Good morning, and welcome to United Rentals' Fourth Quarter and Full Year 2015 Investor Conference Call. Please be advised that this call is being recorded. Before we begin, note that the company’s press release, comments made on today’s call and responses to your questions contain forward looking statements. The company’s business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control, and consequently, actual results may differ materially from those projected. A summary of these uncertainties is included in the Safe Harbor statement contained in the company’s earnings release. For a more complete description of these and other possible risks, please refer to the company’s Annual Report on Form 10-K for the year ended December 31, 2015, as well as to subsequent filings with the SEC. You can access these filings on the company's website at www.ur.com. Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. You should also note that the company's earnings release, investor presentation and today’s call include references to free cash flow, adjusted EPS, EBITDA and adjusted EBITDA, each of which is a non-GAAP term. Speaking today for United Rentals is Michael Kneeland, Chief Executive Officer; William Plummer, Chief Financial Officer; and Matt Flannery, Chief Operating Officer. I will now turn the call over to Mr. Kneeland. Mr. Kneeland, you may begin.

Well, thanks operator. And welcome and good afternoon everybody. I want to thank you for joining us on today's call. These first quarter calls are always about the future in the past and today is no different. But I want to start with a recap of 2015 for two reasons. First, it was a solid year for us with some excellent results, and as I will discuss, it says a lot about how we're managing the business. And second, we saw some trends emerge in 2015 that are likely to impact the current year. I will start with the operating environment. It offers some challenges although the underlying foundation of the recovery remain positive. We capitalized on some broad-based opportunities such as the continued rebound in commercial construction and we saw lively demand from some sectors such as hospitality, renewables and public works. At the same time we dealt with a significant drag for upstream oil and gas and its knock-on effect. A weak Canadian dollar and fleet growth in the industry, which according to Rouse is outpacing demand. Nonetheless, for the full year of 2015 we delivered a record amount of adjusted EBITDA of $2.8 billion and a margin of 48.7%, which is the highest in our company's history. And our free cash flow came in at $919 million after CapEx which was also a record. These numbers tell a good story to show how we can be flexible and adjust our tactics while delivering value for investors. So as we look to 2016, the headwinds are still with us. There are also some evident macro constraints such as pressure on industrial activity, the Canadian economy as well as some unknowns. But underneath these dynamics, the non-residential construction markets are continuing to recover. And that's a key point. The…

Thanks, Mike and good afternoon everyone from me as well. I’ll try to add some more color to the key metrics that you’ve all seen, starting with the revenue picture. Rental revenue in particular – rental revenue was down 3.2% in the quarter this year versus last year, that's about $42 million of revenue decline. The pieces of that really start with re-rent and ancillary. Those two combined were little better than flat, so call it up half a million dollars, the net of those two components. The real driver in the change in the quarter was OER growth. Within that, rental rate down 1.8%, that was about a $21 million decline versus last year. Our volume increased 0.2%, accounted for about $3 million of improved revenue year-over-year, that's a plus year-over-year. Inflation – CapEx inflation cost us about $19 million, little more than $19 million versus last year and then everything else, mix and all other components aggregated to a decline of about $6 million year-over-year. So those are the key pieces of that $42 million rental revenue drop in the quarter and explains the 3.2% decline from last year. One other operating measure within that year-over-year rental revenue performance was time utilization, 68.2% for the quarter was down 2.4 percentage points for the quarter. I’ll point out that, that does include the impact of Canadian currency translation of the fleet on rent in the volume component. Speaking of Canadian currency, the impact in the quarter for the currency was very significant. Canadian dollar cost us $22 million versus where we would've been had it stayed flat. So a pretty significant impact in revenue growth for the quarter. And just one real quick note on the full year rental revenue, $4.949 billion, up 2.7% last year. I'll note that…

[Operator Instructions] Our first question comes from the line of Nicole DeBlase from Morgan Stanley.

So I am going to ask question about free cash flow allocation. So I think you guys said that you have $500 million available from the buyback -- for the buyback into ’16, but generating $900 million to $1 billion of free cash flow. I am just curious about the potential for debt paydown, what you guys are looking at for ‘16?

