SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
on
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000.
[ ]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 06-1522496
Delaware 06-1493538
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification Nos.)
Five Greenwich Office Park,
Greenwich, Connecticut 06830
(Address of Principal Executive Offices) (Zip code)
Registrants' telephone number, including area code: (203) 622-3131
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which Registered
Common Stock, $.01 par value, of United Rentals, Inc. New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
ng requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of October 1, 2001, there were 73,295,189 shares of United Rentals, Inc.
common stock outstanding. The aggregate market value of such common stock held
by non-affiliates of the registrant at October 1, 2001 was approximately $797.2
million. Such aggregate market value was calculated by using the closing price
of such common stock as of such date on the New York Stock Exchange of $17.10.
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.
Documents incorporated by reference: Certain sections of the Proxy
Statement of United Rentals, Inc. to be filed pursuant to Regulation 14A under
the Securities Exchange Act of 1934 within 120 days of the registrant's fiscal
year are incorporated by reference into Part III of this Form 10-K.
This combined Form 10-K 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 (I)(1) (a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure format permitted by
such instruction.
FORM 10-K/A REPORT INDEX
10-K/A Part
and Item No. Page No.
------------ --------
PART II
Item 6 Selected Financial Data...... 2
Item 8 Financial Statements and
Supplementary Data........... 4
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on Form
8-K.......................... 61
PART II
Item 6. Selected Financial Data
The data presented below with respect to the Company should be read in
conjunction with the Consolidated Financial Statements and related Notes
thereto of the Company included elsewhere in this Report and Item
7--"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
During the periods presented below, the Company completed certain
acquisitions that were accounted for as poolings-of-interests (including a
merger in September 1998 with U.S. Rentals) and others that were accounted for
as purchases. The selected financial data presented below has been restated for
all periods presented to include the accounts of the businesses acquired in
transactions accounted for as poolings-of-interests (excluding one such
transaction which was not material) as if the Company and these businesses
acquired were combined for all periods presented. The accounts of businesses
acquired in transactions accounted for as purchases are included from their
respective acquisition dates. In view of the fact that the Company's operating
results for the periods presented below were impacted by acquisitions that were
accounted for as purchases, the Company believes that its results of operations
for the years presented are not directly comparable. See Note 3 of the Notes to
the Consolidated Financial Statements of the Company included elsewhere in this
Report.
Our previously outstanding Series A Perpetual Convertible Preferred Stock
and Series B Perpetual Convertible Preferred Stock were exchanged for Series C
Perpetual Convertible Preferred Stock and Series D Perpetual Convertible
Preferred Stock, respectively. This exchange was effected subsequent to June
30, 2001. The balance sheet data under the heading "Pro Forma" adjusts the
historical balance sheet data to give effect to the exchange, as if it had
occurred on December 31, 2000. For additional information concerning the
exchange, see note 2 to the audited consolidated financial statements of our
company included herein.
Year Ended December 31,
-----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- ---------- ---------- ----------
(dollars in thousands, except per share data)
Income statement data:
Total revenues..................................................... $354,478 $489,838 $1,220,282 $2,233,628 $2,918,861
Total cost of revenues............................................. 241,445 340,546 796,834 1,408,710 1,830,291
-------- -------- ---------- ---------- ----------
Gross profit....................................................... 113,033 149,292 423,448 824,918 1,088,570
Selling, general and administrative expenses....................... 54,721 70,835 195,620 352,595 454,330
Merger-related expenses............................................ 47,178
Non-rental depreciation and amortization........................... 9,387 13,424 35,248 62,867 86,301
Termination cost of deferred compensation agreements............... 20,290
-------- -------- ---------- ---------- ----------
Operating income................................................... 48,925 44,743 145,402 409,456 547,939
Interest expense................................................... 11,278 11,847 64,157 139,828 228,779
Preferred dividends of a subsidiary trust.......................... 7,854 19,500 19,500
Other (income) expense, net........................................ (499) (2,021) (4,906) 8,321 (1,836)
-------- -------- ---------- ---------- ----------
Income before provision for income taxes and extraordinary items... 38,146 34,917 78,297 241,807 301,496
Provision for income taxes......................................... 420 29,508 43,499 99,141 125,121
-------- -------- ---------- ---------- ----------
Income before extraordinary items.................................. 37,726 5,409 34,798 142,666 176,375
Extraordinary items, net (1)....................................... 1,511 21,337
-------- -------- ---------- ---------- ----------
Net income......................................................... $ 37,726 $ 3,898 $ 13,461 $ 142,666 $ 176,375
======== ======== ========== ========== ==========
Pro forma provision for income taxes before extraordinary items (2) $ 15,487 $ 14,176 $ 44,386
Pro forma income before extraordinary items (2).................... 22,659 20,741 33,911
Basic earnings before extraordinary items per share................ $ 1.67 $ 0.12 $ 0.53 $ 2.00 $ 2.48
Diluted earnings before extraordinary items per share.............. $ 1.67 $ 0.11 $ 0.48 $ 1.53 $ 1.89
Basic earnings per share (3)....................................... $ 1.67 $ 0.08 $ 0.20 $ 2.00 $ 2.48
Diluted earnings per share (3)..................................... $ 1.67 $ 0.08 $ 0.18 $ 1.53 $ 1.89
Other financial data:
EBITDA (4)......................................................... $123,606 $160,554 $ 403,738 $ 761,230 $ 962,371
Depreciation and amortization...................................... 74,681 95,521 211,158 343,508 414,432
Dividends on common stock..........................................
December 31,
-------------------------------------------------------------
1996 1997 1998 1999 2000 2000
-------- -------- ---------- ---------- ---------- ----------
Restated unaudited
Pro Forma
(dollars in thousands)
Balance sheet data:
Cash and cash equivalents..................................... $ 2,906 $ 72,411 $ 20,410 $ 23,811 $ 34,384 $ 34,384
Rental equipment, net......................................... 235,055 461,026 1,143,006 1,659,733 1,732,835 1,732,835
Total assets.................................................. 381,228 826,010 2,634,663 4,497,738 5,123,933 5,123,933
Total debt.................................................... 214,337 264,573 1,314,574 2,266,148 2,675,367 2,675,367
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust............................. 300,000 300,000 300,000 300,000
Series A and B preferred stock(5)............................. 430,800 430,800
Stockholders' equity.......................................... 105,420 446,388 726,230 966,686 1,115,143 1,545,943
2
--------
(1)The Company recorded an extraordinary item (net of income taxes) of $1.5
million in 1997 and an extraordinary item (net of income taxes) of $21.3
million in 1998. Such charge in 1997 resulted from the prepayment of certain
debt by U.S. Rentals. Such charge in 1998 resulted from the early
extinguishment of certain debt and primarily reflected prepayment penalties
on certain debt of U.S. Rentals.
(2)U.S. Rentals was taxed as a Subchapter S Corporation until its initial
public offering in February 1997, and another company acquired in a
pooling-of-interests transaction was taxed as a Subchapter S Corporation
until being acquired by the Company in 1998. In general, the income or loss
of a Subchapter S Corporation is passed through to its owners rather than
being subjected to taxes at the entity level. Pro forma provision for income
taxes before extraordinary items and pro forma income before extraordinary
items reflect a provision for income taxes as if all such companies were
liable for federal and state income taxes as taxable corporate entities for
all periods presented.
(3)The Company's earnings during 1997 were impacted by $20.3 million of
expenses relating to the termination of certain deferred compensation
expenses in connection with U.S. Rentals' initial public offering, a $7.5
million charge to recognize deferred tax liabilities of U.S. Rentals and an
extraordinary item (net of income taxes) of $1.5 million. The Company's
earnings during 1998 were impacted by merger-related expenses of $47.2
million ($33.2 million net of taxes), a $4.8 million charge to recognize
deferred tax liabilities of a company acquired in a pooling-of-interests
transaction and an extraordinary item (net of income taxes) of $21.3
million. The Company's earnings during 1999 were impacted by $18.2 million
($10.8 million net of taxes) of expenses incurred related to a terminated
tender offer. Excluding such amounts, (i) basic earnings per share for the
years ended 1997, 1998 and 1999 would have been $0.70, $1.10 and $2.15,
respectively, and (ii) diluted earnings per share for the years ended 1997,
1998 and 1999 would have been $0.66, $1.00 and $1.65, respectively.
