As filed with the Securities and Exchange Commission on May 30, 2002
Registration No. 333-87644
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
United Rentals, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 7353 06-1522496
(State or Other Jurisdiction of Primary Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Identification No.)
Number
Five Greenwich Office Park
Greenwich, Connecticut 06830
(203) 622-3131
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Michael J. Nolan
Five Greenwich Office Park
Greenwich, Connecticut 06830
(203) 622-3131
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
A copy of all communications, including communications sent to the agent for
service, should be sent to:
Joseph Ehrenreich, Esq. Malcolm E. Landau, Esq.
Ehrenreich Eilenberg & Krause LLP Weil, Gotshal & Manges LLP
11 East 44th Street 767 Fifth Avenue
New York, NY 10017 New York, NY 10153
(212) 986-9700 (212) 310-8000
Approximate date of commencement of proposed sale to the public: from time to
time after the effective date of this registration statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information contained in this prospectus is not complete and may be changed.
We may not sell any shares of the common stock until our registration statement
file with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not soliciting offers to buy
these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, Dated May 30, 2002
PROSPECTUS
UNITED RENTALS, INC.
Common Stock
-----------------------------
Issuance of Shares For Acquisitions
We may, from time to time, make acquisitions. This prospectus covers up
to 4,000,000 shares of our common stock that we may, from time to time, issue:
o in connection with acquisition transactions; or
o upon the exercise or conversion of warrants or convertible
securities that we may issue in connection with acquisition
transactions.
We will establish the terms of each acquisition transaction through
negotiations with (1) one or more of the owners of the business or assets to be
acquired, (2) the management of the other company or companies that may be a
party to the transaction and/or (3) representatives of one or more of the
foregoing.
Resale of Shares by Selling Security Holders
Persons that acquire shares from us pursuant to this prospectus may,
with our written consent, use this prospectus to resell such shares. Sales by
such persons may be made:
o through the New York Stock Exchange, in the over-the-counter
market, in privately negotiated transactions or otherwise;
o directly to purchasers or through agents, brokers, dealers or
underwriters; and
o at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, or at negotiated
prices.
Other Information
Our common stock is traded on the New York Stock Exchange under the
symbol "URI."
Investing in our securities involves certain risks. See "Risk Factors"
beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May 30, 2002
TABLE OF CONTENTS
Page
----
Cautionary Notice Regarding Forward-Looking Statements 3
Where You Can Find More Information 3
Incorporation By Reference 3
United Rentals 5
Risk Factors 6
Issuance Of Shares In Connection With Acquisitions 12
Resale Of Shares By Selling Security Holders 13
Restrictions On Resale 14
Validity of Common Stock 15
Experts 15
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. No one is authorized to provide
you with different information. We are not making an offer of shares of our
common stock in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date on the front of those documents.
2
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in, or incorporated by reference in, this
prospectus are forward-looking in nature. Such statements can be identified by
the use of forward-looking terminology such as "believe," "expect," "project,"
"forecast," "may," "will," "should," "on-track," "anticipate," "seek," "plan,"
"intend" or the negative thereof or comparable terminology, or by discussions of
strategy. You are cautioned that our business and operations are subject to a
variety of risks and uncertainties and, consequently, our actual results may
materially differ from those projected by any forward-looking statements.
Certain of such risks and uncertainties are discussed below under the heading
"Risk Factors." We make no commitment to revise or update any forward-looking
statements in order to reflect events or circumstances after the date any such
statement is made.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements, and other information with the SEC.
Such reports, proxy statements, and other information can be read and copied at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room. The SEC maintains an internet site at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC, including our company.
This prospectus is a part of our registration statement on Form S-4
filed with the SEC. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits to the registration
statement. Statements about the contents of contracts or other documents
contained in this prospectus or in any other filing to which we refer you are
not necessarily complete. You should review the actual copy of such documents
filed as an exhibit to the registration statement or such other filing. This
registration statement can be read and copied at the SEC's Public Reference Room
referred to above or accessed on the SEC's internet site referred to above.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the documents that we
file with the SEC. This means that we can disclose important information to you
by referring you to those documents. Any information we incorporate in this
manner is considered part of this prospectus. However, to the extent that there
are any inconsistencies between information presented in this prospectus and
information contained in incorporated documents filed with the SEC before the
date of this prospectus, the information in this prospectus shall be deemed to
supersede the earlier information. Any information we file with the SEC after
the date of this prospectus and until this offering is completed will
automatically update and supersede the information contained in this prospectus.
We incorporate by reference: (1) the documents listed below that we
have filed with the SEC and (2) any filings that we make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 during
the period from May [ ], 2002, which is the date on which we originally filed
the registration statement of which this prospectus forms a part, until this
offering is completed:
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o Annual Report on Form 10-K for the year ended December 31,
2001;
o Quarterly Report on Form 10-Q for the three months ended March
31, 2002;
o The following Current Reports on Form 8-K: (1) Report filed on
March 18, 2002 and (2) Report filed on April 26, 2002
(excluding exhibit 99.2);
o Definitive Proxy Statement on Schedule 14A filed on April 30,
2002; and
o Registration Statements on Form 8-A dated November 27, 1997,
August 6, 1998, and October 9, 2001.
We will provide without charge, upon written or oral request, a copy of
any or all of the documents which are incorporated by reference into this
prospectus. Requests should be directed to: United Rentals, Inc., Attention:
Michael J. Nolan, Five Greenwich Office Park, Greenwich, Connecticut 06830,
telephone number: (203) 622-3131. You must make your request for documents no
later than five business days before the date you make your investment decision
concerning our securities to obtain timely delivery of these documents.
4
UNITED RENTALS
United Rentals is the largest equipment rental company in the world. We
offer for rent over 600 types of equipment--everything from heavy machines to
hand tools--through our network of more than 740 rental locations in the United
States, Canada and Mexico. Our customers include construction and industrial
companies, manufacturers, utilities, municipalities, homeowners and others. In
2001, we served more than 1.4 million customers, completed over 8.4 million
rental transactions and generated revenues of $2.9 billion.
Our fleet of rental equipment is the largest in the world and includes
over 500,000 units having an original purchase price of approximately $3.5
billion. The fleet includes:
o General construction and industrial equipment, such as
backhoes, skid-steer loaders, forklifts, earth moving
equipment, material handling equipment, compressors, pumps and
generators;
o Aerial work platforms, such as scissor lifts and boom lifts;
o General tools and light equipment, such as power washers,
water pumps, heaters and hand tools;
o Traffic control equipment, such as barricades, cones, warning
lights, message boards and pavement marking systems; and
o Trench safety equipment for below ground work, such as trench
shields, aluminum hydraulic shoring systems, slide rails,
crossing plates, construction lasers and line testing
equipment.
In addition to renting equipment, we sell used rental equipment, act as
a dealer for new equipment and sell related merchandise, parts and service.
Our principal executive offices are located at Five Greenwich Office
Park, Greenwich, Connecticut 06830, and our telephone number is (203) 622-3131.
5
RISK FACTORS
In addition to the other information in this document, you should
carefully consider the following factors before making an investment decision.
Decreases in construction and industrial activities could adversely affect our
revenues and operating results by decreasing the demand for our equipment or the
prices that we can charge. For example, the current slow-down in the economy has
caused construction and industrial activity to decrease and, as a result, our
revenues and pricing were down in the first quarter of 2002 compared to the same
period in 2001.
Our equipment is principally used in connection with construction and
industrial activities. Consequently, decreases in construction or industrial
activity due to a recession or other reasons may lead to a decrease in the
demand for our equipment or the prices that we can charge. Any such decrease
could adversely affect our revenues and operating results. For example, the
current slow-down in the economy has caused construction and industrial activity
to decrease and, as a result, our revenues and pricing were both down in the
first quarter of 2002 compared to the same period in 2001.
We have identified below certain factors that may cause a further
downturn in construction and industrial activity, either temporarily or
long-term:
o a continuation or a worsening of the current recessionary
environment;
o an increase in interest rates; or
o adverse weather conditions which may temporarily affect a
particular region.
In addition, demand for our equipment may not reach projected levels
in the event that funding for highway and other construction projects under
government programs, such as the Transportation Equity Act for the 21st Century
("TEA-21"), does not reach expected levels. A recent proposal by the President
would, if enacted by Congress, reduce TEA-21 spending by up to approximately
$8.6 billion beginning in late 2002.
Our operating results may fluctuate, which could affect the trading value of our
common stock.
We expect that our revenues and operating results may fluctuate from
quarter to quarter or over the longer term due to a number of factors. These
factors include:
o seasonal rental patterns of our customers, with rental
activity tending to be lower in the winter;
o completion of acquisitions;
o changes in the amount of revenue relating to renting traffic
control equipment, since revenues from this equipment category
tend to be more seasonal than the rest of our business;
o changes in the size of our rental fleet or in the rate at
which we sell our used equipment;
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o changes in demand for our equipment or the prices therefor due
to changes in economic conditions, competition or other
factors;
o changes in the interest rates applicable to our floating rate
debt;
o if we determine that a potential acquisition will not be
consummated, the need to charge against earnings any
expenditures relating to such transaction (such as financing
commitment fees, merger and acquisition advisory fees and
professional fees) previously capitalized; and
o the possible need, from time to time, to take other write-offs
or special charges due to a variety of occurrences, such as
the adoption of new accounting standards, impairment of
goodwill, store consolidations or closings or the refinancing
of existing indebtedness.
Our substantial indebtedness will require us to devote a substantial portion of
our cash flow to debt service and could, among other things, constrain our
ability to obtain additional financing and make it more difficult for us to cope
with a downturn in our business.
We have a substantial amount of indebtedness. At March 31, 2002, our
total indebtedness was approximately $2,518.3 million. Our substantial
indebtedness has the potential to affect us adversely in a number of ways. For
example, it will or could:
o require us to devote a substantial portion of our cash flow to
debt service, reducing the funds available for other purposes;
o constrain our ability to obtain additional financing,
particularly since substantially all of our assets are subject
to security interests relating to existing indebtedness; or
o make it difficult for us to cope with a downturn in our
business or a decrease in our cash flow.
Furthermore, if we are unable to service our indebtedness and fund our
business, we will be forced to adopt an alternative strategy that may include:
o reducing or delaying capital expenditures;
o limiting our growth;
o seeking additional capital;
o selling assets; or
o restructuring or refinancing our indebtedness.
We cannot be sure that any of these strategies could be effected on favorable
terms or at all.
A portion of our indebtedness bears interest at variable rates that are
linked to changing market interest rates. As a result, an increase in market
interest rates would increase our interest expense and our debt service
obligations. At March 31, 2002, we had $1,091.0 million of variable rate
indebtedness.
7
If we are unable to obtain additional capital as required, we may be unable to
fund the capital outlays required for the success of our business, including
those relating to purchasing equipment, making acquisitions, opening new rental
locations and refinancing existing indebtedness.
If the cash that we generate from our business, together with cash that
we may borrow under our credit facility, is not sufficient to fund our capital
requirements, we will require additional debt and/or equity financing. We
cannot, however, be certain that any additional financing will be available or,
if available, will be available on terms that are satisfactory to us. If we are
unable to obtain sufficient additional capital in the future, we may be unable
to fund the capital outlays required for the success of our business, including
those relating to purchasing equipment, making acquisitions, opening new rental
locations and repaying or refinancing existing indebtedness.
Restrictive covenants could adversely affect our business by limiting our
flexibility.
We are subject to various restrictive financial and operating covenants
under the agreements governing our indebtedness. These covenants limit or
prohibit, among other things, our ability to incur indebtedness, pay dividends,
make prepayments of certain indebtedness, make investments, create liens, make
acquisitions, sell assets and engage in mergers and acquisitions. These
covenants could adversely affect our business by significantly limiting our
operating and financial flexibility.
We cannot guarantee that we will realize the expected benefits from our
acquisitions or that our existing operations will not be harmed as a result of
acquisitions.
We have grown in part through acquisitions and may continue to do so.
The making of acquisitions entails certain risks, including:
o unrecorded liabilities of acquired companies that we fail to
discover during our due diligence investigations;
o difficulty in assimilating the operations and personnel of the
acquired company with our existing operations;
o loss of key employees of the acquired company; and
o difficulty maintaining uniform standards, controls, procedures
and policies.
We cannot guarantee that we will realize the expected benefits from our
acquisitions or that our existing operations will not be harmed as a result of
acquisitions.
Goodwill related to acquisitions represents a substantial portion
of our total assets. If the fair value of the goodwill should drop below the
recorded value, we would be required to write off the excess goodwill, which
could adversely affect our operating results.
At March 31, 2002, we had on our balance sheet net goodwill in the
amount of $1,882.2 million, which represented approximately 39.5% of our total
assets at such date. This goodwill is an intangible asset and represents the
excess of the purchase price that we paid for acquired businesses over the
estimated fair market value of the net assets of those businesses. If the fair
value of the goodwill, determined in accordance with applicable accounting
standards, were to fall below the recorded value shown on the
8
balance sheet, we would be required to write off the excess goodwill. Any
write-off would adversely affect our results. For example, in the first quarter
of 2001, we recorded a pre-tax charge of $349 million for goodwill impairment.
If we lose any member of our senior management team and are unable to find a
suitable replacement, we may not have the depth of senior management resources
required to efficiently manage our business and execute our growth strategy.
Our success is highly dependent on the experience and skills of our
senior management team. If we lose the services of any member of this team and
are unable to find a suitable replacement, we may not have the depth of senior
management resources required to efficiently manage our business and execute our
growth strategy. We do not maintain "key man" life insurance with respect to
members of senior management.
Our industry is highly competitive, and competitive pressures could lead to a
decrease in our market share or in the prices that we can charge.
