10-Q/A 1 d10qa.txt AMENDMENT TO FORM 10-Q ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 on FORM 10-Q/A (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-14387 United Rentals, Inc. Commission File No. 1-13663 United Rentals (North America), Inc. (Exact names of registrants as specified in their charters) Delaware 06-1522496 Delaware 06-1493538 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Nos.) Five Greenwich Office Park, Greenwich, Connecticut 06830 (Address of principal executive offices) (Zip Code)
(203) 622-3131 (Registrants' telephone number, including area code) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. X Yes No As of October 1, 2001, there were 73,295,189 shares of the United Rentals, Inc. common stock, $.01 par value, outstanding. There is no market for the common stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc. This combined Form 10-Q is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a wholly owned subsidiary of United Rentals, Inc.). United Rentals (North America), Inc. meets the conditions set forth in general instruction H(1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by such instruction. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- UNITED RENTALS, INC. UNITED RENTALS (NORTH AMERICA), INC. FORM 10-Q/A FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 INDEX
Page ---- PART I FINANCIAL INFORMATION Item 1 Unaudited Consolidated Financial Statements United Rentals, Inc. Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 (unaudited).................................. 1 United Rentals, Inc. Consolidated Statements of Operations for the Six and Three Months Ended June 30, 2001 and 2000 (unaudited).................................................... 2 United Rentals, Inc. Consolidated Statement of Stockholders' Equity for the Six Months Ended June 30, 2001 (unaudited)...... 3 United Rentals, Inc. Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 (unaudited)........ 4 United Rentals (North America), Inc. Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 (unaudited).............................. 5 United Rentals (North America), Inc. Consolidated Statements of Operations for the Six and Three Months Ended June 30, 2001 and 2000 (unaudited).. 6 United Rentals (North America), Inc. Consolidated Statement of Stockholder's Equity for the Six Months Ended June 30, 2001 (unaudited).................................................... 7 United Rentals (North America), Inc. Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 (unaudited)............ 8 Notes to Unaudited Consolidated Financial Statements............ 9 Signatures...................................................... 25
UNITED RENTALS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, June 30, December 31, 2001 2001 2000 ------------ ---------- ------------ Pro Forma Restated (See Note 1) (See Note 1) (In thousands, except share data) ASSETS Cash and cash equivalents................ $ 36,135 $ 36,135 $ 34,384 Accounts receivable, net of allowance for doubtful accounts of $49,693 in 2001 and $55,624 in 2000......................... 490,555 490,555 469,594 Inventory................................ 114,570 114,570 133,380 Prepaid expenses and other assets........ 183,885 183,885 104,493 Rental equipment, net.................... 1,851,404 1,851,404 1,732,835 Property and equipment, net.............. 428,576 428,576 422,239 Goodwill, net of accumulated amortization of $131,975 in 2001 and $103,219 in 2000........................ 2,199,876 2,199,876 2,215,532 Other intangible assets, net............. 9,645 9,645 11,476 ---------- ---------- ---------- $5,314,646 $5,314,646 $5,123,933 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable....................... $ 312,014 $ 312,014 $ 260,155 Debt................................... 2,759,748 2,759,748 2,675,367 Deferred taxes......................... 230,106 230,106 206,243 Accrued expenses and other liabilities........................... 172,013 172,013 136,225 ---------- ---------- ---------- Total liabilities.................... 3,473,881 3,473,881 3,277,990 Commitments and contingencies Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust...................... 300,000 300,000 300,000 Series A and B preferred stock........... 430,800 430,800 Stockholders' equity: Preferred stock--$.01 par value, 5,000,000 shares authorized: Series C perpetual convertible preferred stock--$300,000 liquidation preference, 300,000 shares issued and outstanding.......................... 3 Series D perpetual convertible preferred stock--$150,000 liquidation preference, 150,000 shares issued and outstanding.......................... 2 Common stock--$.01 par value, 500,000,000 shares authorized, 73,150,359 shares issued and outstanding in 2001 and 71,065,707 in 2000.................................. 732 732 711 Additional paid-in capital............. 1,241,127 810,332 765,529 Deferred compensation.................. (59,255) (59,255) Retained earnings...................... 372,880 372,880 355,850 Accumulated other comprehensive loss... (14,724) (14,724) (6,947) ---------- ---------- ---------- Total stockholders' equity........... 1,540,765 1,109,965 1,115,143 ---------- ---------- ---------- $5,314,646 $5,314,646 $5,123,933 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 1 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, --------------------- ------------------- 2001 2000 2001 2000 ---------- ---------- --------- --------- (In thousands, except per share data) Revenues: Equipment rentals................. $1,043,750 $ 911,632 $ 582,368 $ 511,534 Sales of rental equipment......... 72,239 155,171 33,117 84,839 Sales of equipment and merchandise and other revenues... 271,128 242,105 152,528 133,573 ---------- ---------- --------- --------- Total revenues..................... 1,387,117 1,308,908 768,013 729,946 Cost of revenues: Cost of equipment rentals, excluding depreciation........... 500,136 396,614 270,103 222,314 Depreciation of rental equipment........................ 158,354 159,035 81,553 85,532 Cost of rental equipment sales.... 42,381 91,168 19,305 50,082 Cost of equipment and merchandise sales and other operating costs............................ 197,616 184,309 110,989 100,220 ---------- ---------- --------- --------- Total cost of revenues............. 898,487 831,126 481,950 458,148 ---------- ---------- --------- --------- Gross profit....................... 488,630 477,782 286,063 271,798 Selling, general and administrative expenses.......................... 221,715 210,969 112,822 109,119 Restructuring charge............... 28,922 28,922 Non-rental depreciation and amortization...................... 53,238 40,721 27,131 20,703 ---------- ---------- --------- --------- Operating income................... 184,755 226,092 117,188 141,976 Interest expense................... 114,589 106,210 57,059 56,527 Preferred dividends of a subsidiary trust............................. 9,750 9,750 4,875 4,875 Other (income) expense, net........ 6,935 (312) 7,605 (108) ---------- ---------- --------- --------- Income before provision for income taxes and extraordinary item...... 53,481 110,444 47,649 80,682 Provision for income taxes......... 25,134 45,834 22,714 33,483 ---------- ---------- --------- --------- Income before extraordinary item... 28,347 64,610 24,935 47,199 Extraordinary item, net of tax benefit of $6,759................. 11,317 11,317 ---------- ---------- --------- --------- Net income......................... $ 17,030 $ 64,610 $ 13,618 $ 47,199 ========== ========== ========= ========= Earnings per share--basic: Income before extraordinary item............................ $ 0.40 $ 0.90 $ 0.35 $ 0.66 Extraordinary item, net.......... 0.16 0.16 ---------- ---------- --------- --------- Net income....................... $ 0.24 $ 0.90 $ 0.19 $ 0.66 ========== ========== ========= ========= Earnings per share--diluted: Income before extraordinary item............................ $ 0.31 $ 0.70 $ 0.26 $ 0.51 Extraordinary item, net.......... 0.13 0.12 ---------- ---------- --------- --------- Net income....................... $ 0.18 $ 0.70 $ 0.14 $ 0.51 ========== ========== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 2 UNITED RENTALS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