(4)EBITDA is defined as net income (excluding (i) non-operating income and
expense, (ii) a $20.3 million non-recurring charge incurred by U.S. Rentals
in 1997 arising from the termination of deferred compensation agreements
with certain executives, (iii) $47.2 million in merger-related expenses in
1998 related to the three acquisitions accounted for as
poolings-of-interests, including the merger with U.S. Rentals, and (iv) $8.3
million of expenses that are included in selling, general and administrative
expenses for 1999 and which related to a terminated tender offer), plus
interest expense, income taxes and depreciation and amortization. EBITDA
data is presented to provide additional information concerning the Company's
ability to meet its future debt service obligations and capital expenditure
and working capital requirements. However, EBITDA is not a measure of
financial performance under generally accepted accounting principles.
Accordingly, EBITDA should not be considered an alternative to net income or
cash flows as indicators of the Company's operating performance or
liquidity.
(5)We issued series A and B perpetual convertible preferred stock in 1999 and
included such preferred in stockholders' equity. In July 2001, the SEC
issued guidance to all public companies as to when redeemable preferred
stock may be classified as stockholders' equity. Under this guidance, the
series A and B preferred would not be included in stockholders' equity
because this stock would be subject to mandatory redemption on a hostile
change of control. On September 28, 2001, we entered into an agreement
effecting the exchange of new series C and D perpetual convertible preferred
for the series A and B preferred. The series C and D preferred stock is not
subject to mandatory redemption on a hostile change of control, and will be
included in stockholders' equity under the recent SEC guidance. The effect
of the foregoing is that our perpetual convertible preferred stock is
included in stockholders' equity as of September 28, 2001 and thereafter,
but is outside of stockholders' equity for earlier dates. In all other
respects, the financial statements remain unchanged, including total assets
and liabilities, revenues, operating income, net income and earnings per
share.
3
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page
----
(1) Consolidated Financial Statements:
Report of Independent Auditors........................................................... 5
United Rentals, Inc. Consolidated Balance Sheets--December 31, 2000 and 1999............. 6
United Rentals, Inc. Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998....................................................... 7
United Rentals, Inc. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2000, 1999 and 1998....................................................... 8
United Rentals, Inc. Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998....................................................... 9
Notes to Consolidated Financial Statements............................................... 11
Report of Independent Auditors........................................................... 41
United Rentals (North America), Inc. Consolidated Balance Sheets--December 31, 2000
and 1999............................................................................... 42
United Rentals (North America), Inc. Consolidated Statements of Operations for the years
ended December 31, 2000, 1999 and 1998................................................. 43
United Rentals (North America), Inc. Consolidated Statements of Stockholder's Equity for
the years ended December 31, 2000, 1999 and 1998....................................... 44
United Rentals (North America), Inc. Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998................................................. 45
Notes to Consolidated Financial Statements............................................... 46
(2) Financial Statement Schedules:
Report of Independent Auditors on Financial Statement Schedules.......................... 55
Schedule I Condensed Financial Information of the Registrant............................. 56
Schedule II Valuation and Qualifying Accounts............................................ 60
Schedules other than those listed are omitted as they are not applicable or
the required or equivalent information has been included in the financial
statements or notes thereto.
4
REPORT OF INDEPENDENT AUDITORS
Board of Directors
United Rentals, Inc.
We have audited the accompanying consolidated balance sheets of United
Rentals, Inc. as of December 31, 2000 and 1999 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2000. These consolidated financial
statements are the responsibility of the management of United Rentals, Inc. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of United Rentals, Inc. at December 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
February 23, 2001,
except for Note 2,
paragraphs 9, 10, and 11,
and Note 17 as to which
the date is September 28, 2001
5
UNITED RENTALS, INC.
CONSOLIDATED BALANCE SHEETS
December 31
-----------------------------------
2000 2000 1999
------------ ---------- ----------
Unaudited Restated
Pro Forma (See Note 2)
(See Note 2)
(In thousands, except share data)
Assets
Cash and cash equivalents....................................... $ 34,384 $ 34,384 $ 23,811
Accounts receivable, net of allowance for doubtful accounts of
$55,624 and $58,376 at 2000 and 1999, respectively............ 469,594 469,594 434,985
Inventory....................................................... 133,380 133,380 129,473
Prepaid expenses and other assets............................... 104,493 104,493 81,457
Rental equipment, net........................................... 1,732,835 1,732,835 1,659,733
Property and equipment, net..................................... 422,239 422,239 304,907
Goodwill, net of accumulated amortization of $103,219 and
$49,556 at 2000 and 1999, respectively........................ 2,215,532 2,215,532 1,853,279
Other intangible assets, net.................................... 11,476 11,476 10,093
---------- ---------- ----------
$5,123,933 $5,123,933 $4,497,738
========== ========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable............................................. $ 260,155 $ 260,155 $ 242,946
Debt......................................................... 2,675,367 2,675,367 2,266,148
Deferred taxes............................................... 206,243 206,243 81,229
Accrued expenses and other liabilities....................... 136,225 136,225 209,929
---------- ---------- ----------
Total liabilities........................................ 3,277,990 3,277,990 2,800,252
Commitments and contingencies
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust.............................. 300,000 300,000 300,000
Series A and B preferred stock.................................. 430,800 430,800
Stockholders' equity:
Preferred stock--$.01 par value, 5,000,000 shares
authorized:
Series C perpetual convertible preferred stock--$300,000
liquidation preference, 300,000 shares issued and
outstanding.............................................. 3
Series D perpetual convertible preferred stock--$150,000
liquidation preference, 150,000 shares issued and
outstanding.............................................. 2
Common stock--$.01 par value, 500,000,000 shares authorized,
71,065,707 shares issued and outstanding in 2000 and
72,051,095 shares issued and outstanding in 1999........... 711 711 721
Additional paid-in capital................................... 1,196,324 765,529 786,173
Retained earnings............................................ 355,850 355,850 179,475
Accumulated other comprehensive (loss) income................ (6,947) (6,947) 317
---------- ---------- ----------
Total stockholders' equity............................... 1,545,943 1,115,143 966,686
---------- ---------- ----------
$5,123,933 $5,123,933 $4,497,738
========== ========== ==========
See accompanying notes.
6
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31
---------------------------------------
2000 1999 1998
---------- ---------- ----------
(in thousands, except per share amounts
Revenues:
Equipment rentals............................................. $2,056,683 $1,581,026 $ 895,466
Sales of rental equipment..................................... 347,678 235,678 119,620
Sales of equipment and merchandise and other revenues......... 514,500 416,924 205,196
---------- ---------- ----------
Total revenues................................................. 2,918,861 2,233,628 1,220,282
Cost of revenues:
Cost of equipment rentals, excluding depreciation............. 907,477 676,972 394,750
Depreciation of rental equipment.............................. 328,131 280,641 175,910
Cost of rental equipment sales................................ 208,182 136,678 66,136
Cost of equipment and merchandise sales and other
operating costs............................................. 386,501 314,419 160,038
---------- ---------- ----------
Total cost of revenues......................................... 1,830,291 1,408,710 796,834
---------- ---------- ----------
Gross profit................................................... 1,088,570 824,918 423,448
Selling, general and administrative expenses................... 454,330 352,595 195,620
Merger-related expenses........................................ 47,178
Non-rental depreciation and amortization....................... 86,301 62,867 35,248
---------- ---------- ----------
Operating income............................................... 547,939 409,456 145,402
Interest expense............................................... 228,779 139,828 64,157
Preferred dividends of a subsidiary trust...................... 19,500 19,500 7,854
Other (income) expense, net.................................... (1,836) 8,321 (4,906)
---------- ---------- ----------
Income before provision for income taxes and extraordinary item 301,496 241,807 78,297
Provision for income taxes..................................... 125,121 99,141 43,499
---------- ---------- ----------
Income before extraordinary item............................... 176,375 142,666 34,798
Extraordinary item, net of tax benefit of $14,255.............. 21,337
---------- ---------- ----------
Net income..................................................... $ 176,375 $ 142,666 $ 13,461
========== ========== ==========
Earnings per share--basic:
Income before extraordinary item.............................. $ 2.48 $ 2.00 $ 0.53
Extraordinary item, net....................................... 0.33
---------- ---------- ----------
Net income.................................................... $ 2.48 $ 2.00 $ 0.20
========== ========== ==========
Earnings per share--diluted:
Income before extraordinary item.............................. $ 1.89 $ 1.53 $ 0.48
Extraordinary item, net....................................... 0.30
---------- ---------- ----------
Net income.................................................... $ 1.89 $ 1.53 $ 0.18
========== ========== ==========
See accompanying notes.