The equipment rental industry is highly fragmented and competitive. Our
competitors primarily include small, independent businesses with one or two
rental locations, regional competitors which operate in one or more states,
public companies or divisions of public companies, and equipment vendors and
dealers who both sell and rent equipment directly to customers. We may in the
future encounter increased competition from our existing competitors or from new
companies. In addition, equipment manufacturers may commence or increase their
existing efforts relating to renting and selling equipment directly to our
customers or potential customers. Competitive pressures could adversely affect
our revenues and operating results by decreasing our market share or depressing
the prices that we can charge.
Disruptions in our information technology systems could adversely affect our
operating results by limiting our capacity to effectively monitor and control
our operations.
Our information technology systems facilitate our ability to monitor
and control our operations and adjust to changing market conditions. Any
disruptions in these systems or the failure of these systems to operate as
expected could, depending on the magnitude of the problem, adversely affect our
operating results by limiting our capacity to effectively monitor and control
our operations and adjust to changing market conditions.
We are exposed to various possible claims relating to our business, and our
insurance may not fully protect us.
We are exposed to various possible claims relating to our business.
These possible claims include those relating to (1) personal injury or death
caused by equipment rented or sold by us, (2) motor vehicle accidents involving
our delivery and service personnel and (3) employment related claims. We carry a
broad range of insurance for the protection of our assets and operations.
However, such insurance may not fully protect us for a number of reasons,
including:
o our coverage is subject to a deductible of $1.0 million and
limited to a maximum of $98.0 million per occurrence;
9
o we do not maintain coverage for environmental liability (other
than legally required fuel storage tank coverage), since we
believe that the cost for such coverage is high relative to
the benefit that it provides; and
o certain types of claims, such as claims for punitive damages
or for damages arising from intentional misconduct, which are
often alleged in third party lawsuits, might not be covered by
our insurance.
If we are found liable for any significant claims that are not covered
by insurance, our operating results could be adversely affected. We cannot be
certain that insurance will continue to be available to us on economically
reasonable terms, if at all.
We are subject to numerous environmental and safety regulations. If we are
required to incur compliance or remediation costs that are not currently
anticipated our operating results could be hurt.
Our operations are subject to numerous laws governing environmental
protection and occupational health and safety matters. These laws regulate such
issues as wastewater, stormwater, solid and hazardous wastes and materials, and
air quality. Under these laws, we may be liable for, among other things, (1) the
costs of investigating and remediating contamination at our sites as well as
sites to which we sent hazardous wastes for disposal or treatment regardless of
fault and (2) fines and penalties for non-compliance. Our operations generally
do not raise significant environmental risks, but we use hazardous materials to
clean and maintain equipment, and dispose of solid and hazardous waste and
wastewater from equipment washing, and store and dispense petroleum products
from underground and above-ground storage tanks located at certain of our
locations.
Based on the conditions currently known to us, we do not believe that
any pending or likely remediation and compliance costs will have a material
adverse effect on our business. We cannot be certain, however, as to the
potential financial impact on our business if new adverse environmental
conditions are discovered or environmental and safety requirements become more
stringent. If we are required to incur environmental compliance or remediation
costs that are not currently anticipated by us, our business could be adversely
affected depending on the magnitude of the cost.
Labor disputes could disrupt our ability to serve our customers or lead to
higher labor costs.
We have approximately 1,000 employees that are represented by unions
and covered by collective bargaining agreements. If we should experience a
prolonged labor dispute involving a significant number of our employees, our
ability to serve our customers could be adversely affected. Furthermore, our
labor costs could increase as a result of the settlement of actual or threatened
labor disputes.
Our operations outside the United States are subject to the risks normally
associated with international operations, which could adversely affect our
operating results.
Our operations outside the United States are subject to the risks
normally associated with international operations. These include (1) the need to
convert currencies, which could result in a gain or loss depending on
fluctuations in exchange rates, (2) the
10
need to comply with foreign laws and (3) the possibility of political or
economic instability in foreign countries.
Absence of dividends could reduce our attractiveness to investors.
We have never paid any dividends on our common stock and have no plans
to pay any such dividends in the foreseeable future. Furthermore, certain of the
agreements governing our outstanding indebtedness prohibit us from paying
dividends on our common stock or restrict our ability to pay such dividends. As
a result, our stock may be less attractive to certain investors than the stock
of dividend-paying companies.
Shares eligible for future sale could adversely affect the market price of our
common stock.
If our stockholders sell substantial amounts of our common stock
(including shares issued upon exercise of warrants, options or convertible
securities), the market price of our common stock could fall. Substantially all
of the outstanding shares of our common stock may be sold in the public market.
Our stockholders rights plan and anti-takeover provisions in our charter and
by-laws could limit our share price and deter a third party from acquiring our
company.
We have adopted a stockholders rights plan. This plan could make it
difficult for a third party to acquire our company without the consent of our
incumbent board of directors. Furthermore, certain provisions of our Certificate
of Incorporation and By-laws, as well as applicable Delaware law, could also
make it difficult for a third party to acquire our company without the consent
of the incumbent board. These provisions provide, among other things, that:
o the directors of our company (other than directors elected by
the holders of our outstanding preferred stock) are divided
into three classes, with directors of each class serving for a
staggered three-year period;
o directors may be removed only for cause and only upon the
affirmative vote of at least 66 2/3% of the voting power of
all the then outstanding shares of stock entitled to vote;
o stockholders may not act by written consent;
o stockholder nominations and proposals may only be made if
specified advance notice requirements are complied with;
o stockholders are precluded from calling a special meeting of
stockholders;
o the board of directors has the authority to issue shares of
preferred stock in one or more series and to fix the powers,
preferences and rights of any such series without stockholder
approval; and
o the holders of our Series C preferred stock would have the
right, following completion of specified hostile change of
control transactions, to elect a majority of our board of
directors.
Our stockholders rights plan and these provisions could:
11
o have the effect of delaying, deferring or preventing a change
of control that may be in the best interests of the
stockholders and that the stockholders may favor;
o discourage bids for our common stock at a premium over the
market price; and
o impede the ability of the holders of our common stock to
change our management.
The shares that we issue under this prospectus may be subject to substantial
restrictions on transfer.
The shares that we issue under this prospectus may be subject to
substantial restrictions on transfer as described under "Restrictions on
Resale." As a result, you may not be able to sell your shares when you wish to
and may be required to bear the risks of ownership of the shares for a prolonged
period.
ISSUANCE OF SHARES IN CONNECTION WITH ACQUISITIONS
General
We may, from time to time, make acquisitions. This prospectus covers up
to 4,000,000 shares of our common stock that we may, from time to time, issue:
o in connection with acquisition transactions; or
o upon the exercise or conversion of warrants or convertible
securities that we may issue in connection with acquisition
transactions.
Terms of Acquisition Transactions
We will establish the terms of each acquisition transaction through
negotiations with (1) one or more of the owners of the business or assets to be
acquired, (2) the management of the other company or companies that may be a
party to the transaction and/or (3) representatives of one or more of the
foregoing.
Structure of Acquisition Transactions
We may make acquisitions in different ways. These include purchasing
stock or other equity interests, purchasing assets, or merging or consolidating
with another company. We may make acquisitions directly or through subsidiaries.
Additional Information Concerning Specific Transactions
To the extent required by SEC rules and interpretations, we will
provide additional information concerning the terms of specific transactions. We
may provide this information in an amendment to the registration statement of
which this prospectus forms a part or, to the extent permitted by SEC rules and
interpretations, in a supplement to this prospectus or in a report that is
incorporated by reference herein.
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RESALE OF SHARES BY SELLING SECURITY HOLDERS
General
Persons that acquire shares from us pursuant to this prospectus may,
with our written consent, use this prospectus to resell such shares. We refer to
the persons that may use this prospectus to resell shares as "selling security
holders."
If a selling security holder transfers any of the shares covered by
this prospectus, the transferee may use this prospectus to resell such shares,
provided that (1) the transfer was a private placement and (2) to the extent
required by SEC rules, the transferee is identified in a supplement to this
prospectus.
Plan of Distribution for Sales by Selling Security Holders
The selling security holder may sell shares:
o through the New York Stock Exchange, in the over-the-counter
market, in privately negotiated transactions or otherwise;
o directly to purchasers or through agents, brokers, dealers or
underwriters;
o at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, or at negotiated
prices.
The method of sale may include any or all of the following:
o the sale of shares directly to purchasers;
o the sale of shares through brokers that solicit purchasers or
fill unsolicited orders;
o the sale of shares through underwritten public offerings;
o the sale of shares in other transactions in which
broker-dealers acquire the shares as principal and resell the
shares into the public or private markets;
o the pledge of shares to secure debts or other obligations of
the selling security holders and, in the event of default, the
sale of the shares by the pledgee as if it were the selling
security holder;
o the delivery of the shares to settle short positions;
o the writing of calls or puts with respect to the shares and
the delivery of the shares in settlement of such positions; or
o the establishment of other hedging transactions and the
delivery of the shares in settlement of these positions.
If a selling security holder sells shares through agents, brokers,
dealers or underwriters, such agents, brokers, dealers or underwriters may
receive compensation in the form of discounts, commissions or concessions. Such
compensation may be greater than customary compensation.
To the extent required by SEC rules and interpretations, we will use
our best efforts to file one or more supplements to this prospectus to describe
any material
13
information with respect to the plan of distribution not previously disclosed in
this prospectus or any material change to such information.
Limitation on Use of this Prospectus for Resales
You may not be able to use this prospectus for resale due to a number
of factors, including:
1. We may in our sole discretion withhold our consent to your use
of this prospectus for resales or impose conditions on such
use.
2. We make no commitment to maintain the effectiveness of the
registration statement of which this prospectus forms a part.
If such registration statement should cease to be effective,
this prospectus may no longer be used.
3. We may be required to update the registration statement of
which this prospectus forms a part. We make no commitment to
do so in a specific time frame or at all. If we are required
to update the registration statement, then you may not be able
to use this prospectus for resales until the required updating
is completed. See "Issuance of Shares in Connection with
Acquisitions--Additional Information Concerning Specific
Transactions."
If you are unable to use this prospectus for resales, you may be
subject to the restrictions on resale set forth in Rule 145 under the Securities
Act of 1933. For additional information concerning these restrictions, see
"Restrictions on Resale."
Additional Information Concerning Selling Security Holders
To the extent required, we will file one or more supplements to this
prospectus to (1) provide information concerning each selling security holder
and the shares that may be sold by each selling security holder and (2) describe
any material information with respect to the plan of distribution not previously
disclosed in this prospectus or any material change to such information.
RESTRICTIONS ON RESALE
The shares that we issue in connection with acquisitions may be subject
to restrictions on resale as described below.
Lock-up Agreements
We may negotiate lock-up agreements in connection with particular
acquisition transactions. These agreements may, among other things, prohibit a
recipient of shares from disposing of such shares for a specified time period.
Rule 145 Restrictions
Rule 145 under the Securities Act of 1933 restricts the resale of
certain shares that are issued in connection with acquisitions. If we issue
shares to you in connection with an acquisition and you are an affiliate of the
company that we are acquiring, your shares will be subject to the Rule 145
restrictions. This will be the case even if, upon completion of the transaction,
you are no longer an affiliate of such company and do not become an affiliate of
our company. The term "affiliate" is defined in Rule 144 under the Securities
Act of 1933.
14
If Rule 145 applies to your shares, you will not be permitted to resell
such shares, except (1) pursuant to an effective registration statement, (2)
pursuant to an applicable exemption from registration or (3) in compliance with
the volume limitations and manner of sale requirements of Rule 145. The
restrictions imposed by Rule 145 will generally expire one year after you
acquire your shares, provided that (i) you do not become an affiliate of our
company and (ii) we continue to be a reporting company under the Securities
Exchange Act of 1934.
If you propose to sell your shares in compliance with the volume
limitations and manner of sale requirements of Rule 145, then the maximum number
of shares that you may sell in any three-month period may not exceed the greater
of (i) 1% of our outstanding shares of common stock and (ii) the average weekly
reported volume of trading in our shares of common stock on the New York Stock
and all other national securities exchanges during the four calendar weeks
preceding such three-month period. In addition, you may only make sales in
"brokers transactions" (as defined by Rule 144 under the Securities Act of
1933).
If your shares are subject to Rule 145, you may be able to use this
prospectus to resell your shares as described under "Resale of Shares by Selling
Security Holders." Sales that are made under this prospectus will not be subject
to the volume limitations or manner of sale requirements of Rule 145. However,
as described under "Resale of Shares by Selling Security Holders--Limitations on
Use of this Prospectus for Resales," there are a number of factors that may
preclude you from using this prospectus for resales.
VALIDITY OF COMMON STOCK
The validity of the shares offered will be passed on for us by
Ehrenreich, Eilenberg & Krause LLP, 11 East 44th Street, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedules included herein and in our Annual Report on
Form 10-K for the year ended December 31, 2001, as set forth in their reports,
which are included and incorporated by reference in this prospectus and
elsewhere in the registration statement. Our consolidated financial statements
and schedules are included and incorporated by reference in reliance on Ernst &
Young LLP's reports, given on their authority as experts in accounting and
auditing.
15
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors........................................................... F-2
United Rentals, Inc. Consolidated Balance Sheets--December 31, 2001 and 2000............. F-3
United Rentals, Inc. Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999....................................................... F-4
United Rentals, Inc. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2001, 2000 and 1999....................................................... F-5
United Rentals, Inc. Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999....................................................... F-6
Notes to Consolidated Financial Statements............................................... F-8
F-1
REPORT OF INDEPENDENT AUDITORS
Board of Directors
United Rentals, Inc.
