	72	$	1	$	2,567	$	7,551	42	$	(3,957)	$	(171)

(1)As of December 31, 2021, 2020 and 2019, 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,
	2021		2020		2019
	(In millions)
Cash Flows From Operating Activities:
Net income	$	1,386	$	890	$	1,174
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,983		1,988		2,038
Amortization of deferred financing costs and original issue discounts	13		14		15
Gain on sales of rental equipment	(431)		(332)		(313)
Gain on sales of non-rental equipment	(10)		(8)		(6)
Insurance proceeds from damaged equipment	(25)		(40)		(24)
Stock compensation expense, net	119		70		61
Merger related costs	3		—		1
Restructuring charge	2		17		18
Loss on repurchase/redemption of debt securities	30		183		61


Increase (decrease) in deferred taxes	268		(121)		204
Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable	(300)		218		39
Decrease (increase) in inventory	9		(5)		(8)
Decrease (increase) in prepaid expenses and other assets	248		(228)		(59)
Increase (decrease) in accounts payable	307		10		(86)
Increase (decrease) in accrued expenses and other liabilities	87		2		(91)
Net cash provided by operating activities	3,689		2,658		3,024
Cash Flows From Investing Activities:
Purchases of rental equipment	(2,998)		(961)		(2,132)
Purchases of non-rental equipment and intangible assets	(200)		(197)		(218)
Proceeds from sales of rental equipment	968		858		831
Proceeds from sales of non-rental equipment	30		42		37
Insurance proceeds from damaged equipment	25		40		24
Purchases of other companies, net of cash acquired	(1,436)		(2)		(249)
Purchases of investments	—		(3)		(3)
Net cash used in investing activities	(3,611)		(223)		(1,710)
Cash Flows From Financing Activities:
Proceeds from debt	8,364		9,260		9,260
Payments of debt	(8,462)		(11,245)		(9,678)

Payments of financing costs	(8)		(23)		(28)
Proceeds from the exercise of common stock options	—		1		11
Common stock repurchased	(34)		(286)		(870)


Net cash used in financing activities	(140)		(2,293)		(1,305)
Effect of foreign exchange rates	4		8		—
Net (decrease) increase in cash and cash equivalents	(58)		150		9
Cash and cash equivalents at beginning of year	202		52		43
Cash and cash equivalents at end of year	$	144	$	202	$	52
Supplemental disclosure of cash flow information:
Cash paid for interest	$	391	$	483	$	581
Cash paid for income taxes, net	202		318		238

See accompanying notes.

UNITED RENTALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1. 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 government entities. We primarily operate in the United States and Canada, and have a limited presence in Europe, Australia and New Zealand. In July 2018, we completed the acquisition of BakerCorp International Holdings, Inc. (“BakerCorp”), which allowed for our entry into select European markets. As discussed in note 4 to the consolidated financial statements, in May 2021, we completed the acquisition of General Finance Corporation (“General Finance”), which allowed for our entry into select markets in Australia and New Zealand. 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.

COVID-19

The novel coronavirus (“COVID-19”) was first identified in people in late 2019. COVID-19 spread rapidly throughout the world and, in March 2020, the World Health Organization characterized COVID-19 as a pandemic. COVID-19 is a pandemic of respiratory disease spreading from person-to-person that poses a serious public health risk. The COVID-19 pandemic has significantly disrupted supply chains and businesses around the world. Uncertainty remains regarding the ongoing impact of existing and emerging variant strains of COVID-19 on the operations and financial position of United Rentals, and on the global economy. Uncertainty also remains regarding the length of time it will take for the COVID-19 pandemic to ultimately subside, which will be impacted by the effectiveness of vaccines against COVID-19 (including against emerging variant strains), and by measures that may in the future be implemented to protect public health. See "Item 1. Business-Industry Overview and Economic Outlook" for a discussion of market performance in 2021 and 2020. The health and safety of our employees and customers remains our top priority, and we also implemented a detailed COVID-19 response plan, which is explained in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and which we believe helped mitigate the impact of COVID-19 on our results.

We began to experience a decline in revenues in March 2020, when rental volume declined in response to shelter-in-place orders and other market restrictions. The volume declines were more pronounced in 2020 than 2021, and we have seen recent evidence of recovery across our construction and industrial markets, as well as encouraging gains in end-market indicators, as reflected in our 2022 forecast. COVID-19 is discussed in more detail throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

2. 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, 2021 and 2020 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 and, as applicable, current conditions and reasonable and supportable forecasts that affect collectibility. 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. See note 3 to our consolidated financial statements for further detail.

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 20 years. Rental equipment is depreciated to a salvage value of zero to 50 percent of cost. The weighted average salvage value of our rental equipment is 11 percent of cost. Rental equipment is depreciated whether or not it is out on rent.

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. Rental equipment is valued utilizing either a cost, market or income approach, or a combination of certain of these methods, depending on the asset being valued and the availability of market or income data. The intangible assets that we have acquired are non-compete agreements, customer relationships and trade names and associated trademarks. The estimated fair values of these intangible assets reflect various assumptions about discount rates, revenue growth rates, operating margins, terminal values, useful lives and other prospective financial information. Goodwill is calculated as the excess of the cost of the acquired business over the net of the fair value of the assets acquired and the liabilities assumed. 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.

Determining the fair value of the assets and liabilities acquired can be judgmental in nature and can involve the use of significant estimates and assumptions. The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact net income in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. As discussed below, we regularly review for impairments.

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).

When conducting the goodwill impairment test, we are required to compare the fair value of our reporting units (which are our regions) with the carrying amount. As discussed in note 5 to our consolidated financial statements, as of December 31, 2021, our divisions were our operating segments. We conducted the goodwill impairment test as of October 1, 2021 at the reporting unit level, which is one level below the operating segment level. We conducted the goodwill impairment test as of October 1, 2020 at the same reporting unit level, although at that time, the reporting unit was also the operating segment (see note 5 for further discussion of our segment structure).

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. We estimate the fair

value of our reporting units 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. We believe this approach, which utilizes multiple valuation techniques, yields the most appropriate evidence of fair value.

In connection with our goodwill impairment test that was conducted as of October 1, 2021, we bypassed the optional qualitative assessment for each reporting unit and quantitatively compared the fair values of our reporting units with their carrying amounts. Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Mobile Storage and Mobile Storage International reporting units, had estimated fair values which exceeded their respective carrying amounts by at least 59 percent. As discussed in note 4 to the consolidated financial statements, in May 2021, we completed the acquisition of General Finance. All of the assets in the Mobile Storage and Mobile Storage International reporting units were acquired in the General Finance acquisition. The estimated fair values of our Mobile Storage and Mobile Storage International reporting units exceeded their carrying amounts by 10 percent and 17 percent, respectively. As all of the assets in the Mobile Storage and Mobile Storage International reporting units were recorded at fair value as of the May 2021 acquisition date, we expected the percentages by which the fair values for these reporting units exceeded the carrying values to be significantly less than the equivalent percentages determined for our other reporting units.

In connection with our goodwill impairment test that was conducted as of October 1, 2020, we bypassed the optional qualitative assessment for each reporting unit and proceeded directly to the first step of the goodwill impairment test. We considered the impact of COVID-19 when performing the test, and it did not have a material impact on the test results. Our goodwill impairment testing as of this date indicated that all of our reporting units, excluding our Fluid Solutions Europe reporting unit, had estimated fair values which exceeded their respective carrying amounts by at least 42 percent. As discussed above, in July 2018, we completed the acquisition of BakerCorp. All of the assets in the Fluid Solutions Europe reporting unit were acquired in the BakerCorp acquisition. The estimated fair value of our Fluid Solutions Europe reporting unit exceeded its carrying amount by 22 percent. As all of the assets in the Fluid Solutions Europe reporting unit were recorded at fair value as of the July 2018 acquisition date, we expected the percentage by which the Fluid Solutions Europe reporting unit’s fair value exceeded its carrying value to be significantly less than the equivalent percentages determined for our other reporting units.

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 5 to 15 years. The trade names and associated trademarks are being amortized using the sum of the years' digits method over initial periods of approximately 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 foreign 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

As discussed in note 3 to our consolidated financial statements, we recognize revenue in accordance with two different accounting standards: 1) Topic 606 (which addresses revenue from contracts with customers) and 2) Topic 842 (which

addresses lease revenue). As discussed in note 3, most of our revenue is accounted for under Topic 842. The discussion below addresses our primary revenue types based on the accounting standard used to determine the accounting.

Lease revenues (Topic 842)

The accounting for the significant types of revenue that are accounted for under Topic 842 is discussed below.

Owned equipment rentals: Owned equipment rentals represent revenues from renting equipment that we own. We account for such rentals as operating leases.

Re-rent revenue: Re-rent revenue reflects revenues from equipment that we rent from vendors and then rent to our customers. We account for such rentals as subleases. The accounting for re-rent revenue is the same as the accounting for owned equipment rentals described above.

Revenues from contracts with customers (Topic 606)

The accounting for the significant types of revenue that are accounted for under Topic 606 is discussed below.

Delivery and pick-up: Delivery and pick-up revenue associated with renting equipment is recognized when the service is performed.

Sales of rental equipment, new equipment and contractor supplies are recognized at the time of delivery to, or pick-up by, the customer and when collectibility is probable.

Service and other revenues primarily represent revenues earned from providing repair and maintenance services on our customers’ fleet (including parts sales). Service revenue is recognized as the services are performed.

See note 3 to our consolidated financial statements for further discussion of our revenue accounting.

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, 2021, 2020 and 2019.

