Good morning, and welcome to the United Rentals’ FIRST Quarter 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 31st, 2014, 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.

Thanks operator and good morning everyone and welcome and thank you for joining us on today’s call. Tony will talk about how we’re managing the business in light of our expectations for 2015 with almost four months of the year behind us we’ve able to draw off some conclusions of how this year is shaping up, I want to talk more about that in a minute and then Bill will cover the results and followed by your questions. First speaking with the numbers you saw last night, we had a solid start to the year. Our revenue, EBITDA and the internal invested capital are first quarter records. And that's the credit to our employees. Our rental revenue increased 12% year-over-year based in part on an 8% increase in volume. We generated $602 million of adjusted EBITDA at a 46% margin. Our return on invested capital improved to 9% and our free cash flow for the quarter was $450 million more than 60% higher than a year ago. We also reported record adjusted EPS of $1.34 for the quarter. Now we achieved these results despite some notable headwinds. The most significant constraint was the decline in upstream oil and gas activity. The rapid shutdown of almost 50% of drilled rigs had both the direct and knock-on effect and this was felt more strongly in our pump operations. The slowdown also happened earlier than expected and we now think slightly to continue to at least the next three to six months. We still expect to mitigate the decline within our guidance for revenue and adjusted EBITDA and will have more opportunities to do that now during the peak seasonality. Given the timing of the impact, we felt that it was realistic to narrow the ranges of revenue and EBITDA. Our updated revenue…

Thanks Mike and good morning to everyone. We have got a lot to cover here so I am going to try and streamline my comments about the actual, so we can save a little time to touch on the refinancing that we did, touch on our oil and gas experience for the first quarter and also the outlook. Real briefly on the financials, we had a good revenue result in the quarter. Rental revenue was up by almost 12%, 11.9% as Mike called out let's say $120 million improvement and the drivers were – the ancillary and re-rent revenue performance for the quarter was good. We had about $14 million year-over-year improvement from those two combined. The bulk of it being ancillary pickup delivery and our RPP program, re-rent was just a little better than flat year-over-year so that was about $14 million of the 120. Within owned equipment revenue, OER, rental rate growth you saw was 2.9%, we translate that into about a $26 million improvement over the last year. On the volume front we had 8.1% volume improvement and that translates into about $72 million of volume impact which I will note includes the impact of having pump this year and not in the first quarter of last year. Also sprinkle throughout the volume and some of the other lines is the FX impact that we experienced in the quarter. I will summarize that at the end. Inflation, replacement CapEx inflation we called it about 2.1% for the quarter and that's the headwind of just under $19 million year-over-year, and then mix all other including some portion of FX accounted for $27 million year-over-year that includes the impact again of the pump acquisition as we talked before pump not only contributed through the acquisition but has a more…

[Operator Instructions] Our first question comes from Seth Weber from RBC Capital, your question please.

Hi, good morning everybody.

Good morning Seth.

I’m wondering can you talk a little bit more about the redeployment, Bill I think you mentioned, you’ve seen about $200 million of fleet that’s been affected so far in the oil and gas regions. I mean, can you size for us how much of fleet you’ve redeployed year-to-date so far, where is it going, is it going into the region, is it going out of state to just to non-residential construction markets. And I guess, can you talk, how do you think the non-res markets are going to shape up competitively, we’ve heard anecdotally about the independents kind of adding more fleet recently, I think Michael you mentioned competitive pricing so can you help us kind of frame all that stuff, thanks?

Sure Seth, I will start with sizing and Mike, Matt you guys if you want to chime in on words going. The way we look at it we got about $80 million of fleet that have come out of oil and gas branches going into non-oil and gas branches and primarily that $80 million has come out of the branches that more than 20% share of branches that I mentioned earlier. So the issue has been concentrated in those high share oil and gas branches and we responded there with the de-fleeting of about $80 million so far. The challenge of course is putting that fleet on rent usefully elsewhere we think we stepped up to the challenge. It is more of a challenge in the first part of the year than it will be in the second and third quarters in particular just given the relative busyness of those quarters compared to first quarter. So, we are encouraged by our ability to mitigate by moving fleet around as to where it’s going and so that the environment that is facing you guys want to add anything.

