Form 10-Q For the quarterly period ended June 30, 2005

10-Q 1 d10q.htm FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005 Form 10-Q For the quarterly period ended June 30, 2005

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-14387

United Rentals, Inc.

Commission File Number 1-13663

United Rentals (North America), Inc.

(Exact Names of Registrants as Specified in Their Charters)


Delaware Delaware		06-1522496 06-1493538
(State of Incorporation)		(I.R.S. Employer Identification Nos.)

Five Greenwich Office Park, Greenwich, Connecticut		06831
(Address of Principal Executive Offices)		(Zip code)

Registrants’ telephone number, including area code: (203) 622-3131

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ¨ Yes þ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act).

Large Accelerated Filer þ Accelerated Filer ¨ Non-Accelerated Filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No

As of March 1, 2006, there were 77,520,680 shares of 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 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

INDEX


		Page
PART I	FINANCIAL INFORMATION

Item 1	Unaudited Condensed Consolidated Financial Statements	4

	United Rentals, Inc. Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004 (unaudited)	4

	United Rentals, Inc. Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004 (unaudited)	5

	United Rentals, Inc. Condensed Consolidated Statement of Stockholders’ Equity for the three Months Ended June 30, 2005 (unaudited)	6

	United Rentals, Inc. Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (unaudited)	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3	Quantitative and Qualitative Disclosures about Market Risk	44

Item 4	Controls and Procedures	45

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	50

Item 1A	Risk Factors	52

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 6	Exhibits	53

	Signatures	55

EXPLANATORY NOTE

We were unable to timely file this quarterly report on Form 10-Q, our quarterly reports on Form 10-Q for the quarters ended March 31, 2005 and September 30, 2005 and our annual report on Form 10-K for 2004 as a result of the previously announced SEC inquiry and related review by a Special Committee of our board of directors and the restatement of our consolidated financial statements for 2003 and 2002. We filed our annual report on Form 10-K for 2004, including restated consolidated financial statements for 2003 and 2002, on March 31, 2006 (the “2004 Form 10-K”). The restatement corrected accounting errors related to the recognition of equipment rental revenue, self-insurance reserves, customer relationships and the provision for income taxes, and the accounting for certain short-term sale-leaseback transactions that constituted irregularities (the “Restatement”).

For information concerning the Restatement, see note 2 to our condensed consolidated financial statements included in this report. For additional information regarding the background and effects of the Restatement, see our annual report on Form 10-K for 2005, which we filed contemporaneously with our annual report on Form 10-K for 2004 on March 31, 2006.

Contemporaneous with the filing of this quarterly report on Form 10-Q for the quarter ended June 30, 2005, we are filing our quarterly reports on Form 10-Q for the quarters ended March 31, 2005 and September 30, 2005.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this report are forward-looking in nature. Such statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,” “plan,” “intend” or “anticipate,” 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 Item 1A – 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.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except per share data and unless otherwise indicated)


	June 30, 2005			December 31, 2004
ASSETS
Cash and cash equivalents	$	254		$	303
Accounts receivable, net of allowance for doubtful accounts of $42 in 2005 and $53 in 2004		517			490
Inventory		178			119
Prepaid expenses and other assets		120			120
Rental equipment, net		2,283			2,123
Property and equipment, net		415			397
Goodwill		1,291			1,293
Other intangible assets, net		35			37

	$	5,093		$	4,882

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable	$	336		$	217
Accrued expenses and other liabilities		304			323
Debt		2,954			2,945
Subordinated convertible debentures		222			222
Deferred taxes		187			149

Total liabilities		4,003			3,856
Stockholders’ equity:
Preferred stock—$0.01 par value, 5,000,000 shares authorized:
Series C perpetual convertible preferred stock—$.30 liquidation preference, 300,000 shares issued and outstanding		—			—
Series D perpetual convertible preferred stock—$.15 liquidation preference, 150,000 shares issued and outstanding		—			—
Common stock—$.01 par value, 500,000,000 shares authorized, 78,011,621 shares issued and outstanding on June 30, 2005 and 77,869,576 shares issued and outstanding on December 31, 2004		1			1
Additional paid-in capital		1,352			1,349
Deferred compensation		(17	)		(19	)
Accumulated deficit		(280	)		(342	)
Accumulated other comprehensive income		34			37

Total stockholders’ equity		1,090			1,026

	$	5,093		$	4,882

See accompanying notes.

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data and unless otherwise indicated)


	Six Months Ended June 30,						Three Months Ended June 30,
	2005			2004 (Restated)			2005		2004 (Restated)
Revenues:
Equipment rentals	$	1,141		$	1,031		$	627	$	565
Sales of rental equipment		167			135			87		70
New equipment sales		96			84			55		47
Contractor supplies sales		149			102			85		57
Service and other revenues		67			62			34		32

Total revenues		1,620			1,414			888		771
Cost of revenues:
Cost of equipment rentals, excluding depreciation		601			549			320		285
Depreciation of rental equipment		189			182			95		92
Cost of rental equipment sales		122			96			65		52
Cost of new equipment sales		79			72			45		40
Cost of contractor supplies sales		112			75			64		42
Cost of service and other revenue		32			32			16		15

Total cost of revenues		1,135			1,006			605		526

Gross profit		485			408			283		245
Selling, general and administrative expenses		258			230			136		115
Non-rental depreciation and amortization		32			33			16		16

Operating income (loss)		195			145			131		114
Interest expense		87			80			44		34
Interest expense—subordinated convertible debentures		8			8			4		4
Other (income) expense, net		(1	)		173			1		12

Income (loss) before provision (benefit) for income taxes		101			(116	)		82		64
Provision (benefit) for income taxes		39			(48	)		32		24

Net income (loss)	$	62		$	(68	)	$	50	$	40

Earnings (loss) per share—basic:
Income (loss) available to common stockholders	$	0.65		$	(0.88	)	$	0.53	$	0.42

Earnings (loss) per share—diluted:
Income (loss) available to common stockholders	$	0.60		$	(0.88	)	$	0.48	$	0.39

See accompanying notes.

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In millions, except per share data and unless otherwise indicated)


	Series C Perpetual Convertible Preferred Stock		Series D Perpetual Convertible Preferred Stock		Common Stock			Additional Paid-in Capital		Deferred Compensation			Accumulated Deficit			Comprehensive Income			Accumulated Other Comprehensive Income
	Series C Perpetual Convertible Preferred Stock		Series D Perpetual Convertible Preferred Stock		Number of Shares	Amount		Additional Paid-in Capital		Deferred Compensation			Accumulated Deficit			Comprehensive Income			Accumulated Other Comprehensive Income
Balance, December 31, 2004	$	—	$	—	78	$	1	$	1,349	$	(19	)	$	(342	)		—		$	37
Comprehensive income:
Net income														62			62
Other comprehensive income:
Foreign currency translation adjustments																	(5	)		(5	)
Derivatives qualifying as hedges, net of tax of $(1)																	2			2

Comprehensive income																$	59

Issuance of common stock under deferred compensation plans, net of forfeitures									1		(1	)
Exercise of common stock options and warrants									2
Amortization of deferred compensation											3

Balance, June 30, 2005	$	—	$	—	78	$	1	$	1,352	$	(17	)	$	(280	)				$	34

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions, except per share data and unless otherwise indicated)


	Six Months Ended June 30,
	2005			2004 (Restated)
Cash Flows From Operating Activities:
Net income (loss)	$	62		$	(68	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		221			215
Gain on sales of rental equipment		(45	)		(39	)
Amortization of deferred compensation		5			13
Repurchase premiums for debt refinancing		—			150
Deferred taxes		38			(47	)
Changes in operating assets and liabilities:
Accounts receivable		(28	)		15
Inventory		(42	)		(7	)
Prepaid expenses and other assets		1			23
Accounts payable		119			101
Accrued expenses and other liabilities		(6	)		(11	)

Net cash provided by operating activities		325			345

Cash Flows From Investing Activities:
Purchases of rental equipment		(484	)		(331	)
Purchases of property and equipment		(32	)		(29	)
Proceeds from sales of rental equipment		167			135
Purchases of other companies		(3	)		(61	)
Proceeds from sale of branches		3			—

Net cash used in investing activities		(349	)		(286	)

Cash Flows From Financing Activities:
Proceeds from debt		—			2,178
Payments of debt		(25	)		(2,208	)
Payments of financing costs		(1	)		(36	)
Proceeds from the exercise of common stock options		2			4
Shares repurchased and retired		—			(4	)

Net cash used in financing activities		(24	)		(66	)
Effect of foreign exchange rates		(1	)		—

Net decrease in cash and cash equivalents		(49	)		(7	)
Cash and cash equivalents at beginning of period		303			79

Cash and cash equivalents at end of period	$	254		$	72

See accompanying notes.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data unless otherwise indicated)

1. Organization and Basis of Presentation

General

United Rentals, Inc., (“Holdings,” “United Rentals” or the “Company”) is principally a holding company and conducts its operations primarily through its wholly owned subsidiary United Rentals (North America), Inc. (“URI”) and subsidiaries of URI. 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.

We rent 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, we sell new and used rental equipment, as well as related contractor supplies, parts and service. The nature of our 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.

We have prepared the accompanying unaudited condensed consolidated interim financial statements in accordance with the accounting policies described in the 2004 Form 10-K and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the 2004 Form 10-K.

In our opinion, all adjustments which are necessary for a fair statement of financial position, operating results and cash flows for the interim periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year.

In August 2004 we received notice from the SEC that it was conducting a non-public, fact-finding inquiry of the Company. The SEC inquiry appears to relate to a broad range of the Company’s accounting practices and is not confined to a specific period. In March 2005, our board of directors formed a Special Committee of independent directors to review matters related to the SEC inquiry. Our board of directors received and acted upon findings of the Special Committee in January 2006. The actions that we took with respect to the Special Committee’s findings and actions that we took with respect to certain other accounting matters, including the restatement of previously issued consolidated financial statements for 2003 and 2002, are discussed in note 2 below (the “Restatement Note”). The unaudited condensed consolidated interim financial statements for the 2004 interim period have been restated to reflect the matters discussed in the Restatement Note.

Stock-Based Compensation

The Company accounts for its stock-based compensation arrangements using the intrinsic value method under the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” At June 30, 2005 the Company had six stock-based compensation plans. Since stock options have been 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 has been recognized. Restricted stock awards granted by the Company are recognized as deferred compensation. The Company recognizes compensation expense related to these restricted stock awards over their vesting periods or earlier upon acceleration of vesting. During the first quarter of 2004,

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

the company accelerated the vesting of approximately 404,000 shares of restricted stock. The following table provides additional information related to the Company’s stock-based compensation arrangements:


	Six Months Ended June 30,						Three Months Ended June 30,
	2005			2004 (Restated)			2005			2004 (Restated)
Net income (loss), as reported	$	62		$	(68	)	$	50		$	40
Plus: Stock-based compensation expense included in reported net income (loss), net of tax		4			9			2			2
Less: Stock-based compensation expense determined using the fair value method, net of tax		(4	)		(15	)		(2	)		(6	)

Pro forma net income (loss)	$	62		$	(74	)	$	50		$	36

Basic earnings (loss) per share:
As reported	$	0.65		$	(0.88	)	$	0.53		$	0.42
Pro forma	$	0.65		$	(0.95	)	$	0.53		$	0.38
Diluted earnings (loss) per share:
As reported	$	0.60		$	(0.88	)	$	0.48		$	0.39
Pro forma	$	0.60		$	(0.95	)	$	0.48		$	0.35

New Accounting Pronouncements

During the years ended December 31, 2005 and 2004, the Financial Accounting Standards Board (“FASB”) issued several pronouncements of significance to us which are discussed in detail below. In addition, the FASB issued several other pronouncements, including standards on inventory (SFAS No. 151 “Inventory Costs, an amendment of ARB 43, Chapter 4”), exchanges of nonmonetary assets (SFAS No. 153 “Exchanges of Nonmonetary Assets”), and accounting changes (SFAS No. 154 “Accounting Changes and Error Corrections”), which we either currently comply with or are not anticipating to have a significant impact on our future financial condition or results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“FAS 123(R)”), an amendment of FAS No. 123, “Accounting for Stock-Based Compensation,” which supersedes APB 25 and requires companies to recognize compensation expense using a fair value based method for costs related to share-based payments, including stock options. As permitted by the SEC, the requirements of FAS 123(R) are effective for our fiscal year beginning January 1, 2006. Upon adoption, we will elect to apply the modified prospective transition method and therefore we will not restate the results of prior periods. The implementation of FAS 123(R) is not expected to have a material impact on the Company.

FAS 123(R) also requires that the benefits of tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. While we can not estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options and the fair value of our common stock on the date of exercise), the amount of operating cash flows recognized in 2005 for such excess tax deductions was $1.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 requires an entity to recognize a

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. A conditional asset retirement obligation is a legal obligation to perform an asset retirement activity in which the timing or method of settlement are conditional upon a future event that may or may not be within control of the entity. The adoption of FIN 47 in 2005 did not have a material impact on the Company.

2. Restatement

Restatement and Reclassification of Previously Issued Consolidated Financial Statements and Related Matters

As previously reported and discussed in greater detail in our 2004 Form 10-K, subsequent to the filing of our Form 10-K for the year ended December 31, 2003, which included our consolidated financial statements for the years ended December 31, 2003 and 2002, it was determined that the Company’s originally issued financial statements for those periods required restatement to correct the accounting for (i) the recognition of equipment rental revenue; (ii) irregularities identified by the Special Committee with respect to six short-term, or minor, equipment sale-leaseback transactions; (iii) self-insurance reserves; (iv) customer relationships; and (v) the provision for income taxes.