We have audited the accompanying consolidated balance sheets of United
Rentals, Inc. as of December 31, 2001 and 2000 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2001. These consolidated financial
statements are the responsibility of the management of United Rentals, Inc. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of United Rentals, Inc. at December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
February 19, 2002
F-2
UNITED RENTALS, INC.
CONSOLIDATED BALANCE SHEETS
December 31
--------------------------------
2001 2000
---------- ----------
(In thousands, except share data)
ASSETS
Cash and cash equivalents......................................................... $ 27,326 $ 34,384
Accounts receivable, net of allowance for doubtful accounts of $47,744 in 2001 and
$55,624 in 2000................................................................. 450,273 469,594
Inventory......................................................................... 85,764 133,380
Prepaid expenses and other assets................................................. 133,217 104,493
Rental equipment, net............................................................. 1,747,182 1,732,835
Property and equipment, net....................................................... 410,053 422,239
Goodwill, net of accumulated amortization of $161,570 in 2001 and
$103,219 in 2000................................................................ 2,199,774 2,215,532
Other intangible assets, net...................................................... 7,927 11,476
---------- ----------
$5,061,516 $5,123,933
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable............................................................... $ 204,773 $ 260,155
Debt........................................................................... 2,459,522 2,675,367
Deferred taxes................................................................. 297,024 206,243
Accrued expenses and other liabilities......................................... 174,687 136,225
---------- ----------
Total liabilities.......................................................... 3,136,006 3,277,990
Commitments and contingencies
Company-obligated mandatorily redeemable convertible preferred securities of
a subsidiary trust.............................................................. 300,000 300,000
Series A and B preferred stock.................................................... 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, 73,361,407
shares issued and outstanding in 2001 and 71,065,707 in 2000................. 734 711
Additional paid-in capital..................................................... 1,243,586 765,529
Deferred compensation.......................................................... (55,794)
Retained earnings.............................................................. 467,106 355,850
Accumulated other comprehensive loss........................................... (30,127) (6,947)
---------- ----------
Total stockholders' equity................................................. 1,625,510 1,115,143
---------- ----------
$5,061,516 $5,123,933
========== ==========
See accompanying notes.
F-3
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31
----------------------------------------
2001 2000 1999
---------- ---------- ----------
(In thousands, except per share amounts)
Revenues:
Equipment rentals.................................... $2,212,900 $2,056,683 $1,581,026
Sales of rental equipment............................ 147,101 347,678 235,678
Sales of equipment and merchandise and other revenues 526,604 514,500 416,924
---------- ---------- ----------
Total revenues........................................ 2,886,605 2,918,861 2,233,628
Cost of revenues:
Cost of equipment rentals, excluding depreciation.... 1,053,635 907,477 676,972
Depreciation of rental equipment..................... 320,963 328,131 280,641
Cost of rental equipment sales....................... 88,742 208,182 136,678
Cost of equipment and merchandise sales and other
operating costs.................................... 383,795 386,501 314,419
---------- ---------- ----------
Total cost of revenues................................ 1,847,135 1,830,291 1,408,710
---------- ---------- ----------
Gross profit.......................................... 1,039,470 1,088,570 824,918
Selling, general and administrative expenses.......... 441,751 454,330 352,595
Restructuring charge.................................. 28,922
Non-rental depreciation and amortization.............. 106,763 86,301 62,867
---------- ---------- ----------
Operating income...................................... 462,034 547,939 409,456
Interest expense...................................... 221,563 228,779 139,828
Preferred dividends of a subsidiary trust............. 19,500 19,500 19,500
Other (income) expense, net........................... 6,421 (1,836) 8,321
---------- ---------- ----------
Income before provision for income taxes and
extraordinary item.................................. 214,550 301,496 241,807
Provision for income taxes............................ 91,977 125,121 99,141
---------- ---------- ----------
Income before extraordinary item...................... 122,573 176,375 142,666
Extraordinary item, net of tax benefit of $6,759...... 11,317
---------- ---------- ----------
Net income............................................ $ 111,256 $ 176,375 $ 142,666
========== ========== ==========
Earnings per share--basic:
Income before extraordinary item..................... $ 1.70 $ 2.48 $ 2.00
Extraordinary item, net.............................. 0.16
---------- ---------- ----------
Net income........................................... $ 1.54 $ 2.48 $ 2.00
========== ========== ==========
Earnings per share--diluted:
Income before extraordinary item..................... $ 1.30 $ 1.89 $ 1.53
Extraordinary item, net.............................. 0.12
---------- ---------- ----------
Net income........................................... $ 1.18 $ 1.89 $ 1.53
========== ========== ==========
See accompanying notes.
F-4
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
--------------
Series C Series D
Perpetual Perpetual
Convertible Convertible Number Additional Compre-
Preferred Preferred of Paid-in Deferred Retained hensive
Stock Stock Shares Amount Capital Compensation Earnings Income
----------- ----------- ------ ------ ---------- ------------ -------- --------
(In thousands)
Balance, December 31, 1998.............. 68,428 $ 684 $ 689,018 $ 36,809
Comprehensive income:
Net income........................... 142,666 $142,666
Other comprehensive income:
Foreign currency translation
adjustments........................ 598
--------
Comprehensive income.................. $143,264
========
Issuance of common stock.............. 2,292 23 64,678
Exercise of common stock options...... 1,331 14 32,477
----- ----- ------ ------ ---------- -------- --------
Balance, December 31, 1999.............. 72,051 721 786,173 179,475
Comprehensive income:
Net income........................... 176,375 $176,375
Other comprehensive income:
Foreign currency translation
adjustments........................ (7,264)
--------
Comprehensive income.................. $169,111
========
Issuance of common stock.............. 774 8 9,867
Exercise of common stock options...... 26 421
Shares repurchased and retired........ (1,785) (18) (30,932)
----- ----- ------ ------ ---------- -------- --------
Balance, December 31, 2000.............. 71,066 711 765,529 355,850
Comprehensive income:.................
Net income........................... 111,256 $111,256
Other comprehensive income:
Foreign currency translation
adjustments........................ (16,137)
Cumulative effect on equity of
adopting SFAS 133, net of tax of
$1,784............................. (2,516)
Derivatives qualifying as hedges,
net of tax of $3,212............... (4,527)
--------
Comprehensive income.................. $ 88,076
========
Issuance of common stock under
deferred compensation plans.......... 2,928 29 61,941 $(61,970)
Amortization of deferred
compensation......................... 6,176
Issuance of Series C perpetual
convertible preferred stock.......... $ 3 286,734
Issuance of Series D perpetual
convertible preferred stock.......... $ 2 143,667
Issuance of common stock.............. 3 50
Exercise of common stock options...... 715 8 10,409
Shares repurchased and retired........ (1,351) (14) (24,744)
----- ----- ------ ------ ---------- -------- --------
Balance, December 31, 2001.............. $ 3 $ 2 73,361 $ 734 $1,243,586 $(55,794) $467,106
===== ===== ====== ====== ========== ======== ========
Accumulated
Other
Comprehensive
(Loss) Income
-------------
Balance, December 31, 1998.............. $ (281)
Comprehensive income:
Net income...........................
Other comprehensive income:
Foreign currency translation
adjustments........................ 598
Comprehensive income..................
Issuance of common stock..............
Exercise of common stock options......
--------
Balance, December 31, 1999.............. 317
Comprehensive income:
Net income...........................
Other comprehensive income:
Foreign currency translation
adjustments........................ (7,264)
Comprehensive income..................
Issuance of common stock..............
Exercise of common stock options......
Shares repurchased and retired........
--------
Balance, December 31, 2000.............. (6,947)
Comprehensive income:.................
Net income...........................
Other comprehensive income:
Foreign currency translation
adjustments........................ (16,137)
Cumulative effect on equity of
adopting FAS 133, net of tax of
$1,784............................. (2,516)
Derivatives qualifying as hedges,
net of tax of $3,212............... (4,527)
Comprehensive income..................
Issuance of common stock under
deferred compensation plans..........
Amortization of deferred
compensation.........................
Issuance of Series C perpetual
convertible preferred stock..........
Issuance of Series D perpetual
convertible preferred stock..........
Issuance of common stock..............
Exercise of common stock options......
Shares repurchased and retired........
--------
Balance, December 31, 2001.............. $(30,127)
========
See accompanying notes.
F-5
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-----------------------------------
2001 2000 1999
----------- --------- -----------
(In thousands)
Cash Flows From Operating Activities:
Net income....................................................................... $ 111,256 $ 176,375 $ 142,666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................. 427,726 414,432 343,508
Gain on sales of rental equipment.............................................. (58,359) (139,496) (99,000)
Gain on sales of businesses.................................................... (4,084) (1,842)
Amortization of deferred compensation.......................................... 6,176
Restructuring charge........................................................... 10,893
Extraordinary item............................................................. 18,076
Deferred taxes................................................................. 100,683 109,280 41,820
Changes in operating assets and liabilities:
Accounts receivable............................................................ 24,888 8,613 (93,716)
Inventory...................................................................... 87,084 69,706 (6,544)
Prepaid expenses and other assets.............................................. 8,148 (29,848) 7,257
Accounts payable............................................................... (58,713) (16,091) 64,453
Accrued expenses and other liabilities......................................... 18,852 (76,166) 22,758
----------- --------- -----------
Net cash provided by operating activities..................................... 696,710 512,721 421,360
----------- --------- -----------
Cash Flows From Investing Activities:
Purchases of rental equipment.................................................... (449,770) (808,204) (718,112)
Purchases of property and equipment.............................................. (47,548) (153,770) (123,649)
Proceeds from sales of rental equipment.......................................... 147,101 347,678 235,678
Proceeds from sales of businesses................................................ 19,246 6,521
Purchases of other companies..................................................... (54,838) (347,337) (986,790)
Payments of contingent purchase price............................................ (2,103) (16,266) (8,216)
In-process acquisition costs..................................................... (2,485) (4,285) (1,002)
----------- --------- -----------
Net cash used in investing activities......................................... (409,643) (962,938) (1,595,570)
----------- --------- -----------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net of issuance costs.................... 64,701
Proceeds from the issuance of Series A Preferred, net of issuance costs.......... 287,000
Proceeds from the issuance of Series B Preferred, net of issuance costs.......... 143,800
Proceeds from debt............................................................... 2,053,467 456,202 1,083,616
Payments on debt................................................................. (2,300,507) (134,599) (497,650)
Proceeds from sale-leaseback..................................................... 12,435 193,478 88,000
Payments of financing costs...................................................... (29,042) (16,408) (19,443)
Proceeds from the exercise of common stock options............................... 10,417 331 26,989
Shares repurchased and retired................................................... (24,758) (30,950)
----------- --------- -----------
Net cash provided by (used in) financing activities........................... (277,988) 468,054 1,177,013
Effect of foreign exchange rates................................................. (16,137) (7,264) 598
----------- --------- -----------
Net increase (decrease) in cash and cash equivalents............................. (7,058) 10,573 3,401
Cash and cash equivalents at beginning of year................................... 34,384 23,811 20,410
----------- --------- -----------
Cash and cash equivalents at end of year......................................... $ 27,326 $ 34,384 $ 23,811
=========== ========= ===========
See accompanying notes.
F-6
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
Year Ended December 31
-------------------------------
2001 2000 1999
-------- --------- ----------
(In thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest................................................ $230,385 $ 248,763 $ 124,285
Cash paid for taxes, net of refunds................................... $(30,799) $ 23,746 $ 17,509
Supplemental schedule 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......................................... $ 21,465 $ 529,204 $1,468,567
Liabilities assumed.................................................. (4,612) (133,120) (472,382)
Less:
Amounts paid in common stock....................................... (10,000)
Amounts paid through issuance of debt.............................. (600) (65,500) (9,395)
-------- --------- ----------
16,253 320,584 986,790
Due to seller and other payments..................................... 38,585 26,753
-------- --------- ----------
Net cash paid......................................................... $ 54,838 $ 347,337 $ 986,790
======== ========= ==========
See accompanying notes.
F-7
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
United Rentals, Inc. is principally a holding company ("Holdings") and
conducts its operations primarily through its wholly owned subsidiary United
Rentals (North America), Inc. ("URI") and subsidiaries of URI. Holdings was
incorporated in July 1998 and became the parent of URI on August 5, 1998,
pursuant to the reorganization of the legal structure of URI. Prior to such
reorganization, the name of URI was United Rentals, Inc. References herein to
the "Company" refer to Holdings and its subsidiaries, with respect to periods
following the reorganization, and to URI and its subsidiaries, with respect to
periods prior to the reorganization. As a result of the reorganization,
Holdings' primary asset is its sole ownership of all issued and outstanding
shares of common stock of URI. URI's various credit agreements and debt
instruments place restrictions on its ability to transfer funds to its
shareholder.
The Company rents a broad array of equipment to a diverse customer base
that includes construction and industrial companies, manufacturers, utilities,
municipalities, homeowners and others in the United States, Canada and Mexico.
In addition to renting equipment, the Company sells used rental equipment, acts
as a dealer for new equipment and sells related merchandise, parts and service.
The nature of the Company's business is such that short-term obligations are
typically met by cash flow generated from long-term assets. Therefore, the
accompanying balance sheets are presented on an unclassified basis.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, giving retroactive effect for
the reorganization for all periods presented. All significant intercompany
accounts and transactions have been eliminated.
2. Summary of Significant Accounting Policies
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts. This allowance
reflects the Company's estimate of the amount of its receivables that it will
be unable to collect.
Inventory
Inventory consists of equipment, tools, parts, fuel and related supply
items. Inventory is stated at the lower of cost or market and is net of a
reserve for obsolescence and shrinkage of $9.4 million and $15.5 million at
December 31, 2001 and 2000, respectively. Cost is determined on either a
weighted average or first-in, first-out method.
