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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
on
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2001
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-14387
United Rentals, Inc.
Commission File No. 1-13663
United Rentals (North America), Inc.
(Exact names of registrants as specified in their charters)
Delaware 06-1522496
Delaware 06-1493538
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Nos.)
Five Greenwich Office Park,
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
(203) 622-3131
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
X Yes No
As of October 1, 2001, there were 73,295,189 shares of the United Rentals,
Inc. common stock, $.01 par value, outstanding. There is no market for the
common stock of United Rentals (North America), Inc., all outstanding shares
of which are owned by United Rentals, Inc.
This combined Form 10-Q is separately filed by (i) United Rentals, Inc. and
(ii) United Rentals (North America), Inc. (which is a wholly owned subsidiary
of United Rentals, Inc.). United Rentals (North America), Inc. meets the
conditions set forth in general instruction H(1) (a) and (b) of Form 10-Q and
is therefore filing this form with the reduced disclosure format permitted by
such instruction.
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UNITED RENTALS, INC.
UNITED RENTALS (NORTH AMERICA), INC.
FORM 10-Q/A FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1 Unaudited Consolidated Financial Statements
United Rentals, Inc. Consolidated Balance Sheets as of June 30,
2001 and
December 31, 2000 (unaudited).................................. 1
United Rentals, Inc. Consolidated Statements of Operations for
the Six and Three Months Ended June 30, 2001 and 2000
(unaudited).................................................... 2
United Rentals, Inc. Consolidated Statement of Stockholders'
Equity for the Six Months Ended June 30, 2001 (unaudited)...... 3
United Rentals, Inc. Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2001 and 2000 (unaudited)........ 4
United Rentals (North America), Inc. Consolidated Balance Sheets
as of June 30, 2001
and December 31, 2000 (unaudited).............................. 5
United Rentals (North America), Inc. Consolidated Statements of
Operations for the
Six and Three Months Ended June 30, 2001 and 2000 (unaudited).. 6
United Rentals (North America), Inc. Consolidated Statement of
Stockholder's Equity for the Six Months Ended June 30, 2001
(unaudited).................................................... 7
United Rentals (North America), Inc. Consolidated Statements of
Cash Flows for the
Six Months Ended June 30, 2001 and 2000 (unaudited)............ 8
Notes to Unaudited Consolidated Financial Statements............ 9
Signatures...................................................... 25
UNITED RENTALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, June 30, December 31,
2001 2001 2000
------------ ---------- ------------
Pro Forma Restated
(See Note 1) (See Note 1)
(In thousands, except share data)
ASSETS
Cash and cash equivalents................ $ 36,135 $ 36,135 $ 34,384
Accounts receivable, net of allowance for
doubtful accounts of $49,693 in 2001 and
$55,624 in 2000......................... 490,555 490,555 469,594
Inventory................................ 114,570 114,570 133,380
Prepaid expenses and other assets........ 183,885 183,885 104,493
Rental equipment, net.................... 1,851,404 1,851,404 1,732,835
Property and equipment, net.............. 428,576 428,576 422,239
Goodwill, net of accumulated amortization
of $131,975 in 2001 and
$103,219 in 2000........................ 2,199,876 2,199,876 2,215,532
Other intangible assets, net............. 9,645 9,645 11,476
---------- ---------- ----------
$5,314,646 $5,314,646 $5,123,933
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable....................... $ 312,014 $ 312,014 $ 260,155
Debt................................... 2,759,748 2,759,748 2,675,367
Deferred taxes......................... 230,106 230,106 206,243
Accrued expenses and other
liabilities........................... 172,013 172,013 136,225
---------- ---------- ----------
Total liabilities.................... 3,473,881 3,473,881 3,277,990
Commitments and contingencies
Company-obligated mandatorily redeemable
convertible preferred securities of
a subsidiary trust...................... 300,000 300,000 300,000
Series A and B preferred stock........... 430,800 430,800
Stockholders' equity:
Preferred stock--$.01 par value,
5,000,000 shares authorized:
Series C perpetual convertible
preferred stock--$300,000 liquidation
preference, 300,000 shares issued and
outstanding.......................... 3
Series D perpetual convertible
preferred stock--$150,000 liquidation
preference, 150,000 shares issued and
outstanding.......................... 2
Common stock--$.01 par value,
500,000,000 shares authorized,
73,150,359 shares issued and
outstanding in 2001 and 71,065,707 in
2000.................................. 732 732 711
Additional paid-in capital............. 1,241,127 810,332 765,529
Deferred compensation.................. (59,255) (59,255)
Retained earnings...................... 372,880 372,880 355,850
Accumulated other comprehensive loss... (14,724) (14,724) (6,947)
---------- ---------- ----------
Total stockholders' equity........... 1,540,765 1,109,965 1,115,143
---------- ---------- ----------
$5,314,646 $5,314,646 $5,123,933
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
1
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- -------------------
2001 2000 2001 2000
---------- ---------- --------- ---------
(In thousands, except per share data)
Revenues:
Equipment rentals................. $1,043,750 $ 911,632 $ 582,368 $ 511,534
Sales of rental equipment......... 72,239 155,171 33,117 84,839
Sales of equipment and
merchandise and other revenues... 271,128 242,105 152,528 133,573
---------- ---------- --------- ---------
Total revenues..................... 1,387,117 1,308,908 768,013 729,946
Cost of revenues:
Cost of equipment rentals,
excluding depreciation........... 500,136 396,614 270,103 222,314
Depreciation of rental
equipment........................ 158,354 159,035 81,553 85,532
Cost of rental equipment sales.... 42,381 91,168 19,305 50,082
Cost of equipment and merchandise
sales and other operating
costs............................ 197,616 184,309 110,989 100,220
---------- ---------- --------- ---------
Total cost of revenues............. 898,487 831,126 481,950 458,148
---------- ---------- --------- ---------
Gross profit....................... 488,630 477,782 286,063 271,798
Selling, general and administrative
expenses.......................... 221,715 210,969 112,822 109,119
Restructuring charge............... 28,922 28,922
Non-rental depreciation and
amortization...................... 53,238 40,721 27,131 20,703
---------- ---------- --------- ---------
Operating income................... 184,755 226,092 117,188 141,976
Interest expense................... 114,589 106,210 57,059 56,527
Preferred dividends of a subsidiary
trust............................. 9,750 9,750 4,875 4,875
Other (income) expense, net........ 6,935 (312) 7,605 (108)
---------- ---------- --------- ---------
Income before provision for income
taxes and extraordinary item...... 53,481 110,444 47,649 80,682
Provision for income taxes......... 25,134 45,834 22,714 33,483
---------- ---------- --------- ---------
Income before extraordinary item... 28,347 64,610 24,935 47,199
Extraordinary item, net of tax
benefit of $6,759................. 11,317 11,317
---------- ---------- --------- ---------
Net income......................... $ 17,030 $ 64,610 $ 13,618 $ 47,199
========== ========== ========= =========
Earnings per share--basic:
Income before extraordinary
item............................ $ 0.40 $ 0.90 $ 0.35 $ 0.66
Extraordinary item, net.......... 0.16 0.16
---------- ---------- --------- ---------
Net income....................... $ 0.24 $ 0.90 $ 0.19 $ 0.66
========== ========== ========= =========
Earnings per share--diluted:
Income before extraordinary
item............................ $ 0.31 $ 0.70 $ 0.26 $ 0.51
Extraordinary item, net.......... 0.13 0.12
---------- ---------- --------- ---------
Net income....................... $ 0.18 $ 0.70 $ 0.14 $ 0.51
========== ========== ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
2
UNITED RENTALS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Common Stock
------------------
Accumulated
Additional Other
Number of Paid-in Deferred Retained Comprehensive Comprehensive
Shares Amount Capital Compensation Earnings Income Loss
---------- ------ ---------- ------------ -------- ------------- -------------
(In thousands, except share data)
Balance, December 31,
2000................... 71,065,707 $711 $765,529 $355,850 $ (6,947)
Comprehensive income:
Net income............. 17,030 $17,030
Other comprehensive
income:
Foreign currency
translation
adjustments........... (3,448) (3,448)
Cumulative effect on
equity of adopting FAS
133, net of tax of
$1,784................ (2,516) (2,516)
Derivatives qualifying
as hedges, net of tax
of $1,287............. (1,813) (1,813)
-------
Comprehensive income.... $ 9,253
=======
Issuance of common stock
under deferred
compensation plans..... 2,767,041 28 60,621 $(60,649)
Amortization of deferred
compensation........... 1,394