The effects of the restatement adjustments on our originally reported results of operations for the years ended December 31, 2003 and 2002 and on our originally reported retained earnings at December 31, 2001, are summarized below.


	Net Loss Year Ended December 31,						Retained Earnings at December 31, 2001
	2003			2002			Retained Earnings at December 31, 2001
As originally reported	$	(259	)	$	(398	)	$	467
Adjustments for:
Equipment rental revenues (a)		(2	)		(3	)		(17	)
Sale-leaseback transactions (b)		20			2			(33	)
Self-insurance reserves (c)		8			(13	)		(41	)
Customer relationships (d)		(2	)		(1	)		—

Pre-tax impact		24			(15	)		(91	)
Related tax effects		(9	)		6			35

Adjustments, net of tax		15			(9	)		(56	)
Income taxes (e)		(10	)		1			(9	)

Total adjustments, net of tax		5			(8	)		(65	)

As restated	$	(254	)	$	(406	)	$	402

Below is a summary of the nature and amount of the adjustments reflected in the restatement (all amounts are presented on a pre-tax basis unless otherwise noted). We have provided below the impact on originally reported pre-tax and/or net income for 2001 and 2000 of certain of the items for which we are restating.

(a) Recognition of equipment rental revenues. Our originally reported results reflected the recognition of equipment rental revenues based on the minimum amounts which became due and payable under the terms of our applicable rental contracts. We have determined that equipment rental revenues should be recognized on a straight-line basis and have restated our previously reported results to reflect this correction

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

of an error. Our restatement had the impact of increasing/(decreasing) originally reported pre-tax income for 2001, 2000 and for periods prior to 2000 by $6, $4 and $(27), respectively.

(b) Sale-leaseback transactions. In 2002, 2001, and 2000 we previously recognized gross profits of $1, $20 and $12, respectively, in conjunction with six minor sale-leaseback transactions. It has been determined that the accounting for these transactions constituted irregularities and we are restating our financial statements to properly reflect the accounting for these six transactions. At the dates of the original minor sale-leaseback transactions, we recognized a premium (excess profit above fair value) on these transactions. In exchange for receiving this profit premium, we agreed to disburse cash in later periods as well as pay premiums for subsequent equipment purchases (“subsequent purchases”). Our restatement for the sale-leaseback transactions had the impact of increasing/(decreasing) originally reported pre-tax income for 2003, 2002, 2001 and 2000 by $20, $2, $(21), and $(12), respectively. These restatement adjustments reflect the elimination of the premium originally received in the minor sale-leaseback transactions as well as the deferral of any profit until all of our obligations associated with the originally received premiums were settled. Additionally, the adjustments reflect a reduction in previously recorded depreciation expense because this expense reflected capitalized equipment costs for subsequent purchases that were overstated.

(c) Self-insurance reserves. We self-insure for certain types of claims associated with our business, including (i) workers compensation claims and (ii) claims by third parties for injury or property damage caused by our equipment or personnel. These types of claims may take a substantial amount of time to resolve and, accordingly, the ultimate liability associated with a particular claim may not be known for an extended period of time. Our prior methodology for developing self-insurance reserves was based on management estimates of ultimate liability which were developed without obtaining actuarial valuations. In 2004, management adopted an estimation approach based on third party actuarial calculations that properly reflects and incorporates actuarial assumptions. Based on actuarial calculations performed by our third party actuaries in late 2004 and 2005, we concluded that the estimation process we previously used did not adequately take into account certain factors and that, as a result, a restatement was required. The factors that were not adequately addressed by our historical estimation process included future changes in the cost of known claims over time, cost inflation and incurred but not reported claims. Our restatement for the self-insurance reserves had the impact of increasing/(decreasing) originally reported pre-tax income for 2003, 2002, 2001, 2000 and for periods prior to 2000 by $8, $(13), $(11), $(18) and $(12), respectively.

(d) Customer relationships. In 2001, the FASB issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”), which required the use of the purchase method of accounting for business combinations and prohibited the use of the pooling of interests method. SFAS No. 141 also changed the definition of intangible assets acquired in a purchase business combination, providing specific criteria for the initial recognition and measurement of intangible assets apart from goodwill. SFAS 141 applied to all business combinations accounted for using the purchase method for which the acquisition date is July 1, 2001, or later.

We have reviewed acquisitions we made since July 1, 2001 and have determined that a portion of the purchase price for these acquisitions previously allocated to goodwill should be recorded as a separate intangible asset—customer relationships. This restatement reflects the amortization expense associated with the reallocation of a portion of the purchase price from goodwill (which is not amortized) to customer relationships (which are amortized). This correction of an error had the impact of decreasing originally reported pre-tax income for 2003 and 2002 by $2 and $1, respectively.

(e) Income taxes. We have restated our income tax provision to (i) correctly reflect all book-to-tax temporary differences (primarily depreciation and nondeductible reserves and accruals); (ii) reflect appropriate tax benefits for net operating loss and alternative minimum tax credits; (iii) calculate deferred

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

taxes at appropriate legal entity tax rates; and (iv) account for the settlement of an IRS audit examination. Our restatement for income taxes had the impact of increasing/(decreasing) originally reported net income for 2003, 2002, 2001, 2000 and for periods prior to 2000 by $(10), $1, $(3), $(2) and $(4), respectively.

Buy-out of operating lease

In addition to the restatement matters discussed above, we have determined that $88 of costs for the year ended December 31, 2003 previously classified below operating income should be reclassified to cost of equipment rentals and included in operating income. This amount primarily represents the amount in excess of the fair value related to the buy-out of equipment under operating leases. This reclassification, which has the effect of reducing gross profit and other expense (income), net by $88, has no impact on originally reported net income or earnings per share for the year ended December 31, 2003.

Trade packages

During the period from the fourth quarter of 2000 through 2002, the Company sold used equipment to certain suppliers (referred to as “trade packages”). In certain of the trade packages, prices may have included a premium above fair value. In order to induce these suppliers to buy used equipment at premium prices, the Company made commitments or concessions to the suppliers. It has been determined that the accounting for those transactions involved irregularities and that the Company improperly recognized revenue from the transactions involving the undisclosed inducements. However, because records were not created that would have permitted the linkage of the sales and inducements (as a result of instructions given by certain former employees of the Company), the Company is unable to determine the portion of the revenue and gross profit recognized in connection with trade packages with these suppliers between 2000 and 2002 that was improperly recognized. During this period, all sales of used equipment to these suppliers (which includes all trade package transactions) generated total revenues and gross profits of $38 and $9, respectively. Notwithstanding the lack of records relating to these transactions, the Company believes that its financial statements from and after 2002 are materially correct with respect to the effect of these transactions.

The Special Committee concluded that, based on the evidence it reviewed, the practices regarding certain trade packages and minor sale-leaseback transactions described above appear to have been directed by the Company’s two former chief financial officers. Both of these individuals, who are no longer with the Company, declined to cooperate with the Special Committee’s investigation. Based upon recommendations of the Special Committee, the Company’s board of directors directed the Company, among other things, to evaluate potential claims relating to certain former company personnel, including these individuals and compensation and benefits previously received by them.

Purchase Accounting

The Company was formed and began operations in 1997 with the acquisition of six equipment rental companies. During the subsequent three year period, we grew rapidly and completed approximately 230 additional acquisitions. By the end of 1999, we were the largest equipment rental company in the world, with annual revenues of approximately $2.9 billion. With management’s focus now turned toward organic growth, the pace of our acquisitions significantly slowed and from September 2001 through the date of this report we completed only eight acquisitions. Substantially all of the business combinations that we have completed since the inception of the Company were accounted for as purchases, however, there were several significant business combinations accounted for in the earlier period that were accounted for as poolings.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

Accounting standards applicable to purchase business combinations require the acquiring company to recognize the assets acquired and the liabilities assumed based on their fair values at the time of acquisition. Any excess between the cost of an acquired company and the sum of the fair values of tangible and identifiable intangible assets less liabilities assumed should be recognized as goodwill.

In our historical accounting for these purchase business combinations, long-lived fixed assets (comprised primarily of rental equipment) and goodwill generally represented the largest components of our acquisitions. As a result, when we performed our purchase price allocation process, the purchase price was primarily allocated to these assets.

As discussed above, in March 2005, our Board of Directors formed a Special Committee of independent directors to review matters related to the SEC inquiry. The Special Committee made certain findings related to the Company’s historical practices concerning the valuation of rental equipment acquired in purchase business combinations. The committee concluded that certain of these practices were not adequate between 1997 and August 2000. These practices included, among other things, the use of inconsistent valuation methodologies, some of which were reflected in memoranda that were not provided to or reviewed by the Company’s auditors, suggestions contained in those memoranda that improper methods of valuation be used (although the committee did not find evidence that such improper methods were generally applied), inadequate supervision of personnel, inadequate coordination with providers of outside valuations and apparent confusion on the part of one of those providers. The Special Committee concluded that certain Company personnel (whom the committee was unable to identify) may have sought to manipulate opening balance sheet values for equipment acquired in purchase business combinations by causing them to be understated and that these opening balance sheet values may have been understated by an amount the committee was unable to determine.

Following our review of our historical practices and the findings of the Special Committee, the Company considered whether the effect of the deficiencies identified by the committee required a restatement of previously reported results. These deficiencies in our historical practices between 1997 and August 2000 may have resulted in inaccurate values being ascribed to rental equipment that we acquired in purchase business combinations, including in some cases values that may have been below fair value. However, we do not have the ability to revalue this equipment because we are unable to currently determine its historical physical condition and the records that currently exist for this equipment are not sufficient to establish the physical condition of the equipment at the time of its acquisition.

The equipment valuations performed at the time of the acquisition, some of which included a physical inspection, reflected an assessment of the condition of the equipment. While, as the Special Committee identified, there were various deficiencies in our historical valuation practices, it is not possible to accurately revalue this equipment to assess the reasonableness of specific valuations. Therefore, we believe the only feasible approach is to give effect to the valuations that were performed contemporaneously with these acquisitions. Accordingly, notwithstanding deficiencies in the Company’s historical valuation process as it relates to purchase business combinations, the Company does not believe a restatement is required and believes that its financial statements from and after 2002 are materially correct with respect to the effect of equipment valuations.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

The following table presents the effects of the foregoing restatements on a condensed basis on our quarterly results for the three and six months ended June 30, 2004:


	Three Months Ended June 30, 2004				Six Months Ended June 30, 2004
	Amount Originally Reported		Restated		Amount Originally Reported			Restated
Statements of Operations:
Revenues	$	776	$	771	$	1,421		$	1,414
Operating income		107		114		140			145
Net income		35		40		(72	)		(68	)
Basic loss per share	$	0.45	$	0.42	$	(0.93	)	$	(0.88	)
Diluted loss per share	$	0.36	$	0.39	$	(0.93	)	$	(0.88	)

3. Acquisitions

We completed two and three acquisitions during the years ended December 31, 2005 and 2004, respectively. The results of operations of the businesses acquired in these acquisitions have been included in our results of operations from their respective acquisition dates.

In December 2005, we acquired Sandvick Equipment & Supply Company, a trench safety company, with annual revenues of approximately $21. In June 2005, we acquired HSS RentX branch locations in Colorado. Total 2004 revenues of the acquired branches were approximately $9. The aggregate purchase price for these 2005 acquisitions was approximately $42, less liabilities assumed of approximately $10.

In October 2004, we acquired Atlantic Rentals Ltd., which had revenues in 2003 of approximately $32. In February 2004, we acquired 843504 Alberta Ltd. (formerly known as Skyreach Equipment, Ltd.), which had annual revenues in 2003 of approximately $35. The aggregate purchase price for these 2004 acquisitions was approximately $91, less liabilities assumed of $22.

The purchase prices for all acquisitions have been allocated to the assets acquired and liabilities assumed based on their respective fair values at their respective acquisition dates. Purchase price allocations are subject to change when additional information concerning asset and liability valuations is 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 twelve months of the acquisition date and are not expected to result in significant differences between the preliminary and final allocations.

Pro forma combined results of operations giving effect to these acquisitions would not vary materially from historical results.

4. Goodwill and Other Intangible Assets

Changes in the Company’s carrying amount of goodwill for the six months ended June 30, 2005 are as follows:


Balance at December 31, 2004	$	1,293

Goodwill related to acquisitions		1
Foreign currency translation and other adjustments		(3	)

Balance at June 30, 2005	$	1,291

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

We are required to review our goodwill for impairment annually as of a scheduled review date. However, if events or circumstances suggest that goodwill could be impaired, we may be required to conduct an earlier review. The scheduled review date is October 1 of each year; however, we reviewed our traffic control segment goodwill as of September 30, 2004 because continued weakness in this segment suggested the goodwill associated with this segment may have been impaired. Based on this review, we recorded an impairment charge of approximately $139 to write-off the remaining goodwill associated with our traffic control segment.