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 $49, $22 and $49 for the years ended December 31, 2021, 2020 and 2019, 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. We are also self-insured for group medical claims but purchase “stop loss” insurance as protection against 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.

We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, no taxes were provided on such earnings prior to the fourth quarter of 2020. In the fourth quarter of 2020, we identified cash in our foreign operations in excess of near-term working capital needs, and determined that such cash could no longer be considered indefinitely reinvested. As a result, our prior assertion that all undistributed earnings of our foreign subsidiaries should be considered indefinitely reinvested changed. In the fourth quarter of 2021, we identified additional cash in our foreign operations in excess of near-term working capital needs, and remitted $203 of cash from foreign operations (such amount represents the cumulative amount of identified cash in our foreign operations in excess of near-term working capital needs). The taxes recorded associated with the remitted cash were immaterial in both 2020 and 2021.

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 and reserves for claims. 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 (see note 3 to our consolidated financial statements for further detail). 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 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 recognize forfeitures of stock-based compensation as they occur.

Accounting/Disclosure Guidance Adopted in 2021

Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued guidance intended to simplify the accounting for income taxes. The guidance removes the following exceptions: 1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, 2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary and 4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. Additionally, the guidance simplifies the accounting for income taxes by: 1) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which

the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements (although the entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority), 4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date and 5) making minor improvements for income tax accounting related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. Different components of the guidance required retrospective, modified retrospective or prospective adoption. We adopted this guidance in the first quarter of 2021, and the impact on our financial statements was not material.

Amendments to Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. In February 2021, a Securities and Exchange Commission ("SEC") rule intended to modernize, simplify, and enhance certain financial disclosure requirements became effective. We have adopted this rule in this Form 10-K, and the impact on our financial statements was not material, although several disclosures were updated. The primary disclosure changes we made associated with this rule were to remove: 1) discussions comparing 2020 and 2019 results, as such disclosures were included in our prior SEC filings, 2) selected financial data for the preceding five years and 3) the tabular disclosure of contractual obligations, although we continue to provide disclosures addressing the most significant categories of our short-term and long-term needs for cash.

3. Revenue Recognition

Revenue Recognition Accounting Standards

We recognize revenue in accordance with two different accounting standards: 1) Topic 606 (which addresses revenue from contracts with customers) and 2) Topic 842 (which addresses lease revenue). Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under Topic 606. As reflected below, most of our revenue is accounted for under Topic 842. Our contracts with customers generally do not include multiple performance obligations. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services.

Nature of goods and services

In the following table, revenue is summarized by type and by the applicable accounting standard.


	Year Ended December 31,
			2021						2020						2019
	Topic 842		Topic 606		Total		Topic 842		Topic 606		Total		Topic 842		Topic 606		Total
Revenues:
Owned equipment rentals	$	6,840	$	—	$	6,840	$	6,056	$	—	$	6,056	$	6,777	$	—	$	6,777
Re-rent revenue	194		—		194		142		—		142		155		—		155
Ancillary and other rental revenues:
Delivery and pick-up	—		616		616		—		506		506		—		564		564
Other	426		131		557		338		98		436		356		112		468
Total ancillary and other rental revenues	426		747		1,173		338		604		942		356		676		1,032
Total equipment rentals	7,460		747		8,207		6,536		604		7,140		7,288		676		7,964
Sales of rental equipment	—		968		968		—		858		858		—		831		831
Sales of new equipment	—		203		203		—		247		247		—		268		268
Contractor supplies sales	—		109		109		—		98		98		—		104		104
Service and other revenues	—		229		229		—		187		187		—		184		184
Total revenues	$	7,460	$	2,256	$	9,716	$	6,536	$	1,994	$	8,530	$	7,288	$	2,063	$	9,351

Revenues by reportable segment and geographical market are presented in note 5 of the consolidated financial statements using the revenue captions reflected in our consolidated statements of operations. The majority of our revenue is recognized in

our general rentals segment and in the U.S. (for the year ended December 31, 2021, 76 percent and 90 percent, respectively). We believe that the disaggregation of our revenue from contracts to customers as reflected above, coupled with the further discussion below and the reportable segment and geographical market disclosures in note 5, depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Lease revenues (Topic 842)

The accounting for the types of revenue that are accounted for under Topic 842 is discussed below.

Owned equipment rentals represent our most significant revenue type (they accounted for 70 percent of total revenues for the year ended December 31, 2021) and are governed by our standard rental contract. We account for such rentals as operating leases. The lease terms are included in our contracts, and the determination of whether our contracts contain leases generally does not require significant assumptions or judgments. Our lease revenues do not include material amounts of variable payments.

Owned equipment rentals: Owned equipment rentals represent revenues from renting equipment that we own. We do not generally provide an option for the lessee to purchase the rented equipment at the end of the lease, and do not generate material revenue from sales of equipment under such options.

We recognize revenues from renting equipment on a straight-line basis. Our rental contract periods are hourly, daily, weekly or monthly. By way of example, if a customer were to rent a piece of equipment and the daily, weekly and monthly rental rates for that particular piece were (in actual dollars) $100, $300 and $900, respectively, we would recognize revenue of $32.14 per day. The daily rate for recognition purposes is calculated by dividing the monthly rate of $900 by the monthly term of 28 days. This daily rate assumes that the equipment will be on rent for the full 28 days, as we are unsure of when the customer will return the equipment and therefore unsure of which rental contract period will apply.

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, which is based on the rental contract period applicable to the actual number of days the equipment was out on rent, over the cumulative amount of revenue recognized to date. In any given accounting period, we will have customers return equipment and be contractually required to pay us more than the cumulative amount of revenue recognized to date under the straight-line methodology. For instance, continuing the above example, if the customer rented the above piece of equipment on December 29 and returned it at the close of business on January 1, we would recognize incremental revenue on January 1 of $171.44 (in actual dollars, representing the difference between the amount the customer is contractually required to pay, or $300 at the weekly rate, and the cumulative amount recognized to date on a straight-line basis, or $128.56, which represents four days at $32.14 per day).

We record amounts billed to customers in excess of recognizable revenue as deferred revenue on our balance sheet. We had deferred revenue (associated with both Topic 842 and Topic 606) of $83 and $51 as of December 31, 2021 and 2020, respectively. The increase in 2021 primarily reflects the impact of the General Finance acquisition discussed in note 4 to the consolidated financial statements.

As noted above, we are unsure of when the customer will return rented equipment. As such, we do not know how much the customer will owe us upon return of the equipment and cannot provide a maturity analysis of future lease payments. Our equipment is generally rented for short periods of time (significantly less than a year). Lessees do not provide residual value guarantees on rented equipment.

We expect to derive significant future benefits from our equipment following the end of the rental term. Our rentals are generally short-term in nature, and our equipment is typically rented for the majority of the time that we own it. We additionally recognize revenue from sales of rental equipment when we dispose of the equipment.

“Other” equipment rental revenue is primarily comprised of 1) Rental Protection Plan (or "RPP") revenue associated with the damage waiver customers can purchase when they rent our equipment to protect against potential loss or damage, 2) environmental charges associated with the rental of equipment, 3) charges for rented equipment that is damaged by our customers and 4) charges for setup and other services performed on rented equipment.

Revenues from contracts with customers (Topic 606)

The accounting for the types of revenue that are accounted for under Topic 606 is discussed below. Substantially all of our revenues under Topic 606 are recognized at a point-in-time rather than over time.

Delivery and pick-up: Delivery and pick-up revenue associated with renting equipment is recognized when the service is performed.

“Other” equipment rental revenue is primarily comprised of revenues associated with the consumption of fuel by our customers which are recognized when the equipment is returned by the customer (and consumption, if any, can be measured).

Sales of rental equipment, new equipment and contractor supplies are recognized at the time of delivery to, or pick-up by, the customer and when collectibility is probable.

Receivables and contract assets and liabilities

As reflected above, most of our equipment rental revenue is accounted for under Topic 842 (such revenue represented 77 percent of our total revenues for the year ended December 31, 2021). The customers that are responsible for the remaining revenue that is accounted for under Topic 606 are generally the same customers that rent our equipment. We manage credit risk associated with our accounts receivables at the customer level. Because the same customers generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and our allowances for doubtful accounts address receivables arising from revenues from both Topic 606 and Topic 842.

Concentration of credit risk with respect to our 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 2021, 2020, and 2019. Our customer with the largest receivable balance represented approximately one percent and two percent of total receivables at December 31, 2021 and 2020, respectively. We manage credit risk through credit approvals, credit limits and other monitoring procedures.

Our allowance for doubtful accounts reflects our estimate of the amount of our receivables that we will be unable to collect based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectibility. 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. See the table below for a rollforward of our allowance for doubtful accounts.

In 2020, we adopted accounting guidance that requires companies to present certain financial assets net of the amount expected to be collected. Adoption of this guidance did not materially impact our financial statements. The measurement of expected credit losses is based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectibility. Trade receivables are the only material financial asset we have that is subject to the requirement to measure expected credit losses as noted above, as this requirement does not apply to receivables arising from operating lease revenues. Substantially all of our non-lease trade receivables are due in one year or less. As discussed above, most of our equipment rental revenue is accounted for as lease revenue (such revenue represented 77 percent of our total revenues for the year ended December 31, 2021), and these revenues account for corresponding portions of the $1.677 billion of net accounts receivable and the associated allowance for doubtful accounts of $112 reported on our consolidated balance sheet as of December 31, 2021.

As discussed above, most of our equipment rental revenue is accounted for under Topic 842. The customers that are responsible for the remaining revenue that is accounted for under Topic 606 are generally the same customers that rent our equipment. We manage credit risk associated with our accounts receivables at the customer level. The rollforward of our allowance for doubtful accounts (in total, and associated with revenues arising from both Topic 606 and Topic 842) is shown

below.