Rental Equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
estimated useful lives for rental equipment is two to ten years. Rental
equipment is depreciated to a salvage value of zero to ten percent of cost.
Ordinary repair and maintenance costs are charged to operations as incurred.
F-8
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The range of estimated
useful lives for property and equipment is two to thirty-nine years. Ordinary
repair and maintenance costs are charged to operations as incurred. Leasehold
improvements are amortized using the straight-line method over their estimated
useful lives or the remaining life of the lease, whichever is shorter.
Goodwill
Goodwill consists of the excess of cost over the fair value of identifiable
net assets of businesses acquired and is amortized on a straight-line basis
over forty years. Beginning January 1, 2002, goodwill will no longer be
amortized, but will be tested on at least an annual basis for impairment, see
"--Impact of Recently Issued Accounting Standards" for further information.
Other Intangible Assets
Other intangible assets consists of non-compete agreements. The non-compete
agreements are being amortized on a straight-line basis for a period ranging
from three to eight years.
Long-Lived Assets
Long-lived assets are recorded at the lower of amortized cost or fair
value. As part of an ongoing review of the valuation of long-lived assets, the
Company assesses the carrying value of such assets if facts and circumstances
suggest they may be impaired. If this review indicates that the carrying value
of these assets may not be recoverable, as determined by a nondiscounted cash
flow analysis over the remaining useful life, the carrying value would be
reduced to its estimated fair value. There have been no material impairments
recognized in these financial statements.
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. Derivative financial instruments are periodically
used by the Company in the management of its interest rate and foreign currency
exposures. Derivative financial instruments are not used for trading purposes.
Translation of Foreign Currency
Assets and liabilities of the Company's subsidiaries operating outside the
United States which account in a functional currency other than U.S. dollars
are translated into U.S. dollars using exchange rates at the end of the year.
Revenues and expenses are translated at average exchange rates effective during
the year. Foreign currency translation gains and losses are included as a
component of accumulated other comprehensive loss within shareholders' equity.
F-9
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for accounts
receivable, accounts payable, accrued expenses and other liabilities
approximate fair value due to the immediate to short-term maturity of these
financial instruments. The fair values of the revolving credit facility, term
loan, and receivables securitization are determined using current interest
rates for similar instruments as of December 31, 2001 and 2000 and approximate
the carrying value of these financial instruments due to the fact that the
underlying instruments include provisions to adjust interest rates to
approximate fair market value. The estimated fair value of the Company's other
financial instruments at December 31, 2001 and 2000 are based upon available
market information and are as follows:
2001 2000
-------------------------- --------------------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ---------- --------------- ----------
(In thousands)
Redeemable convertible preferred
securities........................ $ 300,000 $ 204,480 $300,000 $133,125
Senior and senior subordinated notes 1,401,653 1,427,850 951,153 702,500
Other debt.......................... 40,717 40,717 94,086 94,086
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 stock 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 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
10). The Series C Preferred and Series D Preferred stock is not subject to
mandatory redemption on a hostile change of control, and is classified as
stockholders' equity under the recently issued SEC guidance.
The effect of the foregoing is that the Company's perpetual convertible
preferred stock is classified as stockholders' equity as of September 28, 2001
and thereafter, but is classified outside of stockholders' equity for earlier
dates. Accordingly, the Company has restated the 2000 balance sheet 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.
Revenue Recognition
Revenue related to the sale of equipment and merchandise is recognized at
the time of delivery to, or pick-up by, the customer. Revenue related to rental
equipment is recognized over the contract term.
F-10
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Advertising Expense
The Company advertises primarily through trade publications and Yellow
Pages. Advertising costs are expensed as incurred and totaled $11.9 million,
$23.8 million and $19.0 million for the years ended December 31, 2001, 2000 and
1999, respectively.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on the
differences between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse. Recognition of deferred
tax assets is limited to amounts considered by management to be more likely
than not realized in future periods.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Significant estimates include restructuring
charges, allowance for doubtful accounts, useful lives for depreciation,
goodwill and other asset impairments, loss contingencies and fair values of
financial instruments. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions.
Concentration of credit risk with respect to accounts receivable are
limited because a large number of geographically diverse customers make up the
Company's customer base. No single customer represents greater than 1% of total
accounts receivable. The Company controls credit risk through credit approvals,
credit limits, and monitoring procedures.
Stock-Based Compensation
The Company accounts for its stock based compensation arrangements under
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees". Since stock options are granted by
the Company with exercise prices at or greater than the fair value of the
shares at the date of grant, no compensation expense is recognized.
Insurance
The Company is insured for general liability, workers' compensation, and
group medical claims up to a specified claim and aggregate amounts (subject to
a deductible of one million dollars). Insured losses subject to this deductible
are accrued based upon the aggregate liability for reported claims incurred and
an estimated liability for claims incurred but not reported. These liabilities
are not discounted.
F-11
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Impact of Recently Issued Accounting Standards
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. Effective July 1, 2001, the Company
adopted SFAS No. 141.
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. Goodwill amortization for the year ended December 31, 2001 was
approximately $58.4 million. The Company is currently performing impairment
tests in connection with the adoption of this standard on January 1, 2002 and
estimates the non-cash transition charge to be approximately $350 million,
which will be recognized in the first quarter of 2002. This charge will be
recorded on the income statement as a "Cumulative Effect of Change in
Accounting Principle" and will reduce our stockholders' equity by the amount of
the charge.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". This standard addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of". This standard is effective for
fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 is
not expected to have a material effect on the Company's consolidated financial
position or results of operations.
Reclassifications
Certain prior year balances have been reclassified to conform to the 2001
presentation.
3. Acquisitions
The acquisitions completed during the years ended December 31, 2001, 2000
and 1999 include 3, 53 and 102 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 aggregate initial consideration paid by the Company for 2001
acquisitions that were accounted for as purchases was $12.1 million and
consisted of approximately $11.5 million in cash and $0.6 million in seller
notes. In addition, the Company repaid or assumed outstanding indebtedness in
the aggregate amount of approximately $4.9 million.
During 2000, the Company purchased the outstanding stock and certain assets
of (i) Liddell Brothers Inc., in February, (ii) Safety Lites Sales and Leasing,
Inc., in March, (iii) Durante Equipment Corp., Inc., in June, (iv) Horizon High
Reach, Inc., in September, and (v) Wiese Planning & Engineering Inc., in
December. The aggregate initial consideration paid for these five acquisitions
that were accounted for as purchases was approximately $153.1 million and
consisted of $83.8 million in cash and 761,905 shares of common stock and $59.3
million in seller notes. In addition, the Company repaid or assumed outstanding
indebtedness of these companies acquired in the aggregate amount of
approximately $5.5 million.
F-12
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The aggregate initial consideration paid by the Company for other 2000
acquisitions that were accounted for as purchases was $210.2 million and
consisted of approximately $184.6 million in cash and $6.2 million in seller
notes. In addition, the Company repaid or assumed outstanding indebtedness of
the companies acquired in the other 2000 acquisitions in the aggregate amount
of $77.5 million.
During 1999, the Company purchased the outstanding stock and certain assets
of (i) National Equipment Finance Company, in June, (ii) Mi-Jack Products, Inc.
and related entities, in May, (iii) Elmen Rent All, Inc., in June, (iv) Forte,
Inc., in March, and (v) Arayco, Inc. in June. The aggregate
initial consideration paid for these five acquisitions that were accounted for
as purchases was approximately $275.4 million and consisted of $270.4 million
in cash and $5.0 million in seller notes. In addition, the Company repaid or
assumed outstanding indebtedness of these companies acquired in the aggregate
amount of approximately $99.8 million.
The aggregate initial consideration paid by the Company for other 1999
acquisitions accounted for as purchases was $663.6 million and consisted of
approximately $659.2 million in cash and $4.4 million in seller notes. In
addition, the Company repaid or assumed outstanding indebtedness of the
companies acquired in the other 1999 acquisitions in the aggregate amount of
approximately $239.3 million.
The purchase prices for all acquisitions accounted for as purchases 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
consist 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
combined results of operations of the Company for the year ended December 31,
2000 as though each acquisition described above was made on January 1, 2000 (in
thousands, except per share data).
Revenues.................. $3,095,872
Net income................ 182,342
Basic earnings per share.. $ 2.54
==========
Diluted earnings per share $ 1.94
==========
Since the acquisitions made during the year ended December 31, 2001 had an
insignificant impact on the Company's pro forma results of operations, the pro
forma results of operations for the year ended December 31, 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.
Other Costs
The results of operations for the year ended December 31, 1999 include
pre-tax expenses related to a terminated tender offer totaling approximately
$18.2 million ($10.8 million after tax), primarily consisting of $8.3 million
in professional fees recorded in selling, general and administrative expense
and $9.9 million in financing commitment fees recorded in other (income)
expense, net.
F-13
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. 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 the abandonment of certain
information technology projects. During 2001, total activity was approximately
$21.9 million consisting of approximately $11.0 million of cash payments and
approximately $10.9 million of non-cash charges. Of the remaining $7.0 million
of this charge, approximately $3.6 million will be paid by December 31, 2002
and approximately $3.4 million will be paid in future periods.
Components of the restructuring charge are as follows:
Activity Balance
Restructuring in December 31,
Charge 2001 2001
------------- -------- ------------
(In thousands)
Costs to vacate facilities................ $18,291 $14,753 $3,538
Workforce reduction costs................. 5,666 3,611 2,055
Information technology costs.............. 4,965 3,548 1,417
------- ------- ------
$28,922 $21,912 $7,010
======= ======= ======
Under the restructuring plan, 31 underperforming branches and five
administrative offices were closed or consolidated as of December 31, 2001, the
Company's workforce will be reduced by 489 through the termination of branch
and administrative personnel (including 440 terminated as of December 31,
2001), and certain information technology hardware and software will no longer
be used. The workforce reduction 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). 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).
5. Rental Equipment
Rental equipment consists of the following:
December 31
----------------------
2001 2000
---------- ----------
(In thousands)
Rental equipment.................................. $2,485,573 $2,281,994
Less accumulated depreciation..................... (738,391) (549,159)
---------- ----------
Rental equipment, net............................. $1,747,182 $1,732,835
---------- ----------
F-14
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Property and Equipment
Property and equipment consist of the following:
December 31
--------------------
2001 2000
--------- ---------
(In thousands)
Land...................................................... $ 45,050 $ 53,612
Buildings................................................. 91,097 104,925
Transportation equipment.................................. 247,548 228,265
Machinery and equipment................................... 47,672 36,587
Furniture and fixtures.................................... 61,573 56,109
Leasehold improvements.................................... 61,194 48,952
--------- ---------
554,134 528,450
Less accumulated depreciation and amortization............ (144,081) (106,211)
--------- ---------
Property and equipment, net............................... $ 410,053 $ 422,239
========= =========
7. Goodwill Amortization
As discussed above in Note 2, goodwill will no longer be amortized upon the
adoption of SFAS No. 142. The table below shows a reconciliation of reported
income before extraordinary item, net income and earnings per share to adjusted
income before extraordinary item, net income and earnings per share excluding
goodwill amortization as if the elimination of goodwill amortization requirement
under SFAS No. 142 was adopted on January 1, 1999 (in thousands, except per
share data):
Year Ended December 31
--------------------------------
2001 2000 1999
--------- --------- --------
Income before extraordinary item ............ $122,573 $176,375 $142,666
Goodwill amortization expense, net of tax ... 46,022 43,216 28,508
-------- -------- --------
Adjusted income before extraordinary item ... $168,595 $219,591 $171,174
======== ======== ========
Net income .................................. $111,256 $176,375 $142,666
Goodwill amortization expense, net of tax ... 46,022 43,216 28,508
-------- -------- --------
Adjusted net income ......................... $157,278 $219,591 $171,174
======== ======== ========
Earnings per share - basic:
Income before extraordinary item ............ $ 1.70 $ 2.48 $ 2.00
Goodwill amortization expense, net of tax ... 0.64 0.61 0.40
-------- -------- --------
Adjusted income before extraordinary item ... $ 2.34 $ 3.09 $ 2.40
======== ======== ========
Earnings per share - basic:
Net income .................................. $ 1.54 $ 2.48 $ 2.00
Goodwill amortization expense, net of tax ... 0.64 0.61 0.40
-------- -------- --------
Adjusted net income ......................... $ 2.18 $ 3.09 $ 2.40
======== ======== ========
Earnings per share - diluted:
Income before extraordinary item ............ $ 1.30 $ 1.89 $ 1.53
Goodwill amortization expense, net of tax ... 0.48 0.44 0.30
-------- -------- --------
Adjusted income before extraordinary item ... $ 1.78 $ 2.33 $ 1.83
======== ======== ========
Earnings per share - diluted:
Net income .................................. $ 1.18 $ 1.89 $ 1.53
Goodwill amortization expense, net of tax ... 0.49 0.44 0.30
-------- -------- --------
Adjusted net income ......................... $ 1.67 $ 2.33 $ 1.83
======== ======== ========
8. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
December 31
-----------------
2001 2000
-------- --------
(In thousands)
Accrued profit sharing....................................... $ 40,412 $ 39,485
Accrued insurance............................................ 18,559 15,428
Accrued interest............................................. 47,671 36,993
Other........................................................ 68,045 44,319
-------- --------
$174,687 $136,225
======== ========
F-15
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Debt
Debt consists of the following:
December 31
---------------------
2001 2000
---------- ----------
(In thousands)
Credit Facility, interest payable at a weighted average rate of
4.5% and 7.8% at December 31, 2001 and 2000,
respectively.................................................. $ 71,259 $ 337,000
Term Loan, interest payable at 5.3% at December 31, 2001........ 744,375
Term Loan B, interest payable at 8.9% at
December 31, 2000............................................. 246,875
Term Loan C, interest payable at 9.3% at
December 31, 2000............................................. 748,125
Term Loan D, interest payable at a weighted average rate of
9.2% at December 31, 2000..................................... 198,128
9 1/2% Senior Subordinated Notes, interest payable
semi-annually................................................. 200,000 200,000
8.8% Senior Subordinated Notes, interest payable semi-annually.. 201,653 201,153
9 1/4% Senior Subordinated Notes, interest payable
semi-annually................................................. 300,000 300,000
9% Senior Subordinated Notes, interest payable semi-annually.... 250,000 250,000
10 3/4% Senior Notes, interest payable semi-annually............ 450,000
Receivables securitization, interest payable at 2.6% and 7.4% at
December 31, 2001 and 2000, respectively...................... 201,518 100,000
Other debt, interest payable at various rates ranging from 5.3%
to 10% and 4% to 11% at December 31, 2001 and 2000,
respectively, due through 2005................................ 40,717 94,086
---------- ----------
$2,459,522 $2,675,367
========== ==========
Refinancing Transaction. In April 2001, the Company obtained the new
senior secured credit facility and issued the 10 3/4% senior notes both
described below. The proceeds from the senior secured credit facility and
senior notes 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.