Sure, Nicole. I think it’s fair to say that we’re thinking any free cash flow in excess of the share repurchase program that we’ve talked about will go to debt paydown. So we’ve still got the view that the share repurchase program we want to execute over the 18 month period, that averages out to something like $165 million a quarter or so. And that would eat up about $700 million of free cash flow if we did it on that pace. So the remainder of the free cash flow we would use to pay down debt, that is our baseline view of the best use of the cash flow given our outlook for the market and the opportunities that are in front of us.

Thank you. Our next question comes from the line of David Raso from Evercore ISI Group.

My question relates to the free cash flow beyond 2016, just we all can have our own views of the length of the cycle. But just thinking about your maintenance CapEx levels, it appears the 2016 CapEx is getting down toward maintenance levels already and then we have cash taxes going up in ‘17 as well. So can you help us a little bit with that lever that we usually have to pull or things do go awry economically in ‘17 or ’18, you usually have a pretty good lever on pulling the CapEx down. So given we’re already down in maintenance levels, can you just walk us through where we could see CapEx get cut beyond ’16 in case the need arises? I am just trying to understand the dynamics there.

So maybe I will start and Mike and Matt, you guys can chime in. The maintenance level for maintaining fleet size and age is probably in that 1.1 billion kind of area these days. And so that certainly is one view of maintenance and one view of where we could go to if things are softening up. But I would argue that there is no need to replace the units that we have, if our view became that we truly were headed for a downturn. And so I would argue that we could be even more aggressive than that and be a sub a billion in total CapEx if a downturn started to develop. So how far below a billion, I think we’d have to -- we have to discuss that in more depth before we gave an answer to that. But could we carve another couple hundred, 300 million out of the $1.2 billion that we’re spending this year? Yes, I think so.

Hey David, I would just say that $200 million of that growth capital is really going to or the growth capital we have is going to our specialty business. So if things were to turn south as you described we would obviously pair that back and as Bill mentioned, it's not unusual for us to ratchet back given the maintenance CapEx going forward if we had to.

And I know it's relatively early in a quarter. But can you give us a bit of an update – if you said that earlier, I apologize, I missed it. But how the year started when it comes to sequential trends, I mean, usually January is not a strong great month, but just given the way the year ended, how are rates trending sequentially and year-over-year relative to the full year guidance?

So we won't characterize it with a number but I'd say that that rates are trending as we expected. By the way I’d say the same thing for OEC on rent in the early part of the year here, even including the impact of the currency. OEC on rent is trending at what we expected and that's consistent with the rates ending up in the range of guidance that we’ve given. So that’s as far as we will go on that one right here now.

Thank you. Our next question comes from the line of Ted Grace from Susquehanna.

Bill, maybe as a follow-on to that last comment today. I was wondering if we could just decompose kind of rate dynamics, in the fourth quarter and broadly on ‘15 and then relate them to expectations on ’16. Just wondering if we can talk about rate in Canada versus the US, talk about rates in kind of more heavily exposed energy markets versus non -- and then construction versus industrial, just so we can get a sense for what that interplay was last year and how we should think about those dynamics in the current year?

During -- guys help me out. I will start here. And so regards how rates finished out the ’15, I think it's fair to characterize it as they finished weaker than we expected. We’ve given the sequential months there at minus 10 basis points for October, minus 50 November and minus 50 in December as well. And remember, we’ve told you that we expected seasonal to maybe slightly -- seasonal declines in that fourth quarter, right? I think it came a little weaker than what we thought. And Canada was certainly a part of that. As a result, the carryover that we brought into ‘16 starts at a lower point and we’re watching very carefully how rates develop from here. And to our point earlier, that's going to be the watchword for the entire year. Canada, I don’t know if you guys want to handle the Canada notion but Canada did have a fairly sharp decline in the fourth quarter – sharper than we expected when we talked to you at the third quarter call, and we’re watching that very carefully and thinking very very aggressively about what do we do in response, right? What are the drivers? Is it something that we can address and if not, what can we do in response? So that’s how we’re thinking about Canada and honestly thinking about the whole business as we come early end of the year. Matt, Michael, you guys want to add anything?

No, Ted, I think Bill captured it well. I would just say -- if the team up in Western Canada is really fighting it hard, specifically in Alberta and they’re continuing to take the actions necessary to adjust their fleet appropriately and they cannot run the macro environment there and we’re going to adjust appropriately and now we’ll get some growth capital to the lower 48.

