United Rentals, Inc. (URI) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the United Rentals, Inc. Annual Stockholder Meeting. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Michael Kneeland. Sir, the floor is yours.

Good morning. I'm Michael Kneeland, Chairman of the Board of Directors of United Rentals, and I hereby call this meeting to order. I want to welcome you to our 2020 Annual Meeting of Stockholders. Now in light of the health and safety concerns related to COVID-19, we have followed the guidelines of the government authorities and the CDC in using a remote format for the first time. Although this is a virtual meeting, we will follow the same agenda as in the past. And before we begin, I want to speak on behalf of our leadership and the Board in saying how deeply impressed we are with the United Rentals team. The company has put out numerous new safety protocols in place to protect our employees and customers as we continue to provide essential services. But ultimately, the credit belongs to our people who are doing an incredible job of stepping up to the challenges presented by the pandemic. This is also a good time to acknowledge all other essential businesses and their employees on the front lines, particularly health care workers. There is a critical lack of medical capacity, and they're answering every call to help with the construction of emergency hospitals and testing centers. Now moving on to the agenda. First, we'll conduct the formal business portion of our meeting. Next, our President and CEO, Matt Flannery, will provide a brief business update followed by a general question-and-answer session. And I'll chair the meeting, and Joli Gross, the company's General Counsel and Corporate Secretary, will serve as Secretary. The agenda is visible on the portal welcome screen, and the rules of conduct can be found at the bottom right of the screen -- same screen under Meeting Materials. The polls for each matter to be voted on at the 2020 United Rentals Annual Meeting of Stockholders are now open as of this time at 9:04 a.m. Eastern Time on May 7, 2020. To place your vote, click on the Voting button on the Web portal and follow the instructions. You can vote until the polls are officially closed later in the meeting. At this time, I would like to acknowledge our Board members who are joining us virtually today. In addition to Matt Flannery, our directors are José Alvarez; Marc Bruno, Bobby Griffin; Kim Harris Jones; Terri Kelly, Gracia Martore, Filippo Passerini; Don Roof and Shiv Singh. I'd also like to recognize Jason Papastavrou, who is not standing for reelection this year, and to thank him for his years of distinguished service on the Board and his dedication to the company. The company has benefited a great deal by Jason's experience. I also want to acknowledge Brent Ashton and Carey Marshall of Ernst & Young, our independent auditors, who are with us today. And finally, I want to acknowledge Barry Rosenthal of the American Stock Transfer, our transfer agent, who has been designated to act as inspector of elections and is joining us online today. So thank you, Barry. As of March 10, 2020, the record date, and the total number of issued and outstanding shares of common stock of the company entitled to vote at this meeting was 74,077,924 shares. Under our bylaws, the holders of the majority of shares entitled to vote constitutes a quorum. The inspector has determined that based on the number of shares represented at this meeting, a quorum is present. Therefore, this meeting is duly constituted. As you will see from our proxy statement, there are 5 proposals to be voted on by stockholders. These also appear on the meeting agenda: proposal #1, the election of 11 directors; proposal #2, ratification of the appointment of Ernst & Young, our independent registered public accounting firm; proposal #3, an advisory vote on executive compensation; proposal #4, approval of a proposed amendment to the certificate of incorporation, granting share and stockholders the right to act by written consent; and proposal #5, a stockholder proposal to let shareholders vote by (sic) [ on ] bylaw amendments if such proposal is properly presented at this meeting. A question-and-comment period limited to these proposals will follow the presentation of the agenda items. And after the question-and-comment period ends, there will be voting on all agenda matters. I'll ask you to please hold any questions unrelated to the agenda until the general question-and-answer session later on. The first proposal is the election of the Board of 11 directors, as more fully described in proposal #1. The nominees' name in the proxy are José Alvarez, Marc Bruno, Matt Flannery, Bobby Griffin; Kim Harris Jones, Terri Kelly, Michael Kneeland, Gracia Martore, Filippo Passerini, Don Roof and Shiv Singh. Any other nominations for directors were required to have been submitted in proper written form on a timely basis to the secretary, as more fully described in our bylaws. Having received no other nominations, the nomination process is closed. Under our bylaws, all of our directors are elected for a period of 1 year by a majority of votes cast. The next proposal is to ratify the appointment of Ernst & Young, our independent registered public accounting firm, for the fiscal period ending December 31, 2020. Our Audit Committee, which is comprised of independent directors and is charged with this responsibility under its charter, has reappointed Ernst & Young subject to stockholder ratification. Our Board, upon the recommendation of the Audit Committee, recommends that you vote for this proposal. The next proposal is an advisory vote on executive compensation. At our 2017 Annual Meeting, our stockholders voted in favor of holding an advisory vote on executive compensation every year. Accordingly, we are holding this year's annual advisory vote on the compensations of the company's named executive officers. Our Board recommends that you vote for this proposal. The next proposal is to approve a proposed amendment to the company's certification of incorporation, which would grant stockholders the right to act by written consent. Our Board recommends that you vote for this proposal. The final proposal is to consider a stockholder proposal to let shareholders vote by bylaw amendments if properly presented. Our Board recommends that you vote against this proposal. Pursuant to the rules of conduct, the stockholder proponent or his qualified representative will have 3 minutes to present proposal #5. Operator, if the stockholder proponent or his qualified representative has dialed in to present the proposal, would you please open that line now?