F-16
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
New Senior Secured Credit Facility. The new senior secured credit facility
that the Company obtained in April 2001 is comprised of a revolving credit
facility and a term loan.
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 ($65.5 million outstanding as of December 31, 2001). The
revolving credit facility will mature and terminate on October 20, 2006.
As of December 31, 2001, borrowings under the revolving credit facility
accrue interest, at the Company's 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 1.25% or (B) an adjusted LIBOR
rate plus a margin of 2.25%. The above interest rate margins are adjusted
quarterly based on the Company's 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.
As of December 31, 2001, borrowings by the Canadian subsidiary under the
revolving credit facility 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 1.25% or (Y) the B/A rate (which is equal
to the Chase Manhattan Bank of Canada's B/A rate) plus a margin of 2.25%. The
above interest rate margins are adjusted quarterly based on the Company's
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 URI's 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%.
F-17
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Covenants. The agreements governing the new senior secured credit facility
contain certain covenants that require 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.
Guarantees and Security. 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 the Company's other Canadian subsidiaries and
are secured by substantially all of the assets of this Canadian subsidiary and
the stock of its subsidiaries.
10 3/4% Senior Notes. URI issued $450 million aggregate principal amount
of 10 3/4% Senior Notes (the "10 3/4% Notes") which are due April 15, 2008. The
net proceeds from the sale of the 10 3/4% Notes were approximately $439.9
million (after deducting the initial purchasers' discount and offering
expenses). The 10 3/4% Notes are unsecured and are guaranteed by Holdings and
URI's domestic subsidiaries. The 10 3/4% Notes mature on April 15, 2008 and may
be redeemed by URI on or after April 15, 2005, at specified redemption prices
that 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 10 3/4% Notes at
a redemption price of 110.75%. The indenture governing the 10 3/4% 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.
Senior Subordinated Notes. The senior subordinated notes shown in the debt
table above were issued by URI, are unsecured, and are guaranteed by URI's
domestic subsidiaries. The 9 1/2% Senior Subordinate Notes mature on June 1,
2008 and may be redeemed by URI on or after June 1, 2003, at specified
redemption prices that range from 104.75% in 2003 to 100.0% in 2006 and
thereafter. The 8.80% Senior Subordinated Notes mature on August 15, 2008 and
may be redeemed by URI on or after August 15, 2003, at specified redemption
prices that range from 104.4% in 2003 to 100.0% in 2006 and thereafter. The
9 1/4% Senior Subordinated Notes mature on January 15, 2009 and may be redeemed
by URI on or after June 15, 2004, at specified redemption prices that range
from 104.625% in 2004 to 100.0% in 2007 and thereafter. The 9% Senior
Subordinated Notes mature on April 1, 2009 and may be redeemed by URI on or
after April 1, 2004, at specified redemption prices that range from 104.5% in
2004 to 100.0% in 2007 and thereafter.
The indentures governing URI's senior subordinated notes contain 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.
F-18
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Receivables Securitization. The Company has an accounts receivable
securitization facility under which one of its subsidiaries can borrow up to
$250 million against a collateral pool of accounts receivable. The borrowings
under the facility and the receivables in the collateral pool are included in
the liabilities and assets, respectively, reflected on the Company's
consolidated balance sheet. Key terms of this facility include: (i) borrowings
may be made only to the extent that the face amount of the receivables in the
collateral pool exceeds the outstanding loans by a specified amount, (ii) the
facility is structured so that the receivables in the collateral pool are the
lenders only source of repayment, (iii) prior to expiration or early
termination of the facility, amounts collected on the receivables may, subject
to certain conditions, be retained by the borrower, provided that the remaining
receivables in the collateral pool are sufficient to secure the then
outstanding borrowings and (iv) after expiration or early termination of the
facility, the Company will repay the borrowings.
As of December 31, 2001, (i) the outstanding borrowings under the facility
were approximately $201.5 million and (ii) the aggregate face amount of the
receivables in the collateral pool was approximately $337.6 million. The
agreement governing this facility, which was amended in June 2001, contemplates
that the term of the facility may extend for up to three years from the date of
the amended facility. However, on each anniversary of such date, the consent of
the lender is required for the facility to renew for the next year. The next
anniversary date is in June 2002. The Company plans to seek the lender's
approval for renewal.
Interest Rate Swap Agreements. As of December 31, 2001, the Company had
outstanding interest rate swap agreements that convert $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. Changes in the fair values of
the Company's cash flow hedges are recorded in other comprehensive income and
reclassified into earnings in the same periods during which the hedged
transactions affect earnings. The Company also had outstanding interest rate
swap agreements that convert $300.0 million of its fixed rate 9 1/4% Notes to a
floating rate instrument through 2009. These swap agreements are designated as
fair value hedges. Changes in the fair values of the Company's fair value
hedges, as well as the offsetting fair value changes in the hedged items, are
recorded in current income. The Company estimates the amount that will be
reclassified into earnings in 2002 is approximately $2.8 million. There is no
ineffectiveness related to the Company's hedges.
Maturities. Maturities of the Company's debt for each of the next five
years at December 31, 2001 are as follows (In thousands):
2002...... $ 222,784
2003...... 16,013
2004...... 25,088
2005...... 8,351
2006...... 254,071
Thereafter 1,933,215
The maturities in 2002 are comprised primarily of amounts outstanding under
the accounts receivable securitization facility. As described above, the annual
renewal of the Company's accounts receivable securitization facility requires
the lender's consent. If the Company does not obtain this consent, then the
facility will terminate in June 2002 and the Company will repay the borrowings
thereunder.
F-19
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Income Taxes
The provision for federal, state and provincial income taxes is as follows:
Year ended December 31
------------------------
2001 2000 1999
------- -------- -------
(In thousands)
Historical:
Domestic federal:
Current............ $ 10,419 $39,643
Deferred........... $81,507 97,756 37,598
------- -------- -------
81,507 108,175 77,241
Domestic state:
Current............ 1,978 3,587 10,405
Deferred........... 4,570 6,815 3,437
------- -------- -------
6,548 10,402 13,842
------- -------- -------
Total domestic..... 88,055 118,577 91,083
Foreign federal:
Current............ 1,626 1,061 4,917
Deferred........... 1,603 3,590 465
------- -------- -------
3,229 4,651 5,382
Foreign provincial:
Current............ 774 2,356
Deferred........... 693 1,119 320
------- -------- -------
693 1,893 2,676
------- -------- -------
Total foreign...... 3,922 6,544 8,058
------- -------- -------
$91,977 $125,121 $99,141
======= ======== =======
A reconciliation of the provision for income taxes and the amount computed
by applying the statutory federal income tax rate of 35% to income before
provision for income taxes and extraordinary item is as follows:
Year ended December 31
-------------------------
2001 2000 1999
------- -------- -------
(In thousands)
Computed tax rate at statutory tax rate....... $75,064 $105,524 $84,632
State income taxes, net of federal tax benefit 4,256 6,762 8,997
Non-deductible expenses....................... 13,072 9,992 6,265
Other......................................... (415) 2,843 (753)
------- -------- -------
$91,977 $125,121 $99,141
======= ======== =======
F-20
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The components of deferred income tax assets (liabilities) are as follows:
December 31
--------------------
2001 2000
--------- ---------
(In thousands)
Property and equipment..................... $(431,515) $(298,058)
Intangibles................................ (48,163) (32,518)
Reserves and allowances.................... 38,767 37,460
Net operating loss and credit carryforwards 140,455 84,257
Other...................................... 3,432 2,616
--------- ---------
$(297,024) $(206,243)
========= =========
The current and deferred tax assets and liabilities at December 31, 2001
include the effects of certain reclassifications related to differences between
the income tax provisions and tax returns for prior years. These
reclassifications had no effect on net income.
For financial reporting purposes, income before income taxes and
extraordinary items for the Company's foreign subsidiaries was $11.6 million
and $15.6 million for the years ended December 31, 2001 and 2000, respectively.
At December 31, 2001 and 2000, unremitted earnings of foreign subsidiaries were
approximately $30.6 million and $22.9 million, respectively. Since it is the
Company's intention to indefinitely reinvest these earnings, no United States
taxes have been provided. Determination of the amount of unrecognized deferred
tax liability on these unremitted taxes is not practicable.
The Company has net operating loss carryforwards ("NOL's") of $341.3
million for federal income tax purposes that expire through 2021.
11. Company-Obligated Mandatorily Redeemable Convertible Preferred Securities
of a Subsidiary Trust and Series A, B, C and D Preferred Stock
Trust Securities. In August 1998, a subsidiary trust (the "Trust") of
Holdings issued and sold in a private offering (the "Preferred Securities
Offering") $300.0 million of 30 year, 6 1/2% Convertible Quarterly Income
Preferred Securities (the "Preferred Securities"). The Trust used the proceeds
from the Preferred Securities Offering to purchase 6 1/2% convertible
subordinated debentures due 2028 (the "Debentures") from Holdings which
resulted in Holdings receiving all of the net proceeds of the Preferred
Securities Offering. Holdings in turn contributed the net proceeds of the
Preferred Securities Offering to URI. The Preferred Securities are non-voting
securities, carry a liquidation value of $50 per security and are convertible
into the Company's common stock at an initial rate of 1.146 shares per security
(equivalent to an initial conversion price of $43.63 per share). They are
convertible at any time at the holders' option and are redeemable, at the
Company's option, after three years, subject to certain conditions.
Holders of the Preferred Securities are entitled to preferential cumulative
cash distributions from the Trust at an annual rate of 6 1/2% of the
liquidation value, accruing from the original issue date and payable quarterly
in arrears beginning February 1, 1999. The distribution rate and dates
correspond to the interest rate and payments dates on the Debentures. Holdings
may defer interest payments on the Debentures for up to twenty consecutive
quarters, but not beyond the maturity date of the Debentures. If interest
payments on the Debentures are deferred, so are the payments on the Preferred
Securities. Under this circumstance, Holdings will be prohibited from paying
dividends on any of its capital stock or making payments with respect to its
debt that rank pari passu with or junior to the Debentures.
F-21
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Holdings has executed a guarantee with regard to payment of the Preferred
Securities to the extent that the Trust has sufficient funds to make the
required payments.
Series A Preferred and Series B Preferred. The Company sold 300,000 shares
of its Series A Preferred on January 7, 1999 and sold 150,000 shares of its
Series B Preferred on September 30, 1999. On September 28, 2001, the Company
entered into an agreement effecting (a) the exchange of the outstanding Series
A Preferred for an equal number of shares of Series C Preferred and (b) the
exchange of the outstanding Series B Preferred for an equal number of shares of
Series D Preferred.
Series C Preferred and Series D Preferred. There are 300,000 shares of the
Company's Series C Preferred outstanding and 150,000 shares of the Company's
Series D Preferred outstanding. The Series D Preferred includes 105,252 shares
designated as Class D-1 and 44,748 shares designated as Class D-2. The rights
of the two classes of Series D Preferred are substantially the same, except
that only the Class D-1 has the voting rights described below.
Principal terms of the Series C Preferred and Series D Preferred include
the following (subject to the special provisions described below that will
apply in the event of certain Non-Approved Change of Control transactions): (i)
each share is entitled to a liquidation preference of $1,000 per share; (ii) at
holder's option, each share of Series C Preferred is convertible into 40 shares
of common stock subject to adjustment (representing a conversion price of $25
per share based on the liquidation preference) and each share of Series D
Preferred is convertible into 33 1/3 shares of common stock subject to
adjustment (representing a conversion price of $30 per share based on the
liquidation preference); (iii) the holders of the Series C Preferred and Series
D Preferred (on an as converted basis) and the holders of the common stock vote
together as a single class on all matters (except that the Series C Preferred
may vote as a separate class as described in the next clause); (iv) the holders
of the Series C Preferred, voting separately as a single class, may elect two
directors (subject to reduction to one, if the shares of Series C Preferred
owned by specified holders cease to represent, on an as converted basis, at
least eight million shares of common stock, and reduction to zero, if such
shares of Series C Preferred cease to represent at least four million shares of
common stock), (v) there are no stated dividends on the Series C Preferred or
Series D Preferred, but the Series C Preferred and Series D Preferred, on an as
converted basis, will participate in any dividends declared on the common
stock, (vi) upon the occurrence of specified change of control transactions,
other than a Non-Approved Change of Control (as defined below), the Company
must offer to redeem the Series C Preferred and Series D Preferred at a price
per share equal to the liquidation preference plus an amount equal to 6.25% of
the liquidation preference compounded annually from the date of the issuance of
the Series A Preferred, in the case of the Series C Preferred, and the date of
the issuance of the Series B Preferred, in the case of the Series D Preferred,
to the redemption date, (vii) if the Company issues for cash, common stock (or
a series of preferred stock convertible into common stock) and the price for
the common stock is below the conversion price of the Series C Preferred, then
the Company must offer to repurchase a specified portion of the outstanding
Series C Preferred at the price per share set forth in the preceding clause,
and (viii) if the Company issues for cash, common stock (or a series of
preferred stock convertible into common stock) for a price for the common stock
below the conversion price of the Series D Preferred, then the Company must
offer to repurchase a specified portion of the outstanding Series D Preferred
at the price per share specified in the second preceding clause.