Common Stock ------------------ Accumulated Additional Other Number of Paid-in Deferred Retained Comprehensive Comprehensive Shares Amount Capital Compensation Earnings Income Loss ---------- ------ ---------- ------------ -------- ------------- ------------- (In thousands, except share data) Balance, December 31, 2000................... 71,065,707 $711 $765,529 $355,850 $ (6,947) Comprehensive income: Net income............. 17,030 $17,030 Other comprehensive income: Foreign currency translation adjustments........... (3,448) (3,448) Cumulative effect on equity of adopting FAS 133, net of tax of $1,784................ (2,516) (2,516) Derivatives qualifying as hedges, net of tax of $1,287............. (1,813) (1,813) ------- Comprehensive income.... $ 9,253 ======= Issuance of common stock under deferred compensation plans..... 2,767,041 28 60,621 $(60,649) Amortization of deferred compensation........... 1,394 Issuance of common stock.................. 2,770 50 Exercise of common stock options.......... 665,441 7 8,876 Shares repurchased and retired................ (1,350,600) (14) (24,744) ---------- ---- -------- -------- -------- -------- Balance, June 30, 2001.. 73,150,359 $732 $810,332 $(59,255) $372,880 $(14,724) ========== ==== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ---------------------- 2001 2000 ----------- --------- (In thousands) Cash Flows From Operating Activities: Net income............................................ $ 17,030 $ 64,610 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................ 211,592 199,756 Gain on sales of rental equipment.................... (29,858) (64,003) Deferred taxes....................................... 17,427 14,571 Amortization of deferred compensation................ 1,394 Extraordinary item................................... 18,076 Restructuring charge................................. 10,893 Changes in operating assets and liabilities: Accounts receivable.................................. (20,853) (31,981) Inventory............................................ 19,355 (13,616) Prepaid expenses and other assets.................... (50,663) (1,430) Accounts payable..................................... 51,567 137,285 Accrued expenses and other liabilities............... 52,495 (42,367) ----------- --------- Net cash provided by operating activities........ 298,455 262,825 Cash Flows From Investing Activities: Purchases of rental equipment......................... (303,281) (513,817) Purchases of property and equipment................... (31,426) (69,241) Proceeds from sales of rental equipment............... 72,239 155,171 In-process acquisition costs.......................... (2,140) (2,445) Payments of contingent purchase price................. (6,553) Purchases of other companies.......................... (37,801) (265,084) ----------- --------- Net cash used in investing activities............ (302,409) (701,969) Cash Flows From Financing Activities: Proceeds from debt.................................... 1,979,155 376,903 Payments of debt...................................... (1,926,282) (38,217) Proceeds from sale-leaseback.......................... 147,515 Payments of financing costs........................... (27,118) (7,164) Proceeds from the exercise of common stock options.... 8,156 96 Shares repurchased and retired........................ (24,758) (30,950) ----------- --------- Net cash provided by financing activities........ 9,153 448,183 Effect of foreign exchange rates...................... (3,448) 342 ----------- --------- Net increase in cash and cash equivalents............. 1,751 9,381 Cash and cash equivalents at beginning of period...... 34,384 23,811 ----------- --------- Cash and cash equivalents at end of period............ $ 36,135 $ 33,192 =========== ========= Supplemental disclosure of cash flow information: Cash paid for interest................................ $ 110,023 $ 101,046 Cash paid for income taxes, net of refunds............ $ 719 $ 62,720 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired......................... $ 5,457 $ 392,873 Liabilities assumed.................................. (1,036) (102,592) Less: Amounts paid through issuance of debt.............. (600) (25,197) ----------- --------- 3,821 265,084 Due to seller and other payments..................... 33,980 ----------- --------- Net cash paid.................................... $ 37,801 $ 265,084 =========== =========
The accompanying notes are an integral part of these consolidated financial statements. 4 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, 2001 December 31, 2000 ---------------- ------------------ (In thousands, except share data) ASSETS Cash and cash equivalents................. $ 36,135 $ 34,384 Accounts receivable, net of allowance for doubtful accounts of $49,693 in 2001 and $55,624 in 2000.......................... 490,555 469,594 Inventory................................. 114,570 133,380 Prepaid expenses and other assets......... 174,899 104,493 Rental equipment, net..................... 1,851,404 1,732,835 Property and equipment, net............... 393,465 387,432 Goodwill, net of accumulated amortization of $131,975 in 2001 and $103,219 in 2000......................... 2,199,876 2,215,532 Other intangible assets, net.............. 9,645 11,476 ---------------- ---------------- $ 5,270,549 $ 5,089,126 ================ ================ LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Accounts payable........................ $ 312,014 $ 260,155 Debt.................................... 2,759,748 2,675,367 Deferred taxes.......................... 230,106 206,243 Accrued expenses and other liabilities.. 149,825 119,172 ---------------- ---------------- Total liabilities..................... 3,451,693 3,260,937 Commitments and contingencies Stockholder's equity: Common stock--$0.01 par value, 3,000 shares authorized, 1,000 shares issued and outstanding........................ Additional paid-in capital.............. 1,515,817 1,507,661 Retained earnings....................... 317,763 327,475 Accumulated other comprehensive loss.... (14,724) (6,947) ---------------- ---------------- Total stockholder's equity............ 1,818,856 1,828,189 ---------------- ---------------- $ 5,270,549 $ 5,089,126 ================ ================
The accompanying notes are an integral part of these consolidated financial statements. 5 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, --------------------- ------------------- 2001 2000 2001 2000 ---------- ---------- --------- --------- (In thousands) Revenues: Equipment rentals................ $1,043,750 $ 911,632 $582,3 68 $ 511,534 Sales of rental equipment........ 72,239 155,171 33,117 84,839 Sales of equipment and merchandise and other revenues.. 271,128 242,105 152,528 133,573 ---------- ---------- --------- --------- Total revenues.................... 1,387,117 1,308,908 768,013 729,946 Cost of revenues: Cost of equipment rentals, excluding depreciation.......... 500,136 396,614 270,103 222,314 Depreciation of rental equipment....................... 158,354 159,035 81,553 85,532 Cost of rental equipment sales... 42,381 91,168 19,305 50,082 Cost of equipment and merchandise sales and other operating costs........................... 197,616 184,309 110,989 100,220 ---------- ---------- --------- --------- Total cost of revenues............ 898,487 831,126 481,950 458,148 ---------- ---------- --------- --------- Gross profit...................... 488,630 477,782 286,063 271,798 Selling, general and administrative expenses.......... 221,715 210,969 112,822 109,119 Restructuring charge.............. 28,922 28,922 Non-rental depreciation and amortization..................... 48,952 37,155 24,909 18,838 ---------- ---------- --------- --------- Operating income.................. 189,041 229,658 119,410 143,841 Interest expense.................. 114,589 106,210 57,059 56,527 Other (income) expense, net....... 6,935 (312) 7,605 (108) ---------- ---------- --------- --------- Income before provision for income taxes and extraordinary item..... 67,517 123,760 54,746 87,422 Provision for income taxes........ 31,404 51,409 26,104 36,280 ---------- ---------- --------- --------- Income before extraordinary item.. 36,113 72,351 28,642 51,142 Extraordinary item, net of tax benefit of $6,759................ 11,317 11,317 ---------- ---------- --------- --------- Net income ....................... $ 24,796 $ 72,351 $ 17,325 $ 51,142 ========== ========== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 6 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (Unaudited)