	Year ended December 31,
	2021		2020		2019
Beginning balance	$	108	$	103	$	93

Charged to costs and expenses (1)	5		9		8
Charged to revenue (2)	31		25		34
Deductions and other (3)	(32)		(29)		(32)
Ending balance	$	112	$	108	$	103

(1) Reflects bad debt expenses recognized within selling, general and administrative expenses (associated with Topic 606 revenues).

(2) Primarily reflects doubtful accounts associated with lease revenues that were recognized as a reduction to equipment rentals revenue (primarily associated with Topic 842 revenues).

(3) Primarily represents write-offs of accounts, net of immaterial recoveries and other activity.

We do not have material contract assets, or impairment losses associated therewith, or material contract liabilities, associated with contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers in excess of recognizable revenue. We did not recognize material revenue during the years ended December 31, 2021 and December 31, 2020 that was included in the contract liability balance as of the beginning of such periods.

Performance obligations

Most of our Topic 606 revenue is recognized at a point-in-time, rather than over time. Accordingly, in any particular period, we do not generally recognize a significant amount of revenue from performance obligations satisfied (or partially satisfied) in previous periods, and the amounts of such revenue recognized during the years ended December 31, 2021 and December 31, 2020 were not material. We also do not expect to recognize material revenue in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2021.

Payment terms

Our Topic 606 revenues do not include material amounts of variable consideration. Our payment terms vary by the type and location of our customer and the products or services offered. The time between invoicing and when payment is due is not significant. Our contracts do not generally include a significant financing component. For certain products or services and customer types, we require payment before the products or services are delivered to the customer. Our contracts with customers do not generally result in significant obligations associated with returns, refunds or warranties. See above for a discussion of how we manage credit risk.

Revenue is recognized net of taxes collected from customers, which are subsequently remitted to governmental authorities.

Contract costs

We do not recognize any assets associated with the incremental costs of obtaining a contract with a customer (for example, a sales commission) that we expect to recover. Most of our revenue is recognized at a point-in-time or over a period of one year or less, and we use the practical expedient that allows us to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less.

Contract estimates and judgments

Our revenues accounted for under Topic 606 generally do not require significant estimates or judgments, primarily for the following reasons:

The transaction price is generally fixed and stated in our contracts;
As noted above, our contracts generally do not include multiple performance obligations, and accordingly do not generally require estimates of the standalone selling price for each performance obligation;
Our revenues do not include material amounts of variable consideration, or result in significant obligations associated with returns, refunds or warranties; and
Most of our revenue is recognized as of a point-in-time and the timing of the satisfaction of the applicable performance obligations is readily determinable. As noted above, our Topic 606 revenue is generally recognized at the time of delivery to, or pick-up by, the customer.

Our revenues accounted for under Topic 842 also generally do not require significant estimates or judgments. We monitor and review our estimated standalone selling prices on a regular basis.

4. Acquisitions

On May 25, 2021, we completed the acquisition of General Finance. General Finance previously operated as Pac-Van and Container King in the U.S. and Canada, and as Royal Wolf in Australia and New Zealand, and was a leading provider of mobile storage equipment and modular office space. Its network served diverse end-markets, including construction, commercial, industrial, retail, transportation, petrochemical, consumer, natural resources, governmental and education. As of March 31, 2021, General Finance’s rental fleet consisted of approximately 100,000 units at an original cost of approximately $650. For the 12 months ending December 31, 2020, General Finance had revenues of $342 (such amount represents General Finance’s historic revenue presented in accordance with our revenue mapping). The acquisition is expected to:

Complement our leading positions in general construction and industrial rentals and specialty rentals, which will further differentiate us through our ability to deliver value as a one-stop-shop for customers;
Create immediate cross-sell opportunities, and allow us to introduce mobile storage and modular office solutions in service areas that previously were not served by General Finance; and
Provide entry into Australia and New Zealand, with an established platform run by a seasoned management team, and with a strong growth strategy already in place.

The aggregate consideration paid to acquire General Finance was $1.032 billion. The acquisition and related fees and expenses were funded through available cash and drawings on our senior secured asset-based revolving credit facility (“ABL facility”).

The following table summarizes the fair values of the assets acquired and liabilities assumed. The purchase price allocations for these assets and liabilities are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period, although we do not expect material future changes.


Cash and cash equivalents	$	13
Accounts receivable (1)	44
Inventory	36

Rental equipment	686
Property and equipment	42
Intangibles (2)	94
Operating lease right-of-use assets	57
Other assets	24
Total identifiable assets acquired	996

Current liabilities	(93)
Deferred taxes	(122)
Operating lease liabilities	(44)

Total liabilities assumed	(259)
Net identifiable assets acquired	737
Goodwill (3)	295
Net assets acquired	$	1,032

(1)The fair value of accounts receivables acquired was $44, and the gross contractual amount was $50. We estimated that $6 would be uncollectible.

(2)The following table reflects the fair values and useful lives of the acquired intangible assets identified based on our preliminary purchase accounting assessments:



	Fair value		Life (years)
Customer relationships	$	87	7
Trade names and associated trademarks	7		5

Total	$	94

(3)All of the goodwill was assigned to our specialty segment. We have not yet obtained all the information required to finalize the valuations of the assets acquired and liabilities assumed, although we do not expect material future changes. Once finalized, we expect that the goodwill that results from the acquisition will be primarily reflective of General Finance's going-concern value, the value of General Finance's assembled workforce, new customer relationships expected to arise from the acquisition, and operational synergies that we expect to achieve that would not be available to other market participants. $28 of goodwill is expected to be deductible for income tax purposes.

The year ended December 31, 2021 includes General Finance acquisition-related costs which are reflected as “Merger related costs” in our consolidated statements of income. It is not practicable to reasonably estimate the amounts of revenue and earnings of General Finance since the acquisition date, primarily due to the movement of fleet between URI locations and the acquired General Finance locations, as well as our corporate structure and the allocation of corporate costs.

Pro forma financial information

The pro forma information below gives effect to the General Finance acquisition as if it had been completed on January 1, 2020 (the "pro forma acquisition date”). The pro forma information is not necessarily indicative of our results had the acquisition been completed on the above date, nor is it necessarily indicative of our future results. The pro forma information reflects General Finance’s historic revenue presented in accordance with our revenue mapping, does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition, and also does not reflect additional revenue opportunities following the acquisition. The pro forma information includes adjustments to record the acquired assets and liabilities of General Finance at their respective fair values based on available information and to give effect to the financing for the acquisition. The pro forma adjustments reflected in the table below are subject to change as additional analysis is performed. The purchase price allocations for the assets acquired and liabilities assumed are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period, although we do not expect material future changes. Increases or decreases in the estimated fair values of the net assets acquired may impact our statements of income in future periods. We expect that the values assigned to the assets acquired and liabilities assumed will be finalized during the one-year measurement period following the acquisition date. The table below presents unaudited pro forma consolidated income statement information as if General Finance had been included in our consolidated results for the entire periods reflected:


	Year Ended
	December 31,
		2021		2020
United Rentals historic revenues		$	9,716	$	8,530
General Finance historic revenues		144		342
Pro forma revenues		9,860		8,872
United Rentals historic pretax income		1,846		1,139
General Finance historic pretax income		9		9
Combined pretax income		1,855		1,148
Pro forma adjustments to combined pretax income:
Impact of fair value mark-ups/useful life changes on depreciation (1)		(11)		(25)
Impact of the fair value mark-up of acquired fleet on cost of rental equipment sales (2)		(6)		(14)
Intangible asset amortization (3)		(5)		(21)
Goodwill impairment (4)		—		14
Interest expense (5)		(6)		(19)
Elimination of historic interest (6)		23		24
Elimination of merger related costs (7)		12		—
Elimination of changes in the valuation of bifurcated derivatives in convertible notes (8)		(16)		8




Pro forma pretax income		$	1,846	$	1,115

(1) Depreciation of rental equipment and non-rental depreciation were adjusted for the fair value mark-ups, and the changes in useful lives and salvage values, of the equipment acquired in the General Finance acquisition.

(2) Cost of rental equipment sales was adjusted for the fair value mark-ups of rental equipment acquired in the General Finance acquisition.

(3) Intangible asset amortization was adjusted to include amortization of the acquired intangible assets.

(4) The goodwill impairment charge that General Finance recognized during the year ended December 31, 2020 was eliminated. If the acquisition had occurred as of the pro forma acquisition date, this impairment charge would not have been recognized (instead, we would have tested for goodwill impairment based on the post-acquisition reporting unit structure).

(5) As discussed above, we funded the General Finance acquisition using drawings on our ABL facility. Interest expense was adjusted to reflect interest on the ABL facility borrowings.

(6) Historic interest on debt that is not part of the combined entity was eliminated. The adjustment for the year ended December 31, 2021 includes a debt redemption loss of $12.

(7) Merger related costs primarily comprised of financial and legal advisory fees associated with the General Finance acquisition were eliminated as they were assumed to have been recognized prior to the pro forma acquisition date. The adjustment for the year ended December 31, 2021 includes $9 of merger related costs recognized by General Finance prior to the acquisition.

(8) General Finance historically recognized changes in the valuation of bifurcated derivatives in convertible notes in its statements of operations. These historic changes were eliminated because the bifurcated derivatives are not part of the combined entity.