Other intangible assets consist of customer relationships and non-compete agreements and are amortized over periods ranging from three to twelve years. Amortization expense for other intangible assets was $2 for the six months ended June 30, 2005 and 2004. The cost of other intangible assets and the related accumulated amortization as of June 30, 2005 was as follows:


	June 30, 2005
Gross carrying amount	$	61
Accumulated amortization		(26	)

Net amount	$	35

5. Restructuring Charges

We recorded restructuring charges of $28 (including a non-cash component of approximately $3) and $29 (including a non-cash component of approximately $11) in 2002 and 2001, respectively. Restructuring program activity during the six months ended June 30, 2005 is outlined below:


	Restructuring reserve (1)
Balance at December 31, 2004	$	8
Cash payments charged against reserve		(2	)

Balance at June 30, 2005	$	6

(1)	Balance relates to costs to vacate facilities.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

6. Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding and, if dilutive, the Series C and Series D preferred shares as if converted to common shares since such shares are participating securities. Diluted earnings per share includes the impact of other dilutive securities. The diluted share base for periods where the numerator represents a loss excludes incremental weighted shares for the below-captioned “Effect of dilutive securities” due to their antidilutive effect. The following table sets forth the computation of basic and diluted earnings per share:


	Six Months Ended June 30,					Three Months Ended June 30,
	2005		2004 (Restated)			2005		2004 (Restated)
Numerator:
Net income (loss)	$	62	$	(68	)	$	50	$	40
Plus:
Convertible debt interest		1		—			1		1
QUIPS interest		4		—			2		2

Income (loss) available to common stockholders	$	67	$	(68	)	$	53	$	43
Denominator:
Weighted-average common shares		77,956,827		77,334,095			77,992,299		77,334,095
Series C preferred		12,000,000		—			12,000,000		12,000,000
Series D preferred		5,000,000		—			5,000,000		5,000,000

Denominator for basic earnings per share—weighted-average		94,956,827		77,334,095			94,992,299		94,334,095
Effect of dilutive securities:
Employee stock options and warrants		4,207,225					4,312,370		3,679,097
Convertible shares		5,599,350		—			5,599,350		5,599,350
QUIPS shares		5,077,926		—			5,077,926		5,077,926
Restricted stock units and phantom shares		133,065		—			134,792		20,000

Denominator for diluted earnings per share—adjusted weighted-average shares		109,974,393		77,334,095			110,116,737		108,710,468

Earnings (loss) per share—basic:
Income (loss) available to common stockholders	$	0.65	$	(0.88	)	$	0.53	$	0.42

Earnings (loss) per share—diluted:
Income (loss) available to common stockholders	$	0.60	$	(0.88	)	$	0.48	$	0.39

7. Segment Information

Our reportable segments are general rentals, traffic control and trench safety, pump and power. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The general rentals segment’s customers include construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The general rentals segment operates throughout the United States and Canada and has one location in Mexico. The trench safety, pump and power segment includes

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

the rental of specialty construction products and related services. The trench safety, pump and power segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates in the United States and has one location in Canada. The traffic control segment includes the rental of equipment used in the management of traffic-related services and activities. The traffic control segment’s customers include construction companies involved in infrastructure projects and municipalities. The traffic control segment operates in the United States. Our external segment reporting is aligned with the manner in which management evaluates and allocates resources. We evaluate segment performance based on segment operating results.

Operating segment revenues and profitability for the three and six months ended June 30, 2005 and 2004 were as follows:


	Six Months Ended June 30,						Three Months Ended June 30,
	2005			2004 (Restated)			2005			2004 (Restated)
Total revenues
General rentals	$	1,425		$	1,245		$	771		$	673
Trench safety, pump and power		78			57			44			31
Traffic control		117			112			73			67

Total revenues	$	1,620		$	1,414		$	888		$	771

Total depreciation and amortization expense
General rentals	$	199		$	194		$	100		$	98
Trench safety, pump and power		10			7			5			3
Traffic control		12			14			6			7

Total depreciation and amortization expense	$	221		$	215		$	111		$	108

Segment operating income (loss)
General rentals	$	191		$	156		$	122		$	116
Trench safety, pump and power		17			14			11			8
Traffic control		(13	)		(25	)		(2	)		(10	)

Segment operating income	$	195		$	145		$	131		$	114

Total capital expenditures
General rentals	$	488		$	340		$	336		$	175
Trench safety, pump and power		19			14			11			8
Traffic control		9			6			4			3

Total capital expenditures	$	516		$	360		$	351		$	186


	June 30, 2005		December 31, 2004
Total Assets
General rentals	$	4,802	$	4,613
Trench safety, pump and power		107		92
Traffic control		184		177

Total assets	$	5,093	$	4,882

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

8. Financing Transactions/Debt

Transactions Completed in 2004

We refinanced approximately $2.1 billion of debt in 2004 (“the Refinancing”). The Refinancing extended debt maturities, reduced interest expense going forward and provided the Company with greater financial flexibility. As part of the Refinancing, the Company:

•

amended and restated URI’s senior secured credit facility (“New Credit Facility”) to replace URI’s previous $1.3 billion senior secured credit facility;

•

sold $1 billion of URI’s 6¹/2 percent Senior Notes Due 2012;

•

sold $375 of URI’s 7 percent Senior Subordinated Notes Due 2014;

•

repaid $639 of term loans and $52 of borrowings that were outstanding under the old credit facility;

•

repurchased $845 principal amount of URI’s 10³/4 percent Senior Notes Due 2008 (the “10³/4 percent Notes”), pursuant to a tender offer;

•

redeemed $300 principal amount of URI’s outstanding 9¹/4 percent Senior Subordinated Notes Due 2009 (the “9¹/4 percent Notes”); and

•

redeemed $250 principal amount of URI’s outstanding 9 percent Senior Subordinated Notes Due 2009 (the “9 percent Notes”).

The Refinancing was completed during the first quarter of 2004, except that (i) the redemption of the 9 percent Notes was completed on April 1, 2004 and a portion of the term loan that is part of the New Credit Facility was drawn on such date and (ii) an additional $4 of the 10³/4 percent Notes were repurchased on April 7, 2004.

In connection with the Refinancing, the Company incurred aggregate charges of approximately $171. These charges were attributable primarily to (i) the redemption and tender premiums for notes redeemed or repurchased as part of the Refinancing and (ii) the write-off of previously capitalized costs relating to the debt refinanced.

7 percent Senior Subordinated Notes. In January 2004, as part of the Refinancing described above, URI issued $375 aggregate principal amount of 7 percent Senior Subordinated Notes (the “7 percent Notes”) which are due February 15, 2014. The net proceeds from the sale of the 7 percent Notes were approximately $369, after deducting offering expenses. The 7 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URI’s domestic subsidiaries. The 7 percent Notes mature on February 15, 2014 and may be redeemed by URI on or after February 15, 2009, at specified redemption prices that range from 103.5 percent in 2009 to 100.0 percent in 2012 and thereafter. In addition, on or prior to February 15, 2007, URI may, at its option, use the proceeds of public equity offerings to redeem up to an aggregate of 35 percent of the outstanding 7 percent Notes at a redemption price of 107.0 percent. The indenture governing the 7 percent 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.

6¹/2 percent Senior Notes. In February 2004, as part of the Refinancing described above, URI issued $1 billion aggregate principal amount of 6¹/2 percent Senior Notes (the “6¹/2 percent Notes”) which are due February 15, 2012. The net proceeds from the sale of the 6¹/2 percent Notes were approximately $985, after deducting offering expenses. The 6¹/2 percent Notes are unsecured and are guaranteed by Holdings and,

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

subject to limited exceptions, URI’s domestic subsidiaries. The 6¹/2 percent Notes mature on February 15, 2012 and may be redeemed by URI on or after February 15, 2008, at specified redemption prices that range from 103.25 percent in 2008 to 100.0 percent in 2010 and thereafter. In addition, on or prior to February 15, 2007, URI may, at its option, use the proceeds of public equity offerings to redeem up to an aggregate of 35 percent of the outstanding 6¹/2 percent Notes at a redemption price of 106.5 percent. The indenture governing the 6¹/2 percent 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, (viii) the Company’s ability to consolidate, merge or sell all or substantially all of its assets and (ix) sale-leaseback transactions.

New Credit Facility. In the first quarter of 2004, as part of the Refinancing described above, the Company amended and restated URI’s senior secured credit facility. The amended and restated facility includes (i) a $650 revolving credit facility, (ii) a $150 institutional letter of credit facility and (iii) a $750 term loan. The revolving credit facility, institutional letter of credit facility and term loan are governed by the same credit agreement. URI’s obligations under the credit facility are guaranteed by Holdings and, subject to limited exceptions, URI’s domestic subsidiaries and are secured by liens on substantially all of the assets of URI, Holdings and URI’s domestic subsidiaries. Set forth below is certain additional information concerning the amended and restated facility.

Revolving Credit Facility. The revolving credit facility enables URI to borrow up to $650 on a revolving basis and enables certain of the Company’s Canadian subsidiaries to borrow up to $150 (provided that the aggregate borrowings of URI and the Canadian subsidiaries may not exceed $650). A portion of the revolving credit facility, up to $250, is available for issuance of letters of credit. The revolving credit facility is scheduled to mature and terminate in February 2009. As of June 30, 2005 and December 31, 2004, the outstanding borrowings under this facility were approximately $130 and $133 and utilized letters of credit were $64 and $50, respectively. All outstanding borrowings under the revolving credit facility at June 30, 2005 and December 31, 2004 were Canadian subsidiary borrowings.

U.S. dollar borrowings under the revolving credit facility accrue interest, at the option of URI’s Canadian subsidiaries, at either (a) the ABR rate (which is equal to the greater of (i) the Federal Funds Rate plus 0.5 percent and (ii) JPMorgan Chase Bank’s prime rate) plus a margin of 1.25 percent, or (b) an adjusted LIBOR rate plus a maximum margin of 2.25 percent.

Canadian dollar borrowings under the revolving credit facility accrue interest, at the borrower’s option, at either (a) the Canadian prime rate (which is equal to the greater of (i) the CDOR rate plus 1 percent and (ii) JPMorgan Chase Bank, Toronto Branch’s prime rate) plus a margin of 1.25 percent, or (b) the B/A rate (which is equal to JPMorgan Chase Bank, Toronto Branch’s B/A rate) plus a maximum margin of 2.25 percent. The rate applicable to Canadian borrowings outstanding under the revolving credit facility was 4.6 and 4.8 at June 30, 2005 and December 31, 2004, respectively.

URI is also required to pay the lenders a commitment fee equal to 0.5 percent per annum, payable quarterly, in respect of undrawn commitments under the revolving credit facility.

Institutional Letter of Credit Facility (“ILCF”). The ILCF provides for up to $150 in letters of credit. The ILCF is in addition to the letter of credit capacity under the revolving credit facility. The total combined letter of credit capacity under the revolving credit facility and the ILCF is $400. Subject to certain conditions, all or part of the ILCF may be converted into term loans. The ILCF is scheduled to terminate in February 2011. As of both June 30, 2005 and December 31, 2004, the outstanding letters of credit under the ILCF were approximately $150.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

URI is required to pay a fee which accrues at the rate of 0.1 percent per annum on the amount of the ILCF. In addition, URI is required to pay participation and other fees in respect of letters of credit. For letters of credit obtained under both the ILCF and the revolving credit facility, these fees accrue at a maximum rate of 2.25 percent per annum.

Term Loan. The term loan was obtained in two draws. An initial draw of $550 was made upon the closing of the credit facility in February 2004 and an additional draw of $200 was made on April 1, 2004. Amounts repaid in respect of the term loan may not be reborrowed.

The term loan must be repaid in installments as follows: (i) during the period from and including June 30, 2004 to and including March 31, 2010, URI must repay on each March 31, June 30, September 30 and December 31 of each year an amount equal to one-fourth of 1 percent of the original aggregate principal amount of the term loan and (ii) URI must repay on each of June 30, 2010, September 30, 2010, December 31, 2010, and at maturity on February 14, 2011 an amount equal to 23.5 percent of the original aggregate principal amount of the term loan. As of June 30, 2005 and December 31, 2004, amounts outstanding under the term loan were approximately $741 and $744, respectively.

Borrowings under the term loan accrue interest, at URI’s option, at either (a) the ABR rate plus a maximum margin of 1.25 percent, or (b) an adjusted LIBOR rate plus a maximum margin of 2.25 percent. The rate was 5.6 and 4.7 at June 30, 2005 and December 31, 2004, respectively.

Covenants. Under the agreement governing the New Credit Facility, the Company is required to, among other things, satisfy certain financial tests relating to: (a) interest coverage ratio, (b) the ratio of funded debt to cash flow, (c) the ratio of senior secured debt to tangible assets and (d) the ratio of senior secured debt to cash flow. If the Company is unable to satisfy any of these covenants, the lenders could elect to terminate the credit facility and require the Company to repay the outstanding borrowings under the credit facility. The Company is also subject to various other covenants under the agreements governing its credit facility and other indebtedness. These covenants require the Company to timely file audited annual and quarterly financial statements with the SEC and limit or prohibit, among other things, the Company’s ability to incur indebtedness, make prepayments of certain indebtedness, pay dividends, make investments, create liens, make acquisitions, sell assets and engage in mergers and acquisitions. If at any time an event of default under the New Credit Facility exists, the interest rate applicable to each revolving and term loan will be based on the highest margins above plus 2 percent.

Transactions Completed in 2005

Matters Relating to Consent Solicitation: In 2005, the Company successfully solicited consents for amendments to the indentures governing the following securities:

•

6¹/2 percent Senior Notes due 2012

•

7³/4 percent Senior Subordinated Notes due 2013

•

7 percent Senior Subordinated Notes due 2014

•

1⁷/8 percent Convertible Senior Subordinated Notes due 2023 (“Convertible Notes”)

•

6¹/2 percent Convertible Quarterly Income Preferred Securities due 2028 (“QUIPs”)

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

The indentures for these securities require annual and other periodic reports to be filed with the SEC. On September 19, 2005, the Company obtained consents from holders of these securities and entered into supplemental indentures amending the applicable covenants to allow the Company until March 31, 2006 to comply with the requirement to make timely SEC filings (and waiving related defaults that occurred prior to the effectiveness of the amendments). In addition, the supplemental indenture relating to the Convertible Notes changed the conversion rate from 38.9520 to 44.9438 shares of United Rentals common stock for each $1,000 (“one thousand dollars”) principal amount of Convertible Notes. Pursuant to the terms of the consent solicitation, the Company paid aggregate consent fees of approximately $34 to holders of its nonconvertible notes and QUIPs. These costs are being amortized through the maturity dates of the nonconvertible notes and QUIPs.