Common Stock Accumulated ---------------- Additional Other Number Paid-In Retained Comprehensive Comprehensive of Shares Amount Capital Earnings Income Loss --------- ------ ---------- -------- ------------- ------------- (In thousands, except share data) Balance, December 31, 2000.................... 1,000 $1,507,661 $327,475 $(6,947) Comprehensive income: Net income.............. 24.796 $24.796 Other comprehensive income: Foreign currency translation adjustments........... (3,448) (3,448) Cumulative effect on equity of adopting FAS 133, net of tax of $1,784................ (2,516) (2,516) Derivatives qualifying as hedges, net of tax $1,287................ (1,813) (1,813) --- ------- Comprehensive income..... $17,019 ======= Contributed capital from parent.................. 8,156 Dividend distributions to parent.................. (34,508) ----- ---------- -------- -------- Balance, June 30, 2001... 1,000 $1,515,817 $317,763 $(14,724) ===== ========== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 7 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ---------------------- 2001 2000 ----------- --------- (In thousands) Cash Flows From Operating Activities: Net income............................................ $ 24,796 $ 72,351 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................ 207,306 196,190 Gain on sales of rental equipment.................... (29,858) (64,003) Deferred taxes....................................... 17,427 14,571 Extraordinary item................................... 18,076 Restructuring charge................................. 10,893 Changes in operating assets and liabilities: Accounts receivable.................................. (20,853) (31,981) Inventory............................................ 19,355 (13,616) Prepaid expenses and other assets.................... (43,429) (14,124) Accounts payable..................................... 51,567 127,822 Accrued expenses and other liabilities............... 46,583 (56,461) ----------- --------- Net cash provided by operating activities.......... 301,863 230,749 Cash Flows From Investing Activities: Purchases of rental equipment......................... (303,281) (513,817) Purchases of property and equipment................... (27,224) (55,656) Proceeds from sales of rental equipment............... 72,239 155,171 Payments of contingent purchase price................. (6,553) Purchases of other companies.......................... (37,801) (265,084) ----------- --------- Net cash used in investing activities.............. (296,067) (685,939) Cash Flows From Financing Activities: Proceeds from debt.................................... 1,979,155 376,903 Payments of debt...................................... (1,926,282) (38,217) Proceeds from sale-leaseback.......................... 147,515 Payments of financing costs........................... (27,118) (7,155) Due to parent......................................... 30,950 Capital contributions by parent....................... 8,156 96 Dividend distributions to parent...................... (34,508) (45,863) ----------- --------- Net cash provided by (used in) financing activities........................................ (597) 464,229 Effect of foreign exchange rates...................... (3,448) 342 ----------- --------- Net increase in cash and cash equivalents............. 1,751 9,381 Cash and cash equivalents at beginning of period...... 34,384 23,811 ----------- --------- Cash and cash equivalents at end of period............ $ 36,135 $ 33,192 =========== ========= Supplemental disclosure of cash flow information: Cash paid for interest................................ $ 100,273 $ 91,296 Cash paid for income taxes, net of refunds............ $ 719 $ 62,720 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired......................... $ 5,457 $ 392,873 Liabilities assumed.................................. (1,036) (102,592) Less: Amounts paid through issuance of debt.............. (600) (25,197) ----------- --------- 3,821 265,084 Due to seller and other payments..................... 33,980 ----------- --------- Net cash paid.................................... $ 37,801 $ 265,084 =========== =========
The accompanying notes are an integral part of these consolidated financial statements. 8 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation General United Rentals, Inc., is principally a holding company ("Holdings" or the "Company") and conducts its operations primarily through its wholly owned subsidiary United Rentals (North America), Inc. ("URI") and subsidiaries of URI. Separate footnote information is not presented for the financial statements of URI and subsidiaries as that information is substantially equivalent to that presented below. Earnings per share data is not provided for the operating results of URI and its subsidiaries as they are wholly owned subsidiaries of Holdings. The Consolidated Financial Statements of the Company included herein are unaudited and, in the opinion of management, such financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of the interim periods presented. Interim financial statements do not require all disclosures normally presented in year-end financial statements, and, accordingly, certain disclosures have been omitted. Results of operations for the six and three month periods ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. The Consolidated Financial Statements included herein should be read in conjunction with the Company's Consolidated Financial Statements and related Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Impact of Recently Issued Accounting Standards In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities--a replacement of FASB Statement No. 125". This standard revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This standard is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The adoption of SFAS No. 140 did not have a material effect on the Company's consolidated financial position or results of operations. In June 2001, the FASB issued SFAS No. 141, "Business Combinations". This standard addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations" and SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises". All business combinations in the scope of this Statement are to be accounted for using one method, the purchase method. This standard is effective for all business combinations initiated after June 30, 2001. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". This standard addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets". This standard is effective for fiscal years beginning after December 15, 2001. However, this standard is immediately effective in cases where goodwill and intangible assets are acquired after June 30, 2001. Under this standard, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. The Company is currently evaluating the impact SFAS No. 142 will have on its financial statements and will perform a fair value analysis of its goodwill in connection with the adoption of this standard on January 1, 2002. Preferred Stock The Company issued Series A Perpetual Convertible Preferred Stock ("Series A Preferred") and Series B Perpetual Convertible Preferred Stock ("Series B Preferred") in 1999 and included such preferred in stockholders' equity. In July 2001, the SEC issued guidance to all public companies as to when redeemable preferred stock may be classified as stockholders' equity. This guidance indicates that preferred stock that would 9 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) be subject to redemption on the occurrence of an event outside the control of the issuer may not be classified as equity and that the probability of the event occurring is not a factor to be considered. Under this guidance, the Series A Preferred and Series B Preferred would not be included in stockholders' equity because this stock would be subject to mandatory redemption on a hostile change of control. On September 28, 2001, the Company entered into an agreement effecting the exchange of new Series C Perpetual Convertible Preferred Stock ("Series C Preferred") for the Series A Preferred and new Series D Perpetual Convertible Preferred Stock ("Series D Preferred") for the Series B Preferred (see note 11). The Series C Preferred and Series D Preferred stock is not subject to mandatory redemption on a hostile change of control, and will be classified as stockholders' equity under the recently issued SEC guidance. The effect of the foregoing is that the Company's perpetual convertible preferred stock will be classified as stockholders' equity as of September 28, 2001 and thereafter, but will be classified outside of stockholders' equity for earlier dates. Accordingly, the Company has restated the accompanying balance sheets to show its $430.8 million of perpetual convertible preferred stock under "Series A and B Preferred Stock" rather than under "Stockholders' Equity." The Company has also made a corresponding change to the related Consolidated Statements of Stockholders' Equity. In all other respects, the financial statements remain unchanged, including total assets and liabilities, revenues, operating income, net income and earnings per share. The Company's balance sheets for dates after September 28, 2001, will include the perpetual convertible preferred stock in stockholders' equity. The pro forma amounts on the accompanying balance sheet gives effect to the above-referenced exchange, as if it had occurred on June 30, 2001. Reclassifications Certain prior year balances have been reclassified to conform to the 2001 presentation. 