Issuance of common
stock.................. 2,770 50
Exercise of common
stock options.......... 665,441 7 8,876
Shares repurchased and
retired................ (1,350,600) (14) (24,744)
---------- ---- -------- -------- -------- --------
Balance, June 30, 2001.. 73,150,359 $732 $810,332 $(59,255) $372,880 $(14,724)
========== ==== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------
2001 2000
----------- ---------
(In thousands)
Cash Flows From Operating Activities:
Net income............................................ $ 17,030 $ 64,610
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 211,592 199,756
Gain on sales of rental equipment.................... (29,858) (64,003)
Deferred taxes....................................... 17,427 14,571
Amortization of deferred compensation................ 1,394
Extraordinary item................................... 18,076
Restructuring charge................................. 10,893
Changes in operating assets and liabilities:
Accounts receivable.................................. (20,853) (31,981)
Inventory............................................ 19,355 (13,616)
Prepaid expenses and other assets.................... (50,663) (1,430)
Accounts payable..................................... 51,567 137,285
Accrued expenses and other liabilities............... 52,495 (42,367)
----------- ---------
Net cash provided by operating activities........ 298,455 262,825
Cash Flows From Investing Activities:
Purchases of rental equipment......................... (303,281) (513,817)
Purchases of property and equipment................... (31,426) (69,241)
Proceeds from sales of rental equipment............... 72,239 155,171
In-process acquisition costs.......................... (2,140) (2,445)
Payments of contingent purchase price................. (6,553)
Purchases of other companies.......................... (37,801) (265,084)
----------- ---------
Net cash used in investing activities............ (302,409) (701,969)
Cash Flows From Financing Activities:
Proceeds from debt.................................... 1,979,155 376,903
Payments of debt...................................... (1,926,282) (38,217)
Proceeds from sale-leaseback.......................... 147,515
Payments of financing costs........................... (27,118) (7,164)
Proceeds from the exercise of common stock options.... 8,156 96
Shares repurchased and retired........................ (24,758) (30,950)
----------- ---------
Net cash provided by financing activities........ 9,153 448,183
Effect of foreign exchange rates...................... (3,448) 342
----------- ---------
Net increase in cash and cash equivalents............. 1,751 9,381
Cash and cash equivalents at beginning of period...... 34,384 23,811
----------- ---------
Cash and cash equivalents at end of period............ $ 36,135 $ 33,192
=========== =========
Supplemental disclosure of cash flow information:
Cash paid for interest................................ $ 110,023 $ 101,046
Cash paid for income taxes, net of refunds............ $ 719 $ 62,720
Supplemental disclosure of non-cash investing and
financing activities:
The Company acquired the net assets and assumed
certain liabilities of other companies as follows:
Assets, net of cash acquired......................... $ 5,457 $ 392,873
Liabilities assumed.................................. (1,036) (102,592)
Less:
Amounts paid through issuance of debt.............. (600) (25,197)
----------- ---------
3,821 265,084
Due to seller and other payments..................... 33,980
----------- ---------
Net cash paid.................................... $ 37,801 $ 265,084
=========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
4
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,
2001 December 31, 2000
---------------- ------------------
(In thousands, except share data)
ASSETS
Cash and cash equivalents................. $ 36,135 $ 34,384
Accounts receivable, net of allowance for
doubtful accounts of $49,693 in 2001 and
$55,624 in 2000.......................... 490,555 469,594
Inventory................................. 114,570 133,380
Prepaid expenses and other assets......... 174,899 104,493
Rental equipment, net..................... 1,851,404 1,732,835
Property and equipment, net............... 393,465 387,432
Goodwill, net of accumulated amortization
of $131,975 in 2001 and
$103,219 in 2000......................... 2,199,876 2,215,532
Other intangible assets, net.............. 9,645 11,476
---------------- ----------------
$ 5,270,549 $ 5,089,126
================ ================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable........................ $ 312,014 $ 260,155
Debt.................................... 2,759,748 2,675,367
Deferred taxes.......................... 230,106 206,243
Accrued expenses and other liabilities.. 149,825 119,172
---------------- ----------------
Total liabilities..................... 3,451,693 3,260,937
Commitments and contingencies
Stockholder's equity:
Common stock--$0.01 par value, 3,000
shares authorized, 1,000 shares issued
and outstanding........................
Additional paid-in capital.............. 1,515,817 1,507,661
Retained earnings....................... 317,763 327,475
Accumulated other comprehensive loss.... (14,724) (6,947)
---------------- ----------------
Total stockholder's equity............ 1,818,856 1,828,189
---------------- ----------------
$ 5,270,549 $ 5,089,126
================ ================
The accompanying notes are an integral part of these consolidated financial
statements.
5
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- -------------------
2001 2000 2001 2000
---------- ---------- --------- ---------
(In thousands)
Revenues:
Equipment rentals................ $1,043,750 $ 911,632 $582,3 68 $ 511,534
Sales of rental equipment........ 72,239 155,171 33,117 84,839
Sales of equipment and
merchandise and other revenues.. 271,128 242,105 152,528 133,573
---------- ---------- --------- ---------
Total revenues.................... 1,387,117 1,308,908 768,013 729,946
Cost of revenues:
Cost of equipment rentals,
excluding depreciation.......... 500,136 396,614 270,103 222,314
Depreciation of rental
equipment....................... 158,354 159,035 81,553 85,532
Cost of rental equipment sales... 42,381 91,168 19,305 50,082
Cost of equipment and merchandise
sales and other operating
costs........................... 197,616 184,309 110,989 100,220
---------- ---------- --------- ---------
Total cost of revenues............ 898,487 831,126 481,950 458,148
---------- ---------- --------- ---------
Gross profit...................... 488,630 477,782 286,063 271,798
Selling, general and
administrative expenses.......... 221,715 210,969 112,822 109,119
Restructuring charge.............. 28,922 28,922
Non-rental depreciation and
amortization..................... 48,952 37,155 24,909 18,838
---------- ---------- --------- ---------
Operating income.................. 189,041 229,658 119,410 143,841
Interest expense.................. 114,589 106,210 57,059 56,527
Other (income) expense, net....... 6,935 (312) 7,605 (108)
---------- ---------- --------- ---------
Income before provision for income
taxes and extraordinary item..... 67,517 123,760 54,746 87,422
Provision for income taxes........ 31,404 51,409 26,104 36,280
---------- ---------- --------- ---------
Income before extraordinary item.. 36,113 72,351 28,642 51,142
Extraordinary item, net of tax
benefit of $6,759................ 11,317 11,317
---------- ---------- --------- ---------
Net income ....................... $ 24,796 $ 72,351 $ 17,325 $ 51,142
========== ========== ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
6
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(Unaudited)
Common Stock Accumulated
---------------- Additional Other
Number Paid-In Retained Comprehensive Comprehensive
of Shares Amount Capital Earnings Income Loss
--------- ------ ---------- -------- ------------- -------------
(In thousands, except share data)
Balance, December 31,
2000.................... 1,000 $1,507,661 $327,475 $(6,947)
Comprehensive income:
Net income.............. 24.796 $24.796
Other comprehensive
income:
Foreign currency
translation
adjustments........... (3,448) (3,448)
Cumulative effect on
equity of adopting FAS
133, net of tax of
$1,784................ (2,516) (2,516)
Derivatives qualifying
as hedges, net of tax
$1,287................ (1,813) (1,813)
--- -------
Comprehensive income..... $17,019
=======
Contributed capital from
parent.................. 8,156
Dividend distributions to
parent.................. (34,508)
----- ---------- -------- --------
Balance, June 30, 2001... 1,000 $1,515,817 $317,763 $(14,724)
===== ========== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
7
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------
2001 2000
----------- ---------
(In thousands)
Cash Flows From Operating Activities:
Net income............................................ $ 24,796 $ 72,351
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 207,306 196,190
Gain on sales of rental equipment.................... (29,858) (64,003)
Deferred taxes....................................... 17,427 14,571
Extraordinary item................................... 18,076
Restructuring charge................................. 10,893
Changes in operating assets and liabilities:
Accounts receivable.................................. (20,853) (31,981)