In March 2005, the Company successfully obtained its lenders’ consent to an amendment to the New Credit Facility that waived the covenant violation from the delay in making certain SEC filings and extended the Company’s deadline to make SEC filings until June 29, 2005 for our 2004 Annual Report on Form 10-K and until August 15, 2005 for our first quarter 2005 Form 10-Q. In June 2005, the Company successfully obtained its lenders’ consent to an amendment to the New Credit Facility that waived the covenant violation from the delay in making certain SEC filings and extended the Company’s deadline to make SEC filings until December 31, 2005 for our 2004 Annual Report on Form 10-K and for our 2005 Form 10-Qs. Both of these consents were obtained without the payment of any consent fees. In November 2005, the Company successfully obtained its lenders’ consent to an amendment to the New Credit Facility that waived the covenant violation from the delay in making certain SEC filings and extended the Company’s deadline to make SEC filings until March 31, 2006. Consent fees in the amount of $1 were paid to the lenders under the New Credit Facility. On March 31, 2006, the Company obtained its lenders’ consent to an additional amendment to the New Credit Facility that (1) waived the covenant violation from the delay in making certain SEC filings, (2) extended the Company’s deadline to make its SEC filings until April 28, 2006 and (3) limited the Company’s ability to borrow under the New Credit Facility to amounts necessary to fund obligations to be paid in the ordinary course during the one-week period following the applicable borrowing until these SEC filings are made.

Accounts Receivable Securitization: On May 31, 2005, we obtained a new $200 accounts receivable securitization facility and terminated our then existing $250 accounts receivable securitization facility. The new facility provides for generally lower borrowing costs than the old facility. In addition, the new facility provides for a substantially longer term, with the scheduled termination date being May 29, 2009, compared with September 30, 2006 under the old facility. There were no outstanding borrowings under the old facility at the time it was terminated. In connection with terminating the old facility, we incurred a charge of approximately $1, representing the write-off of previously capitalized costs relating to the old facility.

The new facility enables one of our subsidiaries to borrow up to $200 against a collateral pool of eligible accounts receivable. Consistent with the old facility, the borrowings under the new facility will be reflected as debt on our consolidated balance sheets and the receivables in the collateral pool will be reflected as assets on our consolidated balance sheets. However, such assets are only available to satisfy the obligations of the borrower subsidiary, and once the obligations of the borrower subsidiary are satisfied, the remaining assets will be available to be dividended to the parent.

Key terms of this facility include:

•

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;

•

the facility is structured so that the receivables in the collateral pool are the lenders’ only source of repayment;

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

•

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;

•

after expiration or early termination of the facility, no new amounts will be advanced under the facility and collections on the receivables securing the facility will be used to repay the outstanding borrowings; and

•

the facility contains standard termination events including, without limitation, a termination event if (i) the long-term senior secured rating of URI falls below either B+ from Standard & Poor’s Rating Services or B2 from Moody’s Investors Service or (ii) our New Credit Facility is terminated. Our current ratings are discussed below.

Outstanding borrowings under the facility generally accrue interest at the commercial paper rate plus a specified spread not to exceed 1.0 percent. There were no outstanding borrowings under this facility at June 30, 2005 and December 31, 2004. We are also required to pay a commitment fee based on the long-term senior secured ratings of URI. This commitment fee was 0.35 percent at June 30, 2005.

Redemption of remaining 10³/4 Senior Notes: In April 2005, the Company redeemed $12 principal amount of URI’s 10³/4 Senior Notes due 2008 (the “10³/4 Notes”). The principal repurchased represented the amounts of the 10³/4 Notes still outstanding after the 2004 tender offer. In connection with this redemption, the Company incurred charges of approximately $1. These charges were attributed primarily to (i) the redemption for notes redeemed and (ii) the write-off of previously capitalized costs.

Loan Covenants and Compliance

As of June 30, 2005, we were not in compliance with the covenants of the 7 percent Notes and the 6¹/2 percent Notes, or the covenants of our 7³/4 percent Senior Subordinated Notes due 2013, Convertible Notes, or the QUIPs, but we were in compliance with the covenants of the New Credit Facility, as amended, as discussed above. As discussed above (see “Transactions Completed in 2005—Matters Relating to Consent Solicitations”), on September 19, 2005, we amended the indentures governing the above-described securities and our New Credit Facility to allow the Company until March 31, 2006 to comply with the requirement to make timely SEC filings. As described above, on March 31, 2006 the Company obtained its lenders’ consent to an additional amendment to the New Credit Facility that extended the Company’s deadline to make its SEC filings until April 28, 2006.

As of March 31, 2006, although we had filed our annual reports on Form 10-K for the years ended December 31, 2005 and 2004, we had not yet filed our quarterly reports on Form 10-Q for the periods ended in 2005. Therefore, we were in violation of the amendments to our indentures due to not filing our quarterly reports. We are filing each of these quarterly reports on Form 10-Q on the date hereof. The Company was in compliance with the New Credit Facility, as amended, as of March 31, 2006.

9. Legal and Regulatory Matters

SEC Non-Public Fact Finding Inquiry and Special Committee Review

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

United Rentals, Inc. The notice from the SEC states that the inquiry does not mean that the SEC has concluded that the Company or anyone else has broken the law or that the SEC has a negative opinion of any person, entity or security. As previously announced, the inquiry appears to relate to a broad range of our accounting practices and is not confined to a specific period or the matters discussed in this report.

The Company has since received additional document subpoenas from the SEC. As previously announced, in March 2005, the Company’s board of directors formed the Special Committee to review matters related to the SEC inquiry. The Special Committee retained independent counsel. The board of directors received and acted upon findings of the Special Committee on January 26, 2006. The conclusions and recommendations of the Special Committee are discussed above in the Restatement Note and summarized in the Company’s press release and the related current report on Form 8-K dated January 26, 2006.

The Company has provided documents in response to the SEC subpoenas to the SEC or to the Special Committee, which has, in turn, provided documents to the SEC. The Company is cooperating fully with the SEC in complying with the subpoenas. The Company is also responding to the SEC’s informal requests for information.

Shareholder Class Action Lawsuits and Derivative Litigation

As previously announced, following our public announcement of the SEC inquiry referred to above, three purported class action lawsuits were filed against us in the United States District Court for the District of Connecticut. The plaintiff in each of the lawsuits seeks to sue on behalf of a purported class comprised of purchasers of our securities from October 23, 2003 to August 30, 2004. The lawsuits name as the defendants our company, our chairman, our vice chairman and chief executive officer, our former president and chief financial officer, and our former corporate controller. The complaints allege, among other things, that certain of our SEC filings and other public statements contained false and misleading statements which resulted in damages to the plaintiffs and the members of the purported class when they purchased our securities. On the basis of those allegations, plaintiffs in each action assert claims (a) against all defendants under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and (b) against one or more of the individual defendants under Section 20(a) of such Act. The complaints seek unspecified compensatory damages, costs and expenses. On February 1, 2005, the Court entered an order consolidating the three actions. On November 8, 2005, the Court appointed City of Pontiac Policeman’s and Fireman’s Retirement System as lead plaintiff for the purported class. The consolidated action is now entitled In re United Rentals, Inc. Securities Litigation. The court has directed the parties to submit, by April 17, 2006, a proposed schedule for the filing of a consolidated amended complaint and responses to any amended pleading. We intend to defend against these actions vigorously.

In January 2005, an alleged shareholder filed an action in Connecticut State Superior Court, Judicial District of Norwalk/Stamford at Stamford, purportedly suing derivatively on our behalf. The action, entitled Gregory Riegel v. John N. Milne, et al., names as defendants certain of our current and/or former directors and/or officers, and us as a nominal defendant. The complaint asserts, among other things, that the defendants breached their fiduciary duties to us by causing or allowing us to disseminate misleading and inaccurate information to shareholders and the market and by failing to establish and maintain adequate accounting controls, thus exposing us to damages. The complaint seeks unspecified compensatory damages, costs and expenses against the defendants. The parties to the Riegel action have agreed that the proceedings in this action will be stayed pending the resolution of the anticipated motions to dismiss in the purported shareholder class actions.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

to those allegations against certain of our current and/or former directors and/or officers. Following receipt of the letter, the board of directors formed a special committee of the board to consider the letter. In August 2005, this alleged shareholder commenced an action in Connecticut State Superior Court, Judicial District of Norwalk/Stamford at Stamford, purporting to sue derivatively on our behalf. The action, entitled Nathan Brundridge v. Leon D. Black, et al., names as defendants certain of our current and/or former directors and/or officers, and names us as a nominal defendant. The complaint in this action asserts, among other things, that all of the defendants breached fiduciary obligations to us by causing or allowing us to disseminate misleading and inaccurate information to shareholders and the market, and by failing to establish and maintain adequate accounting controls, thus exposing us to damages. The complaint in this action also asserts a claim for unjust enrichment against our chairman, our vice chairman and chief executive officer, and our former president and chief financial officer. The complaint seeks unspecified compensatory damages, equitable relief, costs and expenses against all of the defendants. The complaint also seeks an order, in connection with plaintiff’s unjust enrichment claim, directing the defendants against whom that claim is asserted to disgorge certain compensation they received from us with respect to fiscal years 2001, 2002 and 2003. The parties have agreed to submit to the court, by April 17, 2006, a proposed schedule for the filing of any amended complaint and responses to the operative complaint in the action. The parties’ agreement further provides that the time by which all defendants must answer, move or otherwise respond to the complaint shall be adjourned pending the parties’ submission of the aforementioned schedule.

In August 2005, another alleged shareholder filed an action in the United States District Court for the District of Connecticut, purporting to sue derivatively on our behalf. The action, entitled Natalie Gordon v. Wayland R. Hicks, et al., names as defendants certain of our current and/or former directors and/or officers, and names us as a nominal defendant. The complaint in this action asserts claims against each of the defendants for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. Each of these claims is premised on, among other things, the theory that the individual defendants caused or permitted us to disseminate misleading and inaccurate information to shareholders and to the market, and failed to establish and maintain adequate accounting controls, thus exposing us to damages. The complaint also asserts (a) a claim that a former director breached fiduciary obligations by selling shares of our common stock while in possession of material, non-public information, and (b) a claim against our chairman, our vice chairman and chief executive officer, and our former president and chief financial officer for recovery of certain incentive-based compensation under section 304 of the Sarbanes-Oxley Act. The complaint seeks unspecified compensatory damages, equitable relief, restitution, costs and expenses against all of the defendants. The complaint also seeks an order declaring that the defendants against whom the section 304 claim is directed are liable under the Sarbanes-Oxley Act and directing them to reimburse us for all bonuses or other incentive-based or equity-based compensation they received for the fiscal years 1999 through 2004. The court has directed the parties to submit, on or before April 17, 2006, a proposed schedule for the filing of any amended complaint and responses to the operative complaint in the action. Pending the submission and approval of the aforementioned schedule, the court has adjourned the time by which all defendants must answer, move, or otherwise respond to the complaint in this action.

We are also a party to various other litigation matters, in most cases involving ordinary and routine claims incidental to our business. We cannot estimate with certainty our ultimate legal and financial liability with respect to such pending litigation matters. However, we believe, based on our examination of such matters, that our ultimate liability will not have a material adverse effect on our financial position, results of operations or cash flows.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

Indemnification

The Company indemnifies its officers and directors pursuant to indemnification agreements and may in addition indemnify these individuals as permitted by Delaware law. Accordingly, in connection with the purported class action lawsuit, three purported shareholder derivative lawsuits and the SEC inquiry and related review of the Special Committee described above, the Company advanced counsel fees and other reasonable fees and expenses, actually and necessarily incurred by the present and former directors and officers who are involved, in an aggregate amount of approximately $2.6 during fiscal 2005. Each of the individuals is required to execute an undertaking to repay such expenses if he or she is finally found not to be entitled to indemnification.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

10. Condensed Consolidating Financial Information of Guarantor Subsidiaries

URI is 100 percent owned by Holdings (the “Parent”) and has outstanding (i) certain indebtedness that is guaranteed by the Parent and (ii) certain indebtedness that is guaranteed by both Parent and substantially all of URI’s United States subsidiaries (the “guarantor subsidiaries”). However, this indebtedness is not guaranteed by URI’s foreign subsidiaries (the “non-guarantor subsidiaries”) and certain of its United States subsidiaries. The guarantor subsidiaries are all 100 percent-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 is presented. The condensed consolidating financial information of the Company and its subsidiaries is as follows:

CONDENSED CONSOLIDATING BALANCE SHEET

(Dollars in millions, except per share data unless otherwise indicated)

June 30, 2005


	Parent		URI		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Other & Eliminations			Consolidated Total
ASSETS
Cash and cash equivalents			$	147	$	98		$	9					$	254
Accounts receivable, net				42		424			51						517
Intercompany receivable (payable)				477		(333	)		(144	)					—
Inventory				80		85			13						178
Prepaid expenses and other assets				47		65			1						113
Rental equipment, net				1,238		825			220						2,283
Property and equipment, net	$	27		124		239			25						415
Investment in subsidiaries		1,285		2,083		—			—		$	(3,361	)		7
Goodwill and other intangible assets, net		—		165		1,022			139			—			1,326