Thank you, and good morning. Proposal 5, let shareholders vote on bylaw amendments, sponsored by John Chevedden. Shareholders request that the Board of Directors take the steps necessary to adopt a bylaw that requires any amendments to the bylaws that is approved by the Board shall be subject to a nonbinding shareholder vote as soon as practical, unless such amendment is already subject to a binding vote. The Board of Directors would have the discretion to determine whether a bylaw amendment is a housekeeping amendment and thus omit housekeeping bylaw amendments from the application of this proposal. It is important that bylaw amendments take into consideration the impact that such amendments can have on limiting rights of shareholders and/or on reducing the accountability of directors and managers. For example, directors could adopt a narrowly crafted exclusive-form bylaw to suit the unique circumstances facing the directors. A proxy adviser recently adopted a policy to vote against directors who unilaterally adopt bylaw provisions or amendments to the Articles of Incorporation that materially diminish shareholder rights. This proposal will make our directors and management more accountable to shareholders like the 2019 shareholder proposal for a meaningful shareholder right to act by written consent. United Rentals shareholders gave majority support in 2019 to a shareholder proposal granting the right to act by written consent. In response to this majority shareholder vote, United Rentals management came up with a heavily restricted version of written consent that makes no sense and is on the ballot today as item 4. Under the item 4 version of written consent, it takes $2.5 billion of United Rentals stock to just get management to look at a calendar and assign a date. Why would anyone gather $2.5 billion of United Rentals stock just to have management look at a calendar when the same $2.5 billion of United Rentals stock could obligate management to call a special meeting? The proposed United Rentals written consent thus appears inferior to the long-standing shareholder right to call a special meeting. Mr. José Alvarez, who was the Chairman of the Governance Committee, should try to explain today what shareholders might gain with the heavily restricted version of written consent in proposal 4. It seems to have its own poison pill because it looks to be an inferior alternative to the existing right to call a special meeting. The 2019 majority shareholder vote at United Rentals was not in favor of a heavily restricted version of written consent. Please vote yes, let shareholders vote on bylaw amendments, proposal 5. Thank you.

That completes the presentation of the agenda items. The floor is now open for questions related to the proposals, the 5 proposals. If any stockholder would like to ask a question regarding any of the proposals, please submit your questions to the Web portal. Joli will read any question allowed and ask the appropriate company representative to answer it. I will pause for a moment as the team reviews any questions that may have come in. Joli, are there any stockholder questions on the 5 proposals?

Yes, Michael, we have one. The question is, did management use an outside law firm to draft proposal 4? And if so, which firm? And I'll answer that. The answer is, yes, management worked with Sullivan & Cromwell to put together the draft proposal 4, and the Board reviewed and discussed the proposal prior to having it in our proxy.

So if there are no additional questions on the 5 proposals, we will proceed with voting. Please note that you must have signed in as a stockholder with a valid control number to vote. Any stockholder who hasn't yet voted or wishes to change their vote may do so by clicking on the Voting button on the Web portal and following the instructions on the screen. Stockholders who have sent in proxies or voted via telephone or online and do not want to change their vote do not need to take any further action. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the 2020 United Rentals Annual Meeting of Stockholders closed at the current time of 9:14 Eastern Time on May 7, 2020. I will now ask Joli to report the preliminary voting results. Joli?

Thank you, Michael. Based on the preliminary results reported by the inspector of elections, it appears that stockholders have voted to elect by a majority of the votes cast each of the 11 director nominees named in the proxy statement to hold office until the 2021 Annual Meeting and until his or her successor is duly elected and qualified. It appears that the stockholders have voted to ratify the appointment of Ernst & Young as the company's independent registered public accounting firm. It appears that the stockholders have voted to approve the executive compensation of the company's named executive officers. It appears that the stockholders have voted to approve the proposed amendment to the certificate of incorporation granting stockholders the right to act by written consent. Finally, it appears that the stockholders have voted against the stockholder proposal to let shareholders vote on bylaw amendments.

Thank you, Joli. The results reported today are preliminary, and the final tally remains subject to verification and will be provided in a Form 8-K that will be filed by the company with the SEC within 4 business days. With the formal portion of the annual meeting concluded, I declare the meeting adjourned, and we would like to now proceed to an update from Matt, followed by a general question-and-answer session. So Matt?