7
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
-----------------
Number Additional Compre-
of Paid-in Retained hensive
Shares Amount Capital Earnings Income
---------- ------ ---------- -------- --------
(In thousands, except share amounts)
Balance, December 31, 1997.......................................... 56,239,375 $562 $401,758 $ 44,068
Comprehensive income:
Net income....................................................... 13,461 $ 13,461
Other comprehensive income:
Foreign currency translation adjustments........................ (281)
--------
Comprehensive income.............................................. $ 13,180
========
Issuance of common stock and warrants............................. 10,813,255 108 267,214
Conversion of convertible notes................................... 30,947 461
Cancellation of common stock...................................... (137,600) (1) 1
Reclassification of Subchapter S accumulated earnings to paid-in-
capital.......................................................... 18,979 (18,979)
Pooling-of-interests.............................................. 1,456,997 15 (14) 1,795
Exercise of common stock options.................................. 25,025 619
Subchapter S distributions of a pooled entity..................... (3,536)
---------- ---- -------- --------
Balance, December 31, 1998.......................................... 68,427,999 684 689,018 36,809
Comprehensive income:
Net income....................................................... 142,666 $142,666
Other comprehensive income:
Foreign currency translation adjustments........................ 598
--------
Comprehensive income.............................................. $143,264
========
Issuance of common stock.......................................... 2,291,568 23 64,678
Exercise of common stock options.................................. 1,331,528 14 32,477
---------- ---- -------- --------
Balance, December 31, 1999.......................................... 72,051,095 721 786,173 179,475
Comprehensive income:
Net income....................................................... 176,375 $176,375
Other comprehensive income:
Foreign currency translation adjustments........................ (7,264)
--------
Comprehensive income.............................................. $169,111
========
Issuance of common stock.......................................... 773,320 8 9,867
Exercise of common stock options.................................. 26,307 421
Shares repurchased and retired.................................... (1,785,015) (18) (30,932)
---------- ---- -------- --------
Balance, December 31, 2000.......................................... 71,065,707 $711 $765,529 $355,850
========== ==== ======== ========
Accumulated
Other
Comprehensive
(Loss) Income
-------------
Balance, December 31, 1997..........................................
Comprehensive income:
Net income.......................................................
Other comprehensive income:
Foreign currency translation adjustments........................ $ (281)
Comprehensive income..............................................
Issuance of common stock and warrants.............................
Conversion of convertible notes...................................
Cancellation of common stock......................................
Reclassification of Subchapter S accumulated earnings to paid-in-
capital..........................................................
Pooling-of-interests..............................................
Exercise of common stock options..................................
Subchapter S distributions of a pooled entity.....................
-------
Balance, December 31, 1998.......................................... (281)
Comprehensive income:
Net income.......................................................
Other comprehensive income:
Foreign currency translation adjustments........................ 598
Comprehensive income..............................................
Issuance of common stock..........................................
Exercise of common stock options..................................
-------
Balance, December 31, 1999.......................................... 317
Comprehensive income:
Net income.......................................................
Other comprehensive income:
Foreign currency translation adjustments........................ (7,264)
Comprehensive income..............................................
Issuance of common stock..........................................
Exercise of common stock options..................................
Shares repurchased and retired....................................
-------
Balance, December 31, 2000.......................................... $(6,947)
=======
See accompanying notes.
8
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-----------------------------------
2000 1999 1998
--------- ----------- -----------
(In thousands)
Cash Flows From Operating Activities:
Net income......................................................................... $ 176,375 $ 142,666 $ 13,461
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................... 414,432 343,508 212,311
Gain on sales of rental equipment................................................ (139,496) (99,000) (53,484)
Gain on sales of businesses...................................................... (4,084) (1,842) (4,189)
Write down of assets held for sale............................................... 4,040
Extraordinary item............................................................... 35,592
Deferred taxes................................................................... 109,280 41,820 27,345
Changes in operating assets and liabilities:
Accounts receivable.............................................................. 8,613 (93,716) (53,368)
Inventory........................................................................ 69,706 (6,544) (6,392)
Prepaid expenses and other assets................................................ (29,848) 7,257 (3,526)
Accounts payable................................................................. (16,091) 64,453 39,251
Accrued expenses and other liabilities........................................... (76,166) 22,758 5,088
--------- ----------- -----------
Net cash provided by operating activities....................................... 512,721 421,360 216,129
--------- ----------- -----------
Cash Flows From Investing Activities:
Purchases of rental equipment...................................................... (808,204) (718,112) (479,534)
Purchases of property and equipment................................................ (153,770) (123,649) (84,617)
Proceeds from sales of rental equipment............................................ 347,678 235,678 119,620
Proceeds from sales of businesses.................................................. 19,246 6,521 10,640
Purchases of other companies....................................................... (347,337) (986,790) (911,837)
Payments of contingent purchase price.............................................. (16,266) (8,216) (3,956)
In-process acquisition costs....................................................... (4,285) (1,002) (241)
--------- ----------- -----------
Net cash used in investing activities........................................... (962,938) (1,595,570) (1,349,925)
--------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net of issuance costs...................... 64,701 207,005
Proceeds from the issuance of Series A and B preferred stock, net of issuance costs 430,800
Proceeds from debt................................................................. 456,202 1,083,616 1,263,637
Payments on debt................................................................... (134,599) (497,650) (685,667)
Proceeds from sale-leaseback....................................................... 193,478 88,000 35,000
Proceeds from the issuance of redeemable convertible preferred securities.......... 300,000
Payments of financing costs........................................................ (16,408) (19,443) (34,982)
Proceeds from the exercise of common stock options................................. 331 26,989 619
Subchapter S distributions of a pooled entity...................................... (3,536)
Shares repurchased and retired..................................................... (30,950)
--------- ----------- -----------
Net cash provided by financing activities....................................... 468,054 1,177,013 1,082,076
Effect of foreign exchange rates................................................... (7,264) 598 (281)
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents............................... 10,573 3,401 (52,001)
Cash and cash equivalents at beginning of year..................................... 23,811 20,410 72,411
--------- ----------- -----------
Cash and cash equivalents at end of year........................................... $ 34,384 $ 23,811 $ 20,410
========= =========== ===========
See accompanying notes.
9
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
Year Ended December 31
---------------------------------
2000 1999 1998
--------- ---------- ----------
(In thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest...................................................... $ 248,763 $ 124,285 $ 43,157
Cash paid for taxes, net of refunds......................................... $ 23,746 $ 17,509 $ 10,224
Supplemental schedule of non-cash investing and financing activities
The Company acquired the net assets and assumed certain liabilities of other
companies as follows:
Assets, net of cash acquired.............................................. $ 565,114 $1,468,567 $1,501,467
Liabilities assumed....................................................... (142,277) (472,382) (518,861)
Less:
Amounts paid in common stock and warrants................................ (10,000) (60,304)
Amounts paid through issuance of debt.................................... (65,500) (9,395) (10,465)
--------- ---------- ----------
Net cash paid............................................................... $ 347,337 $ 986,790 $ 911,837
========= ========== ==========
See accompanying notes.