Sure. Yes Seth, so we are seeing and you can look at the construction growth maps that are in the deck on slide 14 specifically of where the demand is and we are shipping the assets to where the demand is. The good news as Bill said that demand will increase as we get into our -- the seasonal uptake will be in our favor. And as we look at our non-oil and gas branches the encouraging news is that they are acting very similar to how we expect them to act to how they have acted in the past and as we sit here today we are seeing both time and sequential rate in those non-oil and gas branches yet the ramp up that we need to hit our goal so that's where it’s going to go, the end markets and the demand tell us that the opportunities is there and most importantly we have the team and the customers and the footprint to deploy it there.

Yes, I will only add that I think you asked the question where is it going and its actually most of it is staying within the region where it’s coming off rent. We are doing transfers we are also doing sales and redeployment of capital that's an ongoing effort for us and we will continue to do that but I also want to point out one thing if you recall over the last several years we have been very disciplined in the way in which we have given our capital and over the years many of our non-oil and gas regions have been looking for fleet. So this is their opportunity, they are taking it and we are supplying them.

Okay. And if I can just on – as a follow-up to that I mean can you just talk about how deep into the year and where do you expect to make the CapEx your billion seven CapEx decision where does kind of – where do we kind of get to the fork on the road on the billion seven number is it if you don't see trends and pick up is it May or June or how deep into the construction session will you go with that versus just continue to move more fleet around?

Yes, I will start Seth, and the guys will chime in please. I think maybe it would be helpful to come at it from the other direction. How late can we go before we have to make a decision about reducing CapEx if we decide there and the answer is [indiscernible] I mean as we top it for we don't have a lot of – we don't have the cancellation penalties or lot of constraint on our ability to pullback once we placed orders up until the point that shipped we can cancel it for the most part. And so that gives us a tremendous runway to make that call. Certainly we want to see how the second quarter ramps up and get a real solid feel for that before we start making any decisions.

Yes, the only thing I will add to that is we are not – we don't need to make that decision and we are not trending towards that decision because as you look at the data, when you take pumps out of the equation even absorbing oil and gas we are ten bips down in the first quarter and that’s improving and when you look at the non-oil and gas branches in Q1 they were actually 40 bips up on a year-over-year basis so if we deliver 3% rate 79% time that's the good reason to spend that 1.7, we do have the flexibility in case anything changes as Bill stated but we feel good about being able to deploy that as well as 18 constructs that we are doing in the full year many of which are opened already. So actually it’s 21, its specialty and 3 general that we have already opened up. So those are all the reasons why we feel like deploying the capital is something that we will be able to do.

Yes, it was 69% time not 79%.

Thank you very much guys.

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

Hey Ted.

Hey gentlemen. How are you?

Good Ted. Doing well.

I was wondering if you could walk through the sequential progression of time utilization in 1Q and then pretty much kind of like what’s happened in April, what gives you confidence that trajectory can reverse out that a lot of the challenges they are reversing out. I know you mentioned that the oil and gas branches that rate of decline has slowed dramatically but could you maybe just help quantify that with some of the time utilization data points that you can talk about?

Sure Ted, its Matt. So the time utilization in January was 63.7% and February was 63.9% and in March it was 64.9% and when we talk about April we see that gap that March was our biggest gap on the year-over-year perspective we see that gap narrowing and as we sit here today we are very close to and this is all in, this is not just non-oil and gas we are very close to being on top of year-over-year time utilization. More importantly as we look at the OEC on rent bill, we have had a very strong two weeks and this is when we need that bill. April, May and June or Q2 is where the bill has to come and we are expecting to cross over the year-over-year time utilization somewhere in mid May that's our target that's what’s got to happen and then have some sequential improvements from there on a year-over-year basis as well as seasonal increase. So that I don't if I answered your question that's the data that we are sharing today.