Special Rights of Series C Preferred and Series D Preferred Upon
Non-Approved Change 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,
F-22
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and the board does not offer the holders of the Series C Preferred and Series D
Preferred essentially the same redemption rights that apply to an Approved
Change of Control transaction: (i) the holders of the Series C Preferred would
elect a majority of the board for a specified period, (ii) the holders of the
Series C Preferred and Series D Preferred would be entitled to an additional
6.25% return on the liquidation preference, compounded annually from January
1999 for the Series C Preferred and from September 1999 for the Series D
Preferred, (iii) after the holders of the common stock receive an amount
equivalent to the liquidation preference, the holders of the Series C Preferred
and Series D Preferred would share with the holders of the common stock, on an
as converted basis, in any remaining amounts available for distribution and
(iv) the Series C Preferred and Series D Preferred would accrue dividends at a
maximum annual rate, compounded annually, equal to 18% of the liquidation
preference.
12. Capital Stock
Warrants. As of December 31, 2001 there are outstanding warrants to
purchase an aggregate of 7,139,296 shares of common stock. The weighted average
exercise price of the warrants is $11.76 per share. All warrants are currently
exercisable and may be exercised at any time through 2011.
Common Stock. The Company has a share repurchase program to acquire up to
$200 million of its issued and outstanding common stock. Share repurchases
under the program may be made from time to time, continuing through May 2003.
The Company repurchased and retired 1,350,600 and 1,785,015 shares of common
stock during 2001 and 2000, respectively.
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 not 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
December 31, 2001, 2,042,933 shares had been awarded under this plan at a
weighted-average price of $23.71 per share with vesting periods up to ten
years. 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 not 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 December 31, 2001, 885,054 shares had
been awarded under this plan at a weighted-average price of
$15.30 per share with vesting periods up to three years. 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).
The Company records the issuance of common 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
F-23
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
related vesting period. Amortization expense recognized for the year ended
December 31, 2001 for the awards of the above stock plans was approximately
$6.2 million.
1997 Stock Option Plan. The Company's 1997 Stock Option Plan provides for
the granting of options to purchase not more than an aggregate of 5,000,000
shares of common stock. Some or all of such options may be "incentive stock
options" within the meaning of the Internal Revenue Code. All officers,
directors and employees of the Company and other persons who perform services
on behalf of the Company are eligible to participate in this plan. Each option
granted pursuant to this plan must provide for an exercise price per share that
is at least equal to the fair market value per share of common stock on the
date of grant. No options may be granted under this plan after August 31, 2007.
As of December 31, 2001 and 2000, options to purchase an aggregate of 4,845,783
shares and 4,950,536 shares of common stock, respectively, were outstanding
under this plan. The exercise price of each option, the period during which
each option may be exercised and other terms and conditions of each option are
determined by the Board of Directors (or by a committee appointed by the Board
of Directors).
1998 Stock Option Plan. The Company's 1998 Stock Option Plan provides for
the granting of options to purchase not more than an aggregate of 4,200,000
shares of common stock. Some or all of the options issued under the 1998 Stock
Option Plan may be "incentive stock options" within the meaning of the Internal
Revenue Code. All officers and directors of the Company and its subsidiaries
are eligible to participate in the 1998 Stock Option Plan. Each option granted
pursuant to the 1998 Stock Option Plan must provide for an exercise price per
share that is at least equal to the fair market value per share of common stock
on the date of grant. No options may be granted under the 1998 Stock Option
Plan after August 20, 2008. As of December 31, 2001 and 2000, options to
purchase an aggregate of 3,686,667 shares and 4,200,000 shares of common stock,
respectively, were outstanding pursuant to this plan to executive officers and
directors. The exercise price of each option, the period during which each
option may be exercised and other terms and conditions of each option are
determined by the Board of Directors (or by a committee appointed by the Board
of Directors).
1998 Supplemental Stock Option Plan. The Company has adopted a stock
option plan pursuant to which options, for up to an aggregate of 5,600,000
shares of common stock, may be granted to employees who are not officers or
directors and to consultants and independent contractors who perform services
for the Company or its subsidiaries. As of December 31, 2001 and 2000, options
to purchase an aggregate of 5,342,097 shares and 5,373,509 shares of common
stock, respectively, were outstanding pursuant to this plan. The exercise price
of each option, the period during which each option may be exercised and other
terms and conditions of each option are determined by the Board of Directors
(or by a committee appointed by the Board of Directors).
1997 Performance Award Plan. Effective February 20, 1997, U.S. Rentals
adopted the 1997 Performance Award Plan under which stock options and other
awards could be granted to key employees and directors at prices and terms
established by U.S. Rentals at the date of grant. The options expire in 2007.
As a result of the Merger, all outstanding options to purchase shares of U.S.
Rentals common stock became fully vested and were converted into options to
purchase the Company's common stock. As of December 31, 2001 and 2000, options
to purchase an aggregate of 2,547,467 shares and 2,572,050 shares of common
stock, respectively, were outstanding pursuant to this plan.
F-24
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of the transactions within the Company's stock option plans
follows:
Weighted
Average
Exercise
Shares Price
---------- --------
Outstanding at December 31, 1998 14,044,814 19.60
Granted...................... 3,092,462 26.77
Exercised.................... (1,331,528) 20.74
Canceled..................... (152,506) 26.70
---------- ------
Outstanding at December 31, 1999 15,653,242 20.86
Granted...................... 1,921,125 16.56
Exercised.................... (26,307) 16.91
Canceled..................... (451,965) 27.03
---------- ------
Outstanding at December 31, 2000 17,096,095 20.23
Granted...................... 633,400 19.78
Exercised.................... (715,143) 14.24
Canceled..................... (592,338) 23.94
---------- ------
Outstanding at December 31, 2001 16,422,014 $20.22
========== ======
Exercisable at December 31, 2001 13,765,239 $20.37
========== ======
Options Outstanding Options Exercisable
-------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Amount Contractual Exercise Amount Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ----------- ----------- -------- ----------- --------
$10.00 - $15.00..... 4,227,133 6.7 years $12.39 4,016,649 $12.29
15.01 - 20.00..... 2,169,527 8.2 years 16.59 654,585 17.50
20.01 - 25.00..... 7,183,892 6.2 years 21.78 6,767,840 21.73
25.01 - 30.00..... 1,549,963 7.2 years 27.31 1,158,408 27.21
30.01 - 50.00..... 1,291,499 6.3 years 34.84 1,167,757 35.18
---------- ----------
16,422,014 6.7 years 20.22 13,765,239 20.37
========== ==========
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" in accounting for stock-based employee compensation arrangements
whereby no compensation cost related to stock options is deducted in
determining net income. Had compensation cost for the Company's stock option
plans been determined pursuant to SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and earnings per share would have
differed. The weighted average fair value of options granted was $7.34, $7.70
and $10.99 during 2001, 2000 and 1999, respectively. The fair value is
estimated on the date of grant using the Black-Scholes option pricing model
which uses subjective assumptions which can materially affect fair value
estimates and, therefore, does not necessarily provide a single measure of fair
value of options. Using the Black-Scholes option pricing model and a risk-free
interest rate average of 3.74%, 5.15% and 6.29% in 2001, 2000 and 1999,
respectively, a volatility factor for the market price of the Company's common
stock of 49%, 69% and 52% in 2001, 2000 and 1999, respectively, and a
weighted-average expected life of options of approximately three years in 2001,
2000 and 1999, the Company's net income, basic earnings per share and diluted
earnings per share would have been $103.1 million, $1.43 and $1.09,
F-25
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
respectively, for the year ended December 31, 2001, $156.4 million, $2.20 and
$1.69, respectively, for the year ended December 31, 2000 and $104.3 million,
$1.46 and $1.12, respectively, for the year ended December 31, 1999. For
purposes of these pro forma disclosures, the estimated fair value of options is
amortized over the options' vesting period. Since the number of options granted
and their fair value may vary significantly from year to year, the pro forma
compensation expense in future years may be materially different.
At December 31, 2001 there are (i) 7,139,296 shares of common stock
reserved for the exercise of warrants, (ii) 16,422,014 shares of common stock
reserved for issuance pursuant to options granted and that may be granted in
the future under the Company's stock option plans, (iii) 6,875,580 shares of
common stock reserved for the issuance of outstanding preferred securities of a
subsidiary trust, (iv) 17,000,000 shares of common stock reserved for the
issuance of Series C and Series D preferred stock and (v) 371,168 shares of
common stock reserved for the conversion of convertible debt.
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
deferring 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.
13. Comprehensive Income
The following table sets forth the Company's comprehensive income:
Year Ended
December 31
------------------
2001 2000
-------- --------
(In thousands)
Net income................................................................ $111,256 $176,375
Other comprehensive gain (loss):
Foreign currency translation adjustment............................... (16,137) (7,264)
Cumulative effect on equity of adopting SFAS No. 133, net of tax of
$1,784............................................................... (2,516)
Derivatives qualifying as hedges, net of tax of $3,212................. (4,527)
-------- --------
Comprehensive income...................................................... $ 88,076 $169,111
======== ========
F-26
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Earnings Per Share
The following table sets forth the computation of historical basic and
diluted earnings per share:
Year Ended December 31
-----------------------------------
2001 2000 1999
----------- ----------- -----------
(In thousands, except share and
per share data)
Numerator:
Income before extraordinary item............ $ 122,573 $ 176,375 $ 142,666
Plus: preferred dividends of a subsidiary
trust, net of taxes....................... 11,406
----------- ----------- -----------
Income available to common stockholders..... $ 122,573 $ 187,781 $ 142,666
=========== =========== ===========
Denominator:
Denominator for basic earnings per share-
weighted-average shares................... 72,141,128 71,069,174 71,353,127
Effect of dilutive securities:
Employee stock options.................... 1,507,820 1,517,015 4,651,237
Warrants.................................. 3,738,239 2,791,387 3,978,536
Series A Preferred........................ 12,000,000 11,802,740
Series B Preferred........................ 5,000,000 1,250,000
Series C Preferred........................ 12,000,000
Series D Preferred........................ 5,000,000
Company-obligated mandatorily
redeemable convertible preferred
securities of a subsidiary trust........ 6,876,003
----------- ----------- -----------
Denominator for dilutive earnings per share-
adjusted weighted-average shares.......... 94,387,187 99,253,579 93,035,640
=========== =========== ===========
Earnings per share-basic:
Income before extraordinary item............ $ 1.70 $ 2.48 $ 2.00
Extraordinary item, net..................... 0.16
----------- ----------- -----------
Net income.................................. $ 1.54 $ 2.48 $ 2.00
=========== =========== ===========
Earnings per share-diluted:
Income before extraordinary item............ $ 1.30 $ 1.89 $ 1.53
Extraordinary item, net..................... 0.12
----------- ----------- -----------
Net income.................................. $ 1.18 $ 1.89 $ 1.53
=========== =========== ===========
F-27
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Commitments and Contingencies
Operating Leases
The Company leases rental equipment, real estate and certain office
equipment under operating leases. Certain real estate leases require the
Company to pay maintenance, insurance, taxes and certain other expenses in
addition to the stated rentals. Future minimum lease payments, by year and in
the aggregate, for noncancellable operating leases with initial or remaining
terms of one year or more are as follows at December 31, 2001:
Real Rental Other
Estate Equipment Equipment
Leases Leases Leases
-------- --------- ---------
(In thousands)
2002...... $ 61,139 $ 84,486 $24,314
2003...... 57,356 72,813 22,131
2004...... 52,955 69,346 16,733
2005...... 45,573 57,551 4,973
2006...... 41,081 48,199 334
Thereafter 125,506 23
-------- -------- -------
$383,610 $332,418 $68,485
======== ======== =======
The Company was the seller-lessee in sale-leaseback transactions with
unrelated third parties in which it sold rental equipment and real estate for
aggregate proceeds of $51.0 million in 2001, rental equipment for aggregate
proceeds of $218.8 million in 2000, and rental equipment for aggregate proceeds
of $88.0 million in 1999. For the 2001 transactions, the Company leased back
the real estate over a 10-year period and the rental equipment for a minor
period of one to eight months. For the 2000 transactions, the Company leased
back a portion of the rental equipment for a minor period of one to eight
months, and the balance over a five-year period. For the 1999 transactions, the
Company leased back the rental equipment over a five-year period. The total
gains related to these transactions in 2001, 2000 and 1999 were, respectively,
approximately $21.6 million of which $1.4 million was deferred, approximately
$16.5 million of which $4.0 million was deferred, and approximately $6.3
million all of which was deferred. The deferred gains are being amortized over
the respective lease periods on a straight-line basis.
Rent expense under non-cancelable operating leases totaled $170.9 million,
$137.3 million and $65.5 million for the years ended December 31, 2001, 2000
and 1999, respectively. The Company's real estate leases provide for varying
terms and include 30 leases that are on a month-to-month basis and 30 leases
that provide for a remaining term of less than one year and do not provide a
renewal option.