10
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
United Rentals, Inc. is principally a holding company ("Holdings") and
conducts its operations primarily through its wholly owned subsidiary United
Rentals (North America), Inc. ("URI") and subsidiaries of URI. Holdings was
incorporated in July 1998 and became the parent of URI on August 5, 1998,
pursuant to the reorganization of the legal structure of URI described in Note
9. Prior to such reorganization, the name of URI was United Rentals, Inc.
References herein to the "Company" refer to Holdings and its subsidiaries, with
respect to periods following the reorganization, and to URI and its
subsidiaries, with respect to periods prior to the reorganization. As a result
of the reorganization, Holdings' primary asset is its sole ownership of all
issued and outstanding shares of common stock of URI. URI's various credit
agreements and debt instruments place restrictions on its ability to transfer
funds to its shareholder.
The Company rents a broad array of equipment to a diverse customer base
that includes construction industry participants, industrial companies,
homeowners and others in the United States, Canada and Mexico. The Company also
engages in related activities such as selling rental equipment, acting as a
distributor for certain new equipment and selling related merchandise and
parts. The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Therefore, the
accompanying balance sheets are presented on an unclassified basis.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, giving retroactive effect for
the reorganization for all periods presented. All significant intercompany
accounts and transactions have been eliminated. The accompanying consolidated
financial statements for the year ended December 31, 1998 include the accounts
of certain acquisitions completed in 1998 that were accounted for as
poolings-of-interests, as described in Note 3.
2. Summary of Significant Accounting Policies
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
Inventory
Inventory consists of equipment, tools, parts, fuel and related supply
items. Inventory is stated at the lower of cost or market and is net of a
reserve for obsolescence and shrinkage of $15.5 million and $16.8 million at
December 31, 2000 and 1999, respectively. Cost is determined on either a
weighted average or first-in, first-out method.
Rental Equipment
Rental equipment is recorded at cost and depreciated over the estimated
useful lives of the equipment using the straight-line method. The range of
estimated useful lives for rental equipment is two to ten years. Rental
equipment is depreciated to a salvage value of zero to ten percent of cost.
Ordinary repair and maintenance costs are charged to operations as incurred.
11
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The range of estimated
useful lives for property and equipment is two to thirty-nine years. Ordinary
repair and maintenance costs are charged to operations as incurred. Leasehold
improvements are amortized using the straight-line method over their estimated
useful lives or the remaining life of the lease, whichever is shorter.
Intangible Assets
Intangible assets consist of the excess of cost over the fair value of
identifiable net assets of businesses acquired and non-compete agreements. The
non-compete agreements are being amortized on a straight-line basis for a
period ranging from three to eight years. The remaining intangible assets are
being amortized on a straight-line basis over forty years.
Long-Lived Assets
Long-lived assets are recorded at the lower of amortized cost or fair
value. As part of an ongoing review of the valuation of long-lived assets, the
Company assesses the carrying value of such assets if facts and circumstances
suggest they may be impaired. If this review indicates that the carrying value
of these assets may not be recoverable, as determined by a nondiscounted cash
flow analysis over the remaining useful life, the carrying value would be
reduced to its estimated fair value. There have been no material impairments
recognized in these financial statements.
Derivative Financial Instruments
Derivative financial instruments, which are periodically used by the
Company in the management of its interest rate and foreign currency exposures,
are accounted for on an accrual basis. Income and expense are recorded in the
same category as that arising from the related asset or liability. The fair
value of these agreements are not recognized in the financial statements.
Derivative financial instruments are not used for trading purposes.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets for accounts
receivable, accounts payable, accrued expenses and other liabilities
approximate fair value due to the immediate to short-term maturity of these
financial instruments. The fair values of the Credit Facility, Term Loan B,
Term Loan C, Term Loan D, receivables securitization and certain other debt are
determined using current interest rates for similar instruments as of December
31, 2000 and 1999 and approximate the carrying value of these financial
instruments due to the fact that the underlying instruments include provisions
to adjust interest rates to approximate fair market value. The estimated fair
value of the Company's other financial instruments at December 31, 2000 and
1999 are based upon available market information and are as follows:
2000 1999
-------------------------- --------------------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ---------- --------------- ----------
(In thousands)
Redeemable convertible preferred
securities.................... $300,000 $133,125 $300,000 $192,375
Series A and B preferred........ 430,800 228,480 430,800 291,210
Senior subordinated notes....... 951,153 702,500 950,653 906,400
Other debt...................... 94,086 94,086 73,745 73,745
12
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Preferred Stock
The Company issued Series A Perpetual Convertible Preferred Stock ("Series
A Preferred") and Series B Perpetual Convertible Preferred Stock ("Series B
Preferred") in 1999 and included such preferred in stockholders' equity. In
July 2001, the SEC issued guidance to all public companies as to when
redeemable preferred stock may be classified as stockholders' equity. This
guidance indicates that preferred stock that would be subject to redemption on
the occurrence of an event outside the control of the issuer may not be
classified as equity and that the probability of the event occurring is not a
factor to be considered. Under this guidance, the Series A Preferred and Series
B Preferred would not be included in stockholders' equity because this stock
would be subject to mandatory redemption on a hostile change of control. On
September 28, 2001, the Company entered into an agreement effecting the
exchange of new Series C Perpetual Convertible Preferred Stock ("Series C
Preferred") for the Series A Preferred and new Series D Perpetual Convertible
Preferred Stock ("Series D Preferred") for the Series B Preferred (see note
17). The Series C Preferred and Series D Preferred stock is not subject to
mandatory redemption on a hostile change of control, and will be classified as
stockholders' equity under the recently issued SEC guidance.
The effect of the foregoing is that the Company's perpetual convertible
preferred stock will be classified as stockholders' equity as of September 28,
2001 and thereafter, but will be classified outside of stockholders' equity for
earlier dates. Accordingly, the Company has restated the accompanying balance
sheets to show its $430.8 million of perpetual convertible preferred stock
under "Series A and B Preferred Stock" rather than under "Stockholders'
Equity." The Company has also made a corresponding change to the related
Consolidated Statements of Stockholders' Equity. In all other respects, the
financial statements remain unchanged, including total assets and liabilities,
revenues, operating income, net income and earnings per share. The Company's
balance sheets for dates after September 28, 2001, will include the perpetual
convertible preferred stock in stockholders' equity.
The pro forma amounts on the accompanying balance sheet gives effect to the
above-referenced exchange, as if it had occurred on December 31, 2000.
Revenue Recognition
Revenue related to the sale of equipment and merchandise is recognized at
the time of delivery to, or pick-up by, the customer. Revenue related to rental
equipment is recognized over the contract term.
Advertising Expense
The Company advertises primarily through trade publications and yellow
pages. Advertising costs are expensed as incurred and totaled $23.8 million,
$19.0 million and $13.5 million for the years ended December 31, 2000, 1999 and
1998, respectively.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on the
differences between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse. Recognition of deferred
tax assets is limited to amounts considered by management to be more likely
than not realized in future periods.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
13
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions.
Concentration of credit risk with respect to accounts receivable are
limited because a large number of geographically diverse customers make up the
Company's customer base. No single customer represents greater than 10% of
total accounts receivable. The Company controls credit risk through credit
approvals, credit limits, and monitoring procedures.
Stock-Based Compensation
The Company accounts for its stock based compensation arrangements under
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees". Since stock options are granted by
the Company with exercise prices at or greater than the fair value of the
shares at the date of grant, no compensation expense is recognized.
Insurance
The Company is insured for general liability, workers' compensation, and
group medical claims up to a specified claim and aggregate amounts (subject to
a deductible of one million dollars). Insured losses subject to this deductible
are accrued based upon the aggregate liability for reported claims incurred and
an estimated liability for claims incurred but not reported. These liabilities
are not discounted.