2. Acquisitions During the six months ended June 30, 2001 and the year ended December 31, 2000, the Company completed two acquisitions and 53 acquisitions, respectively, that were accounted for as purchases. The results of operations of the businesses acquired in these acquisitions have been included in the Company's results of operations from their respective acquisition dates. The purchase prices for such acquisitions have been allocated to the assets acquired and liabilities assumed based on their respective fair values at their respective acquisition dates. However, the Company has not completed its valuation of all of its purchases and, accordingly, the purchase price allocations are subject to change when additional information concerning asset and liability valuations are completed. The preliminary purchase price allocations that are subject to change primarily consists of rental and non- rental equipment valuations. These allocations are finalized within 12 months of the acquisition date and are not expected to result in significant differences between the preliminary and final allocations. The following table summarizes, on an unaudited pro forma basis, the results of operations of the Company for the six months ended June 30, 2000 as though each acquisition which was consummated during the period January 1, 2000 to June 30, 2001 as mentioned above and in Note 3 to the Notes to Consolidated Financial Statements included in the Company's 2000 Annual Report on Form 10-K was made on January 1, 2000 (in thousands, except per share data): Revenues....................................................... $1,455,247 Net income..................................................... $ 71,418 Basic earnings per share....................................... $ 0.98 Diluted earnings per share..................................... $ 0.77
10 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Since the acquisitions made during the six months ended June 30, 2001 had an insignificant impact on the Company's pro forma results of operations, the pro forma results of operations for the six months ended June 30, 2001 are not shown. The unaudited pro forma results are based upon certain assumptions and estimates, which are subject to change. These results are not necessarily indicative of the actual results of operations that might have occurred, nor are they necessarily indicative of expected results in the future. 3. Restructuring Charge During the second quarter of 2001, the Company recorded a restructuring charge of approximately $28.9 million. The charge primarily relates to the closure or consolidation of underperforming branches and administrative offices, a reduction in the Company's workforce, and certain information technology project costs. Approximately $10.9 million of the charge is non- cash. Approximately $3.2 million has been paid during the second quarter of 2001. Of the remaining $14.8 million of this charge, approximately $8.6 million will be paid by December 31, 2001 and approximately $6.2 million will be paid in future periods. Components of the restructuring charge are as follows:
Balance Restructuring Activity in June 30, Charge 2001 2001 ------------- ------------ -------- Costs to vacate facilities............... $18,291 $ 9,779 $ 8,512 Workforce reduction costs................ 5,666 1,296 4,370 Information technology costs............. 4,965 3,042 1,923 ------- ------- ------- $28,922 $14,117 $14,805 ======= ======= =======
Under the restructuring plan, 31 underperforming branches and five administrative offices will be closed or consolidated, the Company's workforce will be reduced by 489 through the termination of branch and administrative personnel (including 437 terminated as of June 30, 2001), and certain information technology hardware and software will no longer be used. The employee termination costs primarily represent severance. The costs to vacate facilities primarily represent the payment of obligations under leases offset by estimated sublease opportunities ($9.9 million), the write-off of capital improvements made to such facilities ($2.8 million) and the write-off of related goodwill ($5.6 million). As of June 30, 2001, 18 of the 31 underperforming branches have been closed or consolidated and the remaining 13 underperforming branches will be closed or consolidated by December 31, 2001. The information technology costs represent the abandonment of certain information technology projects ($2.5 million) and the payment of obligations under equipment leases relating to such projects ($2.5 million). 4. Refinancing of Debt In April 2001, URI issued $450.0 million aggregate principal amount of 10 3/4% senior notes. Concurrent with the issuance of the senior notes, URI entered into a new senior secured credit facility. The new credit facility is comprised of a $750.0 million term loan and a $750.0 million revolving credit facility. The proceeds from the new senior notes and new senior secured credit facility were used to refinance outstanding secured indebtedness of approximately $1,664.5 million and obligations under a synthetic lease of $31.2 million. As a result of the refinancing, the Company recorded an extraordinary charge of approximately $18.1 million ($11.3 million, net of tax), primarily related to the write-off of financing fees, and a charge of approximately $7.8 million recorded in other (income) expense, net related to refinancing costs of the synthetic lease. 11 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10 3/4% Senior Notes. On April 20, 2001, URI sold $450 million aggregate principal amount of 10 3/4% Senior Notes Due 2008. The net proceeds from the sale of the notes were approximately $439.9 million (after deducting the initial purchasers' discount and offering expenses). The notes mature on April 15, 2008. The notes are unsecured and are guaranteed by Holdings and by URI's domestic subsidiaries. URI may, at its option, redeem the notes on or after April 15, 2005, at specified redemption prices which range from 105.375% in 2005 to 100.0% in 2007 and thereafter. In addition, on or prior to April 15, 2004, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding notes, at a redemption price of 110.75%. The indenture governing the notes contains certain restrictive covenants, including limitations on (i) additional indebtedness, (ii) restricted payments, (iii) liens, (iv) dividends and other payments, (v) preferred stock of certain subsidiaries, (vi) transactions with affiliates, (vii) the disposition of proceeds of asset sales and (viii) the Company's ability to consolidate, merge or sell all or substantially all of its assets. New Revolving Credit Facility. The revolving credit facility enables URI to borrow up to $750 million on a revolving basis and enables one of its Canadian subsidiaries to borrow up to $40 million (provided that the aggregate borrowings of URI and the Canadian subsidiary may not exceed $750 million). Up to $100 million of the revolving credit facility is available in the form of letters of credit. The revolving credit facility will mature and terminate on October 20, 2006. Borrowings under the revolving credit facility will until October 20, 2001, accrue interest, at our option, at either (A) the ABR Rate (which is equal to the greater of (i) the Federal Funds Rate plus 0.5% or (ii) the Chase Manhattan Bank's prime rate) plus a margin of 1.00% or (B) an adjusted LIBOR rate plus a margin of 2.0%. From and after October 20, 2001, the above interest rate margins will be adjusted quarterly based on our financial leverage ratio, up to maximum margins of 1.75% and 2.75%, for revolving loans based on the ABR rate and the adjusted LIBOR rate, respectively, and down to minimum margins of 0.75% and 1.75%, for revolving loans based on the ABR rate and the adjusted LIBOR rate, respectively. Borrowings by the Canadian subsidiary under the revolving credit facility will until October 20, 2001, accrue interest, at such subsidiary's option, at either (X) the Prime rate (which is equal to the Chase Manhattan Bank of Canada's prime rate) plus a margin of 1.00% or (Y) the B/A rate (which is equal to the Chase Manhattan Bank of Canada's B/A rate) plus a margin of 2.0%. From and after October 20, 2001, the above interest rate margins will be adjusted quarterly based on our financial leverage ratio, up to maximum margins of 1.75% and 2.75%, for revolving loans based on the Prime rate and the B/A rate, respectively, and down to minimum margins of 0.75% and 1.75%, for revolving loans based on the Prime rate and the B/A rate, respectively. If at any time an event of default exists, the interest rate applicable to each loan will increase by 2% per annum. The Company is also required to pay the lenders a commitment fee equal to 0.5% per annum in respect of undrawn commitments under the revolving credit facility. New Term Loan. On April 20, 2001, URI obtained a $750 million term loan. Amounts repaid in respect of the term loan may not be reborrowed. URI must repay the principal of the term loan in installments, over six and one-half years, as follows: (i) on June 30, 2001 and on the last day of each calendar quarter thereafter up to and including September 30, 2006, URI must repay $1.9 million and (ii) on the last day of each calendar quarter thereafter up to and including September 30, 2007, URI must repay $177.2 million. Borrowings under the term loan accrue interest, at our option, at either (a) the ABR rate (which is equal to the greater of (i) the Federal Funds Rate plus 0.5% or (ii) the Chase Manhattan Bank's prime rate) plus a margin of 2.0%, or (b) an adjusted LIBOR rate plus a margin of 3.0%. 