Yes that's helpful. I think that helps. People understand kind of what that curve looks like. And then I think did you mention that in the first quarter non-oil and gas branches time utilization is up 40 basis points?

Yes.

Okay, versus the recorded of negative 40?

That's right. Correct.

Okay and then okay that's really helpful. The second thing I wanted to ask is just as a follow up on Seth’s question on oil and gas exposure. Quarter ago you walked through the frame work its very helpful you updated data the reasonable worst case scenario is 88% to that $36 million did I hear that correctly is that you still feel that the reasonable worst case scenario is that $36 million or I just want to make sure we understand what the updated kind of messages on the frame work?

Yes, we do still think that's the reasonable way to think about maximum downside Ted as I said the impact came sooner in the year than what we modeled certainly and then what we expected quite honestly. So but yes, I would still say that $36 million is a reasonable downside scenario. Remember when I said the 88% the $32 million I think I said of impact is our view right now that's excluding some of the mitigation that we have been and will be doing over the course of the year. That $80 million of fleet that I said came out of oil and gas and went into other non-oil and gas branches. We haven't given any benefit for mitigation from that fleet being moved the way it has. So that's why we think that the $36 million is still a reasonable downside for EBITDA impact from oil and gas this year.

Okay and so the last thing I would ask, you squared up that against the updated EBITDA guidance 2.95 to 3.0 you kind of hit 25 at the midpoint. How much of that is the updated oil and gas expectations just to understand how that’s baked into the updated guidance?

We work that explicit when we set the range and therefore set the midpoint on the new guidance Ted, what I would say is that what we feel is that if oil and gas continues where it is now or even deteriorates a little bit more it would have been a part of the reduction in the midpoint of the range but not the entire reduction, right would still certainly have the impact to currency that’s continuing throughout the course of the year. We did have the weather impact and we are going to claw away back from that in the second quarter here that continue to impact the full year, so I don’t know how to categorize it numerically but I say oil and gas was part of it but everything else we experience in the first quarter was part of it.

The only thing I would add Ted is and there is a $25 million number on rate so just absorbing that half a point of rate change is part of that.

Okay. Well solid quarter guys and best of luck this quarter.

Thank you.

Thank you. Your next question comes from the line of Nicole DeBlase from Morgan Stanley.

Hi, yes. Thanks guys. Good morning.

Hi Nicole.

My first question is just clarifying Ted’s points so the 32 million and I’m sorry if we’re going on about this but the 32 million impact that you guys now expect from oil and gas, is that fully baked into your guidance, like is it in the low end, is it in the midpoint, is it in the high end of new EBITDA range?

It is baked into our guidance. We are not characterizing whether it puts us at the low, medium or higher. It’s in our thinking when we set the guidance to start.

Okay, got it. Thanks for clarifying that. And then my second question is it seems to me like the new 3% rate guidance is assuming that we kind of get normal seasonality from here which make sense and you guys are already trying to see a pickup in those oil and gas states, but I guess my question is what you see from a rate perspective quarter-to-date during early April, does that gel with a 3% rate guidance that you have and what’s the downside risk at that point that we could have a down revision, what would we need to see the deterioration in oil and gas prices in market for that outcome to occur?

Sure Nicole, I will take that it’s Matt. So as far as the rate guidance what we are seeing in April is that we’ve gotten back to flat and now we can get our sequential clients that we need that as you pointed out. We usually get into season and you are looking at about six tenths a month May through November and then a small drop in December and something that looks similar to that and the good news is as we look at our history we have done that before. So between the strengthening end market and the fact that we have the tools and the capability of doing it is why we felt comfortable setting that target at 3.

Okay got it. Thank you. I will pass it on.

Thank you.

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

Hey Scott.

Good morning guys. I am just curious with regard to the guidance and the softness in the quarter with regard to rate could you address 4X, I think you talked about the rental revenue impact in the quarter could you speak to EBITDA and then just other drivers of the rate guidance is it predominately the oil impact are there other things on asset class geography?

