UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
---------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ -------------
Commission file number 1-12623
-----------------------------------------------------
U.S. Rentals, Inc.
- ----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 94-3061974
- ----------------------------------------------- ---------------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1581 Cummins Drive, Ste. 155, Modesto, California 95358
- ------------------------------------------------------ -------------------
(Address of Principal Executive Offices) (Zip Code)
(209) 544-9000
- -----------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 month (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.
Yes [x] No [ ]
There were 30,748,975 shares of common stock, $.01 per value, outstanding
at August 14, 1997.
- -----------------------------------------------------------------------------
U.S. RENTALS, INC.
TABLE OF CONTENTS
---------------------
PART I: Financial Information
- -------------------------------
Financial Introduction
ITEM 1. Financial Statements
Balance Sheets -
June 30, 1997 and December 31, 1996................ 1
Statements of Operations -
Three and six months ended June 30, 1997 and 1996.. 2
Statements of Cash Flows -
Three and six months ended June 30, 1997 and 1996.. 3
Statement of Changes in Stockholders' Equity -
Six months ended June 30, 1997..................... 4
Notes to Financial Statements -
June 30, 1997...................................... 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 10
PART II: Other Information
- -----------------------------------
ITEM 1. Legal Proceedings.................................... 14
ITEM 2. Changes in Securities................................ 14
ITEM 3. Defaults Upon Senior Securities...................... 14
ITEM 4. Submission of Matters to a Vote of Security Holders.. 14
ITEM 5. Other Information.................................... 14
ITEM 6. Exhibits and Reports on Form 8-K..................... 14
Signatures........................................................... 15
U.S. RENTALS, INC.
FINANCIAL INTRODUCTION
INTRODUCTION
The Registrant's initial public offering ("IPO") was declared effective on
February 20, 1997. Prior to the IPO, the equipment rental business was
operated by USR Holdings, Inc., a California corporation (the "Predecessor")
that was treated as an S-corporation under the Internal Revenue Code. The
Registrant did not have any operations prior to its IPO. Prior to the closing
of the IPO, the Predecessor transferred substantially all of its operating
assets and associated liabilities to the Registrant in exchange for 20,748,975
shares of Common Stock of the Registrant, representing all of the Registrant's
outstanding capital stock prior to the IPO. The Predecessor retained only non-
operating assets and liabilities, including approximately $25.7 million of notes
receivable from related parties and approximately $24.4 million of notes payable
to related parties. These transactions are referred to as the
"Recapitalization" in this report.
Because the Predecessor elected to be treated as an S-corporation, the
Predecessor's sole shareholder paid federal and California taxes on the
Predecessor's taxable income. Therefore, the provision for income taxes prior
to February 20, 1997, reflects only certain state income taxes the Predecessor
was required to pay. Upon the transfer of the assets and liabilities from the
Predecessor to the Registrant, which is a C-corporation, all income generated by
the Registrant became subject to federal income taxes and applicable state
income taxes, as reflected in the financial information included in this report.
Unless otherwise indicated, the "Company" means the Predecessor prior to the IPO
and the Registrant on or after the IPO.
U.S. RENTALS, INC.
BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
1997 1996
ASSETS --------------- -----------------
(Unaudited)
Cash $ 287 $ 2,906
Accounts receivable, net 48,939 35,653
Notes receivable from affiliate - 25,365
Inventories 9,082 5,841
Rental equipment, net 270,183 205,982
Property and equipment, net 55,326 42,345
Prepaid expenses and other assets 11,829 6,356
--------------- -----------------
Total assets $ 395,646 $ 324,448
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other
liabilities $ 64,022 $ 57,008
Notes payable to related parties 18,000 23,943
Notes payable, other 59,300 162,767
Deferred taxes 8,355 -
Taxes payable 2,442 -
--------------- -----------------
Total liabilities 152,119 243,718
--------------- -----------------
Stockholders' equity
Common stock, at stated value
Authorized shares - 2,500 shares
Issued and outstanding
shares - 900 - 699
Common stock, $.01 per value;
Authorized shares - 100,000,000
Issued and outstanding shares -
30,748,975 307 -
Paid-in capital 244,211 13,186
Retained earnings (991) 66,845
--------------- -----------------
Total stockholders' equity 243,527 80,730
--------------- -----------------
Total liabilities and stockholders'
equity $ 395,646 $ 324,448
=============== =================
Page 1
U.S. RENTALS, INC.
STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------------- ------------ ------------ ------------
Revenues:
Rental revenue $ 77,109 $ 60,496 $ 142,439 $ 110,677
Rental equipment sales 9,274 4,767 16,475 8,677
Merchandise and new equipment sales 10,051 5,909 18,501 10,461
------------- ------------ ------------ -----------
Total revenues 96,434 71,172 177,415 129,815
------------- ------------ ------------ -----------
Cost of revenues:
Rental equipment expense 18,678 13,262 36,176 25,355
Rental equipment depreciation 15,708 15,264 30,021 27,221
Cost of rental equipment sales 4,631 1,883 8,016 3,329
Cost of merchandise and new
equipment sales 7,442 4,343 13,936 7,431
Direct operating expense 22,698 18,128 43,881 33,925
------------- ------------ ------------ -----------
Total cost of revenues 69,157 52,880 132,030 97,261
------------- ------------ ------------ -----------
Gross profit 27,277 18,292 45,385 32,554
Selling, general and administrative
expense 10,468 7,320 18,021 14,012
Non-rental depreciation and amortization 2,724 2,258 4,654 4,253
Termination cost of deferred compensation
agreements - - 20,290 -
------------- ------------ ------------ -----------
Operating income 14,085 8,714 2,420 14,289
Other income (expense), net - 74 (473) 208
Interest (expense) income from related
parties, net (223) 79 (171) 182
Interest expense, net (504) (1,901) (2,057) (3,479)
------------- ------------ ------------ -----------
Income (loss) before income taxes
and extraordinary item 13,358 6,966 (281) 11,200
Income tax expense 5,343 131 15,237 160
------------- ------------ ------------ -----------
Income (loss) before extraordinary
item 8,015 6,835 (15,518) 11,040
Extraordinary item, loss on extinguishment
of debt less applicable income tax
benefit of $995 - - 1,511 -
------------- ------------ ------------ -----------
Net income (loss) $ 8,015 $ 6,835 $ (17,029) $ 11,040
============= ============ ============ ==========
Page 2
U.S. RENTALS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
--------- --------- --------- ---------
Operating activities:
Net income (loss) $ 8,015 $ 6,835 $ (17,029) $ 11,040
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 18,082 15,943 34,547 29,896
Gain on sale of equipment (5,104) (3,002) (9,006) (5,449)
Principal adjustment on notes receivable -- -- (146) (268)
Provision for doubtful accounts 1,764 1,401 3,236 2,452
Deferred taxes (66) -- 8,355 --
Interest income not collected -- -- (294) --
Interest expense not paid -- -- 495 --
Loss on early extinguishment of debt -- -- 2,506 --
Changes in operating assets and liabilities
Accounts receivable (10,742) (8,175) (16,522) (6,805)
Inventories (3,265) (339) (3,241) (946)
Prepaid expenses and other assets (7,980) 12 (9,058) (104)
Accounts payable and other liabilities 9,155 6,363 8,492 (590)
Taxes payable 1,939 (165) 2,442 (136)
--------- --------- --------- ---------
Net cash provided by operating activities 11,798 18,873 4,777 29,090
--------- --------- --------- ---------
Investing activities:
Purchases of rental equipment (72,785) (42,199) (102,025) (66,238)
Proceeds from sale of rental equipment 9,262 4,980 16,463 9,094
Purchases of property and equipment, net (11,115) (5,956) (17,161) (11,479)
Collections (funding) of notes receivable, net 32 (835) 253 (1,282)
--------- --------- --------- ---------
Net cash used in investing activities (74,606) (44,010) (102,470) (69,905)
--------- --------- --------- ---------
Financing activities:
Proceeds from (payments on) line of credit, net 45,000 34,443 (13,267) 49,190
Payments on senior notes -- -- (92,506) --
(Payments on) proceeds from other obligations, net (100) 1,611 (200) 341
Proceeds from related party note 18,000 -- 18,000 --
Proceeds from issuance of common stock, net of issuance costs -- -- 185,950 --
Distribution of cash to principal stockholder -- -- (998) --
Dividends paid prior to IPO -- (10,852) (1,905) (11,972)
--------- --------- --------- ---------
Net cash provided by financing activities 62,900 25,202 95,074 37,559
--------- --------- --------- ---------
Net increase (decrease) in cash 92 65 (2,619) (3,256)
Cash at beginning of period 195 157 2,906 3,478
--------- --------- --------- ---------
Cash at end of period $ 287 $ 222 $ 287 $ 222
========= ========= ========= =========
Supplemental non-cash flow information:
Distribution of net assets to principal stockholder $ 3,221
=========
U.S. RENTALS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
Additional Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
------ --------- -------- -------------
Balance at December 31, 1996 $699 $ 13,186 $ 66,845 $ 80,730
Net loss - - (17,029) (17,029)
Recapitalization (699) 699 - -
Distribution of non-operating assets, net - (4,219) - (4,219)
Dividends paid prior to IPO - (1,905) - (1,905)
Contribution of earnings to paid-in capital - 50,807 (50,807) -
Recapitalization due to IPO 207 (207) - -
IPO 100 187,400 - 187,500
IPO costs - (1,550) - (1,550)
------ ----------- ---------- ------------
Balance at June 30, 1997 $307 $244,211 $ (991) $243,527
====== =========== ========== ============
U.S. RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
(Tables in thousands, except share data)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the interim periods are not necessarily indicative of
the results that may be expected for a full year.