12 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Covenants. The agreements governing the new senior secured credit facility contain certain covenants that requires the Company to, among other things, satisfy certain financial tests relating to: (a) the ratio of senior debt to cash flow, (b) minimum interest coverage ratio, (c) the ratio of funded debt to cash flow, and (d) the ratio of senior debt to tangible assets. These agreements also contain various other covenants that restrict the Company's ability to, among other things, (i) incur additional indebtedness, (ii) permit liens to attach to its assets, (iii) pay dividends or make other restricted payments on its common stock and certain other securities and (iv) make acquisitions unless certain financial conditions are satisfied. Security and Guarantees. URI's obligations under the new senior secured facility are, subject to limited exceptions, (i) guaranteed by Holdings and URI's United States subsidiaries and (ii) secured by substantially all of URI's assets, the stock of URI and the stock of Holding's other United States subsidiaries and a portion of the stock of Holding's Canadian subsidiaries. The obligations of the Canadian subsidiary that may borrow under the revolving credit facility are guaranteed by our other Canadian subsidiaries and secured by substantially all of the assets of this Canadian subsidiary and the stock of its subsidiaries. 5. Receivables Securitization During the quarter ended June 30, 2001, the Company obtained an additional $112.0 million in cash through the securitization of certain of its accounts receivable through its existing $250.0 million receivable securitization facility. In the securitization transactions, the Company transferred accounts receivable to a special purpose vehicle (the "SPV"), which in turn pledged those receivables to secure borrowings that the SPV incurred to finance its acquisition of those receivables. The borrowings generally accrue interest at the blended commercial paper rate for commercial paper issued by Gramercy Capital Corporation to fund such borrowings plus a margin of 0.75% per annum. The SPV's borrowings are an obligation of the SPV and not of the Company or URI, and the lenders' recourse in respect of the borrowings is generally limited to collections that the SPV receives on the receivables. Collections on the receivables are used to service the borrowings. From time to time prior to June 2002, subject to certain conditions, collections from the receivables may be reinvested by the SPV in additional accounts receivable originated by the Company. Subject to certain conditions, the term of the receivables securitization may be extended until December 2003. As of June 30, 2001, approximately $212.0 million of borrowings was outstanding under the receivables securitization facility. 13 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
Six Months Three Months Ended Ended June 30, June 30, --------------- --------------- 2001 2000 2001 2000 ------- ------- ------- ------- Numerator: Income before extraordinary item............. $28,347 $64,610 $24,935 $47,199 Denominator: Denominator for basic earnings per share-- weighted-average shares..................... 71,026 71,844 71,318 71,631 Effect of dilutive securities: Employee stock options..................... 1,850 1,144 2,404 1,024 Warrants................................... 3,056 2,435 3,433 2,303 Series A perpetual convertible preferred stock..................................... 12,000 12,000 12,000 12,000 Series B perpetual convertible preferred stock..................................... 5,000 5,000 5,000 5,000 ------- ------- ------- ------- Denominator for diluted earnings per share-- adjusted weighted-average shares............ 92,932 92,423 94,155 91,958 ======= ======= ======= ======= Earnings per share-basic: Income before extraordinary item............. $ 0.40 $ 0.90 $ 0.35 $ 0.66 Extraordinary item, net...................... 0.16 0.16 ------- ------- ------- ------- Net Income................................... $ 0.24 $ 0.90 $ 0.19 $ 0.66 ======= ======= ======= ======= Earnings per share-diluted: Income before extraordinary item............. $ 0.31 $ 0.70 $ 0.27 $ 0.51 Extraordinary item, net...................... $ 0.13 $ 0.13 ======= ======= ======= ======= Net income................................... $ 0.18 $ 0.70 $ 0.14 $ 0.51 ======= ======= ======= =======
7. Stock Plans 2001 Senior Stock Plan. In June 2001, the Company's shareholders approved the adoption of the 2001 Senior Stock Plan. This plan provides for the awarding of common stock and other equity-linked awards to our officers and directors. The maximum number of shares of common stock that can be issued under the plan is 4,000,000. The Company records each share that is awarded under this plan at an amount no less than 100% of the fair market value per share at the date of the award. No shares may be awarded under this plan after June 5, 2011. As of June 30, 2001, 2,015,000 shares had been awarded under this plan. Determinations concerning the persons to receive awards, the form, amount and timing of such awards and terms and provisions of such awards are made by the Board of Directors (or a committee appointed by the Board of Directors). 2001 Stock Plan. In March 2001, the Company adopted the 2001 Stock Plan. This plan provides for the awarding of common stock and other equity-linked awards to certain employees (other than officers and directors) and others who render services to the Company. The maximum number of shares of common stock that can be issued under the plan is 2,000,000. The Company records each share that is awarded under this plan at an amount no less than 100% of the fair market value per share at the date of the award. No shares may be awarded under this plan after March 23, 2011. As of June 30, 2001, 752,041 shares had been awarded under this plan. Determinations concerning the persons to receive awards, the form, amount and timing of such awards and 14 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) terms and provisions of such awards are made by the Board of Directors (or a committee appointed by the Board of Directors). The Company records the issuance of restricted shares at the quoted market price on the date of the grants. Amortization of deferred compensation is then recognized on a straight-line basis over the related vesting period. 8. Comprehensive Income The following table sets forth the Company's comprehensive income (in thousands):
Six Months Three Months Ended Ended June 30, June 30, ---------------- --------------- 2001 2000 2001 2000 ------- ------- ------- ------- Net income................................ $17,030 $64,610 $13,618 $47,199 Other comprehensive gain (loss): Foreign currency translation adjustment............................. (3,448) 342 8,565 1,112 Cumulative effect on equity of adopting FAS 133................................ (2,516) Derivatives qualifying as hedges........ (1,813) 627 ------- ------- ------- ------- Comprehensive income...................... $ 9,253 $64,952 $22,810 $48,311 ======= ======= ======= =======