So on currency I called out $16 million of revenue impact in rental revenue and about $7 million in EBITDA as we look for the full year of currency stays -- you can use 60 and 30 as the full year impacts for the remainder of 2015 and that is considered in our guidance as well. So that's the currency story. Then I am sorry what was the other part of your question Scott.

Thanks its helpful enough Bill, I guess just as a follow-on when moving around assets from the oil locations, could you speak to the asset classes that are being moved and what's just coming off and not going back and what are the asset classes that you are moving and what's having more success or not and how that ties the rate as well. Thanks.

Sure Scott. It’s Matt. So as far as the assets that are moving, what you would expect rich forkless, some boom, some light towers, as well as pumps. If you ask me which one are the most challenge to move, until we further build our footprint we have headwind to move in the pumps as fast as we move the other more fungible assets but that was always our game plan when we made the pump acquisition was to grow out that footprint and penetrate other markets as well as chasing our cross sell opportunity. You will see in the slide deck and I think its slide 35 that we have identified $80 million of cross sell opportunity. So we don't only have the strategy and the hope we actually have the opportunity to continue to move some of those pumps out of the oil and gas and into existing customers through cross sell. So stay tuned for what our close rate will be but there is an opportunity out there that we have identified and that we are chasing and that would be the last part of the asset class that we need to move more aggressively it would be the pumps.

Thanks.

Thank you. Your next question comes from the line of Joe Box from KeyBanc.

Hi guys.

Hi Joe.

Mike you said earlier that you expect the competitive rate environment as we start to get into the summer months. I am curious is that across the board or is that much more concentrated in the energy exposed markets and I apologize if I missed this earlier but do you give us a break down on rental rates within the energy markets versus outside?

We gave the -- its hard for us to break it that way because the way in which we do the ARA, it’s a weighted average on the asset class. It’s hard to break it out that way. With regards to the competitive marketplace I just think that typically look we all have a bad winner, we all had the oil and we see that the competitive marketplace will change as the season swings to a more seasonal opportunity. So, we just see being more competitive. I wouldn't take it anything more than that’s a nutshell.

I mean do you think it’s fair to say that inside energy is negative and outside energy is kind of in-lined with that 3.5% plus that you had highlighted earlier?

I would say that -- I would quantify it by saying that the non-ONG would be, you would see a normal trend that you would normally see that we have experienced overtime as opposed to what we with the – when you add the ONG in it gives us that full impact.

Understood. One last one for you. Bill it looks like there is only about a $6 million difference between the revenue contribution that you are getting from rental rates and then the offset from fleet inflation and that doesn't give you a whole lot of wiggle room, we know what you are guiding for rental rates but what are you expectations for fleet inflation. I am kind of curious if rental rates continue to exceed inflation or if they got a parity or even negative from here?

Yes, the expectation is for fleet inflation to continue sort of the trend that has been, we are replacing something like 15% of our fleet every year and we continue to experience inflation on new purchases at something like the couple of percent a year so when you aggregate that over the average life what we are replacing we are going to stay in that 2% area for fleet inflation going forward and so if we deliver the above 3% that we are talking about for rental rates we still got a spread. My expectation is that the inflation won't change dramatically and I certainly expect that that will continue to drive rates as hard as we can, so I won't give you a long range forecast, we talked about delivering 3% a year rental rate improvement over the long haul for a long time that’s been our long term view. Oil and gas has made that challenging this year but I don’t see a reason to change that longer term view as we said right here.

Yes, Joe. I would only add that aside from just rate is not the only thing that we are leaning on, we are also looking at driving efficiencies in our process improvements. We continue to march down that path and so we are looking at ways in which we can become more efficient and driving not only our fleet but also our cost structure around that process.

Understood. Thanks guys.

Thank you. And your next question comes from the line of David Raso from Evercore ISI.

Hi, David.

The rest of the year guidance that the first quarter incremental EBITDA number was some and margin was pretty healthy, it was 61% but when you look at the rest of the year guidance it requires a bit of step up with the incremental EBITDA margin has to be around 76% ahead of the year. So I’m just kind of walk through either some cost reductions that we can think about to expect the incremental EBITDA margin to accelerate that much as the year goes on or mixed issue, I think you can just dive into that a little bit of more.