Inventory............................................ 19,355 (13,616)
Prepaid expenses and other assets.................... (43,429) (14,124)
Accounts payable..................................... 51,567 127,822
Accrued expenses and other liabilities............... 46,583 (56,461)
----------- ---------
Net cash provided by operating activities.......... 301,863 230,749
Cash Flows From Investing Activities:
Purchases of rental equipment......................... (303,281) (513,817)
Purchases of property and equipment................... (27,224) (55,656)
Proceeds from sales of rental equipment............... 72,239 155,171
Payments of contingent purchase price................. (6,553)
Purchases of other companies.......................... (37,801) (265,084)
----------- ---------
Net cash used in investing activities.............. (296,067) (685,939)
Cash Flows From Financing Activities:
Proceeds from debt.................................... 1,979,155 376,903
Payments of debt...................................... (1,926,282) (38,217)
Proceeds from sale-leaseback.......................... 147,515
Payments of financing costs........................... (27,118) (7,155)
Due to parent......................................... 30,950
Capital contributions by parent....................... 8,156 96
Dividend distributions to parent...................... (34,508) (45,863)
----------- ---------
Net cash provided by (used in) financing
activities........................................ (597) 464,229
Effect of foreign exchange rates...................... (3,448) 342
----------- ---------
Net increase in cash and cash equivalents............. 1,751 9,381
Cash and cash equivalents at beginning of period...... 34,384 23,811
----------- ---------
Cash and cash equivalents at end of period............ $ 36,135 $ 33,192
=========== =========
Supplemental disclosure of cash flow information:
Cash paid for interest................................ $ 100,273 $ 91,296
Cash paid for income taxes, net of refunds............ $ 719 $ 62,720
Supplemental disclosure of non-cash investing and
financing activities:
The Company acquired the net assets and assumed
certain liabilities of other companies as follows:
Assets, net of cash acquired......................... $ 5,457 $ 392,873
Liabilities assumed.................................. (1,036) (102,592)
Less:
Amounts paid through issuance of debt.............. (600) (25,197)
----------- ---------
3,821 265,084
Due to seller and other payments..................... 33,980
----------- ---------
Net cash paid.................................... $ 37,801 $ 265,084
=========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
8
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
General
United Rentals, Inc., is principally a holding company ("Holdings" or the
"Company") and conducts its operations primarily through its wholly owned
subsidiary United Rentals (North America), Inc. ("URI") and subsidiaries of
URI. Separate footnote information is not presented for the financial
statements of URI and subsidiaries as that information is substantially
equivalent to that presented below. Earnings per share data is not provided
for the operating results of URI and its subsidiaries as they are wholly owned
subsidiaries of Holdings.
The Consolidated Financial Statements of the Company included herein are
unaudited and, in the opinion of management, such financial statements reflect
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the results of the interim periods presented. Interim financial
statements do not require all disclosures normally presented in year-end
financial statements, and, accordingly, certain disclosures have been omitted.
Results of operations for the six and three month periods ended June 30, 2001
are not necessarily indicative of the results that may be expected for the
year ending December 31, 2001. The Consolidated Financial Statements included
herein should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000.
Impact of Recently Issued Accounting Standards
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities--a
replacement of FASB Statement No. 125". This standard revises the standards
for accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures. This standard is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001 and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
The adoption of SFAS No. 140 did not have a material effect on the Company's
consolidated financial position or results of operations.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations". This
standard addresses financial accounting and reporting for business
combinations and supersedes APB Opinion No. 16, "Business Combinations" and
SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises". All business combinations in the scope of this Statement are to
be accounted for using one method, the purchase method. This standard is
effective for all business combinations initiated after June 30, 2001.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". This standard addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, "Intangible Assets". This standard is effective for fiscal years beginning
after December 15, 2001. However, this standard is immediately effective in
cases where goodwill and intangible assets are acquired after June 30, 2001.
Under this standard, goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized but will be subject to annual impairment
tests. The Company is currently evaluating the impact SFAS No. 142 will have
on its financial statements and will perform a fair value analysis of its
goodwill in connection with the adoption of this standard on January 1, 2002.
Preferred Stock
The Company issued Series A Perpetual Convertible Preferred Stock ("Series A
Preferred") and Series B Perpetual Convertible Preferred Stock ("Series B
Preferred") in 1999 and included such preferred in stockholders' equity. In
July 2001, the SEC issued guidance to all public companies as to when
redeemable preferred stock may be classified as stockholders' equity. This
guidance indicates that preferred stock that would
9
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
be subject to redemption on the occurrence of an event outside the control of
the issuer may not be classified as equity and that the probability of the
event occurring is not a factor to be considered. Under this guidance, the
Series A Preferred and Series B Preferred would not be included in
stockholders' equity because this stock would be subject to mandatory
redemption on a hostile change of control. On September 28, 2001, the Company
entered into an agreement effecting the exchange of new Series C Perpetual
Convertible Preferred Stock ("Series C Preferred") for the Series A Preferred
and new Series D Perpetual Convertible Preferred Stock ("Series D Preferred")
for the Series B Preferred (see note 11). The Series C Preferred and Series D
Preferred stock is not subject to mandatory redemption on a hostile change of
control, and will be classified as stockholders' equity under the recently
issued SEC guidance.
The effect of the foregoing is that the Company's perpetual convertible
preferred stock will be classified as stockholders' equity as of September 28,
2001 and thereafter, but will be classified outside of stockholders' equity
for earlier dates. Accordingly, the Company has restated the accompanying
balance sheets to show its $430.8 million of perpetual convertible preferred
stock under "Series A and B Preferred Stock" rather than under "Stockholders'
Equity." The Company has also made a corresponding change to the related
Consolidated Statements of Stockholders' Equity. In all other respects, the
financial statements remain unchanged, including total assets and liabilities,
revenues, operating income, net income and earnings per share. The Company's
balance sheets for dates after September 28, 2001, will include the perpetual
convertible preferred stock in stockholders' equity.
The pro forma amounts on the accompanying balance sheet gives effect to the
above-referenced exchange, as if it had occurred on June 30, 2001.
Reclassifications
Certain prior year balances have been reclassified to conform to the 2001
presentation.
2. Acquisitions
During the six months ended June 30, 2001 and the year ended December 31,
2000, the Company completed two acquisitions and 53 acquisitions,
respectively, that were accounted for as purchases. The results of operations
of the businesses acquired in these acquisitions have been included in the
Company's results of operations from their respective acquisition dates.
The purchase prices for such acquisitions have been allocated to the assets
acquired and liabilities assumed based on their respective fair values at
their respective acquisition dates. However, the Company has not completed its
valuation of all of its purchases and, accordingly, the purchase price
allocations are subject to change when additional information concerning asset
and liability valuations are completed. The preliminary purchase price
allocations that are subject to change primarily consists of rental and non-
rental equipment valuations. These allocations are finalized within 12 months
of the acquisition date and are not expected to result in significant
differences between the preliminary and final allocations.