Maybe ask a little differently, rates being down 180 basis points in the fourth quarter. Can you just talk a dispersion like – on a relative basis that – what did Canada do versus, call it, Texas in the Gulf Coast, the stronger reasons like West and the South. I think what people are really trying to understand is if you look at down 10, down 50, down 50, as the monthly progression, how broad-based was that the sequential degradations?

Ted, I think you could say it was spotty and you could imagine the places where they had more challenges. So if you think of the relative rate we've enjoyed in the past, Western Canada and anywhere where we’re doing shale drilling was the highest relative rate. So in markets where that was dramatically impacted mostly in Western Canada than any other single end market, you saw large rate decline. So we saw rate declines in Western Canada in Q4 of over 6%. So that would be the highest that you would see. But as you can imagine losing your highest rate business in Texas or in North Dakota or in Western Pennsylvania, Ohio, right, up in the Marcellus Shale, those were the ones that has a bigger decline and then you had positives in markets on the coast where non-res was really carrying the ball for us and they were able to do well on some of the projects, Mike referenced in his opening remarks.

Thank you. Our next question comes from the line of Jerry Revich from Goldman Sachs.

Hey good afternoon. This is actually Brandon Jaffe on behalf of Jerry. Can you please provide some commentary on what you're seeing out of your industrial customers? Are you seeing any difference in activity from refiners, manufacturers or chemicals companies?

So Brandon, this is Matt. I think that we’re still seeing growth and solid steady business from our chemical and also in our downstream oil and gas customers. But we’re also seeing pressure from those that have a more significant holdings in any kind of exploratory or upstream oil. So I think that's predictable but when you look at -- what we count in our industry, you have to recall in our industrial and other we also put in our infrastructure. And we see some growth opportunities there. We see some growth opportunities in manufacturing and then above all of that, I know you specifically asked about industrial but we continue to see growth opportunities in non-res. So you'll see Global Insight say the industrial has got 5% growth opportunity and you'll see reports that we’re in an industrial recession. I would say we’re experiencing somewhere in the middle of that pack and that’s what we’re seeing in our business and what we’re hearing from our customers.

Yes, I would only add that if you take a look at our investor deck, it has industrial outlook for the US and outlook for Canada, and it’s really a story of two different worlds. But they’re going to grow. And it’s not so much capital projects, it’s also maintenance and so that’s why they go through spending and look how the industrial is forecasted for 2016.

Thank you. Our next question comes from the line of Joe O'Dea from Vertical Research.

I'm just trying to understand a little bit more in terms of how things unfolded over the quarter. I think as of a quarter ago, you were anticipating a quarter of a point to a third of a point of carryover headwind and now that’s a full point, in terms of the experience you’ve had with customers, I mean you talked about no surprise where the weak areas are. But was it really just a function of customers coming back and pushing for those price concessions, or was it more a matter of increased competition that whereas we had expected a lot of fleet would've been moved but still excess supply, and you still see that competition pushing rates down?

Joe, this is Matt. I would say that the concession part of the equation happened earlier in the year mostly in upstream and Western Canada, there are not really any concessions out of that side. But I think the growth opportunity from an OEC on rent perspective tempered any kind of rate improvement that we would get and we certainly had to partner up and defend some strong relationships here and there on national account base. But I wouldn't point to it as a concession driven situation. The fact of the one point carryover is really a function of what Bill stated what Q4 sequentials look like. When you have 0.5 negative in both November and December that made the full year carryover of a full point negative. So when you look at our range of 1 to 2 we’d have to be flat for the full year of ‘16 to achieve that one and that’s where we’re driving towards, and if there is more there, we will take whatever opportunities we can get. And Mike said it earlier that rate discipline is a key lever for the industry as well as for us.

I would only add two things. One, which is -- in the fourth quarter is where we saw a significant drop off in Canada that impacted our carryover as well. That’s number one. Number two, to answer your question, at last year we talked about the supply and demand imbalance and with oil -- and then as the fleet additions coming in, it’s not unusual to see some pricing pressure. And as we went through the fourth and first quarter, I’ve always told a lot of investors that, this will be the challenge, this is the challenge that we have, simply because we don’t have oil like we've had over the last five years. So it’s more seasonal trend, more non-res trend and what gives me a lot of comfort is I am seeing the trend where the absorption is coming through in the fourth quarter, with Rouse and some of the data points they had. And the other one is the declines we’re seeing in OEMs on their book of business tells me that we think this is a prudent decision-making.