9. Derivative Financial Instruments The FASB issued, and subsequently amended, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which became effective for the Company on January 1, 2001. Under SFAS No. 133, all derivatives are required to be recorded as assets or liabilities and measured at fair value. Gains or losses resulting from changes in the values of derivatives are recognized immediately or deferred, depending on the use of the derivative and whether or not it qualifies as a hedge. The Company occasionally uses derivative financial instruments to manage its risk associated with fluctuations in interest rates on its debt. As of June 30, 2001, the Company had outstanding interest rate swap agreements that converts a portion, or $200.0 million, of its variable rate term loan to a fixed rate instrument through 2003. These swap agreements are designated as cash flow hedges and changes in fair value of the hedges are recorded in other comprehensive income and reclassified into earnings in the same periods during which the hedged transaction affects earnings. There is no ineffectiveness related to these hedges. 15 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10. Condensed Consolidating Financial Information of Guarantor Subsidiaries Certain indebtedness of URI, a wholly-owned subsidiary of Holdings (the "Parent"), is guaranteed by URI's United States subsidiaries (the "guarantor subsidiaries") and, in certain cases, also by Parent. However, this indebtedness is not guaranteed by URI's foreign subsidiaries (the "non- guarantor subsidiaries"). The guarantor subsidiaries are all wholly owned and the guarantees are made on a joint and several basis and are full and unconditional (subject to subordination provisions and subject to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws). Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes such information would not be material to investors. However, condensed consolidating financial information as of June 30, 2001 and December 31, 2000 and for the six and three months ended June 30, 2001 and 2000, are presented. The condensed consolidating financial information of URI and its subsidiaries are as follows: CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 2001 ---------------------------------------------------------------- Non- Guarantor Guarantor Other and Consolidated Parent URI Subsidiaries Subsidiaries Eliminations Total ------ ---------- ------------ ------------ ------------ ------------ (In thousands) ASSETS Cash and cash equiva- lents.................. $ 30,586 $ 5,549 $ 36,135 Accounts receivable, net.................... $ 59,479 324,470 106,606 490,555 Intercompany receivable (payable).............. 211,682 49,370 (261,052) Inventory............... 52,232 56,973 5,365 114,570 Prepaid expenses and other assets........... 54,508 119,215 1,176 $ 8,986 183,885 Rental equipment, net... 956,034 768,444 126,926 1,851,404 Property and equipment, net.................... $ 35,111 143,055 233,614 16,796 428,576 Investment in subsidiar- ies.................... 1,814,909 2,330,924 (4,145,833) Intangible assets, net.. 869,416 1,209,403 130,702 2,209,521 ---------- ---------- ---------- --------- ----------- ---------- $1,850,020 $4,677,330 $2,792,075 $ 132,068 $(4,136,847) $5,314,646 ========== ========== ========== ========= =========== ========== LIABILITIES AND STOCK- HOLDER'S EQUITY Liabilities: Accounts payable....... $ 71,448 $ 222,935 $ 17,631 $ 312,014 Debt................... $ 300,000 2,523,718 214,768 21,262 $ (300,000) 2,759,748 Deferred income tax- es.................... 230,056 50 230,106 Accrued expenses and other liabilities..... 9,255 42,280 93,864 13,681 12,933 172,013 ---------- ---------- ---------- --------- ----------- ---------- Total liabilities.... 309,255 2,867,502 531,617 52,574 (287,067) 3,473,881 Commitments and contin- gencies Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust....... 300,000 300,000 Series A and B preferred stock.................. 430,800 430,800 Stockholders' equity: Common stock........... 732 732 Additional paid-in capital............... 810,332 1,496,393 1,838,411 65,901 (3,400,705) 810,332 Deferred compensa- tion.................. (59,255) (59,255) Retained earnings...... 372,880 317,764 422,047 23,988 (763,799) 372,880 Accumulated other com- prehensive income..... (14,724) (4,329) (10,395) 14,724 (14,724) ---------- ---------- ---------- --------- ----------- ---------- Total stockholders' equity.............. 1,109,965 1,809,828 2,260,458 79,494 (4,149,780) 1,109,965 ---------- ---------- ---------- --------- ----------- ---------- $1,850,020 $4,677,330 $2,792,075 $132,068 $(4,136,847) $5,314,646 ========== ========== ========== ========= =========== ==========
16 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
December 31, 2000 --------------------------------------------------------------------------- Non- Guarantor Guarantor Other and Consolidated Parent URI Subsidiaries Subsidiaries Eliminations Total ---------- ---------- ------------ ------------ ------------ ------------ (In thousands) Assets Cash and cash equiva- lents.................. $ 29,733 $ 4,651 $ 34,384 Accounts receivable, net.................... $ 216,444 143,295 109,855 469,594 Intercompany receivable (payable).............. 319,423 (55,187) (264,236) Inventory............... 54,022 73,979 5,379 133,380 Prepaid expenses and other assets........... 28,263 75,633 597 104,493 Rental equipment, net... 837,972 766,219 128,644 1,732,835 Property and equipment, net.................... $ 34,807 139,871 231,195 16,366 422,239 Investment in subsidiar- ies.................... 1,839,952 2,257,692 $(4,097,644) Intangible assets, net.. 960,444 1,132,438 134,126 2,227,008 ---------- ---------- ---------- --------- ----------- ---------- $1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933 ========== ========== ========== ========= =========== ========== Liabilities and Stock- holder's Equity Liabilities: Accounts payable....... $ 78,623 $ 165,677 $ 15,855 $ 260,155 Debt................... $ 300,000 2,647,144 3,484 24,739 $ (300,000) 2,675,367 Deferred income tax- es.................... 186,091 20,702 (550) 206,243 Accrued expenses and other liabilities..... 28,816 86,560 18,862 13,750 (11,763) 136,225 ---------- ---------- ---------- --------- ----------- ---------- Total liabilities.... 328,816 2,998,418 208,725 53,794 (311,763) 3,277,990 Commitments and contin- gencies Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust....... 300,000 300,000 Series A and B preferred stock.................. 430,800 430,800 Stockholders' equity: Common stock........... 711 711 Additional paid-in capital................ 765,529 1,488,238 1,830,500 65,657 (3,384,395) 765,529 Retained earnings...... 355,850 327,475 358,080 22,878 (708,433) 355,850 Accumulated other com- prehensive loss........ (6,947) (6,947) 6,947 (6,947) ---------- ---------- ---------- --------- ----------- ---------- Total stockholders' equity.............. 1,115,143 1,815,713 2,188,580 81,588 (4,085,881) 1,115,143 ---------- ---------- ---------- --------- ----------- ---------- $1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933 ========== ========== ========== ========= =========== ==========
17 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2001 ----------------------------------------------------------------------- Non- Guarantor Guarantor Other and Consolidated Parent URI Subsidiaries Subsidiaries Eliminations Total -------- -------- ------------ ------------ ------------ ------------ (In thousands) Revenues: Equipment rentals...... $446,995 $549,950 $46,805 $1,043,750 Sales of rental equip- ment.................. 33,722 32,104 6,413 72,239 Sales of equipment and merchandise and other revenues............. 127,949 128,094 15,085 271,128 -------- -------- -------- ------- -------- ---------- Total revenues.......... 608,666 710,148 68,303 1,387,117 Cost of revenues: Cost of equipment rent- als, excluding depreciation.......... 191,408 284,455 24,273 500,136 Depreciation of rental equipment............. 77,870 70,337 10,147 158,354 Cost of rental equip- ment sales............ 21,190 17,387 3,804 42,381 Cost of equipment and merchandise sales and other operating costs................. 95,705 90,819 11,092 197,616 -------- -------- -------- ------- -------- ---------- Total cost of revenues.. 386,173 462,998 49,316 898,487 -------- -------- -------- ------- -------- ---------- Gross profit............ 222,493 247,150 18,987 488,630 Selling, general and administrative expenses............... 94,457 114,886 12,372 221,715 Restructuring charge.... 28,922 28,922 Non-rental depreciation and amortization....... $ 4,286 20,291 25,725 2,936 53,238 -------- -------- -------- ------- -------- ---------- Operating income (loss)................. (4,286) 78,823 106,539 3,679 184,755 Interest expense........ 9,750 107,825 6,046 718 $ (9,750) 114,589 Preferred dividends of a subsidiary trust....... 9,750 9,750 Other (income) expense, net.................... 14,725 (8,853) 1,063 6,935 -------- -------- -------- ------- -------- ---------- Income (loss) before provision (benefit) for income taxes and extraordinary item..... (14,036) (43,727) 109,346 1,898 53,481 Provision (benefit) for income taxes........... (6,270) (14,763) 45,379 788 25,134 -------- -------- -------- ------- -------- ---------- Income before extraordi- nary item and equity in net earnings of subsid- iaries................. (7,766) (28,964) 63,967 1,110 28,347 Extraordinary item...... 11,317 11,317 -------- -------- -------- ------- -------- ---------- Income (loss) before equity in net earnings of subsidiaries........ (7,766) (40,281) 63,967 1,110 17,030 Equity in net earnings of subsidiaries........ 24,796 65,077 $(89,873) -------- -------- -------- ------- -------- ---------- Net income ............. $ 17,030 $ 24,796 $ 63,967 $ 1,110 $(89,873) $ 17,030 ======== ======== ======== ======= ======== ==========