	$	1,312	$	4,403	$	2,425		$	314		$	(3,361	)	$	5,093

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable			$	48	$	259		$	29					$	336
Accrued expenses and other liabilities				149		216			7		$	(68	)		304
Debt				2,824		—			130			—			2,954
Subordinated convertible debentures	$	222		—		—			—			—			222
Deferred taxes		—		172		(14	)		29			—			187

Total liabilities		222		3,193		461			195			(68	)		4,003

Total stockholders’ equity		1,090		1,210		1,964			119			(3,293	)		1,090

Total liabilities and stockholder’s equity	$	1,312	$	4,403	$	2,425		$	314		$	(3,361	)	$	5,093

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2004


	Parent		URI		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Other and Eliminations			Consolidated Total
ASSETS
Cash and cash equivalents			$	247	$	34		$	22					$	303
Accounts receivable, net				20		419			51						490
Intercompany receivable (payable)				231		(85	)		(146	)					—
Inventory				46		61			12						119
Prepaid expenses and other assets				46		66			—						112
Rental equipment, net				1,153		764			206						2,123
Property and equipment, net	$	22		120		231			24						397
Investment in subsidiaries		1,226		2,039		—			—		$	(3,257	)		8
Goodwill and other intangible assets, net				362		827			141						1,330

	$	1,248	$	4,264	$	2,317		$	310		$	(3,257	)	$	4,882

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable			$	36	$	156		$	25					$	217
Accrued expenses and other liabilities				140		240			8		$	(65	)		323
Debt				2,812		—			133			—			2,945
Subordinated convertible debentures	$	222		—		—			—			—			222
Deferred taxes		—		126		(5	)		28			—			149

Total liabilities		222		3,114		391			194			(65	)		3,856

Total stockholders’ equity		1,026		1,150		1,926			116			(3,192	)		1,026

Total liabilities and stockholder’s equity	$	1,248	$	4,264	$	2,317		$	310		$	(3,257	)	$	4,882

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2005


	Parent			URI		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Other and Eliminations			Consolidated Total
Revenues:
Equipment rentals				$	280	$	297	$	50				$	627
Sales of rental equipment					42		34		11					87
New equipment sales					27		21		7					55
Contractor supplies sales					33		44		8					85
Service and other revenues					18		12		4					34

Total revenues					400		408		80					888
Cost of revenues:
Cost of equipment rentals, excluding depreciation					124		171		25					320
Depreciation of rental equipment					46		39		10					95
Cost of rental equipment sales					31		25		9					65
Cost of new equipment sales					22		17		6					45
Cost of contractor supplies sales					26		32		6					64
Cost of service and other revenue					8		6		2					16

Total cost of revenues					257		290		58					605

Gross profit					143		118		22					283
Selling, general and administrative expenses					59		67		10					136
Goodwill impairment
Non-rental depreciation and amortization	$	2			7		6		1					16

Operating income (loss)		(2	)		77		45		11					131
Interest expense		4			41		1		2	$	(4	)		44
Interest expense—subordinated convertible debentures		—			—		—		—		4			4
Other (income) expense, net		—			1		—		—		—			1

Income (loss) before provision (benefit) for income taxes		(6	)		35		44		9		—			82
Provision (benefit) for income taxes		(2	)		13		18		3		—			32

Income (loss) before equity in net earnings of subsidiaries		(4	)		22		26		6		—			50
Equity in net earnings of subsidiaries		54			32		—		—		(86	)		—

Net income (loss)	$	50		$	54	$	26	$	6	$	(86	)	$	50

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2004 (Restated)


	Parent			URI		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Other and Eliminations			Consolidated Total
Revenues:
Equipment rentals				$	256	$	272	$	37				$	565
Sales of rental equipment					31		32		7					70
New equipment sales					25		17		5					47
Contractor supplies sales					22		30		5					57
Service and other revenues					17		12		3					32

Total revenues					351		363		57					771
Cost of revenues:
Cost of equipment rentals, excluding depreciation					109		158		18					285
Depreciation of rental equipment					44		39		9					92
Cost of rental equipment sales					23		24		5					52
Cost of new equipment sales					22		14		4					40
Cost of contractor supplies sales					15		23		4					42
Cost of service and other revenue					8		6		1					15

Total cost of revenues					221		264		41					526

Gross profit					130		99		16					245
Selling, general and administrative expenses					50		57		8					115
Goodwill impairment					—		—		—					—
Non-rental depreciation and amortization	$	2			7		6		1					16

Operating income (loss)		(2	)		73		36		7					114
Interest expense		4			33		—		1	$	(4	)		34
Interest expense—subordinated convertible debentures—Quips		—			—		—		—		4			4
Other (income) expense, net		—			11		1		—		—			12

Income (loss) before provision (benefit) for income taxes		(6	)		29		35		6		—			64
Provision (benefit) for income taxes		(2	)		11		13		2		—			24

Income (loss) before equity in net earnings of subsidiaries		(4	)		18		22		4		—			40
Equity in net earnings of subsidiaries		44			26		—		—		(70	)

Net income (loss)	$	40		$	44	$	22	$	4	$	(70	)	$	40

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2005


	Parent			URI		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Other and Eliminations			Consolidated Total
Revenues:
Equipment rentals				$	522	$	527		$	92				$	1,141
Sales of rental equipment					79		68			20					167
New equipment sales					49		36			11					96
Contractor supplies sales					56		77			16					149
Service and other revenues					38		22			7					67

Total revenues					744		730			146					1,620
Cost of revenues:
Cost of equipment rentals, excluding depreciation					244		309			48					601
Depreciation of rental equipment					92		77			20					189
Cost of rental equipment sales					58		49			15					122
Cost of new equipment sales					39		31			9					79
Cost of contractor supplies sales					43		57			12					112
Cost of service and other revenue					17		11			4					32

Total cost of revenues					493		534			108					1,135

Gross profit					251		196			38					485
Selling, general and administrative expenses					111		125			22					258
Non-rental depreciation and amortization	$	3			13		13			3					32

Operating income (loss)		(3	)		127		58			13					195
Interest expense		8			83		1			3	$	(8	)		87
Preferred dividends of a subsidiary trust		—			—		—			—		8			8
Other (income) expense, net		—			3		(4	)		—		—			(1	)

Income (loss) before provision (benefit) for income taxes		(11	)		41		61			10		—			101
Provision (benefit) for income taxes		(4	)		15		24			4		—			39

Income (loss) before equity in net income (loss) of subsidiaries		(7	)		26		37			6		—			62
Equity in net income (loss) of subsidiaries		69			43		—			—		(112	)		—

Net income (loss)	$	62		$	69	$	37		$	6	$	(112	)	$	62

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2004 (Restated)


	Parent			URI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Other and Eliminations			Consolidated Total
Revenues:
Equipment rentals				$	472		$	491		$	68					$	1,031
Sales of rental equipment					62			62			11						135
New equipment sales					45			30			9						84
Contractor supplies sales					39			53			10						102
Service and other revenues					36			21			5						62

Total revenues					654			657			103						1,414
Cost of revenues:
Cost of equipment rentals, excluding depreciation					219			294			36						549
Depreciation of rental equipment					88			77			17						182
Cost of rental equipment sales					44			44			8						96
Cost of new equipment sales					37			28			7						72
Cost of contractor supplies sales					29			39			7						75
Cost of service and other revenue					17			12			3						32

Total cost of revenues					434			494			78						1,006

Gross profit					220			163			25						408
Selling, general and administrative expenses					98			115			17						230
Non-rental depreciation and amortization	$	4			14			13			2						33

Operating income (loss)		(4	)		108			35			6						145
Interest expense		8			77			1			2		$	(8	)		80
Preferred dividends of a subsidiary trust—(Quips)		—			(1	)		1			—			8			8
Other (income) expense, net		—			172			(2	)		3			—			173

Income (loss) before provision (benefit) for income taxes		(12	)		(140	)		35			1			—			(116	)
Provision (benefit) for income taxes		(4	)		(58	)		12			2			—			(48	)

Income (loss) before equity in net income (loss) of subsidiaries		(8	)		(82	)		23			(1	)		—			(68	)
Equity in net income (loss) of subsidiaries		(60	)		22			—			—			38			—

Net income (loss)	$	(68	)	$	(60	)	$	23		$	(1	)	$	38		$	(68	)

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data unless otherwise indicated)

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For Six Months Ended June 30, 2005


	Parent			URI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Other and Eliminations			Consolidated Total
Net cash provided by (used in) operating activities	$	(7	)	$	101		$	214		$	17		$	—		$	325
Net cash used in investing activities		(2	)		(170	)		(150	)		(29	)		2			(349	)
Net cash provided by (used in) financing activities		9			(31	)		—			—			(2	)		(24	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			(1	)		—			(1	)

Increase (decrease) in cash and cash equivalents		—			(100	)		64			(13	)		—			(49	)
Cash and cash equivalents at beginning of period					247			34			22			—			303

Cash and cash equivalents at end of period	$	—		$	147		$	98		$	9		$	—		$	254

For Six Months Ended June 30, 2004 (Restated)


	Parent			URI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Other and Eliminations			Consolidated Total
Net cash provided by (used in) operating activities	$	(6	)	$	204		$	108		$	39		$			$	345
Net cash used in investing activities		(5	)		(130	)		(74	)		(80	)		3			(286	)
Net cash provided by (used in) financing activities		11			(116	)		—			42			(3	)		(66	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			—			—			—

Increase (decrease) in cash and cash equivalents		—			(42	)		34			1			—			(7	)
Cash and cash equivalents at beginning of period		—			42			32			5			—			79

Cash and cash equivalents at end of period	$	—		$	—		$	66		$	6		$	—		$	72

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except per share data unless otherwise indicated)

The following management’s discussion and analysis gives effect to the restatement discussed in the Explanatory Note to this Report and in note 2 to our condensed consolidated financial statements included in this Report.

Results of Operations

As discussed in note 7 to our condensed consolidated financial statements included in this Report, our reportable segments are general rentals, trench safety, pump and power and traffic control. The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The general rentals segment’s customers include construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The general rentals segment operates throughout the United States and Canada and has one location in Mexico. The trench safety, pump and power segment includes the rental of specialty construction products and related services. The trench safety, pump and power segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates in the United States and has one location in Canada. The traffic control segment includes the rental of equipment used in the management of traffic-related services and activities. The traffic control segment’s customers include construction companies involved in infrastructure projects and municipalities. The traffic control segment operates in the United States. The Company’s external segment reporting is aligned with how management evaluates and allocates resources. The Company evaluates segment performance based on segment operating results.

Revenues by segment were as follows:


	General rentals		Trench safety, pump and power		Traffic control		Total
Three months ended June 30, 2005
Equipment rentals	$	531	$	32	$	64	$	627
Sales of rental equipment		83		3		1		87
Sales of new equipment		49		5		1		55
Contractor supplies sales		75		3		7		85
Service and other		33		1		—		34

Total revenue	$	771	$	44	$	73	$	888

Three months ended June 30, 2004
Equipment rentals	$	484	$	23	$	58	$	565
Sales of rental equipment		66		3		1		70
Sales of new equipment		44		2		1		47
Contractor supplies sales		48		2		7		57
Service and other		31		1		—		32

Total revenue	$	673	$	31	$	67	$	771

Six months ended June 30, 2005
Equipment rentals	$	981	$	58	$	102	$	1,141
Sales of rental equipment		159		6		2		167
Sales of new equipment		88		7		1		96
Contractor supplies sales		133		5		11		149
Service and other		64		2		1		67

Total revenue	$	1,425	$	78	$	117	$	1,620

Six months ended June 30, 2004
Equipment rentals	$	890	$	43	$	98	$	1,031
Sales of rental equipment		127		6		2		135
Sales of new equipment		80		3		1		84
Contractor supplies sales		88		3		11		102
Service and other		60		2		—		62

Total revenue	$	1,245	$	57	$	112	$	1,414

Equipment rentals. Equipment rentals represent our revenues from renting equipment.

Three months ended June 30, 2005 and 2004. 2005 equipment rentals of $627 increased $62, or 11 percent, reflecting a 5.2 percent increase in rental rates and an 11 percent increase in same-store rental revenues, partially offset by declines due to store closures in 2004. The increase also reflected an increase in our dollar equipment utilization rate from 59.5 percent for the three months ended June 30, 2004 to 64.0 percent for the three months ended June 30, 2005. Equipment rentals represented approximately 71 percent of total revenues for the three months ended June 30, 2005. On a segment basis, equipment rentals represented approximately 69 percent, 73 percent and 88 percent of total revenues for general rentals, trench safety, pump and power and traffic control, respectively. General rentals equipment rentals increased $47, or 10 percent, reflecting increased rental rates and an 11 percent increase in same-store rental revenues. Trench safety, pump and power equipment rentals increased $9, or 39 percent, reflecting a 26 percent increase in same-store rental revenues. Traffic control equipment rentals increased $6, or 10 percent, reflecting a 13 percent increase in same-store rental revenues, partially offset by the impact of store closures.

Six months ended June 30, 2005 and 2004. 2005 equipment rentals of $1,141 increased $110, or 11 percent, reflecting a 7.1 percent increase in rental rates and an 11 percent increase in same-store rental revenues, partially offset by declines due to store closures in 2004. The increase also reflected an increase in our dollar equipment utilization rate from 54.6 percent for the six months ended June 30, 2004 to 58.9 percent for the six months ended June 30, 2005. Equipment rentals represented approximately 70 percent of total revenues for the six months ended June 30, 2005. On a segment basis, equipment rentals represented approximately 69 percent, 74 percent and 88 percent of total revenues for general rentals, trench safety, pump and power, and traffic control, respectively. General rentals equipment rentals increased $91, or 10 percent, reflecting increased rental rates and an 11 percent increase in same-store rental revenues. Trench safety, pump and power equipment rentals increased $15, or 32 percent, reflecting a 24 percent increase in same-store rental revenues. Traffic control equipment rentals increased $4, or 4 percent, reflecting a 6 percent increase in same-store rental revenues.