The following table summarizes, on an unaudited pro forma basis, the results
of operations of the Company for the six months ended June 30, 2000 as though
each acquisition which was consummated during the period January 1, 2000 to
June 30, 2001 as mentioned above and in Note 3 to the Notes to Consolidated
Financial Statements included in the Company's 2000 Annual Report on Form 10-K
was made on January 1, 2000 (in thousands, except per share data):
Revenues....................................................... $1,455,247
Net income..................................................... $ 71,418
Basic earnings per share....................................... $ 0.98
Diluted earnings per share..................................... $ 0.77
10
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Since the acquisitions made during the six months ended June 30, 2001 had an
insignificant impact on the Company's pro forma results of operations, the pro
forma results of operations for the six months ended June 30, 2001 are not
shown.
The unaudited pro forma results are based upon certain assumptions and
estimates, which are subject to change. These results are not necessarily
indicative of the actual results of operations that might have occurred, nor
are they necessarily indicative of expected results in the future.
3. Restructuring Charge
During the second quarter of 2001, the Company recorded a restructuring
charge of approximately $28.9 million. The charge primarily relates to the
closure or consolidation of underperforming branches and administrative
offices, a reduction in the Company's workforce, and certain information
technology project costs. Approximately $10.9 million of the charge is non-
cash. Approximately $3.2 million has been paid during the second quarter of
2001. Of the remaining $14.8 million of this charge, approximately $8.6
million will be paid by December 31, 2001 and approximately $6.2 million will
be paid in future periods.
Components of the restructuring charge are as follows:
Balance
Restructuring Activity in June 30,
Charge 2001 2001
------------- ------------ --------
Costs to vacate facilities............... $18,291 $ 9,779 $ 8,512
Workforce reduction costs................ 5,666 1,296 4,370
Information technology costs............. 4,965 3,042 1,923
------- ------- -------
$28,922 $14,117 $14,805
======= ======= =======
Under the restructuring plan, 31 underperforming branches and five
administrative offices will be closed or consolidated, the Company's workforce
will be reduced by 489 through the termination of branch and administrative
personnel (including 437 terminated as of June 30, 2001), and certain
information technology hardware and software will no longer be used. The
employee termination costs primarily represent severance. The costs to vacate
facilities primarily represent the payment of obligations under leases offset
by estimated sublease opportunities ($9.9 million), the write-off of capital
improvements made to such facilities ($2.8 million) and the write-off of
related goodwill ($5.6 million). As of June 30, 2001, 18 of the 31
underperforming branches have been closed or consolidated and the remaining 13
underperforming branches will be closed or consolidated by December 31, 2001.
The information technology costs represent the abandonment of certain
information technology projects ($2.5 million) and the payment of obligations
under equipment leases relating to such projects ($2.5 million).
4. Refinancing of Debt
In April 2001, URI issued $450.0 million aggregate principal amount of 10
3/4% senior notes. Concurrent with the issuance of the senior notes, URI
entered into a new senior secured credit facility. The new credit facility is
comprised of a $750.0 million term loan and a $750.0 million revolving credit
facility. The proceeds from the new senior notes and new senior secured credit
facility were used to refinance outstanding secured indebtedness of
approximately $1,664.5 million and obligations under a synthetic lease of
$31.2 million. As a result of the refinancing, the Company recorded an
extraordinary charge of approximately $18.1 million ($11.3 million, net of
tax), primarily related to the write-off of financing fees, and a charge of
approximately $7.8 million recorded in other (income) expense, net related to
refinancing costs of the synthetic lease.
11
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10 3/4% Senior Notes. On April 20, 2001, URI sold $450 million aggregate
principal amount of 10 3/4% Senior Notes Due 2008. The net proceeds from the
sale of the notes were approximately $439.9 million (after deducting the
initial purchasers' discount and offering expenses). The notes mature on April
15, 2008. The notes are unsecured and are guaranteed by Holdings and by URI's
domestic subsidiaries. URI may, at its option, redeem the notes on or after
April 15, 2005, at specified redemption prices which range from 105.375% in
2005 to 100.0% in 2007 and thereafter. In addition, on or prior to April 15,
2004, URI may, at its option, use the proceeds of a public equity offering to
redeem up to 35% of the outstanding notes, at a redemption price of 110.75%.
The indenture governing the notes contains certain restrictive covenants,
including limitations on (i) additional indebtedness, (ii) restricted
payments, (iii) liens, (iv) dividends and other payments, (v) preferred stock
of certain subsidiaries, (vi) transactions with affiliates, (vii) the
disposition of proceeds of asset sales and (viii) the Company's ability to
consolidate, merge or sell all or substantially all of its assets.
New Revolving Credit Facility. The revolving credit facility enables URI to
borrow up to $750 million on a revolving basis and enables one of its Canadian
subsidiaries to borrow up to $40 million (provided that the aggregate
borrowings of URI and the Canadian subsidiary may not exceed $750 million). Up
to $100 million of the revolving credit facility is available in the form of
letters of credit. The revolving credit facility will mature and terminate on
October 20, 2006.
Borrowings under the revolving credit facility will until October 20, 2001,
accrue interest, at our option, at either (A) the ABR Rate (which is equal to
the greater of (i) the Federal Funds Rate plus 0.5% or (ii) the Chase
Manhattan Bank's prime rate) plus a margin of 1.00% or (B) an adjusted LIBOR
rate plus a margin of 2.0%. From and after October 20, 2001, the above
interest rate margins will be adjusted quarterly based on our financial
leverage ratio, up to maximum margins of 1.75% and 2.75%, for revolving loans
based on the ABR rate and the adjusted LIBOR rate, respectively, and down to
minimum margins of 0.75% and 1.75%, for revolving loans based on the ABR rate
and the adjusted LIBOR rate, respectively.
Borrowings by the Canadian subsidiary under the revolving credit facility
will until October 20, 2001, accrue interest, at such subsidiary's option, at
either (X) the Prime rate (which is equal to the Chase Manhattan Bank of
Canada's prime rate) plus a margin of 1.00% or (Y) the B/A rate (which is
equal to the Chase Manhattan Bank of Canada's B/A rate) plus a margin of 2.0%.
From and after October 20, 2001, the above interest rate margins will be
adjusted quarterly based on our financial leverage ratio, up to maximum
margins of 1.75% and 2.75%, for revolving loans based on the Prime rate and
the B/A rate, respectively, and down to minimum margins of 0.75% and 1.75%,
for revolving loans based on the Prime rate and the B/A rate, respectively.
If at any time an event of default exists, the interest rate applicable to
each loan will increase by 2% per annum.
The Company is also required to pay the lenders a commitment fee equal to
0.5% per annum in respect of undrawn commitments under the revolving credit
facility.
New Term Loan. On April 20, 2001, URI obtained a $750 million term loan.
Amounts repaid in respect of the term loan may not be reborrowed. URI must
repay the principal of the term loan in installments, over six and one-half
years, as follows: (i) on June 30, 2001 and on the last day of each calendar
quarter thereafter up to and including September 30, 2006, URI must repay $1.9
million and (ii) on the last day of each calendar quarter thereafter up to and
including September 30, 2007, URI must repay $177.2 million.
Borrowings under the term loan accrue interest, at our option, at either (a)
the ABR rate (which is equal to the greater of (i) the Federal Funds Rate plus
0.5% or (ii) the Chase Manhattan Bank's prime rate) plus a margin of 2.0%, or
(b) an adjusted LIBOR rate plus a margin of 3.0%.
12
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Covenants. The agreements governing the new senior secured credit facility
contain certain covenants that requires the Company to, among other things,
satisfy certain financial tests relating to: (a) the ratio of senior debt to
cash flow, (b) minimum interest coverage ratio, (c) the ratio of funded debt
to cash flow, and (d) the ratio of senior debt to tangible assets. These
agreements also contain various other covenants that restrict the Company's
ability to, among other things, (i) incur additional indebtedness, (ii) permit
liens to attach to its assets, (iii) pay dividends or make other restricted
payments on its common stock and certain other securities and (iv) make
acquisitions unless certain financial conditions are satisfied.