In addition to the General Finance acquisition discussed above, during 2021, we completed a series of acquisitions which were not significant individually or in the aggregate. See the consolidated statements of cash flows for the total cash outflow for purchases of other companies, net of cash acquired, which includes General Finance and the other completed acquisitions, and see note 10 to our consolidated financial statements for a rollforward showing the goodwill acquired associated with these acquisitions. The intangible assets acquired in the General Finance acquisition are discussed above, and $66 of intangible assets were acquired in 2021 associated with the other acquisitions.

5. Segment Information

Our reportable segments are i) general rentals and ii) specialty (formerly "trench, power and fluid solutions"). In the fourth quarter of 2021, following a realignment of certain of our divisions and regions, and changes in leadership roles and responsibilities, we updated our analysis of operating segments and concluded that our divisions now represent our operating segments. Prior to the fourth quarter of 2021, our regions were our operating segments. While this update reflects a change in operating segments, it did not result in any changes to the rental locations in each reportable segment (see Item 2—Properties for detail on the locations in each reportable segment), and, as a result, there were no changes to the historically reported segment financial information.

As noted below, we evaluate segment performance primarily based on segment equipment rentals gross profit. The primary change resulting from the change in segment presentation is to our ongoing review of segment equipment rentals margins, which we monitor on a quarterly basis to assess margin similarity between operating segments. Because of the change in operating segments, this margin analysis is now conducted at the division level, while it was historically performed at the region level. As discussed further in note 2 to our consolidated financial statements ("Evaluation of Goodwill Impairment"), we test for goodwill impairment at the reporting unit (the region, which is one level below the operating segment (division)) level, and the change in the segment structure did not impact our goodwill impairment testing.

For general rentals, the divisions discussed below, which are our operating segments, are aggregated into the reportable segment. The specialty segment is a single division that is both an operating segment and a reportable segment. We believe that the divisions that are aggregated into our reportable segments have similar economic characteristics, as each region is capital intensive, offers similar products to similar customers, uses similar methods to distribute its products, and is subject to similar competitive risks. The aggregation of our divisions also reflects the management structure that we use for making operating decisions and assessing performance. We evaluate segment performance primarily based on segment equipment rentals gross profit.

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 four geographic divisions— Central, Northeast, Southeast and West—and operates throughout the United States and Canada.

The specialty segment, which, as noted above, is a single division that is both an operating segment and a reportable segment, includes the rental of specialty construction products such as i) trench safety equipment, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers and line testing equipment for underground work, ii) power and HVAC equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment, iii) fluid solutions equipment primarily used for fluid containment, transfer and treatment, and iv) mobile storage equipment and modular office space. The specialty segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment primarily operates in the United States and Canada, and has a limited presence in Europe, Australia and New Zealand.

The following table presents the percentage of equipment rental revenue by equipment type for the years ended December 31, 2021, 2020 and 2019:


	Year Ended December 31,
	2021		2020		2019
Primarily rented by our general rentals segment:
General construction and industrial equipment	42	%	43	%	43	%
Aerial work platforms	26	%	27	%	28	%
General tools and light equipment	8	%	8	%	8	%
Primarily rented by our specialty segment:
Power and HVAC equipment	9	%	9	%	8	%
Trench safety equipment	6	%	6	%	6	%
Fluid solutions equipment	7	%	7	%	7	%
Mobile storage equipment and modular office space (1)	2	%	—	%	—	%

(1)As discussed in note 4 to the consolidated financial statements, in May 2021, we completed the acquisition of General Finance, which was a leading provider of mobile storage equipment and modular office space. Prior to the General Finance acquisition, we did not rent material amounts of such equipment.

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, 2021, 2020 and 2019:


	General rentals		Specialty		Total
2021
Equipment rentals	$	6,074	$	2,133	$	8,207
Sales of rental equipment	862		106		968
Sales of new equipment	142		61		203
Contractor supplies sales	71		38		109
Service and other revenues	202		27		229
Total revenue	7,351		2,365		9,716
Depreciation and amortization expense	1,611		372		1,983
Equipment rentals gross profit	2,269		998		3,267
Capital expenditures	2,719		479		3,198
Total assets	$	16,087	$	4,205	$	20,292
2020
Equipment rentals	$	5,472	$	1,668	$	7,140
Sales of rental equipment	785		73		858
Sales of new equipment	214		33		247
Contractor supplies sales	64		34		98
Service and other revenues	164		23		187
Total revenue	6,699		1,831		8,530
Depreciation and amortization expense	1,633		355		1,988
Equipment rentals gross profit	1,954		765		2,719
Capital expenditures	969		189		1,158
Total assets	$	15,051	$	2,817	$	17,868
2019
Equipment rentals	$	6,202	$	1,762	$	7,964
Sales of rental equipment	768		63		831
Sales of new equipment	238		30		268
Contractor supplies sales	71		33		104
Service and other revenues	157		27		184
Total revenue	7,436		1,915		9,351
Depreciation and amortization expense	1,681		357		2,038
Equipment rentals gross profit	2,407		800		3,207
Capital expenditures	1,967		383		2,350
Total assets	$	16,036	$	2,934	$	18,970

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,
	2021		2020		2019
Total equipment rentals gross profit	$	3,267	$	2,719	$	3,207
Gross profit from other lines of business	586		464		463
Selling, general and administrative expenses	(1,199)		(979)		(1,092)
Merger related costs (1)	(3)		—		(1)
Restructuring charge (2)	(2)		(17)		(18)
Non-rental depreciation and amortization	(372)		(387)		(407)
Interest expense, net	(424)		(669)		(648)

Other (expense) income, net	(7)		8		10
Income before provision for income taxes	$	1,846	$	1,139	$	1,514

(1)Primarily reflects transaction costs associated with the General Finance acquisition discussed in note 4 to the consolidated financial statements. Merger related costs only include costs associated with major acquisitions that significantly impact our operations. For additional information, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Other costs/(income)-merger related costs" below.

(2)Primarily reflects severance and branch closure charges associated with our restructuring programs. For additional information, see note 6 to the consolidated financial statements.

We primarily operate in the United States and Canada, and have a limited presence in Europe, Australia and New Zealand. In July 2018, we completed the acquisition of BakerCorp, which allowed for our entry into select European markets. As discussed in note 4 to the consolidated financial statements, in May 2021, we completed the acquisition of General Finance, which allowed for our entry into select markets in Australia and New Zealand. Our presence in Europe, Australia and New Zealand is limited, and the foreign information in the table below primarily reflects Canada. The following table presents geographic area information for the years ended December 31, 2021, 2020 and 2019, except for balance sheet information, which is presented as of December 31, 2021 and 2020:


	Domestic		Foreign		Total
2021
Equipment rentals	$	7,430	$	777	$	8,207
Sales of rental equipment	873		95		968
Sales of new equipment	162		41		203
Contractor supplies sales	95		14		109
Service and other revenues	201		28		229
Total revenue	8,761		955		9,716
Rental equipment, net	9,448		1,112		10,560
Property and equipment, net	560		52		612
Goodwill and other intangible assets, net	$	5,637	$	506	$	6,143
2020
Equipment rentals	$	6,543	$	597	$	7,140
Sales of rental equipment	784		74		858
Sales of new equipment	218		29		247
Contractor supplies sales	86		12		98
Service and other revenues	166		21		187
Total revenue	7,797		733		8,530
Rental equipment, net	7,960		745		8,705
Property and equipment, net	558		46		604
Goodwill and other intangible assets, net	$	5,361	$	455	$	5,816
2019
Equipment rentals	$	7,283	$	681	$	7,964
Sales of rental equipment	757		74		831
Sales of new equipment	238		30		268
Contractor supplies sales	92		12		104
Service and other revenues	164		20		184
Total revenue	$	8,534	$	817	$	9,351

6. Restructuring and Asset Impairment Charges

Restructuring charges primarily include severance costs associated with headcount reductions, as well as branch closure charges. We incur severance costs and branch closure charges in the ordinary course of our business. We only include such costs that are part of a restructuring program as restructuring charges. Since the first such program was initiated in 2008, we have completed five restructuring programs and have incurred total restructuring charges of $352.

Closed Restructuring Programs

Our closed restructuring programs were initiated either in recognition of a challenging economic environment or following the completion of certain significant acquisitions. As of December 31, 2021, the total liability associated with the closed restructuring programs was $9. As of December 31, 2021, we have incurred total restructuring charges under the closed restructuring programs of $335, comprised of $194 of branch closure charges and $141 of severance and other costs.

2020-2021 Cost Savings Restructuring Program

In the fourth quarter of 2019, we initiated a restructuring program associated with the consolidation of certain common functions, the relocation of our shared-service facilities and certain other cost reduction measures. We did not recognize material costs associated with this program in 2019, which is excluded from the table below. We closed this program in the first quarter of 2022 and do not expect to expect to recognize significant future costs under the program.

The table below provides certain information concerning our restructuring charges under the 2020-2021 Cost Savings restructuring program:


Description	Beginning Reserve Balance		Charged to Costs and Expenses (1)		Payments and Other		Ending Reserve Balance




Year Ended December 31, 2020:
Branch closure charges	$	—	$	7	$	(4)	$	3
Severance and other	—		8		(6)		2
Total	$	—	$	15	$	(10)	$	5
Year Ended December 31, 2021:
Branch closure charges	$	3	$	—	$	(2)	$	1
Severance and other	2		1		(3)		—
Total	$	5	$	1	$	(5)	$	1

(1) Reflected in our consolidated statements of income as “Restructuring charge” (such charge also includes activity under our other restructuring programs). The restructuring charges are not allocated to our segments. As of December 31, 2021, we have incurred total restructuring charges under the 2020-2021 Cost Savings restructuring program of $17, comprised of $8 of branch closure charges and $9 of severance and other costs.