Sales of rental equipment. Sales of rental equipment represent revenues associated with selling used equipment. For the three and six months ended June 30, 2005 and 2004, sales of rental equipment represented approximately 10 percent of our total revenues and our general rentals segment accounted for approximately 95 percent of these sales. Sales of rental equipment for trench safety, pump and power and traffic control were insignificant. The increase in sales of rental equipment for the three and six months ended June 30, 2005 primarily relates to an increase in the volume of equipment sold.

Sales of new equipment. For the three and six months ended June 30, 2005 and 2004, sales of new equipment represented approximately 6 percent of our total revenues. Our general rentals segment accounted for between 90 and 95 percent of these sales. Sales of new equipment for trench safety, pump and power and traffic control were insignificant. The increase in sales of new equipment for the three and six months ended June 30, 2005 primarily relates to an increase in the volume of equipment sold.

Sales of contractor supplies. Sales of contractor supplies represent our revenues associated with selling a variety of contractor supplies including construction consumables, tools, small equipment and safety supplies. Consistent with sales of rental and used equipment, general rentals accounts for substantially all of our contractor supplies sales. For the three and six months ended June 30, 2005, general rentals accounted for between 85 and 90 percent of total sales of contractor supplies. The increase in sales of contractor supplies for the three and six months ended June 30, 2005 primarily relates to an increase in the volume of supplies sold.

Service and other. Service and other represent our revenues earned from providing services (including parts sales). Consistent with sales of rental and new equipment as well as sales of contractor supplies, general rentals accounts for substantially all of our service and other revenue. The increase in service and other revenue for the three and six months ended June 30, 2005 primarily relates to increased parts sales.

Segment Operating Profit. Segment operating profit and operating margin were as follows:


	General rentals			Trench safety, pump and power			Traffic control			Total
Three months ended June 30, 2005
Operating Profit (Loss)	$	122		$	11		$	(2	)	$	131
Operating Margin		16	%		25	%		-4	%		15	%
Three months ended June 30, 2004
Operating Profit (Loss)	$	116		$	8		$	(10	)	$	114
Operating Margin		17	%		25	%		-15	%		15	%
Six months ended June 30, 2005
Operating Profit (Loss)	$	191		$	17		$	(13	)	$	195
Operating Margin		13	%		23	%		-11	%		12	%
Six months ended June 30, 2004
Operating Profit (Loss)	$	156		$	14		$	(25	)	$	145
Operating Margin		13	%		23	%		-22	%		10	%

General rentals. For the three months ended June 30, 2005, operating margin declined 1 percentage point as compared to the same period in 2004. The reduction in operating margin reflects higher selling costs related to growth in the business, increased costs for labor, benefits and delivery associated with normal inflationary increases, and increased professional costs related to regulatory issues and related matters. These matters were partially offset by higher rental rates.

For the six months ended June 30, 2005, the operating margin was flat as compared to same period in 2004. For the six months ended June 30, 2005, the benefit of higher rental rates was offset by higher selling costs related to growth in the business, increased costs for labor, benefits and delivery associated with normal inflationary increases, and increased professional costs related to regulatory issues and related matters.

Trench safety, pump and power. Trench safety, pump and power operating profit increased by $3 for the three months ended June 30, 2005 as compared to the same period in 2004. The increase reflects increased revenues of 38 percent due to higher rental rates and a 26 percent increase in same store sales growth.

For the six months ended June 30, 2005, operating margin was flat as compared to the same period in 2004. Operating profit growth reflects a 35 percent increase in revenue primarily relating to a 24 percent increase in same store rental revenues.

Traffic control. Traffic control operating loss decreased by $7 for the three months ended June 30, 2005 as compared to the same period in 2004 reflecting increased revenues of approximately 10 percent and reduced costs as a result of the closure / divestiture of unprofitable branches as well as reduced operating costs due to cost reductions and improved efficiencies.

Traffic control operating loss decreased by $12 for the six months ended June 30, 2005 as compared to the same period in 2004 due to increased revenues of approximately 5 percent and reduced costs as a result of the closure / divestiture of unprofitable branches as well as reduced operating costs due to cost reductions and improved efficiencies.

Gross Margin. Gross margins by revenue classification were as follows:


	Three Months Ended
	June 30, 2005		June 30, 2004
Total gross margin	31.9	%	31.7	%
Equipment rentals	33.9	%	33.2	%
Sales of rental equipment	25.0	%	26.5	%
Sales of new equipment	17.9	%	16.0	%
Contractor supplies sales	24.9	%	26.3	%
Service and other	50.6	%	49.8	%

	Six Months Ended
	June 30, 2005		June 30, 2004
Total gross margin	29.9	%	28.8	%
Equipment rentals	30.8	%	28.9	%
Sales of rental equipment	26.7	%	29.0	%
Sales of new equipment	18.1	%	14.8	%
Contractor supplies sales	24.9	%	26.8	%
Service and other	49.8	%	49.1	%

For the three months ended June 30, 2005, total gross margin improved 0.2 percentage points as compared to the same period in 2004. Equipment rentals gross margin improved 0.7 percentage points primarily due to a year over year increase in rental rates of 5.2 percent, strong revenue growth in trench safety, pump and power as well as cost reductions in traffic control. The reduction in gross margins on contractor supplies sales of 1.4 percentage points resulted primarily from increased costs related to the opening of new distribution centers. The fluctuations in margins on sales of rental equipment and new equipment result primarily from changes in the mix of equipment sold, partially offset by improved pricing.

For the six months ended June 30, 2005, total gross margin improved 1.1 percentage points as compared to the same period in 2004. Equipment rentals gross margin improved 1.9 percentage points primarily due to a year over year increase in rental rates of 7.1 percent, strong revenue growth in trench safety, pump and power and cost reductions in traffic control. The reduction in gross margins on contractor supplies sales of 1.9 percentage points resulted primarily from increased costs related to the opening of new distribution centers. The fluctuations in margins on sales of rental equipment and new equipment result primarily from changes in the mix of equipment sold.

Selling, general and administrative expenses (SG&A). SG&A expense information for the three and six months ended June 30, 2005 and 2004 was as follows:


	Three Months Ended
	June 30, 2005			June 30, 2004
Total SG&A expenses	$	136		$	115
SG&A as a percentage of revenue		15.3	%		14.7	%

	Six Months Ended
	June 30, 2005			June 30, 2004
Total SG&A expenses	$	258		$	230
SG&A as a percentage of revenue		15.9	%		16.3	%

SG&A expense primarily includes sales force compensation, bad debt expense, advertising and marketing expenses, third party professional fees, management salaries and clerical and administrative overhead.

For the three months ended June 30, 2005, SG&A expense increased $21. In addition to normal inflationary increases as well as higher selling and administrative costs related to growth in the business, the year-over-year growth in SG&A expense reflects increased professional costs related to regulatory issues and related matters of $5.

For the six months ended June 30, 2005, SG&A expense increased $28. In addition to normal inflationary increases as well as higher selling and administrative costs related to growth in the business, the year-over-year growth in SG&A expense reflects increased professional costs related to regulatory issues and related matters of $8.

Non-rental depreciation and amortization for the three and six months ended June 30, 2005 and 2004 was as follows:


	Three Months Ended
	June 30, 2005			June 30, 2004
Non-rental depreciation and amortization	$	16		$	16
Non-rental depreciation and amortization as a percent of revenue		2	%		2	%

	Six Months Ended
	June 30, 2005			June 30, 2004
Non-rental depreciation and amortization	$	32		$	33
Non-rental depreciation and amortization as a percent of revenue		2	%		2	%

Non-rental depreciation and amortization includes (i) depreciation expense associated with equipment that is not offered for rent (such as vehicles, computers and office equipment) and amortization expense associated with leasehold improvements, (ii) the amortization of deferred financing costs and (iii) the amortization of other intangible assets. Our other intangible assets primarily consist of customer relationships and non-compete agreements. The amount of non-rental depreciation and amortization has approximated 2 percent of revenues for the periods presented.

Interest expense for the three and six months ended June 30, 2005 and 2004 was as follows:


	Three Months Ended
	June 30, 2005		June 30, 2004
Interest expense	$	44	$	34

	Six Months Ended
	June 30, 2005		June 30, 2004
Interest expense	$	87	$	80

Interest expense for the three months ended June 30, 2005 increased $10, reflecting the increase in interest rates applicable to our floating rate debt. Interest expense for the six months ended June 30, 2005 increased $7 due to increased interest rates applicable to our floating rate debt, partially offset by the benefit of debt refinancings completed in first quarter 2004. As of June 30, 2005, approximately 42 percent of our debt was floating rate debt.

Other (income) expenses, net was as follows:


	Three Months Ended
	June 30, 2005			June 30, 2004
Other (income) expense, net	$	1		$	12

	Six Months Ended
	June 30, 2005			June 30, 2004
Other (income) expense, net	$	(1	)	$	173

Other expense of $173 for the six months ended June 30, 2004 and $12 for the three months ended June 30, 2004 primarily relates to charges related to the refinancing of approximately $2.1 billion of debt. This refinancing is discussed further below; see “Liquidity and Capital Resources.”

Income taxes. The following table summarizes our consolidated provision (benefit) for income taxes and the related effective tax rate for the three months ended June 30, 2005 and 2004:


	Three Months Ended
	June 30, 2005			June 30, 2004
Pre-tax income	$	82		$	64
Provision for income taxes	$	32		$	24
Effective tax rate		39	%		38	%

	Six Months Ended
	June 30, 2005			June 30, 2004
Pre-tax income (loss)	$	101		$	(116	)
Provision (benefit) for income taxes	$	39		$	(48	)
Effective tax rate		39	%		41	%

The difference between the consolidated effective tax rates and the U.S. federal statutory income tax rate of 35 percent primarily relates to state taxes as well as certain non deductible charges.

New Accounting Pronouncements. See note 1 of the consolidated financial statements for a full description of recent accounting pronouncements including the respective dates of adoption and effects on results of operations and financial condition.

Liquidity and Capital Resources

Liquidity. We manage our liquidity using internal cash management practices, which are subject to (1) the statutes, regulations and practices of each of the local jurisdictions in which we operate, (2) the legal requirements of the agreements to which we are a party and (3) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services.

Our principal existing sources of cash are cash generated from operations and from the sale of rental equipment and borrowings available under our revolving credit facility and receivables securitization facility. As of June 30, 2005, we had (i) $456 of borrowing capacity available under the revolving credit facility portion of our $1.55 billion senior secured credit facility and (ii) $200 of borrowing capacity available under our receivables securitization facility (reflecting the size of the eligible collateral pool as of such date and no loans outstanding). We believe that our existing sources of cash will be sufficient to support our existing operations over the next twelve months.

We expect that our principal needs for cash relating to our existing operations over the next twelve months will be to fund (i) operating activities and working capital, (ii) the purchase of rental equipment and inventory

items offered for sale, (iii) payments due under operating leases, (iv) debt service and (v) acquisitions. We plan to fund such cash requirements from our existing sources of cash. In addition, we may seek additional financing through the securitization of some of our equipment or real estate or through the use of additional operating leases.

While emphasizing internal growth, we intend to continue to expand through a disciplined acquisition program. We will consider potential transactions of varying sizes and may, on a selective basis, pursue acquisition or consolidation opportunities involving other public companies or large privately-held companies. We expect to pay for future acquisitions using cash, capital stock, notes and/or assumption of indebtedness. To the extent that our existing sources of cash described above are not sufficient to fund such future acquisitions, we will require additional debt or equity financing and, consequently, our indebtedness may increase or the ownership of existing stockholders may be diluted as we implement our growth strategy.

Transactions Completed in 2004

•

amended and restated URI’s senior secured credit facility (“New Credit Facility”) to replace URI’s previous $1.3 billion senior secured credit facility;

•

sold $1 billion of URI’s 6¹/2 percent Senior Notes Due 2012;

•

sold $375 of URI’s 7 percent Senior Subordinated Notes Due 2014;

•

repaid $639 of term loans and $52 of borrowings that were outstanding under the old credit facility;

•

repurchased $845 principal amount of URI’s 10³/4 percent Senior Notes Due 2008 (the “10³/4 percent Notes”), pursuant to a tender offer;

•

redeemed $300 principal amount of URI’s outstanding 9¹/4 percent Senior Subordinated Notes Due 2009 (the “9¹/4 percent Notes”); and

•

redeemed $250 principal amount of URI’s outstanding 9 percent Senior Subordinated Notes Due 2009 (the “9 percent Notes”).

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.

6¹/2 percent Senior Notes. In February 2004, as part of the Refinancing described above, URI issued $1 billion aggregate principal amount of 6¹/2 percent Senior Notes (the “6¹/2 percent Notes”) which are due February 15, 2012. The net proceeds from the sale of the 6¹/2 percent Notes were approximately $985, after deducting offering expenses. The 6¹/2 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URI’s domestic subsidiaries. The 6¹/2 percent Notes mature on February 15, 2012 and may be redeemed by URI on or after February 15, 2008, at specified redemption prices that range from 103.25 percent in 2008 to 100.0 percent in 2010 and thereafter. In addition, on or prior to February 15, 2007, URI may, at its option, use the proceeds of public equity offerings to redeem up to an aggregate of 35 percent of the outstanding 6¹/2 percent Notes at a redemption price of 106.5 percent. The indenture governing the 6¹/2 percent 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, (viii) the Company’s ability to consolidate, merge or sell all or substantially all of its assets and (ix) sale-leaseback transactions.