Security and Guarantees. URI's obligations under the new senior secured
facility are, subject to limited exceptions, (i) guaranteed by Holdings and
URI's United States subsidiaries and (ii) secured by substantially all of
URI's assets, the stock of URI and the stock of Holding's other United States
subsidiaries and a portion of the stock of Holding's Canadian subsidiaries.
The obligations of the Canadian subsidiary that may borrow under the revolving
credit facility are guaranteed by our other Canadian subsidiaries and secured
by substantially all of the assets of this Canadian subsidiary and the stock
of its subsidiaries.
5. Receivables Securitization
During the quarter ended June 30, 2001, the Company obtained an additional
$112.0 million in cash through the securitization of certain of its accounts
receivable through its existing $250.0 million receivable securitization
facility. In the securitization transactions, the Company transferred accounts
receivable to a special purpose vehicle (the "SPV"), which in turn pledged
those receivables to secure borrowings that the SPV incurred to finance its
acquisition of those receivables. The borrowings generally accrue interest at
the blended commercial paper rate for commercial paper issued by Gramercy
Capital Corporation to fund such borrowings plus a margin of 0.75% per annum.
The SPV's borrowings are an obligation of the SPV and not of the Company or
URI, and the lenders' recourse in respect of the borrowings is generally
limited to collections that the SPV receives on the receivables. Collections
on the receivables are used to service the borrowings. From time to time prior
to June 2002, subject to certain conditions, collections from the receivables
may be reinvested by the SPV in additional accounts receivable originated by
the Company. Subject to certain conditions, the term of the receivables
securitization may be extended until December 2003. As of June 30, 2001,
approximately $212.0 million of borrowings was outstanding under the
receivables securitization facility.
13
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):
Six Months Three Months
Ended Ended
June 30, June 30,
--------------- ---------------
2001 2000 2001 2000
------- ------- ------- -------
Numerator:
Income before extraordinary item............. $28,347 $64,610 $24,935 $47,199
Denominator:
Denominator for basic earnings per share--
weighted-average shares..................... 71,026 71,844 71,318 71,631
Effect of dilutive securities:
Employee stock options..................... 1,850 1,144 2,404 1,024
Warrants................................... 3,056 2,435 3,433 2,303
Series A perpetual convertible preferred
stock..................................... 12,000 12,000 12,000 12,000
Series B perpetual convertible preferred
stock..................................... 5,000 5,000 5,000 5,000
------- ------- ------- -------
Denominator for diluted earnings per share--
adjusted weighted-average shares............ 92,932 92,423 94,155 91,958
======= ======= ======= =======
Earnings per share-basic:
Income before extraordinary item............. $ 0.40 $ 0.90 $ 0.35 $ 0.66
Extraordinary item, net...................... 0.16 0.16
------- ------- ------- -------
Net Income................................... $ 0.24 $ 0.90 $ 0.19 $ 0.66
======= ======= ======= =======
Earnings per share-diluted:
Income before extraordinary item............. $ 0.31 $ 0.70 $ 0.27 $ 0.51
Extraordinary item, net...................... $ 0.13 $ 0.13
======= ======= ======= =======
Net income................................... $ 0.18 $ 0.70 $ 0.14 $ 0.51
======= ======= ======= =======
7. Stock Plans
2001 Senior Stock Plan. In June 2001, the Company's shareholders approved
the adoption of the 2001 Senior Stock Plan. This plan provides for the
awarding of common stock and other equity-linked awards to our officers and
directors. The maximum number of shares of common stock that can be issued
under the plan is 4,000,000. The Company records each share that is awarded
under this plan at an amount no less than 100% of the fair market value per
share at the date of the award. No shares may be awarded under this plan after
June 5, 2011. As of June 30, 2001, 2,015,000 shares had been awarded under
this plan. Determinations concerning the persons to receive awards, the form,
amount and timing of such awards and terms and provisions of such awards are
made by the Board of Directors (or a committee appointed by the Board of
Directors).
2001 Stock Plan. In March 2001, the Company adopted the 2001 Stock Plan.
This plan provides for the awarding of common stock and other equity-linked
awards to certain employees (other than officers and directors) and others who
render services to the Company. The maximum number of shares of common stock
that can be issued under the plan is 2,000,000. The Company records each share
that is awarded under this plan at an amount no less than 100% of the fair
market value per share at the date of the award. No shares may be awarded
under this plan after March 23, 2011. As of June 30, 2001, 752,041 shares had
been awarded under this plan. Determinations concerning the persons to receive
awards, the form, amount and timing of such awards and
14
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
terms and provisions of such awards are made by the Board of Directors (or a
committee appointed by the Board of Directors).
The Company records the issuance of restricted shares at the quoted market
price on the date of the grants. Amortization of deferred compensation is then
recognized on a straight-line basis over the related vesting period.
8. Comprehensive Income
The following table sets forth the Company's comprehensive income (in
thousands):
Six Months Three Months
Ended Ended
June 30, June 30,
---------------- ---------------
2001 2000 2001 2000
------- ------- ------- -------
Net income................................ $17,030 $64,610 $13,618 $47,199
Other comprehensive gain (loss):
Foreign currency translation
adjustment............................. (3,448) 342 8,565 1,112
Cumulative effect on equity of adopting
FAS 133................................ (2,516)
Derivatives qualifying as hedges........ (1,813) 627
------- ------- ------- -------
Comprehensive income...................... $ 9,253 $64,952 $22,810 $48,311
======= ======= ======= =======
9. Derivative Financial Instruments
The FASB issued, and subsequently amended, SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which became effective for the
Company on January 1, 2001. Under SFAS No. 133, all derivatives are required
to be recorded as assets or liabilities and measured at fair value. Gains or
losses resulting from changes in the values of derivatives are recognized
immediately or deferred, depending on the use of the derivative and whether or
not it qualifies as a hedge.
The Company occasionally uses derivative financial instruments to manage its
risk associated with fluctuations in interest rates on its debt. As of June
30, 2001, the Company had outstanding interest rate swap agreements that
converts a portion, or $200.0 million, of its variable rate term loan to a
fixed rate instrument through 2003. These swap agreements are designated as
cash flow hedges and changes in fair value of the hedges are recorded in other
comprehensive income and reclassified into earnings in the same periods during
which the hedged transaction affects earnings. There is no ineffectiveness
related to these hedges.