Asset Impairment Charges

In addition to the restructuring charges discussed above, during the years ended December 31, 2021, 2020 and 2019, we recorded asset impairment charges of $14, $36 and $5, respectively, primarily in our general rentals segment. The 2020 asset impairment charges, which were not related to COVID-19, are primarily reflected in depreciation of rental equipment in our consolidated statements of income and principally relate to the discontinuation of certain equipment programs.

7. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:


	December 31,
	2021		2020
Equipment (1)	$	53	$	300
Insurance	29		18
Advertising reimbursements (2)	21		11
Income taxes	3		4
Other (3)	60		42




Prepaid expenses and other assets	$	166	$	375

(1) Reflects refundable deposits on expected purchases, primarily of rental equipment, pursuant to advanced purchase agreements. Such deposits are presented as a component of our cash flow from operations when paid. The decrease in 2021 primarily reflects purchases of equipment that we had placed deposits on as of December 31, 2020.

(2) Reflects reimbursements due for advertising that promotes a vendor’s products or services. See note 2 ("Advertising Expense") for further detail.

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

8. Rental Equipment

Rental equipment consists of the following:


	December 31,
	2021		2020
Rental equipment	$	16,445	$	14,216
Less accumulated depreciation	(5,885)		(5,511)
Rental equipment, net (1)	$	10,560	$	8,705

(1) As discussed above, disciplined management of capital expenditures and fleet capacity is a component of our COVID-19 response plan. In 2020, when we significantly reduced capital expenditures largely due to COVID-19, net rental equipment declined $1.082 billion. The increase in net rental equipment in 2021 primarily reflects net rental capital expenditures (purchases of rental equipment less proceeds from sales of rental equipment) that exceeded historic (pre-COVID-19) levels, as well as the impact of the General Finance acquisition discussed in note 4 to the consolidated financial statements. Net rental capital expenditures were $2.030 billion, $103 and $1.301 billion in 2021, 2020 and December 31, 2019, respectively.

9. Property and Equipment

Property and equipment consist of the following:


	December 31,
	2021		2020
Land	$	117	$	111
Buildings	222		215
Non-rental vehicles	187		168
Machinery and equipment	182		164
Furniture and fixtures	345		338
Leasehold improvements	427		396
	1,480		1,392
Less accumulated depreciation and amortization	(868)		(788)
Property and equipment, net	$	612	$	604

10. 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, 2021:


	General rentals		Specialty		Total
Balance at January 1, 2019 (1)	$	4,342	$	716	$	5,058
Goodwill related to acquisitions (2)	10		73		83
Foreign currency translation and other adjustments	10		3		13
Balance at December 31, 2019 (1)	4,362		792		5,154
Goodwill related to acquisitions (2)	1		(3)		(2)
Foreign currency translation and other adjustments	5		11		16
Balance at December 31, 2020 (1)	4,368		800		5,168
Goodwill related to acquisitions (2) (3)	76		295		371
Foreign currency translation and other adjustments	1		(12)		(11)
Balance at December 31, 2021 (1)	$	4,445	$	1,083	$	5,528

(1) The total carrying amount of goodwill for all periods in the table above is reflected net of $1.557 billion 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.

(3) For additional detail on the May 2021 acquisition of General Finance, which was assigned to our specialty segment and accounted for most of the goodwill related to acquisitions, see note 4 to our consolidated financial statements.

Other intangible assets were comprised of the following at December 31, 2021 and 2020:


	December 31, 2021
	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Non-compete agreements	51 months	$	65	$	13	$	52
Customer relationships	5 years	$	2,389	$	1,835	$	554
Trade names and associated trademarks	4 years	$	15	$	6	$	9


	December 31, 2020
	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Non-compete agreements	35 months	$	12	$	6	$	6
Customer relationships	6 years	$	2,252	$	1,614	$	638
Trade names and associated trademarks	4 years	$	8	$	4	$	4

Our other intangibles assets, net at December 31, 2021 include the following assets associated with the acquisition of General Finance discussed in note 4 to our consolidated financial statements. No residual value has been assigned to these assets, which are being amortized using the sum of the years' digits method, which we believe best reflects the estimated pattern in which the economic benefits will be consumed. The intangible asset values are based on preliminary valuations and are subject to change as we obtain additional information during the acquisition measurement period, although we do not expect material future changes.



	December 31, 2021
	Weighted-Average Remaining Amortization Period	Net Carrying Amount


Customer relationships	6 years	$	74
Trade names and associated trademarks	4 years	$	5

Amortization expense for other intangible assets was $233, $250 and $290 for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, estimated amortization expense for other intangible assets for each of the next five years and thereafter was as follows:


2022	$	205
2023	156
2024	109
2025	78
2026	44
Thereafter	23
Total	$	615

11. Accrued Expenses and Other Liabilities and Other Long-Term Liabilities

Accrued expenses and other liabilities consist of the following:


	December 31,
	2021		2020
Self-insurance accruals	$	51	$	54
Accrued compensation and benefit costs (1)	187		79
Property and income taxes payable	42		45
Restructuring reserves (2)	10		19
Interest payable	126		133
Deferred revenue (3)	83		51
National accounts accrual	95		84
Operating lease liability	202		178
Other (4)	85		77
Accrued expenses and other liabilities	$	881	$	720

(1) The increase from December 31, 2020 to December 31, 2021 was primarily due to a higher bonus accrual, which reflects increased profitability.

(2) Primarily relates to branch closure charges and severance costs. See note 6 for additional detail.

(3) Reflects amounts billed to customers in excess of recognizable revenue. See note 3 for additional detail.

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

Other long-term liabilities consist of the following:


	December 31,
	2021		2020
Self-insurance accruals	$	100	$	73
Income taxes payable	5		5
Accrued compensation and benefit costs	39		60
Other long-term liabilities	$	144	$	138

12. Fair Value Measurements

As of December 31, 2021 and 2020, the amounts of our assets and liabilities that were accounted for at fair value were immaterial.

Fair value measurements are categorized 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 or 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.

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 ABL, accounts receivable securitization and term loan facilities and finance leases approximated their book values as of December 31, 2021 and 2020. The estimated fair values of our other financial instruments, all of which are categorized in Level 1 of the fair value hierarchy, as of December 31, 2021 and 2020 have been calculated based upon available market information, and were as follows:


	December 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value


Senior notes	$	6,716	$	7,023	$	6,965	$	7,470

13. Debt

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


	December 31,
	2021		2020

Accounts receivable securitization facility expiring 2022 (1)	$	843	$	634
$3.75 billion ABL facility expiring 2024 (1)	1,029		977
Term loan facility expiring 2025 (1)	962		971













5 7/8 percent Senior Notes due 2026 (2)	—		999

5 1/2 percent Senior Notes due 2027	995		994
3 7/8 percent Senior Secured Notes due 2027	743		742
4 7/8 percent Senior Notes due 2028 (3)	1,656		1,654
4 7/8 percent Senior Notes due 2028 (3)	4		4
5 1/4 percent Senior Notes due 2030	743		742
4 percent Senior Notes due 2030	743		742
3 7/8 percent Senior Notes due 2031	1,089		1,088
3 3/4 percent Senior Notes due 2032 (4)	743		—
Finance leases	135		135




Total debt	9,685		9,682
Less short-term portion	(906)		(704)
Total long-term debt	$	8,779	$	8,978

(1) The table below presents financial information associated with our variable rate indebtedness as of and for the year ended December 31, 2021. We have borrowed the full available amount under the term loan facility. The principal obligation under the term loan facility is required to be repaid in quarterly installments in an aggregate amount equal to 1.0 percent per annum, with the balance due at the maturity of the facility. The average amount of debt outstanding under the term loan facility decreases slightly each quarter due to the requirement to repay a portion of the principal obligation.



	ABL facility			Accounts receivable securitization facility			Term loan facility
Borrowing capacity, net of letters of credit	$	2,650		$	57		$	—
Letters of credit	64
Interest rate at December 31, 2021	1.4		%	0.9		%	1.9		%
Average month-end debt outstanding	1,032			736			973
Weighted-average interest rate on average debt outstanding	1.3		%	1.0		%	1.9		%
Maximum month-end debt outstanding	1,672			872			978

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

(2) URNA redeemed all of its 5 7/8 percent Senior Notes in August 2021. Upon redemption, we recognized a loss of $30 in interest expense, net, reflecting the difference between the net carrying amount and the total purchase price of the redeemed notes.

(3) URNA separately issued 4 7/8 percent Senior Notes in August 2017 and in September 2017. Following the issuances, we consummated an exchange offer pursuant to which most of the 4 7/8 percent Senior Notes issued in September 2017 were exchanged for additional notes fungible with the 4 7/8 percent Senior Notes issued in August 2017.

(4) In August 2021, URNA issued $750 aggregate principal amount of 3 3/4 percent Senior Notes due 2032. See below for additional detail on the issued debt.

Short-term debt

As of December 31, 2021, our short-term debt primarily reflects $843 of borrowings under our accounts receivable securitization facility.

Accounts receivable securitization facility. In 2021, the accounts receivable securitization facility was amended, primarily to increase the facility size and to extend the maturity date which may be further extended on a 364-day basis by mutual agreement with the purchasers under the facility. The amended facility expires on June 24, 2022 and has a facility size of $900. 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, 2021, there were $1.180 billion 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).

See the table above for financial information associated with the accounts receivable securitization facility.

Long-term debt

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, and a portion of the facility is also now available for borrowing in British pounds, Euros, Australian dollars and New Zealand dollars by certain subsidiaries of URNA in Europe, Australia and New Zealand. The size of the ABL facility was $3.75 billion as of December 31, 2021. See the table above for financial information associated with the ABL facility.