Impact of Recently Issued Accounting Standards
In June 1999, the Financial Accounting Standards Board ("FASB'') issued
Statement of Financial Accounting Standards ("SFAS'') No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB Statement No. 133". This standard delays the effective date of SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", for one
year, to fiscal years beginning after June 15, 2000. SFAS No. 133 establishes a
new model for accounting for derivatives and hedging activities. The adoption
of SFAS No. 133 on January 1, 2001 is not expected to have a material effect on
the Company's consolidated financial position or results of operations.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". This standard amends
SFAS No. 133 and addresses a limited number of issues causing implementation
difficulties. The Company will adopt SFAS No. 138 on January 1, 2001 and it is
not expected to have a material effect on the Company's consolidated financial
position or results of operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities--a
replacement of FASB Statement No. 125". This standard revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures. This standard is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001 and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
The adoption of SFAS No. 140 is not expected to have a material effect on the
Company's consolidated financial position or results of operations.
14
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Reclassifications
Certain prior year balances have been reclassified to conform to the 2000
presentation.
3. Acquisitions
Acquisitions Accounted for as Poolings-of-Interests
On August 24, 1998, the Company issued 2,744,368 shares of its common stock
for all of the outstanding shares of common stock of Rental Tools.
On September 24, 1998, the Company issued 1,456,997 shares of its common
stock for all of the outstanding shares of common stock of Wynne Systems, Inc.
This transaction was accounted for as a pooling-of-interests; however, this
transaction was not material to the Company's consolidated operations and
financial position and, therefore, the Company's financial statements have not
been restated for this transaction but have been combined beginning July 1,
1998.
On September 29, 1998, a merger (the "Merger") of United Rentals, Inc. and
U.S. Rentals was completed. The Merger was effected by having a wholly owned
subsidiary of United Rentals, Inc. merge with and into U.S. Rentals. Following
the Merger, United Rentals, Inc. contributed the capital stock of U.S. Rentals
to URI, a wholly owned subsidiary of United Rentals, Inc. Pursuant to the
Merger, each outstanding share of common stock of U.S. Rentals was converted
into the right to receive 0.9625 of a share of common stock of United Rentals,
Inc. An aggregate of approximately 29.6 million shares of United Rentals, Inc.
common stock were issued in the Merger in exchange for the outstanding shares
of U.S. Rentals common stock.
The table below shows the separate revenue and net income (loss) of the
Company prior to the above mergers ("United"), U.S. Rentals and Rental Tools
for periods prior to combination:
U.S. Rental
United Rentals Tools Combined
-------- -------- ------- --------
(In thousands)
For the nine months ended September 30, 1998:
Revenues.................................. $311,919 $451,101 $41,242 $804,262
Net income (loss)......................... (53,178) 43,670 4,695 (4,813)
Acquisitions Accounted for as Purchases
The acquisitions completed during the years ended December 31, 2000, 1999
and 1998 include 53, 102 and 81 acquisitions, respectively, that were accounted
for as purchases. The results of operations of the businesses acquired in these
acquisitions have been included in the Company's results of operations from
their respective acquisition dates.
During 2000, the Company purchased the outstanding stock and certain assets
of (i) Liddell Brothers Inc., in February, (ii) Safety Lites Sales and Leasing,
Inc., in March, (iii) Durante Equipment Corp., Inc., in June, (iv) Horizon High
Reach, Inc., in September, and (v) Wiese Planning & Engineering Inc., in
December. The aggregate initial consideration paid for these five acquisitions
that were accounted for as purchases was approximately $153.1 million and
consisted of $83.8 million in cash and 761,905 shares of common stock and $59.3
million in seller notes. In addition, the Company repaid or assumed outstanding
indebtedness of these companies acquired in the aggregate amount of
approximately $5.5 million.
15
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The aggregate initial consideration paid by the Company for other 2000
acquisitions that were accounted for as purchases was $210.2 million and
consisted of approximately $184.6 million in cash and $6.2 million in seller
notes. In addition, the Company repaid or assumed outstanding indebtedness of
the companies acquired in the other 2000 acquisitions in the aggregate amount
of $77.5 million.
During 1999, the Company purchased the outstanding stock and certain assets
of (i) National Equipment Finance Company, in June, (ii) Mi-Jack Products, Inc.
and related entities, in May, (iii) Elmen Rent All, Inc., in June (iv) Forte,
Inc., in March, and (v) Arayco, Inc. in June. The aggregate initial
consideration paid for these five acquisitions that were accounted for as
purchases was approximately $275.4 million and consisted of $270.4 million in
cash and $5.0 million in seller notes. In addition, the Company repaid or
assumed outstanding indebtedness of these companies acquired in the aggregate
amount of approximately $99.8 million.
The aggregate initial consideration paid by the Company for other 1999
acquisitions accounted for as purchases was $663.6 million and consisted of
approximately $659.2 million in cash and $4.4 million in seller notes. In
addition, the Company repaid or assumed outstanding indebtedness of the
companies acquired in the other 1999 acquisitions in the aggregate amount of
approximately $239.3 million.
In January 1998 the Company purchased the outstanding stock and certain
assets of (i) Access Rentals, Inc. and Affiliate, (ii) the BNR Group of
Companies and (iii) Mission Valley Rentals, Inc. The aggregate initial
consideration paid by the Company for these three acquisitions that were
accounted for as purchases was $88.7 million and consisted of approximately
$81.4 million in cash and 370,231 shares of common stock and warrants to
purchase an aggregate of 30,000 shares of the Company's common stock. In
addition, the Company repaid or assumed outstanding indebtedness of these three
companies acquired in the aggregate amount of $64.0 million.
Also during 1998, the Company purchased the outstanding stock and certain
assets of (i) Power Rental Co., Inc., in June (ii) Equipment Supply Co., Inc.
and Affiliates in June and (iii) McClinch Inc. and Subsidiaries and McClinch
Equipment Services, Inc. in September. The aggregate initial consideration paid
by the Company for these three acquisitions that were accounted for as
purchases was $298.4 million and consisted of approximately $278.0 million in
cash and 496,063 shares of common stock. In addition, the Company repaid or
assumed outstanding indebtedness of these three companies acquired in the
aggregate amount of $155.4 million.
The aggregate initial consideration paid by the Company for other 1998
acquisitions that were accounted for as purchases was $550.4 million and
consisted of approximately $507.3 million in cash and 1,083,997 shares of
common stock, and seller notes of $10.5 million. In addition, the Company
repaid or assumed outstanding indebtedness of the other companies acquired in
1998 in the aggregate amount of $211.8 million.
The purchase prices for all acquisitions accounted for as purchases have
been allocated to the assets acquired and liabilities assumed based on their
respective fair values at their respective acquisition dates. However, the
Company has not completed its valuation of all of its purchases and,
accordingly, the purchase price allocations are subject to change when
additional information concerning asset and liability valuations are completed.
The preliminary purchase price allocations that are subject to change primarily
consists of rental and non-rental equipment valuations. These allocations are
finalized within 12 months of the acquisition date and are not expected to
result in significant differences between the preliminary and final
allocations.
16
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company for the years ended December 31,
2000 and 1999 as though each acquisition described above was made on January 1,
for each of the periods.
2000 1999
---------- ----------
(In thousands, except
per share data)
Revenues.................. $3,095,872 $2,956,543
Net income................ 182,342 154,084
Basic earnings per share.. $ 2.54 $ 2.14
========== ==========
Diluted earnings per share $ 1.94 $ 1.64
========== ==========
The unaudited pro forma results are based upon certain assumptions and
estimates which are subject to change. These results are not necessarily
indicative of the actual results of operations that might have occurred, nor
are they necessarily indicative of expected results in the future.
Merger-Related Expenses, Extraordinary Item and Other Costs
The results of operations for the year ended December 31, 1999 include
pre-tax expenses related to a terminated tender offer totaling approximately
$18.2 million ($10.8 million after tax), primarily consisting of $8.3 million
in professional fees recorded in selling, general and administrative expense
and $9.9 million in financing commitment fees recorded in other (income)
expense, net.