Employee Benefit Plans
The Company currently sponsors one defined contribution 401(k) retirement
plan which is subject to the provisions of ERISA. The Company also sponsors a
deferred profit sharing plan for the benefit of the full time employees of its
Canadian subsidiaries. Under these plans, the Company matches a percentage of
the participants contributions up to a specified amount. Company contributions
to the plans were $6.0 million, $6.2 million and $4.6 million for the years
ended December 31, 2001, 2000 and 1999, respectively.
F-28
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Legal Matters
The Company is party to legal proceedings and potential claims arising in
the ordinary course of its business. In the opinion of management, the Company
has adequate legal defenses, reserves, or insurance coverage with respect to
these matters so that the ultimate resolution will not have a material adverse
effect on the Company's financial position, results of operations, or cash
flows. The Company had accrued $7.6 million at December 31, 2001 and 2000, to
cover the uninsured portion of estimated costs arising from these pending
claims and other potential unasserted claims.
Environmental Matters
The Company and its operations are subject to various laws and related
regulations governing environmental matters. Under such laws, an owner or
lessee of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances located on or in, or emanating from, such
property, as well as investigation of property damage. The Company incurs
ongoing expenses associated with the removal of underground storage tanks and
the performance of appropriate remediation at certain of its locations. The
Company believes that such removal and remediation will not have a material
adverse effect on the Company's financial position, results of operations, or
cash flows.
16. Segment Information
Each of the Company's branch locations is an operating segment which
consists of the rental and sales of equipment and related merchandise and
parts. Certain of the Company's branches also provide speciality traffic
control services as a product line and the amount of revenue attributable to
such services was $272.2 million, $245.0 million and $79.3 million during the
years ended December 31, 2001, 2000 and 1999, respectively. All of the
Company's branches have been aggregated into one reportable segment because
they offer similar products and services in similar markets and the factors
determining strategic decisions are comparable.
F-29
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company operates in the United States, Canada and Mexico. Revenues are
attributable to countries based upon the location of the customers. Geographic
area information for the years ended December 31, 2001, 2000 and 1999 is as
follows:
Year ended December 31
--------------------------------
2001 2000 1999
---------- ---------- ----------
(In thousands)
Revenues from external customers
Domestic................................................... $2,740,694 $2,753,266 $2,086,808
Foreign.................................................... 145,911 165,595 146,820
---------- ---------- ----------
Total revenues from external customers...................... $2,886,605 $2,918,861 $2,233,628
========== ========== ==========
Rental equipment, net
Domestic................................................... $1,630,411 $1,604,191 $1,537,199
Foreign.................................................... 116,771 128,644 122,534
---------- ---------- ----------
Total consolidated rental equipment, net.................... $1,747,182 $1,732,835 $1,659,733
========== ========== ==========
Property and equipment, net
Domestic................................................... $ 393,541 $ 405,873 $ 285,456
Foreign.................................................... 16,512 16,366 19,451
---------- ---------- ----------
Total consolidated property and equipment, net.............. $ 410,053 $ 422,239 $ 304,907
========== ========== ==========
Goodwill and other intangible assets, net
Domestic................................................... $2,086,481 $2,092,882 $1,740,326
Foreign.................................................... 121,220 134,126 123,046
---------- ---------- ----------
Total consolidated goodwill and other intangible assets, net $2,207,701 $2,227,008 $1,863,372
========== ========== ==========
F-30
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
17. Quarterly Financial Information (Unaudited)
Selected Financial Data
The following table of quarterly financial information has been prepared
from unaudited financial statements of the Company, and reflects adjustments
which are, in the opinion of management, necessary for a fair presentation of
the interim periods presented.
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(In thousands, except per share data)
For the year ended December 31, 2001:
Total revenues............................ $619,104 $768,013 $795,483 $704,005
Gross profit.............................. 202,567 286,063 305,242 245,598
Income before extraordinary item.......... 3,412 24,935 62,052 32,174
Extraordinary item........................ 11,317
Net income................................ 3,412 13,618 62,052 32,174
Basic earnings before extraordinary item
per share............................... $ 0.05 $ 0.35 $ 0.85 $ 0.45
Diluted earnings before extraordinary item
per share............................... 0.04 0.26 0.63 0.34
For the year ended December 31, 2000:
Total revenues............................ $578,962 $729,946 $859,033 $750,920
Gross profit.............................. 205,984 271,798 340,704 270,084
Net income................................ 17,411 47,199 75,391 36,374
Basic earnings per share.................. $ 0.24 $ 0.66 $ 1.07 $ 0.51
Diluted earnings per share................ 0.19 0.51 0.79 0.40
F-31
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
18. 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 that such information would not be material to
investors. However, condensed consolidating financial information as of
December 31, 2001 and 2000, and for each of the three years in the period ended
December 31, 2001, are presented. The condensed consolidating financial
information of the Company and its subsidiaries are as follows:
CONDENSED CONSOLIDATING BALANCE SHEET
December 30, 2001
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
---------- ---------- ------------ ------------- ------------ ------------
(In thousands)
ASSETS
Cash and cash equivalents......... $ 6,385 $ 19,798 $ 1,143 $ 27,326
Accounts receivable, net.......... 7,142 418,260 24,871 450,273
Intercompany receivable
(payable)....................... 89,612 39,548 (129,160)
Inventory......................... 36,335 46,410 3,019 85,764
Prepaid expenses and other
assets.......................... 57,764 64,699 1,935 8,819 133,217
Rental equipment, net............. 885,442 744,969 116,771 1,747,182
Property and equipment, net....... $ 26,793 135,240 231,508 16,512 410,053
Investment in subsidiaries........ 1,904,000 2,414,710 (4,318,710)
Intangible assets, net............ 855,360 1,231,121 121,220 2,207,701
---------- ---------- ---------- --------- ----------- ----------
$1,930,793 $4,487,990 $2,796,313 $ 156,311 $(4,309,891) $5,061,516
========== ========== ========== ========= =========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable............... $ 38,436 $ 155,029 $ 11,308 $ 204,773
Debt........................... $ 300,000 2,193,380 203,896 62,246 $ (300,000) 2,459,522
Deferred income taxes.......... 296,974 50 297,024
Accrued expenses and
other liabilities............. 5,283 57,108 96,793 12,253 3,250 174,687
---------- ---------- ---------- --------- ----------- ----------
Total liabilities............ 305,283 2,585,898 455,768 85,807 (296,750) 3,136,006
Commitments and contingencies
Company-obligated
mandatorily redeemable
convertible preferred securities
of a subsidiary trust........... 300,000 300,000
Stockholders' equity:
Preferred stock................ 5 5
Common stock................... 734 734
Additional paid-in capital..... 1,243,586 1,498,655 1,840,604 65,970 (3,405,229) 1,243,586
Deferred compensation.......... (55,794) (55,794)
Retained earnings.............. 467,106 410,480 499,941 27,618 (938,039) 467,106
Accumulated other
comprehensive loss........... (30,127) (7,043) (23,084) 30,127 (30,127)
---------- ---------- ---------- --------- ----------- ----------
Total stockholders'
equity..................... 1,625,510 1,902,092 2,340,545 70,504 (4,313,141) 1,625,510
---------- ---------- ---------- --------- ----------- ----------
$1,930,793 $4,487,990 $2,796,313 $ 156,311 $(4,309,891) $5,061,516
========== ========== ========== ========= =========== ==========
F-32
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
---------- ---------- ------------ ------------- ------------ ------------
(In thousands)
ASSETS
Cash and cash equivalents...... $ 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 subsidiaries..... 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
STOCKHOLDER'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 taxes.............. 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 contingencies
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
Stockholder's 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
comprehensive
loss....................... (6,947) (6,947) 6,947 (6,947)
---------- ---------- ---------- ---------- ----------- ----------
Total stockholder's
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
========== ========== ========== ========== =========== ==========
F-33
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2001
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- ---------- ------------ ------------ ------------ ------------
(In thousands)
Revenues:
Equipment rentals............... $ 907,070 $1,201,439 $104,391 $2,212,900
Sales of rental equipment....... 63,612 70,331 13,158 147,101
Sales of equipment and
merchandise and other
revenues....................... 244,020 254,222 28,362 526,604
-------- ---------- ---------- -------- --------- ----------
Total revenues.................... 1,214,702 1,525,992 145,911 2,886,605
Cost of revenues:
Cost of equipment rentals,
excluding depreciation......... 376,634 626,867 50,134 1,053,635
Depreciation of rental
equipment...................... 150,619 149,868 20,476 320,963
Cost of rental equipment sales.. 38,702 42,088 7,952 88,742
Cost of equipment and
merchandise sales and other
operating costs................ 177,659 185,223 20,913 383,795
-------- ---------- ---------- -------- --------- ----------
Total cost of revenues............ 743,614 1,004,046 99,475 1,847,135
-------- ---------- ---------- -------- --------- ----------
Gross profit...................... 471,088 521,946 46,436 1,039,470
Selling, general and
administrative expenses.......... 192,640 224,707 24,404 441,751
Restructuring charge.............. 8,877 17,096 2,949 28,922
Non-rental depreciation and
amortization..................... $ 7,862 42,012 51,014 5,875 106,763
-------- ---------- ---------- -------- --------- ----------
Operating income (loss)........... (7,862) 227,559 229,129 13,208 462,034
Interest expense.................. 19,500 211,220 7,834 2,509 $ (19,500) 221,563
Preferred dividends of a
subsidiary trust................. 19,500 19,500
Other (income) expense, net....... 25,586 (21,202) 2,037 6,421
-------- ---------- ---------- -------- --------- ----------
Income (loss) before provision
(benefit) for income taxes and
extraordinary item............... (27,362) (9,247) 242,497 8,662 214,550
Provision (benefit) for income
taxes............................ (11,355) (1,226) 100,636 3,922 91,977
-------- ---------- ---------- -------- --------- ----------
Income (loss) before
extraordinary item and equity in
net earnings of subsidiaries..... (16,007) (8,021) 141,861 4,740 122,573
Extraordinary item................ 11,317 11,317
-------- ---------- ---------- -------- --------- ----------
Income (loss) before equity in net
earnings of subsidiaries......... (16,007) (19,338) 141,861 4,740 111,256
Equity in net earnings of
subsidiaries..................... 127,263 146,601 (273,864)
-------- ---------- ---------- -------- --------- ----------
Net income........................ $111,256 $ 127,263 $ 141,861 $ 4,740 $(273,864) $ 111,256
======== ========== ========== ======== ========= ==========
F-34
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- ---------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals............... $ 851,541 $1,094,613 $ 110,529 $2,056,683
Sales of rental equipment....... 145,519 178,576 23,583 347,678
Sales of equipment and
merchandise and other
revenues....................... 253,798 229,219 31,483 514,500
-------- ---------- ---------- ---------- ---------- ----------
Total revenues.................... 1,250,858 1,502,408 165,595 2,918,861
Cost of revenues:
Cost of equipment rentals,
excluding depreciation......... 364,047 494,350 49,080 907,477
Depreciation of rental
equipment...................... 152,640 155,239 20,252 328,131
Cost of rental equipment sales.. 87,161 106,617 14,404 208,182
Cost of equipment and
merchandise sales and other
operating costs................ 197,190 164,186 25,125 386,501
-------- ---------- ---------- ---------- ---------- ----------
Total cost of revenues............ 801,038 920,392 108,861 1,830,291
-------- ---------- ---------- ---------- ---------- ----------
Gross profit...................... 449,820 582,016 56,734 1,088,570
Selling, general and
administrative expenses.......... 184,135 245,431 24,764 454,330
Non-rental depreciation and
amortization..................... $ 7,718 33,692 39,618 5,273 86,301
-------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)........... (7,718) 231,993 296,967 26,697 547,939
Interest expense.................. 19,500 217,904 135 10,740 $ (19,500) 228,779
Preferred dividends of a
subsidiary trust................. 19,500 19,500
Other (income) expense, net....... 2,129 (4,285) 320 (1,836)
-------- ---------- ---------- ---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes....... (27,218) 11,960 301,117 15,637 301,496
Provision (benefit) for income
taxes............................ (11,295) 4,908 124,964 6,544 125,121
-------- ---------- ---------- ---------- ---------- ----------
Income (loss) before equity in net
earnings of subsidiaries......... (15,923) 7,052 176,153 9,093 176,375
Equity in net earnings of
subsidiaries..................... 192,298 185,246 $ (377,544)
-------- ---------- ---------- ---------- ---------- ----------
Net income........................ $176,375 $ 192,298 $ 176,153 $ 9,093 $ (377,544) $ 176,375
======== ========== ========== ========== ========== ==========
F-35
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- -------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals..................... $600,431 $ 880,182 $100,413 $1,581,026
Sales of rental equipment............. 113,982 106,737 14,959 235,678
Sales of equipment and merchandise
and other revenues................... 195,647 189,829 31,448 416,924
-------- -------- ---------- -------- --------- ----------
Total revenues.......................... 910,060 1,176,748 146,820 2,233,628
Cost of revenues:
Cost of equipment rentals,
excluding depreciation............... 250,959 381,718 44,295 676,972
Depreciation of rental equipment...... 116,385 146,622 17,634 280,641
Cost of rental equipment sales........ 62,972 64,945 8,761 136,678
Cost of equipment and merchandise
sales and other operating costs...... 161,902 128,328 24,189 314,419
-------- -------- ---------- -------- --------- ----------
Total cost of revenues.................. 592,218 721,613 94,879 1,408,710
-------- -------- ---------- -------- --------- ----------
Gross profit............................ 317,842 455,135 51,941 824,918