Thank you. Our next question comes from the line of Seth Weber from RBC.

I just want to follow up on a couple earlier questions. I think the first one on the potential levers to pull. I think you guys – you’ve got $40 million or $50 million through your efficiency program so far. I mean are there actual measures that you can take from a cost-cutting perspective other than cutting fleet, I mean branch closures -- any other, more on the expense initiative side that you guys have considered. I didn’t – haven’t really heard any talk about that so far.

Sure, Seth. We certainly are looking at opportunities to help address any shortfall should it develop as we go through the year. We have taken some actions. You saw in the quarter that we took a restructuring charge in the quarter as we restructured some of our organizations in the last couple of months. We are looking for other opportunities that might make sense should the environment deteriorate from where we are. Those actions come across a wide variety of our operations. And so we’ve got our usual lean initiatives that we’ve been talking about for a couple of years now, and those initiatives really resulted in a run rate of savings at the end of the year of about $53 million. We still are targeting getting that run rate up to $200 million by the end of this year. So there are lots of other actions that we’re going to continue to look at. Right here and now we don't have a notion of branch closures. Right here now we don’t have a notion of large headcount reductions but those are questions that we’re going to continue to evaluate as we go forward. And we think that’s the prudent way to get at it. In the meantime there are some specific things that we are already doing that we think we can double down on to help drive that run rate of cost saves higher and help realize some of those cost saves in the current year. So those are the things that we’re focused on right here now. We continue to evaluate to see whatever actions we might need to add to the list that we already have.

The other thing I would add to that is – this is a very seasoned team and we have done this before, if need be, we’ve got the experience -- not only through economic downturns but also in achieving synergies when your – during your mergers. So I have high respect for the team and what they are capable of doing. And as Bill mentioned, we’re not thinking about it now but we are more than capable of making adjustments as they come.

And then just circling back on the oil discussion, can you update us on what you think your direct oil exposure is today and whether you're still – whether you think you need to continue to move fleet around, I think you had a target of $200 million for 2015. Is there an estimate for 2016 or do you feel like that we’re kind of near the bottom on the oil and gas, the weakness, you’re starting to anniversary that soon?

Yes, Seth, this is Matt. So we had talked about at the end of the third quarter as far as fleet movement that we were down to about 30 million, 35 million of seasonal items and we pointed the heat and light towers and I would say other than the heat, be in a little bit light we still may have another 10 million, 12 million of excess heat right now in the oil and gas that we haven’t repositioned because the demand hasn’t been there. We’re pretty much through the oil and gas movement. The exposure now in the upstream is down to 4%, down from 6% a year and a half ago when we started tracking this. So our exposure is certainly less and if we end up getting a little bit more of a dip than where the baseline is today, I don't -- certainly don't think it's anything that we’d have to call out in large fleet movement, it would be like any other end market that ebbs and flows that we had to move fleet out.

The other thing I would add to that is the fact that, look, we expect continued weakness in oil and gas, particularly in the upstream. And more importantly Canada -- my opening comments I think the issues there will likely persist with a very meek GDP growth that we’re going to have for 2016.

Thank you. Our next question comes from the line of Steven Fisher from UBS.

It sounds like you guys are still pretty committed to buying back stock these levels, which I understand simply because stock is down – do you still believe you’d ever get opportunity ahead of you but if how are you weighing the possibility to reduce debt as the cycle moves. I guess, as a follow on, what would you have to see in order to start being more being aggressive and in paying down debt.