18 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000 ------------------------------------------------------------------------ Guarantor Non-Guarantor Other and Consolidated Parent URI Subsidiaries Subsidiaries Eliminations Total ------ --- ------------ ------------- ------------ ------------ (In thousands) Revenues: Equipment rentals...... $378,801 $484,540 $48,291 $ 911,632 Sales of rental equipment............. 74,484 68,315 12,372 155,171 Sales of equipment and merchandise and other revenues.............. 112,041 114,201 15,863 242,105 -------- -------- -------- ------- --------- ---------- Total revenues.......... 565,326 667,056 76,526 1,308,908 Cost of revenues: Cost of equipment rentals, excluding depreciation.......... 162,317 211,389 22,908 396,614 Depreciation of rental equipment............. 70,016 79,670 9,349 159,035 Cost of rental equipment sales....... 43,989 39,471 7,708 91,168 Cost of equipment and merchandise sales and other operating costs................. 91,840 79,645 12,824 184,309 -------- -------- -------- ------- --------- ---------- Total cost of revenues.. 368,162 410,175 52,789 831,126 -------- -------- -------- ------- --------- ---------- Gross profit............ 197,164 256,881 23,737 477,782 Selling, general and administrative expenses............... 92,687 106,523 11,759 210,969 Non-rental depreciation and amortization....... $ 3,566 17,912 16,597 2,646 40,721 -------- -------- -------- ------- --------- ---------- Operating income........ (3,566) 86,565 133,761 9,332 226,092 Interest expense........ 9,750 104,617 195 1,398 $ (9,750) 106,210 Preferred dividends of a subsidiary trust....... 9,750 9,750 Other (income) expense, net.................... 3,929 (4,422) 181 (312) -------- -------- -------- ------- --------- ---------- Income (loss) before provision for income taxes.................. (13,316) (21,981) 137,988 7,753 110,444 Provision (benefit) for income taxes........... (5,575) (9,122) 57,265 3,266 45,834 -------- -------- -------- ------- --------- ---------- Income (loss) before equity in net earnings of subsidiaries........ (7,741) (12,859) 80,723 4,487 64,610 Equity in net earnings of subsidiaries........ 72,351 85,210 $(157,561) -------- -------- -------- ------- --------- ---------- Net income.............. $ 64,610 $ 72,351 $ 80,723 $ 4,487 $(157,561) $ 64,610 ======== ======== ======== ======= ========= ==========
19 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2001 ---------------------------------------------------------------------- Non- Guarantor Guarantor Other and Consolidated Parent URI Subsidiaries Subsidiaries Eliminations Total ------- -------- ------------ ------------ ------------ ------------ (In thousands) Revenues: Equipment rentals...... $239,522 $316,596 $26,250 $582,368 Sales of rental equip- ment.................. 5,527 24,045 3,545 33,117 Sales of equipment and merchandise and other revenues............. 71,408 73,444 7,676 152,528 ------- -------- -------- ------- -------- -------- Total revenues.......... 316,457 414,085 37,471 768,013 Cost of revenues: Cost of equipment rentals, excluding depreciation.......... 92,597 164,780 12,726 270,103 Depreciation of rental equipment............. 40,459 36,041 5,053 81,553 Cost of rental equip- ment sales............ 4,606 12,485 2,214 19,305 Cost of equipment and merchandise sales and other operating costs................. 53,033 52,311 5,645 110,989 ------- -------- -------- ------- -------- -------- Total cost of revenues.. 190,695 265,617 25,638 481,950 ------- -------- -------- ------- -------- -------- Gross profit............ 125,762 148,468 11,833 286,063 Selling, general and administrative expenses............... 46,208 60,278 6,336 112,822 Restructuring charge.... 28,922 28,922 Non-rental depreciation and amortization....... $ 2,222 9,454 13,969 1,486 27,131 ------- -------- -------- ------- -------- -------- Operating income........ (2,222) 41,178 74,221 4,011 117,188 Interest expense........ 4,875 50,978 5,610 471 $ (4,875) 57,059 Preferred dividends of a subsidiary trust....... 4,875 4,875 Other (income) expense, net.................... 8,525 (1,468) 548 7,605 ------- -------- -------- ------- -------- -------- Income (loss) before provision for income taxes and extraordinary item................... (7,097) (18,325) 70,079 2,992 47,649 Provision (benefit) for income taxes........... (3,390) (4,221) 29,083 1,242 22,714 ------- -------- -------- ------- -------- -------- Income before extraordi- nary item and equity in net earnings of subsid- iaries................. (3,707) (14,104) 40,996 1,750 24,935 Extraordinary item...... 11,317 11,317 ------- -------- -------- ------- -------- -------- Income (loss) before equity in net earnings of subsidiaries........ (3,707) (25,421) 40,996 1,750 13,618 Equity in net earnings of subsidiaries........ 17,325 42,746 $(60,071) ------- -------- -------- ------- -------- -------- Net income ............. $13,618 $ 17,325 $ 40,996 $ 1,750 $(60,071) $ 13,618 ======= ======== ======== ======= ======== ========
20 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2000 --------------------------------------------------------------------- Non- Gurantor Guarantor Other and Consolidated Parent URI Subsidiaries Subsidiaries Eliminations Total ------- -------- ------------ ------------ ------------ ------------ (In thousands) Revenues: Equipment rentals...... $212,902 $271,802 $26,830 $511,534 Sales of rental equipment............. 31,500 47,444 5,895 84,839 Sales of equipment and merchandise and other revenues.............. 65,415 59,722 8,436 133,573 ------- -------- -------- ------- --------- -------- Total revenues.......... 309,817 378,968 41,161 729,946 Cost of revenues: Cost of equipment rentals, excluding depreciation.......... 84,062 126,661 11,591 222,314 Depreciation of rental equipment............. 36,928 43,798 4,806 85,532 Cost of rental equipment sales....... 17,848 28,830 3,404 50,082 Cost of equipment and merchandise sales and other operating costs................. 52,782 40,833 6,605 100,220 ------- -------- -------- ------- --------- -------- Total cost of revenues.. 191,620 240,122 26,406 458,148 ------- -------- -------- ------- --------- -------- Gross profit............ 118,197 138,846 14,755 271,798 Selling, general and administrative expenses............... 48,535 54,065 6,519 109,119 Non-rental depreciation and amortization....... $ 1,865 8,653 8,813 1,372 20,703 ------- -------- -------- ------- --------- -------- Operating income........ (1,865) 61,009 75,968 6,864 141,976 Interest expense........ 4,875 55,949 35 543 $ (4,875) 56,527 Preferred dividends of a subsidiary trust....... 4,875 4,875 Other (income) expense, net.................... 2,156 (2,698) 434 (108) ------- -------- -------- ------- --------- -------- Income (loss) before provision (benefit) for income taxes........... (6,740) 2,904 78,631 5,887 80,682 Provision (benefit) for income taxes........... (2,797) 1,205 32,661 2,414 33,483 ------- -------- -------- ------- --------- -------- Income (loss) before equity in net earnings of subsidiaries........ (3,943) 1,699 45,970 3,473 47,199 Equity in net earnings of subsidiaries........ 51,142 49,443 (100,585) ------- -------- -------- ------- --------- -------- Net income.............. $47,199 $ 51,142 $ 45,970 $ 3,473 $(100,585) $ 47,199 ======= ======== ======== ======= ========= ========
21 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Six Months Ended June 30, 2001 -------------------------------------------------------------------------- Guarantor Non-guarantor Other and Parent URI Subsidiaries Subsidiaries Eliminations Consolidated ------- ---------- ------------- ------------- ------------ ------------ (In thousands) Net cash provided by (used in) operating activities............. $(4,007) $ 205,885 $78,440 $18,137 $ 298,455 Cash flows from investing activities: Purchases of rental equipment............. (199,566) (89,546) (14,169) (303,281) Purchases of property and equipment......... (3,603) (6,627) (18,907) (2,289) (31,426) Proceeds from sales of rental equipment...... 33,722 32,104 6,413 72,239 Capital contributed to subsidiary............ (8,155) $ 8,155 Purchases of other companies............. (36,983) (818) (37,801) In-process acquisition costs................. (2,140) (2,140) ------- ---------- ------- ------- ------- ---------- Net cash used in investing activities.......... (13,898) (209,454) (76,349) (10,863) 8,155 (302,409) Cash flows from financing activities: Proceeds from debt..... 1,979,144 11 1,979,155 Payments of debt....... (1,922,168) (1,249) (2,865) (1,926,282) Payments of financing costs................. (27,055) (63) (27,118) Capital contributions by parent............. 