2. PRO FORMA EARNINGS (LOSS) PER SHARE
Pro forma net income reflects an income tax provision as if the Company had been
a C-corporation for all periods presented.
The computation of pro forma earnings per share is based on the weighted average
number of outstanding common shares, on a pro forma basis, after giving effect
to the Recapitalization and the IPO. Common stock equivalents, consisting of
certain shares subject to stock options, were not included in the calculation of
pro forma earnings per share as they did not have a dilutive effect.
Pro forma income data: Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Historical net income (loss) before income
taxes and extraordinary item $ 13,358 $ 6,966 $ ( 281) $ 11,200
Pro forma income tax (benefit) expense 5,343 2,786 (112) 4,480
----------- ----------- ----------- -----------
Pro forma net income (loss) before
extraordinary item 8,015 4,180 (169) 6,720
Extraordinary item, loss on extinguishment of
debt less applicable income tax benefit
of $995,000 - - 1,511 -
----------- ----------- ----------- -----------
Pro forma net income (loss) $ 8,015 $ 4,180 $ (1,680) $ 6,720
=========== =========== =========== ===========
Pro forma net income (loss) per share $ .26 $ .20 $ (.06) $ .32
=========== =========== =========== ===========
Pro forma number of shares outstanding 30,748,975 20,748,975 27,946,777 20,748,975
=========== =========== =========== ===========
8
U.S. RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
(Tables in thousands, except share data)
(Unaudited)
3. BANK DEBT AND LONG-TERM OBLIGATIONS
Bank debt and long-term obligations consist of the following:
June 30, December 31,
1997 1996
---- ----
Notes payable:
Senior notes payable to various parties, interest
payable semi-annually ranging from 6.82% to
7.76%, due 1999-2002 $ - $ 90,000
Revolving line of credit, interest payable monthly at
reference rate (8.5% at June 30, 1997 and 8.25%
at December 31, 1996) 7,000 26,300
Revolving line of credit, interest payable monthly
at money market rates (6.42% at June 30, 1997
and 6.13% to 6.19% at December 31, 1996) 52,000 43,000
Notes payable to a bank, interest and principal
payable monthly at rates ranging from 5.74%
to 9.51%, due 1997 - 2,967
Notes payable related to the purchase of certain
businesses, imputed interest averaging 7%,
due through 1999 300 500
-------- --------
59,300 162,767
-------- --------
Notes payable to related parties:
Subordinated note payable to The Colburn School
of Performing Arts, interest payable quarterly
at prime rate plus 5%, due in 2013 and 2014
(13.5% at December 31, 1996) - 20,000
Demand notes payable to related parties, interest at
various rates tied to the Predecessor's average
bank borrowing rate. Interest rates ranged from
8.45% to 10.25% at December 31, 1996 - 3,943
Demand note payable to related party, interest at a
variable rate, payable monthly, 5.936%
at June 30, 1997 18,000 -
-------- --------
18,000 23,943
-------- --------
$ 77,300 $186,710
======== ========
On February 26, 1997 the Company repaid the bank notes, revolving line of credit
and senior notes utilizing proceeds from its IPO. The early extinguishment of
debt generated an extraordinary loss of $1,511,000 (and a net income tax benefit
of $995,000).
On February 26, 1997, the Company entered into a $300,000,000 unsecured line of
credit with a bank maturing no later than February 25, 2002. The Company
believes it is in compliance with all covenants in the credit agreement.