15
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Condensed Consolidating Financial Information of Guarantor Subsidiaries
Certain indebtedness of URI, a wholly-owned subsidiary of Holdings (the
"Parent"), is guaranteed by URI's United States subsidiaries (the "guarantor
subsidiaries") and, in certain cases, also by Parent. However, this
indebtedness is not guaranteed by URI's foreign subsidiaries (the "non-
guarantor subsidiaries"). The guarantor subsidiaries are all wholly owned and
the guarantees are made on a joint and several basis and are full and
unconditional (subject to subordination provisions and subject to a standard
limitation which provides that the maximum amount guaranteed by each guarantor
will not exceed the maximum amount that can be guaranteed without making the
guarantee void under fraudulent conveyance laws). Separate consolidated
financial statements of the guarantor subsidiaries have not been presented
because management believes such information would not be material to
investors. However, condensed consolidating financial information as of June
30, 2001 and December 31, 2000 and for the six and three months ended June 30,
2001 and 2000, are presented. The condensed consolidating financial information
of URI and its subsidiaries are as follows:
CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2001
----------------------------------------------------------------
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
------ ---------- ------------ ------------ ------------ ------------
(In thousands)
ASSETS
Cash and cash equiva-
lents.................. $ 30,586 $ 5,549 $ 36,135
Accounts receivable,
net.................... $ 59,479 324,470 106,606 490,555
Intercompany receivable
(payable).............. 211,682 49,370 (261,052)
Inventory............... 52,232 56,973 5,365 114,570
Prepaid expenses and
other assets........... 54,508 119,215 1,176 $ 8,986 183,885
Rental equipment, net... 956,034 768,444 126,926 1,851,404
Property and equipment,
net.................... $ 35,111 143,055 233,614 16,796 428,576
Investment in subsidiar-
ies.................... 1,814,909 2,330,924 (4,145,833)
Intangible assets, net.. 869,416 1,209,403 130,702 2,209,521
---------- ---------- ---------- --------- ----------- ----------
$1,850,020 $4,677,330 $2,792,075 $ 132,068 $(4,136,847) $5,314,646
========== ========== ========== ========= =========== ==========
LIABILITIES AND STOCK-
HOLDER'S EQUITY
Liabilities:
Accounts payable....... $ 71,448 $ 222,935 $ 17,631 $ 312,014
Debt................... $ 300,000 2,523,718 214,768 21,262 $ (300,000) 2,759,748
Deferred income tax-
es.................... 230,056 50 230,106
Accrued expenses and
other liabilities..... 9,255 42,280 93,864 13,681 12,933 172,013
---------- ---------- ---------- --------- ----------- ----------
Total liabilities.... 309,255 2,867,502 531,617 52,574 (287,067) 3,473,881
Commitments and contin-
gencies
Company-obligated
mandatorily redeemable
convertible preferred
securities of a
subsidiary trust....... 300,000 300,000
Series A and B preferred
stock.................. 430,800 430,800
Stockholders' equity:
Common stock........... 732 732
Additional paid-in
capital............... 810,332 1,496,393 1,838,411 65,901 (3,400,705) 810,332
Deferred compensa-
tion.................. (59,255) (59,255)
Retained earnings...... 372,880 317,764 422,047 23,988 (763,799) 372,880
Accumulated other com-
prehensive income..... (14,724) (4,329) (10,395) 14,724 (14,724)
---------- ---------- ---------- --------- ----------- ----------
Total stockholders'
equity.............. 1,109,965 1,809,828 2,260,458 79,494 (4,149,780) 1,109,965
---------- ---------- ---------- --------- ----------- ----------
$1,850,020 $4,677,330 $2,792,075 $132,068 $(4,136,847) $5,314,646
========== ========== ========== ========= =========== ==========
16
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
December 31, 2000
---------------------------------------------------------------------------
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
---------- ---------- ------------ ------------ ------------ ------------
(In thousands)
Assets
Cash and cash equiva-
lents.................. $ 29,733 $ 4,651 $ 34,384
Accounts receivable,
net.................... $ 216,444 143,295 109,855 469,594
Intercompany receivable
(payable).............. 319,423 (55,187) (264,236)
Inventory............... 54,022 73,979 5,379 133,380
Prepaid expenses and
other assets........... 28,263 75,633 597 104,493
Rental equipment, net... 837,972 766,219 128,644 1,732,835
Property and equipment,
net.................... $ 34,807 139,871 231,195 16,366 422,239
Investment in subsidiar-
ies.................... 1,839,952 2,257,692 $(4,097,644)
Intangible assets, net.. 960,444 1,132,438 134,126 2,227,008
---------- ---------- ---------- --------- ----------- ----------
$1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933
========== ========== ========== ========= =========== ==========
Liabilities and Stock-
holder's Equity
Liabilities:
Accounts payable....... $ 78,623 $ 165,677 $ 15,855 $ 260,155
Debt................... $ 300,000 2,647,144 3,484 24,739 $ (300,000) 2,675,367
Deferred income tax-
es.................... 186,091 20,702 (550) 206,243
Accrued expenses and
other liabilities..... 28,816 86,560 18,862 13,750 (11,763) 136,225
---------- ---------- ---------- --------- ----------- ----------
Total liabilities.... 328,816 2,998,418 208,725 53,794 (311,763) 3,277,990
Commitments and contin-
gencies
Company-obligated
mandatorily redeemable
convertible preferred
securities of a
subsidiary trust....... 300,000 300,000
Series A and B preferred
stock.................. 430,800 430,800
Stockholders' equity:
Common stock........... 711 711
Additional paid-in
capital................ 765,529 1,488,238 1,830,500 65,657 (3,384,395) 765,529
Retained earnings...... 355,850 327,475 358,080 22,878 (708,433) 355,850
Accumulated other com-
prehensive loss........ (6,947) (6,947) 6,947 (6,947)
---------- ---------- ---------- --------- ----------- ----------
Total stockholders'
equity.............. 1,115,143 1,815,713 2,188,580 81,588 (4,085,881) 1,115,143
---------- ---------- ---------- --------- ----------- ----------
$1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933
========== ========== ========== ========= =========== ==========
17
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2001
-----------------------------------------------------------------------
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- -------- ------------ ------------ ------------ ------------
(In thousands)
Revenues:
Equipment rentals...... $446,995 $549,950 $46,805 $1,043,750
Sales of rental equip-
ment.................. 33,722 32,104 6,413 72,239
Sales of equipment and
merchandise and other
revenues............. 127,949 128,094 15,085 271,128
-------- -------- -------- ------- -------- ----------
Total revenues.......... 608,666 710,148 68,303 1,387,117
Cost of revenues:
Cost of equipment rent-
als, excluding
depreciation.......... 191,408 284,455 24,273 500,136
Depreciation of rental
equipment............. 77,870 70,337 10,147 158,354
Cost of rental equip-
ment sales............ 21,190 17,387 3,804 42,381
Cost of equipment and
merchandise sales and
other operating
costs................. 95,705 90,819 11,092 197,616
-------- -------- -------- ------- -------- ----------
Total cost of revenues.. 386,173 462,998 49,316 898,487
-------- -------- -------- ------- -------- ----------
Gross profit............ 222,493 247,150 18,987 488,630
Selling, general and
administrative
expenses............... 94,457 114,886 12,372 221,715
Restructuring charge.... 28,922 28,922
Non-rental depreciation
and amortization....... $ 4,286 20,291 25,725 2,936 53,238
-------- -------- -------- ------- -------- ----------
Operating income
(loss)................. (4,286) 78,823 106,539 3,679 184,755
Interest expense........ 9,750 107,825 6,046 718 $ (9,750) 114,589
Preferred dividends of a
subsidiary trust....... 9,750 9,750
Other (income) expense,
net.................... 14,725 (8,853) 1,063 6,935
-------- -------- -------- ------- -------- ----------
Income (loss) before
provision (benefit) for
income taxes and
extraordinary item..... (14,036) (43,727) 109,346 1,898 53,481
Provision (benefit) for
income taxes........... (6,270) (14,763) 45,379 788 25,134
-------- -------- -------- ------- -------- ----------
Income before extraordi-
nary item and equity in
net earnings of subsid-
iaries................. (7,766) (28,964) 63,967 1,110 28,347
Extraordinary item...... 11,317 11,317
-------- -------- -------- ------- -------- ----------
Income (loss) before
equity in net earnings
of subsidiaries........ (7,766) (40,281) 63,967 1,110 17,030
Equity in net earnings
of subsidiaries........ 24,796 65,077 $(89,873)
-------- -------- -------- ------- -------- ----------
Net income ............. $ 17,030 $ 24,796 $ 63,967 $ 1,110 $(89,873) $ 17,030