8,155 (8,155) Dividend distributions to parent............. (34,507) 34,507 Shares repurchased and retired............... (24,758) (24,758) Proceeds from the exercise of common stock options......... 8,156 8,156 Proceeds from the dividends from subsidiary............ 34,507 (34,507) ------- ---------- ------- ------- ------- ---------- Net cash provided by (used in) financing activities.......... 17,905 3,569 (1,238) (2,928) (8,155) 9,153 Effect of foreign exchange rates........ (3,448) (3,448) ------- ---------- ------- ------- ------- ---------- Net decrease in cash and cash equivalents........... 853 898 1,751 Cash and cash equivalents at beginning of period... 29,733 4,651 34,384 ------- ---------- ------- ------- ------- ---------- Cash and cash equivalents at end of period................ $30,586 $ 5,549 $ 36,135 ======= ========== ======= ======= ======= ========== Supplemental disclosure of cash flow information: Cash paid for interest............ $ 9,750 $ 94,892 $ 4,562 $ 819 $ 110,023 Cash paid for income taxes, net of refunds............. $ 1,584 $ (865) $ 719 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired.............. $ 4,624 $ 833 $ 5,457 Liabilities assumed.... (842) (194) (1,036) Less: Amounts paid through issuance of debt.... (600) (600) ------- ---------- ------- ------- ------- ---------- 3,182 639 3,821 Due to seller and other payments........ 33,801 179 33,980 ------- ---------- ------- ------- ------- ---------- Net cash paid........ $ 36,983 $ 818 $ 37,801 ======= ========== ======= ======= ======= ==========
22 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Six Months Ended June 30, 2000 -------------------------------------------------------------- Guarantor Non-guarantor Other and Parent URI Subsidiaries Subsidiaries Eliminations Consolidated -------- ---------- ------------- ------------- ------------ ------------ (In thousands) Net cash provided by (used in) operating activities............. $ 1,117 $ (106,798) $ 356,725 $ 11,772 $ 9 $ 262,825 Cash flows from investing activities: Purchases of rental equipment............. (127,778) (368,805) (17,234) (513,817) Purchases of property and equipment......... (13,585) (12,678) (41,512) (1,466) (69,241) Proceeds from sales of rental equipment...... 74,484 68,315 12,372 155,171 Payments of contingent purchase price........ (851) (5,702) (6,553) Purchases of other companies............. (261,982) (3,102) (265,084) Capital contributed to subsidiary............ (96) 96 In-process acquisition costs................. (2,445) (2,445) -------- ---------- --------- -------- ------- --------- Net cash used in investing activities.......... (16,126) (328,805) (347,704) (9,430) 96 (701,969) Cash flows from financing activities: Proceeds from debt..... 357,250 19,653 376,903 Payments of debt....... (19,929) (14,037) (4,251) (38,217) Proceeds from sale- leaseback............. 147,515 147,515 Payments of financing costs................. (7,155) (9) (7,164) Capital contributions by parent............. 96 (96) Dividend distributions to parent............. (45,863) 45,863 Proceeds from the exercise of common stock options......... 96 96 Proceeds from dividends from subsidiary............ 45,863 (45,863) Shares repurchased and retired............... (30,950) (30,950) -------- ---------- --------- -------- ------- --------- Net cash provided by (used in) financing activities.......... 15,009 431,914 5,616 (4,251) (105) 448,183 Effect of foreign exchange rates........ 342 342 -------- ---------- --------- -------- ------- --------- Net increase (decrease) in cash and cash equivalents........... (3,689) 14,637 (1,567) 9,381 Cash and cash equivalents at beginning of period... 3,689 16,414 3,708 23,811 -------- ---------- --------- -------- ------- --------- Cash and cash equivalents at end of period................ $ 31,051 $ 2,141 $ 33,192 ======== ========== ========= ======== ======= ========= Supplemental disclosure of cash flow information: Cash paid for interest............ $ 9,750 $ 89,682 $ 243 $ 1,371 $ 101,046 Cash paid for income taxes............... $ 55,791 $ 6,929 $ 62,720 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired.............. $ 387,989 $ 4,884 $ 392,873 Liabilities assumed.... (100,810) (1,782) (102,592) Less: Amounts paid through issuance of debt.... (25,197) (25,197) -------- ---------- --------- -------- ------- --------- Net cash paid...... $ 261,982 $ 3,102 $ 265,084 ======== ========== ========= ======== ======= =========
23 UNITED RENTALS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 11. Subsequent Events New Preferred Stock. On September 28, 2001, the Company entered into an agreement effecting an exchange of the Company's outstanding Series A Preferred for an equal number of shares of Series C Preferred and the exchange of the Company's Series B Preferred for an equal number of shares of Series D Preferred. Except as described below, the material terms of the new Series C Preferred are the same as the old Series A Preferred and the material terms of the new Series D Preferred are the same as the old Series B Preferred. The certificates of designation for the Series A Preferred and Series B Preferred (the "Prior Preferred") provide that, upon the occurrence of a Change of Control (as defined in these certificates of designation), the Company is required to redeem the Prior Preferred. The term "Change of Control," as defined in these certificates of designation, would have included certain transactions that were disapproved by the Company's board. The certificates of designation for Series C Preferred and Series D Preferred (the "New Preferred") change these provisions by excluding from the definition of "Change of Control" transactions that are defined as "Non-Approved Changes of Control." In general, a Non-Approved Change of Control transaction is a change of control transaction that the board has disapproved and which the board has not facilitated by such actions as weakening or eliminating the Company's Stockholder Rights Plan. If a Non-Approved Change of Control occurs, the holders of the New Preferred obtain the following additional rights, but only if, prior to the transaction, the board does not elect to offer the holders of the New Preferred essentially the same redemption rights that apply to an approved Change of Control transaction: . The holders of the Series C Preferred would elect a majority of the board for a specified period and, during such period, the unanimous vote of the board would be required to approve any optional redemption of the New Preferred or to declare, pay, or change the accrual rate of, any dividends on the New Preferred. . Upon liquidation, the holders of the New Preferred would receive, in addition to the liquidation preference and accrued dividends, an amount equal to 6.25% of the liquidation preference, compounded annually from the date the Series A Preferred was issued, in the case of the Series C Preferred, or the date the Series B was issued, in the case of the Series D Preferred, and ending on the date of the Non Approved Change of Control. In addition, after holders of the Common Stock have received the equivalent amount, the holders of the New Preferred would participate with the holders of the Common Stock in any remaining amounts available for distribution (based upon the number of shares of Common Stock into which such Preferred shares would then be convertible). . Dividends would begin to accrue on the New Preferred. Accrued dividends would not be payable until liquidation or sale of the Company, unless the board by unanimous vote approves earlier payment. The dividend rate would be 10% per annum of the liquidation preference, compounded annually. If these dividends are not paid quarterly, additional dividends would accrue at the rate of 8% per annum of the liquidation preference, compounded annually. Any regular or additional dividends that are not paid quarterly would be added to the liquidation preference. Stockholders Rights Plan. The Company adopted a Stockholders Rights Plan on September 28, 2001 (with a record date of October 19, 2001). This plan and other provisions of the Company's charter and bylaws may have the effect of deterring hostile takeovers or delaying or preventing changes in control or management of the Company, including transactions in which the shareholders of the Company might otherwise receive a premium for their shares over then current market prices. The rights expire on September 27, 2011. 24 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned hereunto duly authorized. United Rentals, Inc. Dated: October 9, 2001 /s/ Michael J. Nolan By: _________________________________ Michael J. Nolan Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer) United Rentals (North America), Inc. Dated: October 9, 2001 /s/ Michael J. Nolan By: _________________________________ Michael J. Nolan Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer) 25