9
U.S. RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
(Tables in thousands, except share data)
(Unaudited)
4. INCOME TAXES
Income tax expense consists of the following:
Six Months Ended
June 30,
--------
1997 1996
---- ----
One-time charge for cumulative deferred taxes as
of the date of the IPO as if the Company had
always been subject to taxes as a C-corporation $ 8,303 $ -
Income tax provision for the period subsequent to
the IPO 6,934 -
S-corporation income tax expense - 160
-------- ----
$ 15,237 $160
======== ====
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
credits are based on the changes in the deferred income tax assets or
liabilities from period to period.
Deferred tax assets (liabilities) are as follows:
June 30,
1997
--------
Self-insurance reserves $ 6,988
Compensation related accruals 1,524
Allowances for doubtful accounts 3,998
State income taxes 579
Others, net 1,388
--------
14,477
Depreciation (22,832)
--------
$ (8,355)
========
10
U.S. RENTALS, INC.
JUNE 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SECOND QUARTER 1997 VS. SECOND QUARTER 1996
RESULTS OF OPERATIONS
Revenues. Total revenues for the second quarter of 1997 increased 35.5% to
$96.4 million compared to $71.2 million in the second quarter of 1996. Rental
revenue increased 27.5% to $77.1 million or 80.0% of total revenues for the
second quarter of 1997, as compared to rental revenue of $60.5 million or 85.0%
of total revenues in the second quarter of 1996. Of the $16.6 million increase
in rental revenue, $9.1 million was due primarily to increased equipment rental
fleet at existing locations. The remaining increase of approximately
$7.5 million was primarily due to 15 new locations which were added subsequent
to June 30, 1996. Rental equipment sales increased 94.5% to $9.3 million or 9.6%
of total revenues for the second quarter of 1997 from $4.8 million or 6.7% of
total revenues in the second quarter of 1996 due to increased customer demand
and increased sales efforts. Merchandise and new equipment sales increased 70.1%
for the second quarter of 1997 to $10.1 million or 10.4% of total revenues as
compared to $5.9 million or 8.3% of total revenues in the second quarter of
1996, primarily due to increased rental revenue, demand for new equipment and
customer volume.
Gross Profit. Gross profit for the second quarter of 1997 increased 49.1% to
$27.3 million from $18.3 million in the second quarter of 1996 primarily due to
increased rental revenue. Gross profit from rentals increased 33.6% to
$42.7 million for the second quarter of 1997 compared to $32.0 million in the
second quarter of 1996 as a result of higher revenue volume. Rental gross profit
as a percent of revenue increased to 55.4% for the second quarter of 1997 from
52.8% in the second quarter of 1996. This increase was due primarily to a 27.5%
increase in rental revenue resulting from the increase in rental fleet and
utilization. Gross profit from sales of used rental equipment increased 61.0% to
$4.6 million for the second quarter of 1997 compared to $2.9 million in the
second quarter of 1996 due to increased demand for used equipment, but decreased
as a percent of such revenue due to the mix of sales toward later model
equipment. Gross profit from sales of merchandise and new equipment increased
66.6% for the second quarter of 1997 compared to the second quarter of 1996 due
to the impact of increased rental volume on the sale of merchandise and an
increase in new equipment sales and customer volume, but decreased as a percent
of such revenue due to the increased mix of sales of lower margin items. Gross
profit was also impacted by an increase in direct operating expenses for the
second quarter of 1997 which increased 25.2% to $22.7 million as compared to
$18.1 million in the second quarter of 1996. The increase reflects staffing and
facilities costs resulting from an increased number of rental yards and higher
maintenance costs necessary to support the increased size of the rental fleet
and volume.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the second quarter of 1997 increased 43.0% to
$10.5 million or 10.9% of total revenues compared to $7.3 million or 10.3% of
total revenue in the second quarter of 1996. The increase was primarily due to
higher advertising, bad debt, liability insurance expenses and an increase in
profit sharing expense in the second quarter of 1997 as compared to the second
quarter of 1996.
Other Income (Expense). Substantially all other income and expense items for
the second quarter of 1996 are related to investments and charitable
contributions made at the direction of the principal stockholder of the S-
corporation prior to the IPO and are not expected to be incurred by the Company
in the future as a result of the Recapitalization.
U.S. RENTALS, INC.
JUNE 30, 1997
Interest Expense. Interest expense decreased 73.7% to $.5 million for the
second quarter of 1997 from $1.9 million in the second quarter of 1996. The
decrease was primarily the result of lower debt outstanding for the second
quarter of 1997 as compared to the second quarter of 1996 as a result of
repayment of debt from the proceeds of the IPO.