======== ======== ======== ======= ======== ==========
18
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000
------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
------ --- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals...... $378,801 $484,540 $48,291 $ 911,632
Sales of rental
equipment............. 74,484 68,315 12,372 155,171
Sales of equipment and
merchandise and other
revenues.............. 112,041 114,201 15,863 242,105
-------- -------- -------- ------- --------- ----------
Total revenues.......... 565,326 667,056 76,526 1,308,908
Cost of revenues:
Cost of equipment
rentals, excluding
depreciation.......... 162,317 211,389 22,908 396,614
Depreciation of rental
equipment............. 70,016 79,670 9,349 159,035
Cost of rental
equipment sales....... 43,989 39,471 7,708 91,168
Cost of equipment and
merchandise sales and
other operating
costs................. 91,840 79,645 12,824 184,309
-------- -------- -------- ------- --------- ----------
Total cost of revenues.. 368,162 410,175 52,789 831,126
-------- -------- -------- ------- --------- ----------
Gross profit............ 197,164 256,881 23,737 477,782
Selling, general and
administrative
expenses............... 92,687 106,523 11,759 210,969
Non-rental depreciation
and amortization....... $ 3,566 17,912 16,597 2,646 40,721
-------- -------- -------- ------- --------- ----------
Operating income........ (3,566) 86,565 133,761 9,332 226,092
Interest expense........ 9,750 104,617 195 1,398 $ (9,750) 106,210
Preferred dividends of a
subsidiary trust....... 9,750 9,750
Other (income) expense,
net.................... 3,929 (4,422) 181 (312)
-------- -------- -------- ------- --------- ----------
Income (loss) before
provision for income
taxes.................. (13,316) (21,981) 137,988 7,753 110,444
Provision (benefit) for
income taxes........... (5,575) (9,122) 57,265 3,266 45,834
-------- -------- -------- ------- --------- ----------
Income (loss) before
equity in net earnings
of subsidiaries........ (7,741) (12,859) 80,723 4,487 64,610
Equity in net earnings
of subsidiaries........ 72,351 85,210 $(157,561)
-------- -------- -------- ------- --------- ----------
Net income.............. $ 64,610 $ 72,351 $ 80,723 $ 4,487 $(157,561) $ 64,610
======== ======== ======== ======= ========= ==========
19
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2001
----------------------------------------------------------------------
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
------- -------- ------------ ------------ ------------ ------------
(In thousands)
Revenues:
Equipment rentals...... $239,522 $316,596 $26,250 $582,368
Sales of rental equip-
ment.................. 5,527 24,045 3,545 33,117
Sales of equipment and
merchandise and other
revenues............. 71,408 73,444 7,676 152,528
------- -------- -------- ------- -------- --------
Total revenues.......... 316,457 414,085 37,471 768,013
Cost of revenues:
Cost of equipment
rentals, excluding
depreciation.......... 92,597 164,780 12,726 270,103
Depreciation of rental
equipment............. 40,459 36,041 5,053 81,553
Cost of rental equip-
ment sales............ 4,606 12,485 2,214 19,305
Cost of equipment and
merchandise sales and
other operating
costs................. 53,033 52,311 5,645 110,989
------- -------- -------- ------- -------- --------
Total cost of revenues.. 190,695 265,617 25,638 481,950
------- -------- -------- ------- -------- --------
Gross profit............ 125,762 148,468 11,833 286,063
Selling, general and
administrative
expenses............... 46,208 60,278 6,336 112,822
Restructuring charge.... 28,922 28,922
Non-rental depreciation
and amortization....... $ 2,222 9,454 13,969 1,486 27,131
------- -------- -------- ------- -------- --------
Operating income........ (2,222) 41,178 74,221 4,011 117,188
Interest expense........ 4,875 50,978 5,610 471 $ (4,875) 57,059
Preferred dividends of a
subsidiary trust....... 4,875 4,875
Other (income) expense,
net.................... 8,525 (1,468) 548 7,605
------- -------- -------- ------- -------- --------
Income (loss) before
provision for income
taxes and extraordinary
item................... (7,097) (18,325) 70,079 2,992 47,649
Provision (benefit) for
income taxes........... (3,390) (4,221) 29,083 1,242 22,714
------- -------- -------- ------- -------- --------
Income before extraordi-
nary item and equity in
net earnings of subsid-
iaries................. (3,707) (14,104) 40,996 1,750 24,935
Extraordinary item...... 11,317 11,317
------- -------- -------- ------- -------- --------
Income (loss) before
equity in net earnings
of subsidiaries........ (3,707) (25,421) 40,996 1,750 13,618
Equity in net earnings
of subsidiaries........ 17,325 42,746 $(60,071)
------- -------- -------- ------- -------- --------
Net income ............. $13,618 $ 17,325 $ 40,996 $ 1,750 $(60,071) $ 13,618
======= ======== ======== ======= ======== ========
20
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2000
---------------------------------------------------------------------
Non-
Gurantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
------- -------- ------------ ------------ ------------ ------------
(In thousands)
Revenues:
Equipment rentals...... $212,902 $271,802 $26,830 $511,534
Sales of rental
equipment............. 31,500 47,444 5,895 84,839
Sales of equipment and
merchandise and other
revenues.............. 65,415 59,722 8,436 133,573
------- -------- -------- ------- --------- --------
Total revenues.......... 309,817 378,968 41,161 729,946
Cost of revenues:
Cost of equipment
rentals, excluding
depreciation.......... 84,062 126,661 11,591 222,314
Depreciation of rental
equipment............. 36,928 43,798 4,806 85,532
Cost of rental
equipment sales....... 17,848 28,830 3,404 50,082
Cost of equipment and
merchandise sales and
other operating
costs................. 52,782 40,833 6,605 100,220
------- -------- -------- ------- --------- --------
Total cost of revenues.. 191,620 240,122 26,406 458,148
------- -------- -------- ------- --------- --------
Gross profit............ 118,197 138,846 14,755 271,798
Selling, general and
administrative
expenses............... 48,535 54,065 6,519 109,119
Non-rental depreciation
and amortization....... $ 1,865 8,653 8,813 1,372 20,703
------- -------- -------- ------- --------- --------
Operating income........ (1,865) 61,009 75,968 6,864 141,976
Interest expense........ 4,875 55,949 35 543 $ (4,875) 56,527
Preferred dividends of a
subsidiary trust....... 4,875 4,875
Other (income) expense,
net.................... 2,156 (2,698) 434 (108)
------- -------- -------- ------- --------- --------
Income (loss) before
provision (benefit) for
income taxes........... (6,740) 2,904 78,631 5,887 80,682
Provision (benefit) for
income taxes........... (2,797) 1,205 32,661 2,414 33,483
------- -------- -------- ------- --------- --------
Income (loss) before
equity in net earnings
of subsidiaries........ (3,943) 1,699 45,970 3,473 47,199
Equity in net earnings
of subsidiaries........ 51,142 49,443 (100,585)
------- -------- -------- ------- --------- --------
Net income.............. $47,199 $ 51,142 $ 45,970 $ 3,473 $(100,585) $ 47,199
======= ======== ======== ======= ========= ========
21
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Six Months Ended June 30, 2001
--------------------------------------------------------------------------
Guarantor Non-guarantor Other and
Parent URI Subsidiaries Subsidiaries Eliminations Consolidated
------- ---------- ------------- ------------- ------------ ------------
(In thousands)
Net cash provided by
(used in) operating
activities............. $(4,007) $ 205,885 $78,440 $18,137 $ 298,455
Cash flows from
investing activities:
Purchases of rental
equipment............. (199,566) (89,546) (14,169) (303,281)
Purchases of property
and equipment......... (3,603) (6,627) (18,907) (2,289) (31,426)
Proceeds from sales of
rental equipment...... 33,722 32,104 6,413 72,239
Capital contributed to
subsidiary............ (8,155) $ 8,155
Purchases of other
companies............. (36,983) (818) (37,801)
In-process acquisition
costs................. (2,140) (2,140)
------- ---------- ------- ------- ------- ----------
Net cash used in
investing
activities.......... (13,898) (209,454) (76,349) (10,863) 8,155 (302,409)
Cash flows from
financing activities:
Proceeds from debt..... 1,979,144 11 1,979,155
Payments of debt....... (1,922,168) (1,249) (2,865) (1,926,282)
Payments of financing
costs................. (27,055) (63) (27,118)
Capital contributions
by parent............. 8,155 (8,155)
Dividend distributions
to parent............. (34,507) 34,507
Shares repurchased and
retired............... (24,758) (24,758)
Proceeds from the
exercise of common
stock options......... 8,156 8,156
Proceeds from the
dividends from
subsidiary............ 34,507 (34,507)
------- ---------- ------- ------- ------- ----------