Yes, thanks David. So I called out the impact of one particular item bonus accrual difference year-over-year was $6 million in the first quarter, if we continue on the path that we are on that’s going to continue to contribute as we go throughout the rest of the year. In fact the contribution will increase because last year we increased our bonus accrual as the year were on second half we ran very strong versus our plan and so we accrued up to a much higher level for last year’s bonus. This year assuming we stay and deliver the guidance that we have given it’s going to be less and so that $6 million will go up a little bit in future quarter. So that will help and as you know the incremental margin calculation is very sensitive even to reasonably small dollar amount. So, I think that’s one example to Mike’s point we got very intense focus on productivity overall, we realized what was the number 7 million of year-to-date impact of our efficiency our main focus and that set a run rate of $42 million. So, we will continue to drive that run rate higher and the realized about higher as we go forward as well. So that’s going to contribute and help support the incremental margin and then I say that debt expense is always a little bit of wildcard but we think that there could be an opportunity in that debt expense as we drive some process changes internally to focus on how effectively we collect. So, I think those are the things that I point to you that give us some confidence that the 60% flow through margin are flow through that we talk about is very realistic for the year.

Would you – given it’s -- your control for something really could just make confident if you need to can you help us a little bit more in quantify the potential benefit from the accrual on the bonus because this quarter say you need another $20 million of help year-over-year on accrual bonus to get to the 76% incremental for this quarter that’s a pretty healthy jump this quarter the benefit was only six. So just give us more comfort that that is a lever that you could pull, I mean can that add not 6 in the second quarter and third quarter could it be 20s and 30s I mean, is it that significant a number?

It could be, right now if you are looking for a number I’d say something in the neighborhood of just I’m hesitating, I’m going too far here but in the middle to upper 30s it could be.

On the year-over-year benefit? Okay that’s something under your control, I am sorry was that full year or per –

That's full year. And it could be a little bit more depending on how the year plays out. Again that's – it depends on how the year plays out and how we do versus the target that we set for the year.

Okay. Alright. Then on the rate the comment Matt about 60 bips per months get you to the I am not sure if you are quite get there but when you get close I guess more for the cadence even if we can do that there appears the rate for the second quarter would still be lower than the 29 we just printed. So I am just trying to get a sense of the cadence when do you expect quarter to show above 3, I am just making sure we – I’m trying to figure out when do we make that harder decision on CapEx utilization, rate and I would think you need to make that decision probably as you said by the end of the second quarter if not maybe a little earlier. What’s the cadence or rate increase this year-over-year that we should be thinking about to help think about that trigger decision on CapEx?

So if you do the math you will see that you don't cross the 3 – you don't get the three threshold until the second half of the year. So we understand that. We understand that the headwind that we got in Q1 compounds and has the carryover effect to our Q2 results when you look at the year-over-year and that's within our modeling and where we are expecting so you are talking towards the end of the third quarter and then moving on from there.

Okay that's helpful. Okay I appreciate it. Thank you.

Thank you. Our next question comes from the line of George Tong from Piper Jaffray. Your question please.

Hi, good morning.

Good morning George.

I want to drill into the downside scenario. In your prior earnings calls you noted 400 million of fleet would be affected by oil and gas and then you assume you could mitigate half of that by redeploying the fleet so that's about 200 million of fleet affected and then previously you had assumed, you expected only half year impact so that worked out to be 100 million of fleet affected. 100 million of fleet assuming 60% dollar utilization gives you $60 million of revenue impact and then $60 million revenues on 60% EBITDA flow through gets you to the $36 million EBITDA downside. So it appears your prior downside 36 million assumes a half year impact and assumes you can mitigate the downside by redeploying the fleet. So given the greater part of the year has been affected by oil, does that increase the downside beyond 36 million?