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 February 2024. 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, (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, (iii) in the case of loans in Euros, at a rate equal to the London interbank offered rate or an alternate base rate, in each case plus a spread, (iv) in the case of loans in British pounds, at a rate equal to daily simple Sterling Overnight Interbank Average or an alternate base rate, in each case plus a spread or (v) in the case of loans in Australian Dollars or New Zealand Dollars, at a rate equal to the applicable bank bill rate or an alternate base 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. As discussed below (see “Loan Covenants and Compliance”), the only financial covenant that currently exists in the ABL facility is the fixed charge coverage ratio. As of December 31, 2021, availability under the ABL facility has exceeded the required threshold and, as a result, this financial covenant was 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 borrowings under the credit agreement by URNA 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 borrowings under the credit agreement by URNA are guaranteed by Holdings 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. Borrowings under the credit agreement by URNA’s subsidiaries in Europe, Puerto Rico, Australia and New Zealand are guaranteed by Holdings, URNA, URNA’s Canadian subsidiaries and, subject to certain exceptions, our domestic subsidiaries and secured by substantially all the assets of our U.S. subsidiaries (other than real property and certain accounts receivable) and substantially all the assets of URNA’s Canadian 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.

Term loan facility. In October 2018, Holdings, URNA, and certain of our subsidiaries entered into a $1 billion senior secured term loan facility. See the table above for financial information associated with the term loan facility. The term loan facility is guaranteed by Holdings and the same domestic subsidiaries that guarantee the borrowings of URNA under the ABL facility. In addition, the obligations under the term loan facility are secured by first priority security interests in the same collateral that secures the borrowings of URNA under the ABL facility, on a pari passu basis with the ABL facility.

The principal obligations under the term loan facility are to be repaid in quarterly installments in an aggregate amount equal to 1.0 percent per annum, with the balance due at the maturity of the term loan facility. The term loan facility matures on October 31, 2025. Amounts drawn under the term loan facility bear annual interest, at URNA’s option, at either the London interbank offered rate plus a margin of 1.75 percent or at an alternative base rate plus a margin of 0.75 percent.

The term loan facility contains customary negative covenants applicable to URNA and its subsidiaries, including negative covenants that restrict the ability of such entities to, among other things, (i) incur additional indebtedness; (ii) incur additional liens; (iii) make dividends and other restricted payments; and (iv) engage in mergers, acquisitions and dispositions. The term loan facility does not include any financial covenants. Under the term loan facility, a change of control (as defined in the credit agreement) constitutes an event of default, entitling our lenders to, among other things, terminate the term loan facility and require us to repay outstanding loans.

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”). In February 2017, URNA issued $250 aggregate principal amount of 2027 5 1/2 percent Notes as an add-on to the existing 2027 5 1/2 percent Notes, after which the aggregate principal amount of outstanding 2027 5 1/2 percent Notes was $1.0 billion. The notes issued in February 2017 have identical terms, and are fungible, with the existing 2027 5 1/2 percent Notes. 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. The carrying value of the 2027 5 1/2 percent Notes includes the $2 unamortized portion of the original issue premium recognized in conjunction with the February 2017 issuance, which is being amortized through the maturity date in 2027. The effective interest rate on the 2027 5 1/2 percent Notes, which includes the impact of the original issue premium, is 5.5 percent.

3 7*/*8 percent Senior Secured Notes due 2027. In November 2019, URNA issued $750 aggregate principal amount of 3 7/8 percent Senior Secured Notes (the “3 7/8 percent Notes”) which are due November 15, 2027. The 3 7/8 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 and the term loan facility, subject to certain exceptions. The 3 7/8 percent Notes may be redeemed on or after November 15, 2022, at specified redemption prices that range from 101.938 percent in 2022, to 100 percent in 2025 and thereafter, in each case, plus accrued and unpaid interest, if any. In addition, at any time on or prior to November 15, 2022, up to 40 percent of the aggregate principal amount of the 3 7/8 percent

Notes may be redeemed with the net cash proceeds of certain equity offerings at a redemption price equal to 103.875 percent of the aggregate principal amount of the notes plus accrued and unpaid interest, if any. The indenture governing the 3 7/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens and (ii) mergers and consolidations, 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. In addition, the requirements to provide subsidiary guarantees, to give further assurances and to make an offer to repurchase the notes upon the occurrence of a change of control will not apply to URNA and its restricted subsidiaries during any period when the 3 7/8 percent Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA, provided at such time no default under the indenture has occurred and is continuing. 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 3 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.

4 7*/*8 percent Senior Notes due 2028. In August 2017, URNA issued $925 principal amount of 4 7/8 percent Senior Notes (the “Initial 4 7/8 percent Notes”) which are due January 15, 2028. The Initial 4 7/8 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The Initial 4 7/8 percent Notes may be redeemed on or after January 15, 2023, at specified redemption prices that range from 102.438 percent in 2023, to 100 percent in 2026 and thereafter, in each case, plus accrued and unpaid interest, if any. The indenture governing the Initial 4 7/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) mergers and consolidations; (iii) sales, transfers and other dispositions of assets; (iv) dividends and other distributions, stock repurchases and redemptions and other restricted payments; and (v) 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. In addition, the covenant relating to dividends and other distributions, stock repurchases and redemptions and other restricted payments and the requirements relating to additional subsidiary guarantors will not apply to URNA and its restricted subsidiaries during any period when the Initial 4 7/8 percent Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA, provided at such time no default under the indenture has occurred and is continuing. 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 Initial 4 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.

In September 2017, URNA issued $750 principal amount of 4 7/8 percent Senior Notes (the “Subsequent 4 7/8 percent Notes”) which are due January 15, 2028. The Subsequent 4 7/8 percent Notes represent a separate a distinct series of notes from the Initial 4 7/8 percent Notes. The Subsequent 4 7/8 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The Subsequent 4 7/8 percent Notes may be redeemed on or after January 15, 2023, at specified redemption prices that range from 102.438 percent in 2023, to 100 percent in 2026 and thereafter, in each case, plus accrued and unpaid interest, if any. The indenture governing the Subsequent 4 7/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) mergers and consolidations; (iii) sales, transfers and other dispositions of assets; (iv) dividends and other distributions, stock repurchases and redemptions and other restricted payments; and (v) 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. In addition, the covenant relating to dividends and other distributions, stock repurchases and redemptions and other restricted payments and the requirements relating to additional subsidiary guarantors will not apply to URNA and its restricted subsidiaries during any period when the Subsequent 4 7/8 percent Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA, provided at such time no default under the indenture has occurred and is continuing. 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 Subsequent 4 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. The effective interest rate on the Subsequent 4 7/8 percent Notes, which includes the impact of the original issue premium, is 4.84 percent.

In December 2017, we consummated an exchange offer pursuant to which approximately $744 principal amount of Subsequent 4 7/8 percent Notes were exchanged for additional Initial 4 7/8 percent Notes issued under the indenture governing the Initial 4 7/8 percent Notes and fungible with the Initial 4 7/8 percent Notes. As of December 31, 2021, the principal amounts outstanding were $1.669 billion for the Initial 4 7/8 percent Notes and $4 for the Subsequent 4 7/8 percent Notes. The carrying value of the Initial 4 7/8 percent Notes includes $1 of the unamortized original issue premium, which is being amortized through the maturity date in 2028. The effective interest rate on the Initial 4 7/8 percent Notes, which includes the impact of the original issue premium, is 4.86 percent.

5 1*/*4 percent Senior Notes due 2030. In May 2019, URNA issued $750 aggregate principal amount of 5 1/4 percent Senior Notes (the “5 1/4 percent Notes”) which are due January 15, 2030. The 5 1/4 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 5 1/4 percent Notes may be redeemed on or after January 15, 2025, at specified redemption prices that range from 102.625 percent in 2025, to 100 percent in 2028 and thereafter, in each case, plus accrued and unpaid interest, if any. In addition, at any time on or prior to January 15, 2023, up to 40 percent of the aggregate principal amount of the 5 1/4 percent Notes may be redeemed with the net cash proceeds of certain equity offerings at a redemption price equal to 105.250 percent of the aggregate principal amount of the notes plus accrued and unpaid interest, if any. The indenture governing the 5 1/4 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens; (ii) mergers and consolidations; and (iii) dividends and other distributions, stock repurchases and redemptions and other restricted payments, 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. In addition, the covenant relating to dividends and other distributions, stock repurchases and redemptions and other restricted payments and the requirements relating to additional subsidiary guarantors will not apply to URNA and its restricted subsidiaries during any period when the 5 1/4 percent Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA, provided at such time no default under the indenture has occurred and is continuing. 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 1/4 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.

4 percent Senior Notes due 2030. In February 2020, URNA issued $750 aggregate principal amount of 4 percent Notes which are due July 15, 2030. The 4 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 4 percent Notes may be redeemed on or after July 15, 2025, at specified redemption prices that range from 102.000 percent in 2025, to 100 percent in 2028 and thereafter, in each case, plus accrued and unpaid interest, if any. In addition, at any time on or prior to July 15, 2023, up to 40 percent of the aggregate principal amount of the 4 percent Notes may be redeemed with the net cash proceeds of certain equity offerings at a redemption price equal to 104.000 percent of the aggregate principal amount of the notes plus accrued and unpaid interest, if any. The indenture governing the 4 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens and (ii) mergers and consolidations, 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. In addition, the requirements to provide subsidiary guarantees and to make an offer to repurchase the notes upon the occurrence of a change of control will not apply to URNA and its restricted subsidiaries during any period when the 4 percent Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA, provided at such time no default under the indenture has occurred and is continuing. 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 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.