The results of operations for the year ended December 31, 1998, include
pre-tax expenses related to three acquisitions accounted for as
poolings-of-interests totaling approximately $47.2 million ($33.2 million
after-tax), consisting of (i) $18.5 million for investment banking, legal,
accounting services and other merger costs, (ii) $14.5 million of expenses
relating to the closing of duplicate facilities, (iii) $8.2 million for
employee severance and related matters, (iv) $2.1 million for the write down of
computer systems acquired through the U.S. Rentals merger and one of the other
acquisitions accounted for as a pooling-of-interests and (v) $3.9 million in
other expenses.
The Company recorded a pre-tax extraordinary item of $35.6 million ($21.3
million after-tax) in 1998. The charge related to the early extinguishment of
debt primarily related to the Merger with U.S. Rentals.
4. Rental Equipment
Rental equipment consists of the following:
December 31
----------------------
2000 1999
---------- ----------
(In thousands)
Rental equipment............. $2,281,994 $2,098,624
Less accumulated depreciation (549,159) (438,891)
---------- ----------
Rental equipment, net........ $1,732,835 $1,659,733
---------- ----------
17
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Property and Equipment
Property and equipment consist of the following:
December 31
-------------------
2000 1999
--------- --------
(In thousands)
Land.......................................... $ 53,612 $ 50,143
Buildings..................................... 104,925 91,934
Transportation equipment...................... 228,265 139,944
Machinery and equipment....................... 36,587 31,484
Furniture and fixtures........................ 56,109 46,507
Leasehold improvements........................ 48,952 26,387
--------- --------
528,450 386,399
Less accumulated depreciation and amortization (106,211) (81,492)
--------- --------
Property and equipment, net................... $ 422,239 $304,907
========= ========
6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
December 31
-----------------
2000 1999
-------- --------
(In thousands)
Accrued profit sharing $ 39,485 $ 39,052
Accrued insurance..... 15,428 22,738
Accrued interest...... 36,993 37,477
Other................. 44,319 110,662
-------- --------
$136,225 $209,929
======== ========
18
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Debt
Debt consists of the following:
December 31
---------------------
2000 1999
---------- ----------
(In thousands)
Credit Facility, interest payable at a weighted average rate
of 7.8% and 6.9% at December 31, 2000 and 1999,
respectively.............................................. $ 337,000 $ 243,000
Term Loan B, interest payable at 8.89% and 8.71% at
December 31, 2000 and 1999, respectively.................. 246,875 248,750
Term Loan C, interest payable at 9.26% and 8.96% at
December 31, 2000 and 1999, respectively.................. 748,125 750,000
Term Loan D, interest payable at a weighted average rate of
9.18% at December 31, 2000................................ 198,128
Senior Subordinated Notes, interest payable semi-annually,
(9 1/2% at December 31, 2000 and 1999).................... 200,000 200,000
Senior Subordinated Notes, interest payable semi-annually,
(8.80% at December 31, 2000 and 1999)..................... 201,153 200,653
Senior Subordinated Notes, interest payable semi-annually,
(9 1/4% at December 31, 2000 and 1999).................... 300,000 300,000
Senior Subordinated Notes, interest payable semi-annually,
(9% at December 31, 2000 and 1999)........................ 250,000 250,000
Receivables securitization, interest payable at 7.44% at
December 31, 2000......................................... 100,000
Other debt, interest payable at various rates ranging from
4% to 11% and 6% to 12.3% at December 31, 2000 and
1999, respectively, due through 2007...................... 94,086 73,745
---------- ----------
$2,675,367 $2,266,148
========== ==========
Credit Facility. The Company has a credit facility (the "Credit Facility")
which enables URI to borrow up to $827.5 million on a revolving basis and
permits a Canadian subsidiary of URI (the "Canadian Subsidiary") to directly
borrow up to $40.0 million under the Credit Facility (provided that the
aggregate borrowings of URI and the Canadian Subsidiary do not exceed $827.5
million). Up to $50.0 million ($1.4 million outstanding at December 31, 2000)
of the Credit Facility is available in the form of letters of credit. The
agreement governing the Credit Facility requires that the aggregate commitment
shall be reduced on the last day of each calendar quarter, beginning September
30, 2001 and continuing through June 30, 2003, by an amount equal to $20.7
million. The Credit Facility terminates on September 26, 2003, at which time
all outstanding indebtedness is due.
Borrowings by URI under the Credit Facility accrue interest at URI's
option, at either (a) the Base Rate (which is equal to the greater of (i) the
Federal Funds Rate plus 0.5% or (ii) Bank of America's reference rate) or (b)
the Eurodollar Rate (which for borrowings by URI is equal to Bank of America's
reserve adjusted eurodollar rate) plus a margin ranging from 1.200% to 1.875%
per annum. Borrowings by the Canadian Subsidiary under the Credit Facility
accrue interest, at such subsidiary's option, at either (x) the Prime Rate
(which is equal to Bank of America Canada's prime rate), (y) the BA Rate (which
is equal to Bank of America Canada's BA Rate) plus a margin ranging from 1.200%
to 1.875% per annum or (z) the Eurodollar Rate (which for borrowing by the
Canadian Subsidiary is equal to Bank of America Canada's reserve adjusted
Eurodollar Rate) plus a margin ranging from 1.200% to 1.875% per annum. If at
any time an event of default (as defined in the agreement governing the Credit
19
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Facility) exists, the interest rate applicable to each loan will increase by 2%
per annum. The Company is also required to pay the banks an annual facility fee
equal to 0.375% of the banks' $827.5 million aggregate lending commitment under
the Credit Facility (which fee may be reduced to 0.300% for periods during
which the Company maintains a specified funded debt to cash flow ratio).
The obligations of URI under the Credit Facility are (i) secured by
substantially all of its assets, the stock of its United States subsidiaries
and a portion of the stock of URI's Canadian subsidiaries and (ii) guaranteed
by Holdings and secured by the stock of URI. The obligations of the Canadian
Subsidiary under the Credit Facility are guaranteed by URI and secured by
substantially all of the assets of the Canadian Subsidiary and the stock of the
subsidiaries of the Canadian Subsidiary.
The Credit Facility contains certain covenants that require the Company to,
among other things, satisfy certain financial tests relating to: (a) maximum
leverage, (b) the ratio of senior debt to cash flow, (c) minimum interest
coverage ratio, (d) the ratio of funded debt to cash flow, and (e) the ratio of
senior debt to tangible assets. The agreements governing the Credit Facility
also contain various other covenants that restrict the Company's ability to,
among other things, (i) incur additional indebtedness, (ii) permit liens to
attach to its assets, (iii) pay dividends or make other restricted payments on
its common stock and certain other securities and (iv) make acquisitions unless
certain financial conditions are satisfied. In addition, the agreement
governing the Credit Facility (a) requires the Company to maintain certain
financial ratios and (b) provides that failure by any two of certain of the
Company's executive officers to continue to hold executive positions with the
Company for a period of 30 consecutive days constitutes an event of default
unless replacement officers satisfactory to the lenders are appointed.
Term Loan B. URI obtained a $250.0 million term loan (the "Term Loan B")
from a group of financial institutions. The Term Loan B matures on June 30,
2005. Prior to maturity, quarterly installments of principal in the amount of
$0.6 million are due on the last day of each calendar quarter, commencing
September 30, 1999. The amount due at maturity is $235.6 million. The Term Loan
B accrues interest, at URI's option, at either (a) the Base Rate (as defined
above with respect to the Credit Facility) plus a margin of 0.375% per annum,
or (b) the Eurodollar Rate (as defined above with respect to the Credit
Facility for borrowings by the Company) plus a margin of 2.25% per annum. The
Term Loan B is secured pari passu with the Credit Facility and the agreement
governing the Term Loan B contains restrictive covenants substantially similar
to those provided under the Credit Facility.
Term Loan C. URI obtained a $750.0 million term loan from a group of
financial institutions (the "Term Loan C"). The Term Loan C matures in June
2006. Prior to maturity, quarterly installments of principal in the amount of
$1.9 million are due on the last day of each calendar quarter, commencing
September 30, 2000. The amount due at maturity is $706.3 million. The Term Loan
C accrues interest, at URI's option, at either (a) the Base Rate (as defined
above with respect to the Credit Facility) plus a margin of 0.625% per annum,
or (b) the Eurodollar Rate (as defined above with respect to the Credit
Facility) plus a margin of 2.50% per annum. The Term Loan C is secured pari
passu with the Credit Facility and the agreement governing the Term Loan C
contains restrictive covenants substantially similar to those provided under
the Credit Facility.