Yes. That's what I was trying to call out. The fact that we’ve now experienced the equivalent of $200 million decline for now it’s going to be three quarters assuming it doesn't get any worse or doesn't get any better it will be three quarters of 200 of impact and one quarter at an average of zero to 200 so call it a net affect of $175 million of impact before mitigation and then the math flows through from there to that 88% or $32 million number that I gave earlier. But the mitigation I want to point out, the mitigation is not included in that calculation on the 80 million of fleet that came out of oil and gas and with somewhere else. We would have to do a separate calculation of the mitigation impact of that and that's why I said that I don't believe that there will be a full $32 million impact that we will experience but something less than that. And I try to range it between 18 and 36 and you probably say 18 and 32 as the realistic range. So that's how we are thinking about it this year and obviously it requires us to continue to mitigate pretty aggressively with the fleet that does come out of oil and gas and as I pointed out that's harder to do in the first part of the year in the first quarter that it is when things get busy in second and third quarters so we are encouraged by our ability to mitigate even more effectively as we go forward. Hopefully that answers if not ask again George.

Yes. No, okay. That makes sense. If I look at your updated guidance range for revenues and EBITDA at the midpoint of the range EBITDA flow through works out to be 70%, you are still maintaining 60% flow through target for the full year so this addresses either EBITDA will be below the midpoint or revenues will be above the midpoint or both. Can you comment on which of these you are thinking about as you target 60% there?

Yes, this is where the range is always make life challenging. I mean what I – I don't want to go further than just the ranges that we have given and the fact that we believe that revenue and EBITDA will fall within the range given the sensitivity of the calculation the combination of those two will get you at least to the -- about 60% flow through that we expect and not going further than that George otherwise we might as well give you the whole forecast right.

Thank you.

That might be happy for some of you but not for us.

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

Hi Joe.

Hi. Good morning. First on just on end markets. It sounds like non-res feedback that you are getting through the market remains pretty constructive because you talk about with the 8% or so fleet growth that you have baked in on the current CapEx guide, what the underlying breakdown is on say a non-res growth that you anticipate to drive that versus the industrial growth that you anticipate within that?

Well, I don't know that we break it down specifically in those two categories. There is two pages on our deck that parses it out by state. The forecast and industrial growth rate for 2015 is 3.3 and the non-res construction is 6.2. So it gives you a lot of detail by state within those two categories. Beside from that some of the macro things the [eye] index just came out that's another positive by the way that's 11 of the last 12 months that shows a positive trend and it seems to have build particularly in construction and industrial and it was 50.9 in January. It was 51.2 in February and in March its 53 so you continue to see that momentum that's building and that is the future leading indicator and then when you couple that with housing and the conscientious report that I mentioned those are some of the backdrops for some of the leading indicators that we are thinking about.

Got it. Thank you. And then just back on rental rate given some of the details you have provided and I guess but without knowing exactly where March wound up are you able to just sort of frame what the rental rate for 2Q would be if you see the sort of typical sequential climbs through the course of the quarter?

Yes, Joe its Bill. It would be below the 29 year-over-year for the full quarter that we achieved in Q1 so I mean you can do the math. It comes to about 2.5% in the second quarter just on the sequential month the way Matt described it and that certainly reflects the strong second quarter that we had last year making for it.

Great and on that I mean with the tougher comp in the high flows through I mean I know 60% is a full year target so it seems like that there is a little bit harder comp on getting that 60% incremental maybe in 2Q and it gets better into 3Q, 4Q you have better rental rate support?

You got it. It will be more challenging in the second quarter and then it gets better in the back half.

Okay. Great. Thanks very much.

Okay.

Thank you. And due to time constraint this does conclude the question-and-answer session of today's program. I would like to hand the program back to management for any further remarks.

Thanks operator and by the way I want to thank everybody for joining us on today's call. I hope we have given you some insights into our current operating conditions and what we expect in the months ahead. Please be sure to download our updated investor presentation and also feel free to reach out to Fred Bradman in our Stanford office anytime for any additional questions that if we can be of assistance or align up any presentations and/or some field site visits. So thank you very much and operator you can end the call now.

Thank you. And thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.