Thank you, Michael, and hello, everyone. 2019 was a solid year of profitable growth for United Rentals, both organically and through the impact of our acquisitions. We continued to gain ground in a cycle that definitely appeared to have runway as we entered 2020. And that continued to be true until about mid-March when we saw the significant impacts of COVID-19. There's very little clarity surrounding COVID in any industry at this time. One crucial thing that we have in our favor is a great deal of flexibility. Our contingency planning is focused on both the near term and a range of possible future states, all of which are manageable with our business model, strong liquidity and operating discipline and, most of all, our people. I'll add a huge thank you to Michael's earlier comments expressing admiration for our employees. They understand what it means to provide essential services, and they're embracing both the responsibility and the pride that comes with that. Finally, I'll note that while COVID is unchartered waters for everyone, our company has been in unchartered waters before. We came through the Great Recession intact, and 12 years later, we're even stronger, more diverse, more efficient and more resilient. The value we're preserving now in these unprecedented circumstances will be the foundation of the value that we create in the recovery. And with that, I'll hand the meeting back to Michael, and we'll take your questions. Mike, over to you.

Thank you, Matt. We'll now proceed to the general question-and-answer session. Any stockholder who wishes to ask a question should do by submitting it through the Web portal. Joli will read any question allowed and ask the appropriate company representative to answer it. Please note that we will attempt to answer as many questions as time allows and only questions that are germane to today's meeting. If any questions cannot be answered during the meeting due to the time constraints, we will post answers to those questions on our company website. The questions and answers will be available as soon as reasonably possible after this meeting and will remain available for 1 week after posting. I'll pause for a moment as the team reviews any questions that may have come in.

Joli, is there any general stockholder questions?

Yes, Michael, there are. The first question was, was the say-on-pay executive pay vote higher or lower in 2020? And I believe Craig Pintoff will be answering that question.

Craig?

Can you hear me now?

Yes.

Yes.

Okay. Thank you. So the short answer is that the say-on-pay vote in 2020 is higher than it was in 2019. Our current records indicate that the support this year was approximately 92% as compared to last year where it was approximately 89.5%.

Thank you, Craig, for that.

Thank you. The next question is a long one. I'll read it out. Mr. Chairman, as long-term shareholders, the carpenter union pension funds appreciate the company's efforts to address the difficulties being expressed by employees, customers and other important corporate stakeholders related to the COVID-19 pandemic. The emphasis the company has placed on employee safety during this challenging time is particularly commendable. The company has a share repurchase program which has been paused. While markets will undoubtedly be unsettled for some time, what do you see as the factors the Board might consider in a decision to restart the purchase -- the repurchase plan, sorry, versus other capital needs?

I'll take that one, Joli. This is Matt. So first off, thank you for the recognition of all that we're doing to take care of our employees and our customers. That's first and foremost on our minds. As far as the share repurchase, as we reported a few weeks ago, we have already completed over half of the repurchase commitment that we had for the year. And at this time, things are very unclear, and I think we're just going to wait to see some stabilization points with this virus and how the markets will react to this virus and how our customers will react. And at the appropriate time, and I wouldn't expect it to be before the end of Q2, but maybe we'll get stabilization sooner as a nation, we'll communicate on our calls what we'll do with the share repurchase. And really, that's about the extent of where we are right now. So thank you for your question.

Yes, it's a great question. The only thing I would add is that the Board reviews the capital allocation ongoing. And to Matt's point, it's a very fluid situation, and it will be something that the Board will continue to monitor and look at.

Okay. The next question is, will United Rentals have an independent Board Chairman in the near future? Matt, would you like to ask that -- answer that, sorry?

Mike, I think it's appropriate for you to answer that.

Well, I'm dedicated to this company. As long as I'm deemed by the stockholders to be someone capable of running as Chairman, I will stay. And I look forward to working with management and the Board. But I'm here, and I'm voted on an annual basis, like every Board of Directors during the stockholders' meeting.

And I'll just add, it's good governance, obviously, with Mike having been our CEO for quite some time and then taking the Chairman role. It's just good governance for us to have a lead independent director as well, which we have in Bobby Griffin. And we're just pleased overall with the support and the guidance that the Board gives. So thanks for the question.

Thank you. And our final question is, why would any group of shareholders use written consent when, with the same, they can accomplish more by calling for a special meeting? And Craig Pintoff, can you please answer?

Craig on mute?

There'll just be a slight delay, folks, while they patch him in.

Thank you. And just to clarify, it's when with the same effort, they can accomplish more by calling a special meeting.

Can you hear me now, Joli?

Yes, I can, Craig. Thank you.

Okay, okay. Thank you. So the answer to that question from our perspective is that we adopted the right to written consent to be responsive to the shareholder vote last year that we had. In constructing the Board's proposal this year, we talked to our stockholders to get their feedback. And we made sure that based on their input, we included the appropriate procedural safeguards as to what right a shareholder would want to use. Whether it's the right to act by written consent or the right to call a special meeting, that would be obviously up to the shareholder to decide what right is more appropriate for them in that particular circumstance. So that would be our response.

Thank you. Michael, that's it for questions.

So if there are no additional questions, we'll close the meeting now. Thank you for all your support, for attending our 2020 Annual Stockholder -- Meeting of Stockholders. Thank you. Have a great day. Be safe.

Thank you. This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time, and have a great day.