URI is also required to pay the lenders a commitment fee equal to 0.5 percent per annum, payable quarterly, in respect of undrawn commitments under the revolving credit facility.

letter of credit capacity under the revolving credit facility and the ILCF is $400. Subject to certain conditions, all or part of the ILCF may be converted into term loans. The ILCF is scheduled to terminate in February 2011. As of both June 30, 2005 and December 31, 2004, the outstanding letters of credit under the ILCF were approximately $150.

Transactions Completed in 2005

Matters Relating to Consent Solicitation: In 2005, the Company successfully solicited consents for amendments to the indentures governing the following securities:

•

6¹/2 percent Senior Notes due 2012

•

7³/4 percent Senior Subordinated Notes due 2013

•

7 percent Senior Subordinated Notes due 2014

•

1⁷/8 percent Convertible Senior Subordinated Notes due 2023 (“Convertible Notes”)

•

6¹/2 percent Convertible Quarterly Income Preferred Securities due 2028 (“QUIPs”)

comply with the requirement to make timely SEC filings (and waiving related defaults that occurred prior to the effectiveness of the amendments). In addition, the supplemental indenture relating to the Convertible Notes changed the conversion rate from 38.9520 to 44.9438 shares of United Rentals common stock for each $1,000 (“one thousand dollars”) principal amount of Convertible Notes. Pursuant to the terms of the consent solicitation, the Company paid aggregate consent fees of approximately $34 to holders of its nonconvertible notes and QUIPs. These costs are being amortized through the maturity dates of the nonconvertible notes and QUIPs.

Key terms of this facility include:

•

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;

•

the facility is structured so that the receivables in the collateral pool are the lenders’ only source of repayment;

•

Redemption of remaining 10³/4 Senior Notes: In April 2005, the Company redeemed $12 principal amount of URI’s 10³/4 Senior Notes due 2008 (the “10³/4 Notes”). The principal repurchased represented the amounts of the 10³/4 Notes still outstanding after the 2004 tender offer. In connection with this redemption, the Company incurred charges of approximately $1. These charges were attributed primarily to (i) the redemption for notes redeemed and (ii) the write-off of previously capitalized costs.

Loan Covenants and Compliance

Sources and Uses of Cash. During six months ended June 30, 2005, we (i) generated cash from operations of $325 and (ii) generated cash from the sale of rental equipment of $167. We used cash during this period principally to (i) purchase rental equipment of $484, (ii) purchase other property and equipment of $32, (iii) purchase other companies, net of cash acquired, of $3 and (iv) make debt repayments, net of borrowings, and financing costs of $26.

During the six months ended June 30, 2004, we (i) generated cash from operations of $345, (ii) generated cash from the sale of rental equipment of $135 and (iii) utilized cash for debt repayments, net of borrowings, and financing costs of $66. We used cash during this period principally to (i) purchase rental equipment of $331, (ii) purchase other property and equipment of $29 and (iii) purchase other companies, net of cash acquired, of $61.

Our credit ratings as of April 12, 2006 were as follows:


	Corporate Rating	Outlook (1)
Moody’s	B2	Developing
S&P	BB-	Negative
Fitch	BB	Negative

(1)	On April 3, 2006, Moody’s changed its outlook to Developing from Negative.

Both our ability to obtain financing and the related cost of borrowing are affected by our credit ratings, which are periodically reviewed by these rating agencies. Our current credit ratings are below investment grade and we expect our access to the public debt markets to be limited to the non-investment grade segment until our ratings reflect an investment grade rating.

Certain Information Concerning Off-Balance Sheet Arrangements

We lease real estate, rental equipment and non-rental equipment under operating leases as a `regular business activity. As part of some of our equipment operating leases, we guarantee that the value of the equipment at the end of the term will not be less than a specified projected residual value. If the actual residual value for all equipment subject to such guarantees were to be zero, then our maximum potential liability under these guarantees would be approximately $26. Under current circumstances we do not anticipate paying significant amounts under these guarantees; however, we cannot be certain that changes in market conditions or other factors will not cause the actual residual values to be lower than those currently anticipated. In accordance with FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” this potential liability was not reflected on our balance sheet as of June 30, 2005 and December 31, 2004 or any prior date because the leases associated with such guarantees were entered into prior to January 1, 2003.

Certain Information Concerning Trust Preferred Securities

In August 1998, a subsidiary trust of Holdings sold $300 of QUIPs. The trust used the proceeds from the sale of these securities to purchase 6¹/2 percent subordinated convertible debentures due 2028 which resulted in Holdings receiving all of the net proceeds of the sale. The subsidiary trust that issued the trust preferred securities was consolidated with Holdings until December 31, 2003, when it was deconsolidated.

Relationship Between Holdings and URI

Holdings is principally a holding company and primarily conducts its operations through its wholly owned subsidiary URI and subsidiaries of URI. Holdings provides certain services to URI in connection with its operations. These services principally include: (i) senior management services, (ii) finance and tax related services and support, (iii) information technology systems and support, (iv) acquisition related services, (v) legal services, and (vi) human resource support. In addition, Holdings leases certain equipment and real property that are made available for use by URI and its subsidiaries. URI has made, and expects to continue to make, certain payments to Holdings in respect of the services provided by Holdings to URI. The expenses relating to URI’s payments to Holdings are reflected on URI’s financial statements as selling, general and administrative expenses. In addition, although not legally obligated to do so, URI has in the past made, and expects that it will in the future make, distributions to Holdings to, among other things, enable Holdings to pay interest on the convertible debentures that were issued to a subsidiary trust of Holdings as described above.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk primarily consists of (1) interest rate risk associated with our variable rate debt and (2) foreign currency exchange rate risk primarily associated with our Canadian operations.

Interest Rate Risk. We periodically utilize interest rate swap agreements and interest rate cap agreements to manage our interest costs and exposure to changes in interest rates. As of June 30, 2005, we had swap agreements with an aggregate notional amount of $1.2 billion and cap agreements with an agreement notional amount of $725. The effect of the swap agreement was, at June 30, 2005, to convert $1.2 billion of our fixed rate notes to floating rate instruments. The fixed rate notes being converted consisted of (i) $445 of our 6¹/2 percent notes through 2012, (ii) $375 of our 7 percent notes, and (iii) $375 of our 7³/4 percent senior subordinated notes through 2013.

As of June 30, 2005, after giving effect to our interest rate swap and cap agreements, we had an aggregate of $1.3 billion of indebtedness that bears interest at variable rates. For this purpose, the portion of the term loan subject to the cap is considered fixed. The debt that is subject to fluctuations in interest rates includes $130 of borrowings under our revolver Canadian facility, $1.2 billion in swaps, and $16 of term loans not subject to an interest rate cap. The weighted-average effective interest rates applicable to our variable rate debt on June 30, 2005 were (i) 4.6 percent for the revolving credit facility (represents the Canadian rate since the amount outstanding was Canadian borrowings), (ii) 5.6 percent for the term loan and (iii) 6.0 percent for the debt subject to our swap agreements. As of June 30, 2005, based upon the amount of our variable rate debt outstanding, after giving effect to our interest rate swap agreements, our annual earnings would decrease by approximately $13 for each one percentage point increase in the interest rates applicable to our variable rate debt.

The amount of our variable rate indebtedness may fluctuate significantly as a result of changes in the amount of indebtedness outstanding under our revolving credit facility and receivables securitization facility from time to time. For additional information concerning the terms of our variable rate debt, see note 8 to our consolidated financial statements.

Currency Exchange Risk. The functional currency for our Canadian operations is the Canadian dollar. As a result, our future earnings could be affected by fluctuations in the exchange rate between the U.S. and Canadian dollars. Based upon the level of our Canadian operations during 2005 relative to the company as a whole, a 10 percent change in this exchange rate would not have a material impact on our earnings. In addition, we periodically enter into foreign exchange contracts to hedge our transaction exposures. We had no outstanding foreign exchange contracts as of June 30, 2005. We do not engage in purchasing forward exchange contracts for speculative purposes.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Offer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2004 and June 30, 2005, the Company’s management carried out an evaluation, under the supervision and with participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a–15(e) and 15d–15(e) of the Exchange Act. Based on the evaluation and the identification of the material weaknesses in internal control over financial reporting described below, as well as our inability to timely file our 2004 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2005, the Company’s disclosure controls and procedures were not effective. In addition, as a result of the subsequent identification of material weaknesses in internal control as of December 31, 2004, as reported below and in the Company’s Annual Report on Form 10-K for 2004 filed on March 31, 2006, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as of June 30, 2004 were not effective.

In light of the material weaknesses in internal control described below, and as a result of the SEC inquiry and review of the Special Committee as discussed elsewhere in this Quarterly Report on Form 10-Q, we performed additional procedures to ensure that our unaudited condensed consolidated financial statements included in this report and our audited consolidated financial statements in our Annual Reports on Form 10-K for the years ended December 31, 2005 and December 31, 2004 were prepared in accordance with generally

accepted accounting principles in the United States of America (“GAAP”). These steps included, among other actions, expansion of our year-end closing procedures, including performing detailed analyses of accounts and review of subsequent transactions to affirm year-end account balances, and dedication of significant internal resources and external consultants to validating financial statement account balances and disclosures.

These and other procedures resulted in the identification of accounting and audit adjustments to our consolidated financial statements for the year ended December 31, 2004, which significantly delayed the filing of our Annual Report on Form 10-K for the year ended December 31, 2004. These adjustments also required us to restate our previously filed unaudited condensed consolidated financial statements for the quarters ended March 31, June 30 and September 30, 2004, respectively, and our audited consolidated financial statements for the years ended December 31, 2003 and 2002. The restatement adjustments are further described in note 2 to our unaudited condensed consolidated financial statements included within this Form 10-Q.

As a result of the additional procedures and related adjustments and restatements described above, management has concluded that the condensed consolidated financial statements for the periods included in this quarterly report are fairly stated, in all material respects, in accordance with GAAP.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with management’s assessment of the effectiveness of our internal control over financial reporting, we identified the following material weaknesses in internal control over financial reporting as of December 31, 2004 (and as of June 30, 2004), which had not been effectively remediated, and therefore continued to exist, as of June 30, 2005.

Control environment. We did not maintain an effective control environment over financial reporting. Specifically, we identified the following deficiencies in the control environment, which, in the aggregate, represent a material weakness in the overall control environment:

•

There was not sufficiently effective communication of the importance of high standards for internal control over financial reporting. In addition, a former member of senior management maintained the

dual role of President and Chief Financial Officer, which further impaired the Company’s ability to maintain sufficient emphasis on internal controls over financial reporting;

•

We did not maintain a sufficient complement of experienced personnel in key financial reporting functions, including Corporate Finance and Accounting, Tax, Information Technology, and Internal Audit;

•

Certain of the Company’s corporate governance practices were not effective, including a limited Internal Audit function and lack of effective business ethics training for employees; and

•

The Company’s alert-line, conflict-of-interest inquiry process and related “whistle-blower” mechanisms were not effective as instances were noted where follow-up of alleged improprieties and conflict-of-interest responses were not completed timely and effectively.

The material weakness in our control environment described above contributed to the existence of the material weaknesses discussed below.

Financial statement close process. Internal controls over the financial statement close process were not effective and represented a material weakness in our internal control over financial reporting. The primary factors contributing to this material weakness were:

•

We did not maintain sufficient formal, written policies and procedures governing the financial statement close process;

•

We did not maintain effective controls to provide reasonable assurance that accounts were complete and accurate and agreed to detailed support, and that account reconciliations were properly performed, reviewed and approved. Accounts impacted by these deficiencies included stock compensation and deferred rent expense, among others;

•

We did not properly analyze and document key assumptions and processes used in determining reserve balances for certain judgmental accounts, including credit memo reserves, contract accounting, accrued bonuses, medical insurance reserves and accounts payable cutoffs, and the analyses supporting recorded balances were not effectively reviewed and approved by appropriate management;

•

We did not maintain effective controls over the recording of journal entries, to ensure that entries were properly prepared with sufficient supporting documentation and were reviewed and approved by appropriate management;

•

We did not maintain a documented formal management review process of the consolidated interim and annual financial statements; and

•

We did not maintain sufficient staffing with appropriate technical competence in the corporate finance and accounting departments.

Income taxes. Internal controls surrounding the accounting for income taxes were not effective and represented a material weakness in our internal control over financial reporting. The primary factors contributing to the material weakness in accounting for income taxes were failure to maintain tax basis balance sheets permitting effective reconciliation of cumulative book to tax differences, including book versus tax fixed asset records; failure to annually evaluate state tax rates; and failure to adequately verify data used in computations, particularly as it pertains to historical deferred tax liabilities and assets.

Self-insurance reserves. Internal controls pertaining to the self-insurance reserve estimation process were not effective and represented a material weakness in our internal control over financial reporting. The primary factors contributing to these deficiencies was a lack of effective reconciliation of claims data and evaluation of recorded liabilities associated with workers’ compensation claims and claims by third-parties for damage or injury caused by the Company.

Bulk rental assets. Internal controls regarding the manner that certain types of bulk rental assets are recorded, tracked and relieved from the accounts upon disposal or sale were not effective and represented a material weakness in our internal control over financial reporting. The primary factor contributing to the material weakness was a deficiency in the perpetual inventory system which did not provide for complete data regarding bulk rental asset quantities and unit costs, which in turn impaired the ability to compute depreciation expense, record accurate cost of sales upon disposal and to complete fully effective physical inventories of these bulk rental assets.