Income Taxes. Prior to the IPO, the Company had elected to be taxed as an
S-corporation for federal and state purposes. Income tax expense was
approximately 1.5% of pre-tax income for 1996 and for the period January 1, 1997
through February 26, 1997. For the remainder of the first quarter, February 27,
1997, and through June 30, 1997, the Company's income was taxed as a
C-corporation at an effective rate of 40.0%.
SIX MONTHS 1997 VS. SIX MONTHS 1996
RESULTS OF OPERATIONS
Revenues. Total revenues for the first six months of 1997 increased 36.7% to
$177.4 million compared to $129.8 million in the first six months of 1996.
Rental revenue increased 28.7% to $142.4 million or 80.3% of total revenues in
the first six months of 1997, as compared to rental revenue of $110.7 million or
85.3% of total revenues in the first six months of 1996. Of the $31.7 million
increase in rental revenue, $18.9 million was due primarily to increased
equipment rental fleet at existing locations. The remaining increase of
approximately $12.8 million was primarily due to 15 new locations which were
added subsequent to June 30, 1996. Rental equipment sales increased 89.9% to
$16.5 million or 9.3% of total revenues for the first six months of 1997 from
$8.7 million or 6.7% of total revenues in the first six months of 1996 due to
increased customer demand and increased sales efforts. Merchandise and new
equipment sales increased 76.9% for the first six months of 1997 to
$18.5 million or 10.4% of total revenues as compared to $10.5 million or 8.1% of
total revenues in the first six months of 1996, primarily due to increased
rental revenue, demand for new equipment and customer volume.
Gross Profit. Gross profit for the first six months of 1997 increased 39.3% to
$45.4 million from $32.6 million in the first six months of 1996 primarily due
to increased rental revenue. Gross profit from rentals increased 31.2% to
$76.2 million for the first six months of 1997 from $58.1 million in the first
six months of 1996 as a result of higher revenue volume. Rental gross profit as
a percent of revenue increased to 53.5% for the first six months of 1997 from
52.5% in the first six months of 1996. This increase was due primarily to a
28.7% increase in rental revenue resulting from the increase in rental fleet and
volume. Gross profit from sales of used rental equipment increased 58.2% to
$8.5 million for the first six months of 1997 from $5.3 million in the first six
months of 1996 due to increased demand for used equipment, but decreased as a
percent of such revenue due to the mix of sales toward later model equipment.
Gross profit from sales of merchandise and new equipment increased 50.7% for the
first six months of 1997 compared to the first six months of 1996 due to the
impact of increased rental volume on the sale of merchandise and an increase in
new equipment sales and customer volume, but decreased as a percent of such
revenue due to the increased mix of sales of lower margin items. Gross profit
was also impacted by an increase in direct operating expenses for the first six
months of 1997 which increased 29.3% to $43.9 million as compared to
$33.9 million in the first six months of 1996. The increase reflects staffing
and facilities costs resulting from an increased number of rental yards and
higher maintenance costs necessary to support the increased size of the rental
fleet and volume.
U.S. RENTALS, INC.
JUNE 30, 1997
Selling, General and Administrative Expense. Selling, general and
administrative expense for the first six months of 1997 increased 28.6% to
$18.0 million or 10.2% of total revenues compared to $14.0 million or 10.8% of
total revenue in the first six months of 1996. The increase was primarily due to
higher advertising, bad debt, liability insurance expenses and an increase in
profit sharing expense.
Other Operating Expense. Other operating expense for the first six months of
1997 includes $20.3 million of non-recurring compensation expense related to the
termination of the Predecessor's deferred incentive compensation agreements just
prior to the initial public offering in February, 1997.
Other Income (Expense). Substantially all other income and expense items for
the six months of 1997 and 1996 are related to investments and charitable
contributions made at the direction of the principal stockholder of the
S-corporation prior to the IPO and are not expected to be incurred by the
Company in the future as a result of the Recapitalization.
Interest Expense. Interest expense decreased 40.0% to $2.1 million for the
first six months of 1997 from $3.5 million in the first six months of 1996. The
decrease was primarily the result of lower debt outstanding for the first six
months of 1997 as compared to the first six months of 1996 as a result of
repayment of debt from the proceeds of the IPO.
Income Taxes. Prior to the its IPO, the Company had elected to be taxed as an
S-corporation for federal and state purposes. Income tax expense was
approximately 1.5% of pre-tax income for 1996 and for the period January 1, 1997
through February 26, 1997. For the remainder of the first quarter and through
June 30, 1997, the company's income was taxed as a C-corporation at an effective
rate of 40.0%.