3 7*/*8 percent Senior Notes due 2031. In August 2020, URNA issued $1.100 billion aggregate principal amount of 3 7/8 percent Senior Notes (the “3 7/8 percent Notes”) which are due February 15, 2031. The 3 7/8 percent Notes are unsecured and are guaranteed by Holdings and certain domestic subsidiaries of URNA. The 3 7/8 percent Notes may be redeemed on or after August 15, 2025, at specified redemption prices that range from 101.938 percent in 2025, to 100 percent in 2028 and thereafter, in each case, plus accrued and unpaid interest, if any. In addition, at any time on or prior to August 15, 2023, up to 40 percent of the aggregate principal amount of the 3 7/8 percent Notes may be redeemed with the net cash proceeds of certain equity offerings at a redemption price equal to 103.875 percent of the aggregate principal amount of the notes plus accrued and unpaid interest, if any. The indenture governing the 3 7/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens and (ii) mergers and consolidations, 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. In addition, the requirements to provide subsidiary guarantees and to make an offer to repurchase the notes upon the occurrence of a change of control will not apply to URNA and its restricted subsidiaries during any period when the 3 7/8 percent Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA, provided at such time no default under the indenture has occurred and is continuing. 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 3 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.

3 3*/*4 percent Senior Notes due 2032. In August 2021, URNA issued $750 aggregate principal amount of 3 3/4 percent Senior Notes (the “3 3/4 percent Notes”) which are due January 15, 2032. The 3 3/4 percent Notes are unsecured and are

guaranteed by Holdings and certain domestic subsidiaries of URNA. The 3 3/4 percent Notes may be redeemed on or after July 15, 2026, at specified redemption prices that range from 101.875 percent in 2026, to 100 percent in 2029 and thereafter, in each case, plus accrued and unpaid interest, if any. In addition, at any time on or prior to July 30, 2024, up to 40 percent of the aggregate principal amount of the 3 3/4 percent Notes may be redeemed with the net cash proceeds of certain equity offerings at a redemption price equal to 103.750 percent of the aggregate principal amount of the notes plus accrued and unpaid interest, if any. The indenture governing the 3 3/4 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) liens and (ii) mergers and consolidations, 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. In addition, the requirements to provide subsidiary guarantees and to make an offer to repurchase the notes upon the occurrence of a change of control will not apply to URNA and its restricted subsidiaries during any period when the 3 3/4 percent Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., or, in certain circumstances, another rating agency selected by URNA, provided at such time no default under the indenture has occurred and is continuing. 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 3 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.

Loan Covenants and Compliance

As of December 31, 2021, we were in compliance with the covenants and other provisions of the ABL, accounts receivable securitization and term loan facilities and the senior notes. 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, 2021, specified availability under the ABL facility exceeded the required threshold and, as a result, this financial covenant was inapplicable. Under our accounts receivable securitization facility, we are required, among other things, to maintain certain financial tests relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales outstanding. The accounts receivable securitization facility also requires us to comply with the fixed charge coverage ratio under the ABL facility, to the extent the ratio is applicable under the ABL facility.

Maturities

Debt maturities (exclusive of any unamortized original issue premiums and unamortized debt issuance costs) for each of the next five years and thereafter at December 31, 2021 are as follows:


2022	$	906
2023	52
2024	1,070
2025	949
2026	2
Thereafter	6,775
Total	$	9,754

14. Leases

As discussed in note 3 to the consolidated financial statements, most of our equipment rental revenue is accounted for as lease revenue under Topic 842 (such revenue represented 77 percent of our total revenues for the year ended December 31, 2021). See note 3 for a discussion of our revenue accounting (such discussion includes lessor disclosures required under Topic 842).

We determine if an arrangement is a lease at inception. Our material lease contracts are generally for real estate or vehicles, and the determination of whether such contracts contain leases generally does not require significant estimates or judgments. We lease real estate and equipment under operating leases. We lease a significant portion of our branch locations, and also lease other premises used for purposes such as district and regional offices and service centers. Our finance lease obligations consist primarily of rental equipment (primarily vehicles) and building leases.

Operating leases result in the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives. Our lease terms may include options, at our sole discretion, to extend or terminate the lease that we are reasonably certain to exercise. The amount of payments associated with such options reflected in the “Maturity of lease liabilities” table below is not material. Most real estate leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more. Lease expense is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense on such leases is recognized on a straight-line basis over the lease term. The primary leases we enter into with initial terms of 12 months or less are for equipment that we rent from vendors and then rent to our customers. We generate sublease revenue from such leases that we refer to as "re-rent revenue" as discussed in note 3 to the consolidated financial statements. Apart from the re-rent revenue discussed in note 3, we do not generate material sublease income.

We have lease agreements with lease and non-lease components, and, for our real estate operating leases, we account for the lease and non-lease components as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The tables below present financial information associated with our leases as of December 31, 2021 and 2020, and for the years ended December 31, 2021, 2020 and 2019.


	Classification	December 31, 2021		December 31, 2020
Assets
Operating lease assets	Operating lease right-of-use assets (1)	$	784	$	688
Finance lease assets	Rental equipment	329		295
	Less accumulated depreciation	(102)		(86)
	Rental equipment, net	227		209
	Property and equipment, net:
	Non-rental vehicles	8		8
	Buildings	23		19
	Less accumulated depreciation and amortization	(19)		(11)
	Property and equipment, net	12		16
Total leased assets		1,023		913
Liabilities
Current
Operating	Accrued expenses and other liabilities	202		178
Finance	Short-term debt and current maturities of long-term debt	53		60
Long-term
Operating	Operating lease liabilities (1)	621		549
Finance	Long-term debt	82		75
Total lease liabilities		$	958	$	862

(1) The increases in 2021 include the impact of the General Finance acquisition discussed in note 4 to the consolidated financial statements.


Lease cost	Classification	Year Ended December 31, 2021		Year Ended December 31, 2020		Year Ended December 31, 2019
Operating lease cost (1)	Cost of equipment rentals, excluding depreciation (1)	$	432	$	366	$	370
	Selling, general and administrative expenses	11		10		10
	Restructuring charge	1		9		16
Finance lease cost
Amortization of leased assets	Depreciation of rental equipment	36		31		28
	Non-rental depreciation and amortization	2		1		2
Interest on lease liabilities	Interest expense, net	4		5		6
Sublease income (2)		(194)		(142)		(157)
Net lease cost		$	292	$	280	$	275

(1) Includes variable lease costs, which are immaterial. Cost of equipment rentals, excluding depreciation for the years ended December 31, 2021, 2020 and 2019 includes $163, $124 and $142, respectively, of short-term lease costs associated with equipment that we rent from vendors and then rent to our customers, as discussed further above. Apart from these costs, short-term lease costs are immaterial.

(2) Primarily reflects re-rent revenue as discussed further above.


Maturity of lease liabilities (as of December 31, 2021)	Operating leases (1)		Finance leases (2)
2022	$	226	$	56
2023	196		44
2024	162		26
2025	124		12
2026	84		2
Thereafter	101		4
Total	893		144
Less amount representing interest	(70)		(9)
Present value of lease liabilities	$	823	$	135

(1) Reflects payments for non-cancelable operating leases with initial or remaining terms of one year or more as of December 31, 2021. The table above does not include any legally binding minimum lease payments for leases signed but not yet commenced, and such leases are not material in the aggregate.

(2) The table above does not include any legally binding minimum lease payments for leases signed but not yet commenced, and such leases are not material in the aggregate.


Lease term and discount rate	December 31, 2021		December 31, 2020
Weighted-average remaining lease term (years)
Operating leases	5.0		5.0
Finance leases	3.2		3.0
Weighted-average discount rate
Operating leases	3.5	%	4.2	%
Finance leases	2.8	%	3.4	%


Other information	Year Ended December 31, 2021		Year Ended December 31, 2020		Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	221	$	207	$	202
Operating cash flows from finance leases	4		5		6
Financing cash flows from finance leases	69		53		47
Leased assets obtained in exchange for new operating lease liabilities (1)	299		202		201
Leased assets obtained in exchange for new finance lease liabilities	$	66	$	64	$	55

(1) The increase in 2021 includes the impact of the General Finance acquisition discussed in note 4 to the consolidated financial statements.

15. Income Taxes

The components of the provision (benefit) for income taxes for each of the three years in the period ended December 31, 2021 are as follows:


	Year ended December 31,
	2021		2020		2019
Current
Federal	$	78	$	290	$	97
Foreign	26		15		(6)
State and local	88		65		45
	192		370		136
Deferred
Federal	260		(107)		185
Foreign	14		6		14
State and local	(6)		(20)		5
	268		(121)		204
Total	$	460	$	249	$	340

A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate of 21 percent to the income before provision (benefit) for income taxes for each of the three years in the period ended December 31, 2021 is as follows:


	Year ended December 31,
	2021		2020		2019
Computed tax at statutory tax rate	$	388	$	239	$	318
State income taxes, net of federal tax benefit	64		31		43
Other permanent items	1		(3)		(17)
Change in federal valuation allowance	—		(22)		(3)

Foreign tax rate differential	7		4		(1)
Total	$	460	$	249	$	340

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


	December 31, 2021		December 31, 2020
Reserves and allowances	$	165	$	129

Debt cancellation and other	16		10
Net operating loss and credit carryforwards	175		242
Operating lease assets	210		183
Total deferred tax assets	566		564
Less: valuation allowance (1)	(9)		(21)
Total net deferred tax assets	557		543
Property and equipment, including rental equipment	(2,349)		(1,962)
Operating lease liabilities	(210)		(183)
Intangibles	(152)		(166)


Total deferred tax liability	(2,711)		(2,311)
Total net deferred tax liability	$	(2,154)	$	(1,768)

(1) Relates to state net operating loss carryforwards and state tax credits that may not be realized.