As a result of the material weaknesses described above, our management has concluded that the Company did not maintain effective internal control over financial reporting as of June 30, 2005 (or as of June 30, 2004).

Remediation of Material Weaknesses in Internal Control over Financial Reporting

During fiscal 2005, we engaged in substantial efforts to address the material weaknesses in our internal control over financial reporting and related ineffectiveness of our disclosure controls and procedures. The following paragraphs describe the on-going changes to our internal control over financial reporting subsequent to December 31, 2004 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:

To remediate the control environment deficiencies and related material weakness:

•

We significantly strengthened management within key financial functions, including the appointment of a new Chief Financial Officer, who joined the Company as Interim Chief Financial Officer in the third quarter of 2005 and was appointed our Executive Vice President and Chief Financial Officer in March 2006, a new Vice President of Internal Audit in the second quarter of 2005, a new Vice President, Assistant Corporate Controller and a Director of Accounting and Consolidations in the third quarter of 2005 and a new Director of Financial Reporting and Analysis in the fourth quarter of 2005. In addition, subsequent to fiscal 2005, in the first quarter of 2006, we hired a new Vice President of Taxes and a new Senior Vice President, Chief Information Officer, and certain former Corporate Finance and Accounting personnel were terminated or removed from their positions;

•

To strengthen the Company’s corporate governance practices, in January 2005 the Company formed a Compliance Committee to monitor and enhance code of conduct and related matters, including subsequent release of mandatory ethics and compliance training for all employees. Also, in February 2005 we expanded the role and resources of the internal audit function through establishing a co-sourcing internal audit engagement with a global accounting and audit firm and through the subsequent hiring of an experienced Vice President of Internal Audit who reports directly to our audit committee; and

•

Procedures for investigating and resolving allegations of wrong-doing, as reported through the Company’s alert-line, were substantially improved through increased access to the audit committee and senior management. Further, administration and monitoring of the conflict-of-interest process was transferred to the Corporate Security function to ensure effective and timely completion of this annual process.

To correct the control deficiencies in our financial statement close process, we took the following actions in 2005:

•

We began the process of documenting formal, written policies and procedures governing the financial close process, including implementing formal monthly closing meetings with corporate and region accounting staff;

•

We began implementing more formal account reconciliation and analysis processes, including review and approval requirements;

•

We began performing additional review and documentation of the assumptions and processes used in determining the reserve balances for judgmental accounts, including accrued bonuses and medical insurance reserves;

•

We began implementing more formal journal entry documentation, review and approval requirements and related procedures, to ensure journal entries are properly prepared with supporting documentation and have been appropriately approved; and

•

As noted above, we upgraded the corporate finance and accounting staff with the addition of several experienced financial personnel at the Vice President, Director and senior analyst levels.

Several changes in our corporate tax function were adopted to remediate the material weakness in our accounting for income taxes as of December 31, 2005. These included procedures to ensure that the income tax provision and related tax assets and liabilities are reconciled accurately and timely; maintaining tax basis balance sheets and effective reconciliation of the cumulative book-to-tax differences, including book and tax fixed asset records; and annually evaluating the appropriate state tax rates. Additionally, the Company has enhanced communications between business unit, tax and accounting department personnel, and completed, with the assistance of consultants, a thorough analysis of historical acquisitions and other activities supporting deferred tax liabilities and assets. To further strengthen the Company’s tax function, a search for an experienced Vice President of Taxes was initiated in late 2005, with successful recruitment of this new hire in January 2006, as mentioned above.

The material weakness pertaining to our self-insurance estimation and evaluation process was remediated as of December 31, 2005 through our engaging qualified, third-party actuaries to perform actuarial calculations of the liabilities for outstanding and incurred-but-not-reported claims, and by properly analyzing and reconciling claims data recorded in the general ledger with the data used by the actuaries. These actuarial calculations incorporate appropriate actuarial assumptions and represent a substantial improvement from the former practice of estimating our liability with limited actuarial input. This more formal and complete analysis and evaluation of the estimated self-insurance liabilities is now completed semi-annually by the corporate accounting and risk management functions.

To correct the control deficiencies surrounding accounting for bulk rental assets, as of December 31, 2005 the Company completed a thorough analysis of the bulk assets accounting practices within each of our three reportable business segments, and implemented appropriate actions to ensure that the bulk asset accounting properly reflects the transactions within each segment. These actions included standardizing bulk rental asset policies and practices across all locations within each segment, modifying the inventory system and updating procedures to capture asset quantities and unit costs and to properly track bulk rental asset changes.

We believe the foregoing actions have improved and will continue to improve our internal control over financial reporting, as well as our disclosure controls and procedures. However, the material weakness in our financial close process was not remediated by December 31, 2005 and, accordingly, as reported in our Annual Report on Form 10-K for the year ended December 31, 2005 our internal control over financial reporting and our disclosure controls and procedures remain ineffective as of December 31, 2005.

The remediation efforts noted above are subject to the Company’s ongoing internal control assessment, testing and evaluation processes. While these remediation efforts continue, we will utilize additional analyses and other detailed procedures and other appropriate measures to assist us with meeting the objectives otherwise fulfilled by an effective internal control environment.

Changes in Internal Control over Financial Reporting

Except as discussed above, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2005 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

SEC Non-Public Fact Finding Inquiry and Special Committee Review

As previously announced, on August 25, 2004, the Company received a letter from the SEC in which the SEC referred to an inquiry of the Company. The letter transmitted a subpoena requesting certain of the Company’s documents. The letter and the subpoena referred to an SEC investigation entitled In the Matter of United Rentals, Inc. The notice from the SEC states that the inquiry does not mean that the SEC has concluded that the Company or anyone else has broken the law or that the SEC has a negative opinion of any person, entity or security. As previously announced, the inquiry appears to relate to a broad range of our accounting practices and is not confined to a specific period or the matters discussed in this report.

The Company has since received additional document subpoenas from the SEC. As previously announced, in March 2005, the Company’s board of directors formed the Special Committee to review matters related to the SEC inquiry. The Special Committee retained independent counsel. The board of directors received and acted upon findings of the Special Committee on January 26, 2006. The conclusions and recommendations of the Special Committee are discussed above in note 2 to our unaudited condensed consolidated financial statements included in this report (the “Restatement Note”) and summarized in the Company’s press release and the related current report on Form 8-K dated January 26, 2006.

Shareholder Class Action Lawsuits and Derivative Litigation

In November 2004, we received a letter from counsel for an alleged shareholder, raising allegations similar to the ones set forth in the derivative complaint described above and demanding that we take action in response to those allegations against certain of our current and/or former directors and/or officers. Following receipt of the letter, the board of directors formed a special committee of the board to consider the letter. In August 2005, this alleged shareholder commenced an action in Connecticut State Superior Court, Judicial District of Norwalk/Stamford at Stamford, purporting to sue derivatively on our behalf. The action, entitled Nathan Brundridge v. Leon D. Black, et al., names as defendants certain of our current and/or former directors and/or officers, and names us as a nominal defendant. The complaint in this action asserts, among other things, that all of the defendants breached fiduciary obligations to us by causing or allowing us to disseminate misleading and inaccurate information to shareholders and the market, and by failing to establish and maintain adequate accounting controls, thus exposing us to damages. The complaint in this action also asserts a claim for unjust enrichment against our chairman, our vice chairman and chief executive officer, and our former president and chief financial officer. The complaint seeks unspecified compensatory damages, equitable relief, costs and expenses against all of the defendants. The complaint also seeks an order, in connection with plaintiff’s unjust enrichment claim, directing the defendants against whom that claim is asserted to disgorge certain compensation they received from us with respect to fiscal years 2001, 2002 and 2003. The parties have agreed to submit to the court, by April 17, 2006, a proposed schedule for the filing of any amended complaint and responses to the operative complaint in the action. The parties’ agreement further provides that the time by which all defendants must answer, move or otherwise respond to the complaint shall be adjourned pending the parties’ submission of the aforementioned schedule.

Indemnification

purported class action lawsuit, three purported shareholder derivative lawsuits and the SEC inquiry and related review of the Special Committee described above, the Company advanced counsel fees and other reasonable fees and expenses, actually and necessarily incurred by the present and former directors and officers who are involved, in an aggregate amount of approximately $2,566,190 in fiscal 2005. Each of the individuals is required to execute an undertaking to repay such expenses if he or she is finally found not to be entitled to indemnification.

Item 1A.

Risk Factors

Our results of operations and financial condition are subject to numerous risks and uncertainties described in our Annual Report on Form 10-K for 2005, filed on March 31, 2006, and incorporated herein by reference. You should carefully consider these risk factors in conjunction with the other information contained in this report. Should any of these risks materialize, our business, financial condition and future prospects could be negatively impacted.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share
4/1/05 through 4/30/05	—		—
5/1/05 through 5/31/05	128	$	20.05
6/1/05 through 6/30/05	—		—

Total	128	$	20.05

(1)	The shares were surrendered to the Company by employees in order to satisfy tax withholding obligations upon the vesting of restricted stock. These shares were not acquired pursuant to any repurchase plan or program.

Item 6.

Exhibits

(a) Exhibits:


Exhibit Number		Description of Exhibit
3(a)		Amended and Restated Certificate of Incorporation of United Rentals, Inc., (incorporated by reference to exhibit 3.1 of United Rentals, Inc. Report on Form 10-Q for the quarter ended June 30, 1998)

3(b)		Certificate of Amendment to the United Rentals, Inc. Amended and Restated Certificate of Incorporation dated, September 29, 1998 (incorporated by reference to Exhibit 4.2 to the United Rentals, Inc. Registration Statement on Form S-3, No. 333-70151)

3(c)		By-laws of United Rentals, Inc. (incorporated by reference to exhibit 3.2 of United Rentals, Inc. Report on Form 10-Q for the quarter ended June 30, 1998)

3(d)		Form of Certificate of Designation for Series C Perpetual Convertible Preferred Stock (incorporated by reference to exhibit 3(f) of United Rentals, Inc. Report on Form 10-Q for the quarter ended September 30, 2001)

3(e)		Form of Certificate of Designation for Series D Perpetual Convertible Preferred Stock (incorporated by reference to exhibit 3(g) of United Rentals, Inc. Report on Form 10-Q for the quarter ended September 30, 2001)

3(f)		Form of Certificate of Designation for Series E Junior Participating Preferred Stock (incorporated by reference to Exhibit A of Exhibit 4 of the United Rentals, Inc. Current Report on Form 8-K filed on October 5, 2001)

3(g)		Rights Agreement dated September 28, 2001 between United Rentals, Inc. and American Stock Transfer & Trust Co., as Rights Agent (incorporated by reference to Exhibit 4 of the United Rentals, Inc. Current Report on Form 8-K filed on October 5, 2001)

3(h)		Amended and Restated Certificate of Incorporation of United Rentals (North America), Inc., (incorporated by reference to Exhibit 3.3 of the United Rentals (North America), Inc. Report on Form 10-Q for the quarter ended June 30, 1998)

3(i)		By-laws of United Rentals (North America), Inc., (incorporated by reference to Exhibit 3.4 of the United Rentals (North America), Inc. Report on Form 10-Q for the quarter ended June 30, 1998)

10(c)		Amendment, dated as of June 22, 2005, among United Rentals, Inc., United Rentals (North America), Inc., United Rentals of Canada, Inc., United Rentals of Nova Scotia (No.1), ULC, JPMorgan Chase Bank, N.A., and JPMorgan Bank, N.A., Toronto Branch (incorporated by reference to Exhibit 99.2 to United Rentals, Inc. Report on Form 8-K filed on June 24, 2005)

10(nn)		Indemnification Agreement dated as of June 7, 2005, between United Rentals, Inc. and Jason D. Papastavrou (incorporated by reference to exhibit 99.1 of the United Rentals, Inc. Report on Form 8-K filed June 7, 2005)‡

10(iii)		Receivables Purchase Agreement dated as of May 31, 2005 between United Rentals Receivables LLC II, United Rentals, Inc., Atlantic Asset Securitization Corp., Liberty Street Funding Corp., Calyon New York Branch, and The Bank of Nova Scotia (incorporated by reference to Exhibit 99.1 of the United Rentals, Inc. Report on Form 8-K filed on June 6, 2005)

10(jjj)		Purchase and Contribution Agreement dated as of May 31, 2005 between United Rentals (North America), Inc., United Rentals Northwest, Inc., United Rentals Southeast, L.P., United Equipment Rentals Gulf, L.P., United Rentals, Inc., and United Rentals Receivables LLC II (incorporated by reference to Exhibit 99.2 of the United Rentals, Inc. Report on Form 8-K filed on June 6, 2005)


Exhibit Number		Description of Exhibit
10(kkk)		Performance Undertaking dated as of May 31, 2005 executed by United Rentals, Inc. in favor of United Rentals Receivables LLC II (incorporated by reference to Exhibit 99.3 of the United Rentals, Inc. Report on Form 8-K filed on June 6, 2005)

31(a)*		Rule 13a-14(a) Certification by Chief Executive Officer

31(b)*		Rule 13a-14(a) Certification by Chief Financial Officer

32(a)*		Section 1350 Certification by Chief Executive Officer

32(b)*		Section 1350 Certification by Chief Financial Officer

*	Filed herewith.

‡	This document is a management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


		UNITED RENTALS, INC.

Dated:	April 12, 2006	By:	/s/ MARTIN E. WELCH III
			Martin E. Welch III
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

		UNITED RENTALS (NORTH AMERICA), INC.

Dated:	April 12, 2006	By:	/s/ MARTIN E. WELCH III
			Martin E. Welch III
			Chief Financial Officer
			(Principal Financial and Accounting Officer)