Term Loan D. URI obtained a $200.0 million term loan from a financial
institution (the "Term Loan D"). The Term Loan D matures in June 2006. Prior to
maturity, quarterly installments of principal are due on the last day of each
calendar quarter, in the amount of $0.25 million on September 30, 2000 and in
the amount of $0.5 million commencing December 31, 2000 to maturity. The amount
due at maturity is $188.5 million. The Term Loan D accrues interest, at URI's
option, at either (a) the Base Rate (as defined above with respect to the
Credit Facility) plus a margin of 0.625% per annum, or (b) the Eurodollar Rate
(as defined above with respect to the Credit Facility) plus a margin of 2.5%
per
20
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
annum. The Term Loan D is secured pari passu with the Credit Facility, and the
agreement governing the Term Loan D contains restrictive covenants
substantially similar to those provided under the Credit Facility.
At December 31, 2000, the Company had interest rate protection in the form
of swap agreements with an aggregate notional amount of $200.0 million. The
effect of these agreements is to limit the interest rate exposure to 8.75% on
$200.0 million of Term Loan B. The overall weighted average interest rate on
the Term Loan B was 8.80% at December 31, 2000. While it is not the Company's
intention to terminate the interest rate swap agreements, the fair values were
estimated by obtaining quotes from brokers which represented the amounts that
the Company would receive or pay if the agreements were terminated. These fair
values indicated that termination of the agreements at December 31, 2000, would
have resulted in a pretax loss of $4.3 million.
9 1/2% Senior Subordinated Notes. URI issued $200.0 million aggregate
principal amount of 9 1/2% senior subordinated notes, (the "9 1/2 Notes") which
are due June 1, 2008. The 9 1/2% Notes are unsecured. URI may, at its option,
redeem the 9 1/2% Notes on or after June 1, 2003 at specified redemption prices
which range from 104.75% in 2003 to 100.0% in 2006 and thereafter. In addition,
on or prior to June 1, 2001, URI may, at its option, use the proceeds of a
public equity offering to redeem up to 35% of the outstanding 9 1/2% Notes, at
a redemption price of 109.5%. The indenture governing the 9 1/2% Notes contains
certain restrictive covenants, including (i) limitations on additional
indebtedness, (ii) limitations on restricted payments, (iii) limitations on
liens, (iv) limitations on dividends and other payment restrictions, (v)
limitations on preferred stock of certain subsidiaries, (vi) limitations on
transactions with affiliates, (vii) limitations on the disposition of proceeds
of asset sales and (viii) limitations on the ability of the Company to
consolidate, merge or sell all or substantially all of its assets.
8.80% Senior Subordinated Notes. URI issued $205.0 million aggregate
principal amount of 8.80% senior subordinated notes, (the "8.80% Notes") which
are due August 15, 2008. The 8.80% Notes are unsecured. URI may, at its option,
redeem the 8.80% Notes on or after August 15, 2003 at specified redemption
prices which range from 104.4% in 2003 to 100.0% in 2006 and thereafter. In
addition, on or prior to August 15, 2001, URI may, at its option, use the
proceeds of a public equity offering to redeem up to 35% of the outstanding
8.80% Notes, at a redemption price of 108.8%. The indenture governing the 8.80%
Notes contains restrictions substantially similar to those applicable to the 9
1/2% Notes.
9 1/4% Senior Subordinated Notes. URI issued $300.0 million aggregate
principal amount of 9 1/4% senior subordinated notes, (the "9 1/4% Notes")
which are due January 15, 2009. The 9 1/4% Notes are unsecured. URI may, at its
option, redeem the 9 1/4% Notes on or after January 15, 2004 at specified
redemption prices which range from 104.625% in 2004 to 100.0% in 2007 and
thereafter. In addition, on or prior to January 15, 2002, URI may, at its
option, use the proceeds of a public equity offering to redeem up to 35% of the
outstanding 9 1/4% Notes, at a redemption price of 109.25%. The indenture
governing the 9 1/4% Notes contains restrictions substantially similar to those
applicable to the 9 1/2% Notes.
9% Senior Subordinated Notes. URI issued $250.0 million aggregate principal
amount of 9% senior subordinated notes, (the "9% Notes") which are due April 1,
2009. The 9% Notes are unsecured. URI may, at its option, redeem the 9% Notes
on or after April 1, 2004 at specified redemption prices which range from
104.5% in 2004 to 100.0% in 2007 and thereafter. In addition, on or prior to
April 1, 2002, URI may, at its option, use the proceeds of a public equity
offering to redeem up to 35% of the outstanding 9% Notes, at a redemption price
of 109.0%. The indenture governing the 9% Notes contains restrictions
substantially similar to those applicable to the 9 1/2% Notes.
21
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Receivables Securitization. In December 2000, the Company obtained $100.0
million through the securitization of certain of its accounts receivable. In
the securitization, the Company transferred $203.0 million of its accounts
receivable to a special purpose subsidiary (the "SPV") which in turn pledged
those receivables to secure $100.0 million of borrowings that the SPV incurred
to finance its acquisition of those receivables from the Company. These
borrowings accrue interest at Credit Lyonnais' blended commercial paper rate
plus a margin of 0.75% per annum. These borrowings are an obligation of the SPV
and not of Holdings or URI, and the lenders' recourse in respect of the
borrowings is generally limited to collections that the SPV receives on the
receivables. Collections on the receivables are used to service the borrowings.
Subject to certain conditions, collections from the receivables may also be
used by the SPV from time to time until December 2003 to acquire additional
accounts receivables from the Company that the SPV will pledge to the lenders
to secure the borrowings.
Maturities of the Company's debt for each of the next five years at
December 31, 2000 are as follows (In thousands):
2001...... $ 33,787
2002...... 29,512
2003...... 464,498
2004...... 33,984
2005...... 250,043
Thereafter 1,863,543
8. Income Taxes
The provision for historical federal and state income taxes is as follows:
Year ended December 31
------------------------
2000 1999 1998
-------- ------- -------
(In thousands)
Historical:
Domestic federal:
Current............ $ 10,419 $39,643 $14,291
Deferred........... 97,756 37,598 21,047
-------- ------- -------
108,175 77,241 35,338
Domestic state:
Current............ 3,587 10,405 1,067
Deferred........... 6,815 3,437 7,020
-------- ------- -------
10,402 13,842 8,087
-------- ------- -------
Total domestic..... 118,577 91,083 43,425
Foreign federal:
Current............ 1,061 4,917 519
Deferred........... 3,590 465 (492)
-------- ------- -------
4,651 5,382 27
Foreign provincial:
Current............ 774 2,356 277
Deferred........... 1,119 320 (230)
-------- ------- -------
1,893 2,676 47
-------- ------- -------
Total foreign...... 6,544 8,058 74
-------- ------- -------
$125,121 $99,141 $43,499
======== ======= =======
22
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the provision for income taxes and the amount computed
by applying the statutory federal income tax rate of 35% to income before
provision for income taxes is as follows:
Year ended December 31
-------------------------
2000 1999 1998
-------- ------- -------
(In thousands)
Computed tax rate at statutory tax rate.................... $105,524 $84,632 $27,404
State income taxes, net of federal tax benefit............. 6,762 8,997 4,177
Non-deductible expenses.................................... 9,992 6,265 7,400
Provision for deferred taxes of Subchapter S Corporation at
time of pooling.......................................... 4,750
Other...................................................... 2,843 (753) (232)
-------- ------- -------
$125,121 $99,141 $43,499
======== ======= =======
The components of deferred income tax assets (liabilities) are as follows:
December 31
--------------------
2000 1999
--------- ---------
(In thousands)
Property and equipment..................... $(298,058) $(175,180)
Intangibles................................ (32,518) (13,188)
Reserves and allowances.................... 37,460 48,577
Net operating loss and credit carryforwards 84,257 56,266
Other...................................... 2,616 2,296
--------- ---------
$(206,243) $ (81,229)
========= =========
The current and deferred tax assets and liabilities at December 31, 2000
include the effects of certain reclassifications related to differences between
the income tax provisions and tax returns for prior years. These
reclassifications had no effect on net income.