Selling, general and administrative
expenses............................... $ 8,267 144,341 177,456 22,531 352,595
Non-rental depreciation and
amortization........................... 4,926 29,667 24,617 3,657 62,867
-------- -------- ---------- -------- --------- ----------
Operating income (loss)................. (13,193) 143,834 253,062 25,753 409,456
Interest expense........................ 19,500 132,929 1,428 5,471 $ (19,500) 139,828
Preferred dividends of a subsidiary
trust.................................. 19,500 19,500
Other (income) expense, net............. 9,689 (1,549) (524) 427 278 8,321
-------- -------- ---------- -------- --------- ----------
Income (loss) before provision (benefit)
for income taxes....................... (42,382) 12,454 252,158 19,855 (278) 241,807
Provision (benefit) for income taxes.... (17,487) 3,039 105,531 8,058 99,141
-------- -------- ---------- -------- --------- ----------
Income (loss) before equity in net
earnings of subsidiaries............... (24,895) 9,415 146,627 11,797 (278) 142,666
Equity in net earnings of subsidiaries.. 167,561 158,424 (325,985)
-------- -------- ---------- -------- --------- ----------
Net income.............................. $142,666 $167,839 $ 146,627 $ 11,797 $(326,263) $ 142,666
======== ======== ========== ======== ========= ==========
F-36
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2001
Non-
Guarantor Guarantor Other and
Parent URI Subsidiaries Subsidiaries Eliminations Consolidated
-------- ----------- ------------ ------------ ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities..................................... $(16,826) $ 622,289 $ 97,695 $ (8,933) $ 2,485 $ 696,710
Cash flows from investing activities:
Purchases of rental equipment................ (277,032) (148,125) (24,613) (449,770)
Purchases of property and equipment.......... (2,674) (13,159) (28,214) (3,501) (47,548)
Proceeds from sales of rental equipment...... 63,612 70,331 13,158 147,101
Capital contributed to subsidiary............ (10,417) 10,417
Purchases of other companies................. (53,565) (1,273) (54,838)
Payments of contingent purchase price........ (2,103) (2,103)
In-process acquisition costs................. (2,485) (2,485)
-------- ----------- --------- -------- -------- -----------
Net cash used in investing activities...... (13,091) (282,247) (106,008) (16,229) 7,932 (409,643)
Cash flows from financing activities:
Proceeds from debt........................... 2,008,644 65 44,758 2,053,467
Payments of debt............................. (2,292,186) (1,687) (6,634) (2,300,507)
Proceeds from sale-leaseback................. 12,435 12,435
Payments of financing costs.................. (28,709) (333) (29,042)
Capital contributions by parent.............. 10,417 (10,417)
Dividend distributions to parent............. (44,258) 44,258
Shares repurchased and retired............... (24,758) (24,758)
Proceeds from the exercise of common
stock options............................... 10,417 10,417
Proceeds from dividends from subsidiary...... 44,258 (44,258)
-------- ----------- --------- -------- -------- -----------
Net cash provided by (used in)
financing activities..................... 29,917 (333,657) (1,622) 37,791 (10,417) (277,988)
Effect of foreign exchange rates............. (16,137) (16,137)
-------- ----------- --------- -------- -------- -----------
Net increase (decrease) in cash and cash
equivalents.................................... 6,385 (9,935) (3,508) (7,058)
Cash and cash equivalents at beginning of period 29,733 4,651 34,384
-------- ----------- --------- -------- -------- -----------
Cash and cash equivalents at end of period...... $ 6,385 $ 19,798 $ 1,143 $ 27,326
======== =========== ========= ======== ======== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest..................... $ 19,500 $ 197,315 $ 10,561 $ 3,009 $ 230,385
Cash paid for income taxes, net of
refunds.................................... $ (31,122) $ 323 $ (30,799)
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................. $ 20,264 $ 1,201 $ 21,465
Liabilities assumed.......................... (4,468) (144) (4,612)
Less:
Amounts paid through issuance of
debt..................................... (600) (600)
-------- ----------- --------- -------- -------- -----------
15,196 1,057 16,253
Due to seller and other payments............. 38,369 216 38,585
-------- ----------- --------- -------- -------- -----------
Net cash paid.............................. $ 53,565 $ 1,273 $ 54,838
======== =========== ========= ======== ======== ===========
F-37
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- --------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities................................ $ (6,429) $ 243,759 $ 227,855 $ 43,066 $ 4,470 $ 512,721
Cash flows from investing activities:
Purchases of rental equipment........... (489,259) (283,488) (35,457) (808,204)
Purchases of property and equipment..... (13,071) (34,477) (102,510) (3,712) (153,770)
Proceeds from sales of rental
equipment.............................. 145,519 178,576 23,583 347,678
Proceeds from sale of businesses........ 16,246 3,000 19,246
Payments of contingent purchase
price.................................. (3,030) (13,236) (16,266)
Purchases of other companies............ (337,257) (10,080) (347,337)
Capital contributed to subsidiary....... (331) 331
In-process acquisition costs............ (4,285) (4,285)
-------- --------- --------- -------- -------- ---------
Net cash used in investing
activities.......................... (13,402) (702,258) (217,658) (25,666) (3,954) (962,938)
Cash flows from financing activities:
Shares repurchased and retired.......... (30,950) (30,950)
Dividend distributions to parent........ (50,450) 50,450
Proceeds from debt...................... 452,912 3,290 456,202
Repayments of debt...................... (125,238) (168) (9,193) (134,599)
Proceeds from sale-leaseback............ 193,478 193,478
Payments of financing costs............. (16,223) (185) (16,408)
Capital contributions by parent......... 331 (331)
Proceeds from the exercise of stock
options................................ 331 331
Proceeds from dividends from
subsidiary............................. 50,450 (50,450)
-------- --------- --------- -------- -------- ---------
Net cash provided by (used in)
financing activities................ 19,831 454,810 3,122 (9,193) (516) 468,054
Effect of foreign exchange rates........ (7,264) (7,264)
-------- --------- --------- -------- -------- ---------
Net increase (decrease) in cash and cash
equivalents............................... (3,689) 13,319 943 10,573
Cash and cash equivalents at beginning
of period................................. 3,689 16,414 3,708 23,811
-------- --------- --------- -------- -------- ---------
Cash and cash equivalents at end of
period.................................... $ $ 29,733 $ 4,651 $ 34,384
======== ========= ========= ======== ======== =========
Supplemental disclosure of cash flow
information:
Cash paid for interest.................. $ 19,500 $ 218,346 $ 135 $ 10,782 $ 248,763
Cash paid for income taxes.............. $ 19,833 $ 3,913 $ 23,746
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......... $ 518,167 $ 11,037 $ 529,204
Liabilities assumed.................. (132,163) (957) (133,120)
Less:
Amounts paid in common
stock of parent.................. (10,000) (10,000)
Amounts paid through
issuance of debt................. (65,500) (65,500)
-------- --------- --------- -------- -------- ---------
310,504 10,080 320,584
Due to seller and other payments..... 26,753 26,753
-------- --------- --------- -------- -------- ---------
Net cash paid..................... $ 337,257 $ 10,080 $ 347,337
======== ========= ========= ======== ======== =========
F-38
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 1999
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
--------- ----------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities.............................. $ (4,824) $ 292,412 $ 13,185 $ 119,585 $ 1,002 $ 421,360
Cash flows from investing activities:
Purchases of rental equipment......... (539,775) (99,365) (78,972) (718,112)
Purchases of property and equipment... (14,181) (74,634) (20,366) (14,468) (123,649)
Proceeds from sales of rental
equipment............................ 113,982 106,737 14,959 235,678
Proceeds from sale of
businesses........................... 1,040 2,354 3,127 6,521
Payments of contingent purchase
price................................ (2,387) (4,265) (1,564) (8,216)
Purchases of other companies.......... (915,937) (70,853) (986,790)
Capital contributed to subsidiary..... (522,985) 522,985
In-process acquisition costs.......... (1,002) (1,002)
--------- ----------- -------- --------- --------- -----------
Net cash used in investing
activities......................... (537,166) (1,417,711) (14,905) (147,771) 521,983 (1,595,570)
Cash flows from financing activities:
Dividend distributions to parent...... (19,500) 19,500
Proceeds from debt.................... 1,025,843 26,524 31,249 1,083,616
Repayments of debt.................... (474,808) (20,958) (1,884) (497,650)
Proceeds from sale-leaseback.......... 88,000 88,000
Payments of financing costs........... (18,995) (448) (19,443)
Capital contributions by parent....... 522,985 (522,985)
Proceeds from issuance of common
stock and warrants, net of issuance
costs................................ 64,701 64,701
Proceeds from issuance of Series A
and B preferred stock, net of
issuance costs....................... 430,800 430,800
Proceeds from the exercise of stock
options.............................. 26,989 26,989
Proceeds from dividends from
subsidiary........................... 19,500 (19,500)
--------- ----------- -------- --------- --------- -----------
Net cash provided by financing
activities......................... 541,990 1,123,525 5,566 28,917 (522,985) 1,177,013
Effect of foreign exchange rates...... 598 598
--------- ----------- -------- --------- --------- -----------
Net increase (decrease) in cash and cash
equivalents............................. (1,774) 3,846 1,329 3,401
Cash and cash equivalents at beginning of
period.................................. 1,774 16,257 2,379 20,410
--------- ----------- -------- --------- --------- -----------
Cash and cash equivalents at end of
period.................................. $ $ $ 20,103 $ 3,708 $ 23,811
========= =========== ======== ========= ========= ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest................ $ 19,500 $ 98,728 $ 1,194 $ 4,863 $ 124,285
Cash paid for income taxes............ $ 16,372 $ 1,137 $ 17,509
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........ $ 1,371,807 $ 96,760 $ 1,468,567
Liabilities assumed................. (448,685) (23,697) (472,382)
Less:
Amounts paid through
issuance of debt................ (7,185) (2,210) (9,395)
--------- ----------- -------- --------- --------- -----------
Net cash paid.................... $ 915,937 $ 70,853 $ 986,790
========= =========== ======== ========= ========= ===========
F-39
PART II
Item 20. Indemnification of Directors and Officers
The Certificate of Incorporation (the "Certificate") of the United
Rentals, Inc. (the "Company") provides that a director will not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law (the "Delaware Law"), which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Delaware Law is
subsequently amended to permit further limitation of the personal liability of
directors, the liability of a director of the Company will be eliminated or
limited to the fullest extent permitted by the Delaware Law as amended.
The Registrant, as a Delaware corporation, is empowered by Section 145
of the Delaware Law, subject to the procedures and limitation stated therein, to
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or proceeding
in which such person is made a party by reason of his being or having been a
director, officer, employee or agent of the Registrant. The statute provides
that indemnification pursuant to its provisions is not exclusive of other rights
of indemnification to which a person may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors, or otherwise. The
Company has entered into indemnification agreements with its directors and
officers. In general, these agreements require the Company to indemnify each of
such persons against expenses, judgments, fines, settlements and other
liabilities incurred in connection with any proceeding (including a derivative
action) to which such person may be made a party by reason of the fact that such
person is or was a director, officer or employee of the Company or guaranteed
any obligations of the Company, provided that the right of an indemnitee to
receive indemnification is subject to the following limitations: (i) an
indemnitee is not entitled to indemnification unless he acted in good faith and
in a manner that he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful and
(ii) in the case of a derivative action, an indemnitee is not entitled to
indemnification in the event that he is judged in a final non-appealable
decision of a court of competent jurisdiction to be liable to the Company due to
willful misconduct in the performance of his duties to the Company (unless and
only to the extent that the court determines that the indemnitee is fairly and
reasonably entitled to indemnification).
Pursuant to Section 145 of the Delaware Law, the Registrant has
purchased insurance on behalf of its present and former directors and officers
against any liability asserted against or incurred by them in such capacity or
arising out of their status as such.
II-1
Item 21. Exhibits.
5.1 Opinion of Ehrenreich Eilenberg & Krause LLP**
23.1 Consent of Ehrenreich Eilenberg & Krause LLP (included in
Exhibit 5.1)
23.2 Consent of Ernst & Young LLP*
24.1 Power of Attorney**
* Filed herewith
** Previously filed
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; Notwithstanding the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities and Exchange
Act of 1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes that:
(1) prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) every prospectus (i) that is filed pursuant to paragraph (c)(1)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This
II-3
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(f) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Greenwich,
Connecticut, on the 29th day of May, 2002.
United Rentals, Inc.
By: /s/ Michael J. Nolan
-----------------------
Michael J. Nolan
Chief Financial Officer
Bradley S. Jacobs
/s/ Bradley S. Jacobs
---------------------------
Bradley S. Jacobs
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
May 29, 2002
Wayland R. Hicks
*
--------------------------
Wayland R. Hicks, Director
May 29, 2002
John N. Milne
*
--------------------------
John N. Milne, Director
May 29, 2002
John S. McKinney
--------------------------
John S. McKinney, Director
May , 2002
Leon D. Black
--------------------------
Leon D. Black, Director
May , 2002
Richard D. Colburn
*
--------------------------
Richard D. Colburn, Director
May 29, 2002
Ronald M. DeFeo
*
--------------------------
Ronald M. DeFeo, Director
May 29, 2002
Michael S. Gross
--------------------------
Michael S. Gross, Director
May , 2002
Timothy J. Tully
*
--------------------------
Timothy J. Tully, Director
May 29, 2002
Christian M. Weyer
*
--------------------------
Christian M. Weyer, Director
May 29, 2002
Michael J. Nolan
/s/ Michael J. Nolan
---------------------------
Michael J. Nolan, Chief Financial Officer
(Principal Financial Officer)
May 29, 2002
Joseph B. Sherk
/s/ Joseph B. Sherk
---------------------------
Joseph B. Sherk, Vice President, Corporate Controller
(Principal Accounting Officer)
May 29, 2002
*By Michael J. Nolan, attorney-in-fact
/s/Michael J. Nolan
-------------------------
May 29, 2002