LIQUIDITY AND CAPITAL RESOURCES
The Company received net proceeds of $186.0 million from the initial public
offering of 10,000,000 shares of its common stock on February 26, 1997. A
portion of the net proceeds from the offering were used to repay all of the
senior notes and borrowings under the credit facility. In conjunction with the
offering, the Company entered into a new credit facility which provides
availability of up to $300.0 million with its existing lenders.
The Company has primarily used cash to purchase rental equipment and invest in
acquired and start-up rental yards. The Company historically has financed its
cash requirements primarily through net cash provided by operating activities
and borrowings under its credit facility. The Company believes that cash flow
from operations and availability under the new credit facility will be
sufficient to support its operations, expansion and liquidity requirements for
at least the next 12 months.
For the first six months of 1997, the Company's operating activities before
changes in operating assets and liabilities provided net cash flow of
$22.7 million as compared to $37.7 million in the first six months of 1996. The
$15.0 million decrease in cash flows generated by operating activities before
adjustments for changes in operating assets and liabilities was primarily due to
the termination of deferred compensation agreements and an increase in gain from
sale of equipment but was partially offset by higher depreciation expense due to
a larger rental equipment fleet that supported growth in revenues.
U.S. RENTALS, INC.
JUNE 30, 1997
Net cash used in investing activities was $102.5 million for the first six
months of 1997 as compared to $69.9 million in the first six months of 1996. The
principal causes for the variation in cash flow between the periods were
increased purchases of rental equipment and investment in property and
equipment, partially offset by increased sales of rental equipment. The increase
in rental fleet relates to newly opened or acquired yards and the continued
expansion of rental fleet at existing locations. Rental equipment purchases for
the first six months of 1997 were $102.0 million as compared to $66.2 million in
the first six months of 1996.
Net cash provided by financing activities was $95.1 million for the first six
months of 1997 as compared to $37.6 million in the first six months of 1996. The
principal causes for the variation between periods was the receipt of the net
proceeds of $186.0 million from the IPO in February, 1997, which were used to
repay all of the senior notes and borrowings under the credit facility, and the
proceeds from a note payable to a related party.
U.S. RENTALS, INC.
June 30, 1997
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Supplemental Pro Forma Net Income.
Supplemental pro forma net income data (unaudited):
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Supplemental pro forma net income $ 8,015,000 $ 5,535,000 $12,900,000 $ 8,946,000
=========== =========== =========== ===========
Supplemental pro forma net income per share $ .26 $ .18 $ .42 $ .29
=========== =========== =========== ===========
Supplemental number of shares outstanding 30,748,975 30,748,975 30,748,975 30,748,975
=========== =========== =========== ===========
Supplemental pro forma net income increased 49% to $8.0 million for the
three months ended June 30, 1997 from $5.5 million for the same period
in 1996. Supplemental pro forma net income for the three months ended
June 30, 1996 includes the reduction/add-back of interest income
(expense) on related party balances, and the add back of interest
expense related to bank debt that was repaid with the net proceeds of
the IPO.
U.S. RENTALS, INC.
June 30, 1997
Item 5.-continued,
Supplemental pro forma net income increased 44% to $12.9 million for the
six months ended June 30, 1997 from $8.9 million for the same period in
1996. Supplemental pro forma net income for the six months ended June 30,
1997 and 1996 includes the following adjustments to the historical income
statement: the add-back of $20.3 million non-recurring charges related to
the termination of the Company's deferred compensation agreements, the
reduction/add-back of interest income (expense) on related party balances
prior to the IPO, and the add-back of interest expense related to bank
debt that was repaid with the net proceeds of the IPO.
These adjustments reflect the Company as if the Recapitalization and IPO
occurred as of the beginning of the periods presented. In addition,
income taxes have been calculated as if the Company had been taxed as a
C-corporation during all periods presented. On a pro forma C-corporation
basis, the Company's effective tax rate was 40.0% in 1997 compared to
40.2% in 1996.
Earnings (loss) per share is computed using the weighted average number
of shares of common stock and common stock equivalents, on a pro forma
basis, assuming that the Recapitalization and IPO occurred as of the
beginning of the periods presented.
Item 6.Exhibits and reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
June 30, 1997.
27.1 Financial data schedule.
U.S. RENTALS, INC.
June 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. RENTALS, INC.
(Registrant)
Date: August 14, 1997 By: /s/ JOHN S. MCKINNEY
--------------- ------------------------
John S. McKinney
Vice President
Chief Financial Officer