We file income tax returns in the U.S., Canada and Europe. Without exception, 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 2012.

For financial reporting purposes, income before provision for income taxes for our foreign subsidiaries was $134, $83 and $62 for the years ended December 31, 2021, 2020 and 2019, respectively.

We continue to expect that the remaining balance of our undistributed foreign earnings will be indefinitely reinvested. If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. At December 31, 2021, unremitted earnings of foreign subsidiaries were $737. Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.

We have net operating loss carryforwards (“NOLs”) of $475 for federal income tax purposes that expire from 2032 through 2037, $3 for foreign income tax purposes that expire from 2024 through 2030 and $621 for state income tax purposes that expire from 2022 through 2034.

16. 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.

Employee Benefit Plans

We currently sponsor two defined contribution 401(k) retirement plans, which are subject to the provisions of the Employee Retirement Income Security Act of 1974. We also sponsor a deferred profit sharing plan and a registered retirement savings 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 $36, $33 and $37 in the years ended December 31, 2021, 2020 and 2019, 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.

17. Common Stock

We have 500 million authorized shares of common stock, $0.01 par value. At December 31, 2021 and 2020, there were 0.0 million shares of common stock reserved for issuance pursuant to options granted under our stock option plans.

As of December 31, 2021, there were an aggregate of 0.7 million outstanding time and performance-based RSUs and 1.8 million shares available for grants of stock and options under our 2019 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 December 31, 2020	10	61.93
Granted	—	—
Exercised	(5)	43.56
Canceled	—	—
Outstanding at December 31, 2021	5	80.47


Exercisable at December 31, 2021	5	$	80.47

The following table presents information associated with stock options as of December 31, 2021 and 2020, and for the years ended December 31, 2021, 2020 and 2019. No stock options were granted during any of the years presented below.



	2021		2020		2019
Intrinsic value of options outstanding as of December 31	$	1	$	2
Intrinsic value of options exercisable as of December 31	1		2
Intrinsic value of options exercised	1		3		45

In addition to stock options, the Company issues time-based and performance-based RSUs to certain officers and key executives under various equity incentive 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 based on the achievement of the performance conditions during the applicable performance periods (currently the calendar year). There were 219 thousand shares of common stock issued upon vesting of RSUs during 2021, net of 123 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,
	2021		2020		2019
RSUs granted	348		643		456
Weighted-average grant date price per unit	$	297.02	$	140.99	$	124.37

As of December 31, 2021, the total pretax compensation cost not yet recognized by the Company with regard to unvested RSUs was $48. The weighted-average period over which this compensation cost is expected to be recognized is 2.0 years.

A summary of RSU activity for the year ended December 31, 2021 follows (RSUs in thousands):


	Stock Units	Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2020	517	$	164.62
Granted	348	297.02
Vested	(422)	222.64
Forfeited	(25)	183.00
Nonvested as of December 31, 2021	418	$	215.23

The total fair value of RSUs vested during the fiscal years ended December 31, 2021, 2020 and 2019 was $94, $75, and $80, respectively.

Dividend Policy. Holdings has not paid dividends on its common stock since inception. The payment of any future dividends or the authorization of stock repurchases or other recapitalizations will be determined by our Board of Directors in light of conditions then existing, including earnings, financial condition and capital requirements, financing agreements, business conditions, stock price and other factors. The terms of certain agreements governing our outstanding indebtedness contain certain limitations on our ability to move operating cash flows to Holdings and/or to pay dividends on, or effect repurchases of, our common stock. In addition, under Delaware law, dividends may only be paid out of surplus or current or prior year’s net profits.

Stockholders’ Rights Plan. Our stockholders' rights plan expired in accordance with its terms in 2011. Our Board of Directors elected not to renew or extend the plan.

18. Quarterly Financial Information (Unaudited)


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
For the year ended December 31, 2021 (1) (2):
Total revenues (1)	$	2,057	$	2,287	$	2,596	$	2,776	$	9,716
Gross profit	714		875		1,103		1,161		3,853
Operating income	372		481		679		745		2,277
Net income (2)	203		293		409		481		1,386
Earnings per share—basic	2.81		4.03		5.65		6.65		19.14
Earnings per share—diluted (3)	2.80		4.02		5.63		6.61		19.04

For the year ended December 31, 2020 (1) (2):
Total revenues (1)	$	2,125	$	1,939	$	2,187	$	2,279	$	8,530
Gross profit	727		701		886		869		3,183
Operating income	358		381		551		510		1,800
Net income (2)	173		212		208		297		890
Earnings per share—basic	2.33		2.94		2.88		4.11		12.24
Earnings per share—diluted (3)	2.33		2.93		2.87		4.09		12.20

(1) As discussed in note 1 to our consolidated financial statements, COVID-19 has significantly disrupted supply chains and businesses around the world. We began to experience a decline in revenues in March 2020, when rental volume declined in response to shelter-in-place orders and other market restrictions. The volume declines were more pronounced in 2020 than 2021, and we have seen recent evidence of recovery across our construction and industrial markets, as well as encouraging gains in end-market indicators, as reflected in our 2022 forecast.

(2) There were no unusual or infrequently occurring items recognized in the fourth quarter of 2021 that had a material impact on our financial statements. In the fourth quarter of 2020, we redeemed all of our 4 5/8 percent Senior Notes due 2025, and recognized a redemption loss of $24 in interest expense, net. The loss represented the difference between the net carrying amount and the total purchase price of the redeemed notes.

(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, 2021:
Merger related costs (4)	$	—	$	(0.03)	$	—	$	—	$	(0.03)
Merger related intangible asset amortization (5)	(0.50)		(0.48)		(0.53)		(0.47)		(1.98)
Impact on depreciation related to acquired fleet and property and equipment (6)	(0.02)		(0.01)		(0.01)		(0.13)		(0.16)
Impact of the fair value mark-up of acquired fleet (7)	(0.12)		(0.08)		(0.08)		(0.10)		(0.38)


Restructuring charge (8)	(0.01)		—		—		—		(0.02)
Asset impairment charge (9)	—		(0.04)		(0.02)		(0.08)		(0.14)
Loss on repurchase/redemption of debt securities (10)	—		—		(0.31)		—		(0.31)

For the year ended December 31, 2020:

Merger related intangible asset amortization (5)	$	(0.59)	$	(0.59)	$	(0.55)	$	(0.52)	$	(2.22)
Impact on depreciation related to acquired fleet and property and equipment (6)	(0.03)		(0.02)		(0.06)		0.04		(0.08)
Impact of the fair value mark-up of acquired fleet (7)	(0.12)		(0.10)		(0.12)		(0.16)		(0.51)


Restructuring charge (8)	(0.02)		(0.04)		(0.06)		(0.06)		(0.18)
Asset impairment charge (9)	(0.26)		—		(0.10)		—		(0.37)
Loss on repurchase/redemption of debt securities (10)	—		—		(1.64)		(0.25)		(1.88)

(4)This reflects transaction costs associated with the General Finance acquisition discussed in note 4 to our consolidated financial statements. Merger related costs only include costs associated with major acquisitions that significantly impact our operations (the "major acquisitions," each of which had annual revenues of over $200 prior to acquisition). For additional information, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Other costs/(income)-merger related costs".

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

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

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

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

(9)This reflects write-offs of leasehold improvements and other fixed assets. As discussed in note 6 to our consolidated financial statements, the 2020 charges primarily reflect the discontinuation of certain equipment programs, and were not related to COVID-19.

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

19. 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,
	2021		2020		2019
Numerator:




Net income available to common stockholders	$	1,386	$	890	$	1,174
Denominator:
Denominator for basic earnings per share—weighted-average common shares	72,432		72,658		77,341
Effect of dilutive securities:
Employee stock options	4		12		114


Restricted stock units	381		259		255
Denominator for diluted earnings per share—adjusted weighted-average common shares	72,817		72,929		77,710



Basic earnings per share	$	19.14	$	12.24	$	15.18



Diluted earnings per share	$	19.04	$	12.20	$	15.11

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

UNITED RENTALS, INC.

(In millions)


Description	Balance at Beginning of Period		Charged to Costs and Expenses			Charged to Revenue			Deductions and Other			Balance at End of Period
Year Ended December 31, 2021:
Allowance for doubtful accounts	$	108	$	5	(a)	$	31	(a)	$	32	(b)	$	112
Reserve for obsolescence and shrinkage	8		37			—			34		(c)	11
Self-insurance reserve	127		179			—			155		(d)	151
Year Ended December 31, 2020:
Allowance for doubtful accounts	$	103	$	9	(a)	$	25	(a)	$	29	(b)	$	108
Reserve for obsolescence and shrinkage	10		34			—			36		(c)	8
Self-insurance reserve	121		169			—			163		(d)	127
Year Ended December 31, 2019:
Allowance for doubtful accounts	$	93	$	8	(a)	$	34	(a)	$	32	(b)	$	103
Reserve for obsolescence and shrinkage	5		40			—			35		(c)	10
Self-insurance reserve	106		180			—			165		(d)	121

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) Amounts charged to cost and expenses reflect bad debt expenses recognized within selling, general and administrative expenses. The amounts charged to revenue primarily reflect doubtful accounts associated with lease revenues that were recognized as a reduction to equipment rentals revenue.

(b) Primarily represents write-offs of accounts, net of recoveries and other activity.

(d) Represents payments.

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