So we are as I said my prepared comments we are still on the pace that we talked about for the share repurchase and we think that that's appropriate given our baseline view that says that the cycle still has room to run. We believe there will be growth in construction in 2016. We believe that there is likely growth in construction in 2017 and on that basis, we think that the cash flow is going to remain robust and we can still execute that share repurchase to pay down some debt and end up in a better place. What would have to be true in order to change that point of you is I think we would have to come with different conclusion about how long the cycle has to run. I realized that there is a reasonable position that says, hey, Bill ‘16 and ‘17 are not looking good right now, so you should change your view right now. We haven't gotten to that point. The good news is that we’ve got the capability, we’re executing the program on a steady pace over time. Now we’ve got capability to pull it back if we do change our view based on the experience that we have in the marketplace. If the first several months of the year come in weaker than we expect right now, then we’re going to have to rethink that approach to the share repurchase and debt-paydown. And that's how we’re approaching it right. This is part of the notion of flexibility, we set up a point of view. We established a plan based on that point of view but then we keep our head on a swivel as they say and keep asking ourselves: is it still right? Is it still right? And at the point where we can convince ourselves that it's not, then it’s time to something different and that might include paying down more debt and buying back less share.

Yes, I would just add that, capital allocation for us is very important, it’s also ore discussion that we have quite frequently. And those write, how we see the world, I guess the point I would make is we’re approaching the world and this year cautiously, with our capital, with our CapEx and we will kind of see how things unfold and we will make adjustments and changes if need be. But right here and now we spend -- we frequently spend -- of these either monthly or at least once a quarter with the various of industry experts. Scott with the Global Insight, McGraw Hill and other industry experts to try to gauge the marketplace and try to understand what they see. And that forms our decision -- as part of our decision process.

So it sounds like, just to paraphrase that, you believe that debt reduction is really the downturn tool and capital discipline is really your up-cycle tool for not for letting the debt get too far, the levers can go out of control, is that the way to sort of paraphrase it?

Yes, I think that’s fair. Obviously the capital control and the cash flow it drives links to the amount of cash flow that's available for debt reduction or share repurchase. And we have to manage and balance all of that as we go forward. And I think it’s a high-class problem to have to be able to say, oh, we’re buying back shares and we’re paying down some debt. But maybe the mix isn’t right. It's great to be in a position where you can do both and that's the approach that we’ve been taking, and we’ve been talking to you about for a number of years. So that’s a great position to be in. Now we’ve just got to come to a view about what’s the right mix. We have a view that says 700 – 250, to use the midpoint of the cash flow -- is the view that we want to manage to right here now. So let's go forward and see if anything comes along to convince that, that's not the right view.

Thank you. Our next question comes from the line of Robert Wertheimer from Barclays.

If I can do a two for – is there any flexibility to move fleet from Canada to the US, or you just under spend if that market sort of semi-structurally declines? And then second, just to ask a question, maybe there are bunch of us a little more bluntly. Have you been able to benchmark more on a branch by branch basis against major competitors to see if you have any competitive issues versus just mix issues that you’ve been talking about for a long time on rate and utilization?

Thanks, Robert. This is Matt. So we are absolutely going to move fleet out of Canada. The first lever that we pull as we discussed before is to sell any excess fleet, that’s outside of its real useful life and we’re being very aggressive doing that as we speak right now here in the first quarter. The next lever would be to go through our normal retail channels and target, and maybe it’d be some special values and to move some of that fleet. And then the third value -- lever would be to move it and there’s some more complexity about moving it out of Canada than there would be if it was internal but not enough that we can't get over through most of our assets. I think the first two levers are going to be enough to adjust the fleet to where it needs to be but if we have to go further we are capable of doing it. And we absolutely are doing it today.

Your question around what kind of metrics and add down to the granular level of a branch on where we stand amongst our peers is something that we utilize routes for, it’s not by branch, it’s by market. It’s a rearview mirror of 90 days but it is a useful tool that we use to help judge us in our process. We didn't have that years ago, it's relatively new, it represents about 40% of the market or somewhere around there, and we pushed that down, all the way down to the district level, which is kind of how they measure our markets.

And the outcome – I mean you feel confident, you talked about it, I understand that, at a high level. You feel confident that you are in a district level, let's say, or regional level that it's more mix than competitive slippage? Well, I know you're saying it better than [mass] overall. I get that. I guess I'm just thinking of larger competitors.

It only measures you against your peer group. It doesn’t give you specific people. And so it’s a very general tool of measurement and it’s the best measurement we have because we all report electronically – the electronic feeds nightly to the Rouse report. So look, on balance, we are doing very well. Is there opportunities? Absolutely. And those are things that we pick up on, that helps the way in which we manage to become a better company. So that's why we subscribe to it and we use it – we’re actually utilizing it as a tool.