Net cash provided by
(used in) financing
activities.......... 17,905 3,569 (1,238) (2,928) (8,155) 9,153
Effect of foreign
exchange rates........ (3,448) (3,448)
------- ---------- ------- ------- ------- ----------
Net decrease in cash
and cash
equivalents........... 853 898 1,751
Cash and cash
equivalents at
beginning of period... 29,733 4,651 34,384
------- ---------- ------- ------- ------- ----------
Cash and cash
equivalents at end of
period................ $30,586 $ 5,549 $ 36,135
======= ========== ======= ======= ======= ==========
Supplemental disclosure
of cash flow
information:
Cash paid for
interest............ $ 9,750 $ 94,892 $ 4,562 $ 819 $ 110,023
Cash paid for income
taxes, net of
refunds............. $ 1,584 $ (865) $ 719
Supplemental disclosure
of non-cash investing
and financing
activities:
The Company acquired the
net assets and assumed
certain liabilities of
other companies as
follows:
Assets, net of cash
acquired.............. $ 4,624 $ 833 $ 5,457
Liabilities assumed.... (842) (194) (1,036)
Less:
Amounts paid through
issuance of debt.... (600) (600)
------- ---------- ------- ------- ------- ----------
3,182 639 3,821
Due to seller and
other payments........ 33,801 179 33,980
------- ---------- ------- ------- ------- ----------
Net cash paid........ $ 36,983 $ 818 $ 37,801
======= ========== ======= ======= ======= ==========
22
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Six Months Ended June 30, 2000
--------------------------------------------------------------
Guarantor Non-guarantor Other and
Parent URI Subsidiaries Subsidiaries Eliminations Consolidated
-------- ---------- ------------- ------------- ------------ ------------
(In thousands)
Net cash provided by
(used in) operating
activities............. $ 1,117 $ (106,798) $ 356,725 $ 11,772 $ 9 $ 262,825
Cash flows from
investing activities:
Purchases of rental
equipment............. (127,778) (368,805) (17,234) (513,817)
Purchases of property
and equipment......... (13,585) (12,678) (41,512) (1,466) (69,241)
Proceeds from sales of
rental equipment...... 74,484 68,315 12,372 155,171
Payments of contingent
purchase price........ (851) (5,702) (6,553)
Purchases of other
companies............. (261,982) (3,102) (265,084)
Capital contributed to
subsidiary............ (96) 96
In-process acquisition
costs................. (2,445) (2,445)
-------- ---------- --------- -------- ------- ---------
Net cash used in
investing
activities.......... (16,126) (328,805) (347,704) (9,430) 96 (701,969)
Cash flows from
financing activities:
Proceeds from debt..... 357,250 19,653 376,903
Payments of debt....... (19,929) (14,037) (4,251) (38,217)
Proceeds from sale-
leaseback............. 147,515 147,515
Payments of financing
costs................. (7,155) (9) (7,164)
Capital contributions
by parent............. 96 (96)
Dividend distributions
to parent............. (45,863) 45,863
Proceeds from the
exercise of common
stock options......... 96 96
Proceeds from
dividends from
subsidiary............ 45,863 (45,863)
Shares repurchased and
retired............... (30,950) (30,950)
-------- ---------- --------- -------- ------- ---------
Net cash provided by
(used in) financing
activities.......... 15,009 431,914 5,616 (4,251) (105) 448,183
Effect of foreign
exchange rates........ 342 342
-------- ---------- --------- -------- ------- ---------
Net increase
(decrease) in cash
and cash
equivalents........... (3,689) 14,637 (1,567) 9,381
Cash and cash
equivalents at
beginning of period... 3,689 16,414 3,708 23,811
-------- ---------- --------- -------- ------- ---------
Cash and cash
equivalents at end of
period................ $ 31,051 $ 2,141 $ 33,192
======== ========== ========= ======== ======= =========
Supplemental disclosure
of cash flow
information:
Cash paid for
interest............ $ 9,750 $ 89,682 $ 243 $ 1,371 $ 101,046
Cash paid for income
taxes............... $ 55,791 $ 6,929 $ 62,720
Supplemental disclosure
of non-cash investing
and
financing activities:
The Company acquired the
net assets and assumed
certain liabilities of
other companies as
follows:
Assets, net of cash
acquired.............. $ 387,989 $ 4,884 $ 392,873
Liabilities assumed.... (100,810) (1,782) (102,592)
Less:
Amounts paid through
issuance of debt.... (25,197) (25,197)
-------- ---------- --------- -------- ------- ---------
Net cash paid...... $ 261,982 $ 3,102 $ 265,084
======== ========== ========= ======== ======= =========
23
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Subsequent Events
New Preferred Stock. On September 28, 2001, the Company entered into an
agreement effecting an exchange of the Company's outstanding Series A
Preferred for an equal number of shares of Series C Preferred and the exchange
of the Company's Series B Preferred for an equal number of shares of Series D
Preferred. Except as described below, the material terms of the new Series C
Preferred are the same as the old Series A Preferred and the material terms of
the new Series D Preferred are the same as the old Series B Preferred.
The certificates of designation for the Series A Preferred and Series B
Preferred (the "Prior Preferred") provide that, upon the occurrence of a
Change of Control (as defined in these certificates of designation), the
Company is required to redeem the Prior Preferred. The term "Change of
Control," as defined in these certificates of designation, would have included
certain transactions that were disapproved by the Company's board. The
certificates of designation for Series C Preferred and Series D Preferred (the
"New Preferred") change these provisions by excluding from the definition of
"Change of Control" transactions that are defined as "Non-Approved Changes of
Control." In general, a Non-Approved Change of Control transaction is a change
of control transaction that the board has disapproved and which the board has
not facilitated by such actions as weakening or eliminating the Company's
Stockholder Rights Plan.
If a Non-Approved Change of Control occurs, the holders of the New Preferred
obtain the following additional rights, but only if, prior to the transaction,
the board does not elect to offer the holders of the New Preferred essentially
the same redemption rights that apply to an approved Change of Control
transaction:
. The holders of the Series C Preferred would elect a majority of the
board for a specified period and, during such period, the unanimous vote
of the board would be required to approve any optional redemption of the
New Preferred or to declare, pay, or change the accrual rate of, any
dividends on the New Preferred.
. Upon liquidation, the holders of the New Preferred would receive, in
addition to the liquidation preference and accrued dividends, an amount
equal to 6.25% of the liquidation preference, compounded annually from
the date the Series A Preferred was issued, in the case of the Series C
Preferred, or the date the Series B was issued, in the case of the
Series D Preferred, and ending on the date of the Non Approved Change of
Control. In addition, after holders of the Common Stock have received
the equivalent amount, the holders of the New Preferred would
participate with the holders of the Common Stock in any remaining
amounts available for distribution (based upon the number of shares of
Common Stock into which such Preferred shares would then be
convertible).
. Dividends would begin to accrue on the New Preferred. Accrued dividends
would not be payable until liquidation or sale of the Company, unless
the board by unanimous vote approves earlier payment. The dividend rate
would be 10% per annum of the liquidation preference, compounded
annually. If these dividends are not paid quarterly, additional
dividends would accrue at the rate of 8% per annum of the liquidation
preference, compounded annually. Any regular or additional dividends
that are not paid quarterly would be added to the liquidation
preference.
Stockholders Rights Plan. The Company adopted a Stockholders Rights Plan on
September 28, 2001 (with a record date of October 19, 2001). This plan and
other provisions of the Company's charter and bylaws may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or
management of the Company, including transactions in which the shareholders of
the Company might otherwise receive a premium for their shares over then
current market prices. The rights expire on September 27, 2011.
24
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by
the undersigned hereunto duly authorized.
United Rentals, Inc.
Dated: October 9, 2001 /s/ Michael J. Nolan
By: _________________________________
Michael J. Nolan
Chief Financial Officer
(Principal Financial Officer
and Chief Accounting Officer)
United Rentals (North America), Inc.
Dated: October 9, 2001 /s/ Michael J. Nolan
By: _________________________________
Michael J. Nolan
Chief Financial Officer
(Principal Financial Officer
and Chief Accounting Officer)
25