Thank you. Our next question comes from the line of Scott Schneeberger from Oppenheimer.

Hey, guys, good afternoon. I'm going to go little bit off here and a question on rent versus buy. On your three biggest general rent categories aerial, earthmoving and reach forks, where would you say we are in the rent versus buy percentage? And then also, if you would address it in your specialty category as well?

That’s a loaded question but I would tell you that from an aerial perspective I would – Matt, correct me, it’s probably in the high 90s goes through the rental channel. There is not a real distribution network to speak of. With regards to earthmoving, I think it's probably and there’s reports out there, so I may get a little bit wrong but it’s somewhere either 50:50 or 60:40 or one way or the other. But earthmoving is predominantly still owned, as in comparison to a lot of the rental assets. With regards to our specialty, think of specialty as not just the product, it’s really the solution. We’re trying to solve problems whether it be pump, how much fluid, what kind of distance, what type of fluid, what’s the velocity do you need and how often does it need to be recurring, singles for power, there's various sizes, and then also with HVAC whether it’s industrial cooling or whether it's something that you're doing for just air-conditioning. Each one is more of a solution than it is just the asset.

Yes, I think Mike hit it very well. Trench, would add with trench -- the only one he didn’t touch on would be we really got secular penetration against non-compliance which is a great end market sell-in to grow that pie. So I agree wholeheartedly.

Scott, I interpret -- I heard your question as being what the guys answered. But I also heard your question as being – has the rent versus buy decision dynamic changed in any fundamental way? And my view would be no, it hasn’t. There is still I think a pretty powerful argument for rental versus purchase across all of those cat classes that you mentioned. And we believe that that's going to continue to be the case going forward.

Yes, and on that point, the OEMs we’re seeing their distribution network add more to their rental fleet. So rentals become more of a viable channel.

Thank you. And due to time constraints, our next question is our final question from the line of Ross Gilardi from Bank of America Merrill Lynch.

Thanks, guys, good afternoon. Thanks for squeezing me in. Michael, I just want to ask you, I mean your number one competitor seems pretty insistent out there publicly that things are great in the rental space and that nothing is even remotely changed outside of the oil and gas space. They are clearly taking a much different stance on capital spending than United Rentals and I'm just wondering, is that one of the reasons why the pricing environment still hasn't really firmed up, or is the pressure on rate coming from elsewhere? And how willing are you to cede market share to them if they continue to keep their foot on the accelerator?

Well, look, everyone's got different strategies. So we have ours about value creation and that's what we’re going to stick to. I have mentioned about the fleet imbalance, that’s the data that comes out of Rouse in comparison to the growth of the industry. We can peek in different markets as well and we have more of an industrial non-construction related than others. We also have a more geographic footprint, like I mentioned in Canada which also has an impact. And so I think that each one has their own strategy but the industry has its own challenges and I can only speak to what we’re going to do and how we’re going to approach it.

But in terms of the pricing pressure that is out there, do you think it's -- is it coming from Sunbelt or is it coming from the smaller players who are the ones that are really saddled with more of the over capacity right now?

Ross, this is Matt. I won’t speak individually to any one competitor but because we don't have visibility to what their baseline is and what their price levels are. But all I would say is when you look at the Rouse data which is industry average, so let’s say just looking at 6% or 7% of the market, looking at a third to 40% of the market, it’s very clear that there was too much fleet early on, time utilization was impacted and you can make the inference that that impacts rate growth in each individual market. As far as the smaller regional players, if you are in some of the markets where we’re seeing great growth on the coast, I am sure we have small regional players that are seeing great growth as well. So it's really spotty as far as where you are on the map. And I think that's why you will hear different versions of what people are enjoying. End of Q&A

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Mr. Michael Kneeland for any further remarks.

Great. Well thank you all for coming and joining us. We actually shifted to an hour later to accommodate everybody and I hope we’ve given you visibility in 2016 and the flexibility we have to address any changes in our operating environment. As always, please be sure you download and update our investor presentations. It’s rich with a lot of material. We also have a new corporate responsibility report on our website and always feel free to reach out to Fred here in Stanford any time to set up a call, or a potential visit. So operator, you can end the call. Thank you.