For financial reporting purposes, income before income taxes and
extraordinary items for the Company's foreign subsidiaries was $15.6 million
and $19.9 million for the years ended December 31, 2000 and 1999, respectively.
At December 31, 2000 and 1999, unremitted earnings of foreign subsidiaries were
approximately $22.9 million and $13.8 million, respectively. Since it is the
Company's intention to indefinitely reinvest these earnings, no United States
taxes have been provided. Determination of the amount of unrecognized deferred
tax liability on these unremitted taxes is not practicable.
The Company has net operating loss carryforwards ("NOL's") of $138.2
million for federal income tax purposes that expire through 2018.
9. Holding Company Reorganization
URI was formerly named United Rentals, Inc. On August 5, 1998, a
reorganization was effected pursuant to which (i) URI became a wholly owned
subsidiary of Holdings, a newly formed holding company, (ii) the name of URI
was changed from United Rentals, Inc. to United Rentals (North America), Inc.,
(iii) the name of the new holding company became United Rentals, Inc., (iv) the
outstanding common stock of URI was automatically converted, on a
share-for-share basis, into common stock of Holdings and (v) the common stock
of Holdings commenced trading on the New York Stock Exchange under the symbol
"URI" instead of the common stock of URI. The purpose of the reorganization was
to facilitate certain financings. The business operations of the Company did
not
23
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
change as a result of the new legal structure. The stockholders of Holdings
have the same rights, privileges and interests with respect to Holdings as they
had with respect to URI immediately prior to the reorganization.
10. Company-Obligated Mandatorily Redeemable Convertible Preferred Securities
of a Subsidiary Trust and Series A and B Preferred Stock
Trust Securities. In August 1998, a subsidiary trust (the "Trust") of
Holdings issued and sold in a private offering (the "Preferred Securities
Offering") $300.0 million of 30 year, 6 1/2% Convertible Quarterly Income
Preferred Securities (the "Preferred Securities"). The net proceeds from the
Preferred Securities Offering were approximately $290.0 million. The Trust used
the proceeds from the Preferred Securities Offering to purchase 6 1/2%
convertible subordinated debentures due 2028 (the "Debentures") from Holdings
which resulted in Holdings receiving all of the net proceeds of the Preferred
Securities Offering. Holdings in turn contributed the net proceeds of the
Preferred Securities Offering to URI. The Preferred Securities are non-voting
securities, carry a liquidation value of $50 per security and are convertible
into the Company's common stock at an initial rate of 1.146 shares per security
(equivalent to an initial conversion price of $43.63 per share). They are
convertible at any time at the holders' option and are redeemable, at the
Company's option, after three years, subject to certain conditions.
Holders of the Preferred Securities are entitled to preferential cumulative
cash distributions from the Trust at an annual rate of 6 1/2% of the
liquidation value, accruing from the original issue date and payable quarterly
in arrears beginning February 1, 1999. The distribution rate and dates
correspond to the interest rate and payments dates on the Debentures. Holdings
may defer interest payments on the Debentures for up to twenty consecutive
quarters, but not beyond the maturity date of the Debentures. If interest
payments on the Debentures are deferred, so are the payments on the Preferred
Securities. Under this circumstance, Holdings will be prohibited from paying
dividends on any of its capital stock or making payments with respect to its
debt that rank pari passu with or junior to the Debentures.
Holdings has executed a guarantee with regard to payment of the Preferred
Securities to the extent that the Trust has sufficient funds to make the
required payments.
Series A Preferred. On January 7, 1999, Holdings sold 300,000 shares of its
Series A Preferred. Subject to certain thresholds related to the aggregate
number of shares issuable upon conversion of Series A Preferred, the holders of
the Series A Preferred, voting separately as a single class, have the right, on
an as-converted basis, to elect up to two directors. Currently, holders of the
Series A Preferred may elect two directors. Except for the election of
directors, the holders of the Series A Preferred have the same voting rights as
those belonging to holders of Holdings common stock. The net proceeds from the
sale of the Series A Preferred were approximately $287.0 million. Holdings
contributed such net proceeds to URI. The Series A Preferred is convertible
into 12,000,000 shares of Holdings common stock at $25 per share based upon a
liquidation preference of $1,000 per share of Series A Preferred, subject to
adjustment. The Series A Preferred has no stated dividend. However, in the
event Holdings declares or pays any dividends on, or distributions of, its
common stock, it must (subject to certain exceptions) also declare and pay to
the holders of Series A Preferred the dividends and distributions which would
have been declared and paid upon conversion of the Series A Preferred. See note
2 for additional information on the Series A Preferred.
Series B Preferred. On September 30, 1999, Holdings sold 150,000 shares of
its Series B Preferred. The Series B Preferred is divided into two classes
designated as Class B-1 and Class B-2. Other than voting rights, the classes
are substantially the same. The holders of the 105,252 shares of Class B-1 are
entitled to the same voting rights, on an as-converted basis, as those
belonging
24
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
to holders of Holdings common stock. The holders of the 44,748 shares of Class
B-2 have no such voting rights. The net proceeds from the sale of the Series B
Preferred were approximately $143.8 million. Holdings contributed such net
proceeds to URI. The Series B Preferred is convertible into 5,000,000 shares of
Holding's common stock at $30 per share based upon a liquidation preference of
$1,000 per share of Series B Preferred, subject to adjustment. The Series B
Preferred has no stated dividend. However, in the event Holdings declares or
pays any dividends on, or distributions of, its common stock, it must (subject
to certain exceptions) also declare and pay to the holders of Series B
Preferred the dividends and distributions which would have been declared and
paid upon conversion of the Series B Preferred. See note 2 for additional
information on the Series B Preferred.
11. Capital Stock
Warrants. As of December 31, 2000 there are outstanding warrants to
purchase an aggregate of 7,094,296 shares of common stock. The weighted average
exercise price of the warrants is $11.76 per share. All warrants are currently
exercisable and may be exercised at any time through 2009.
Common Stock. On March 9, 1999, Holdings completed a public offering of
2,290,000 shares of common stock. The net proceeds to the Company from this
offering were approximately $64.7 million (after deducting underwriting
discounts and offering expenses). Holdings contributed such net proceeds to
URI. During 2000, the Company approved a share repurchase program to acquire up
to $200 million of its issued and outstanding common stock. Share repurchases
under the program may be made from time to time, continuing through May 2002.
During 2000, the Company repurchased and retired 1,785,015 shares of common
stock.
1997 Stock Option Plan. The Company's 1997 Stock Option Plan provides for
the granting of options to purchase not more than an aggregate of 5,000,000
shares of common stock. Some or all of such options may be "incentive stock
options" within the meaning of the Internal Revenue Code. All officers,
directors and employees of the Company and other persons who perform services
on behalf of the Company are eligible to participate in this plan. Each option
granted pursuant to this plan must provide for an exercise price per share that
is at least equal to the fair market value per share of common stock on the
date of grant. No options may be granted under this plan after August 31, 2007.
As of December 31, 2000 and 1999, options to purchase an aggregate of 4,950,536
shares and 4,731,183 shares of common stock, respectively, were outstanding
under this plan. The exercise price of each option, the period during which
each option may be exercised and other terms and conditions of each option are
determined by the Board of Directors (or by a committee appointed by the Board
of Directors).
1998 Stock Option Plan. The Company's 1998 Stock Option Plan provides for
the granting of options to purchase not more than an aggregate of 4,200,000
shares of common stock. Some or all of the options issued under the 1998 Stock
Option Plan may be "incentive stock options" within the meaning of the Internal
Revenue Code. All officers and directors of the Company and its subsidiaries
are eligible to participate in the 1998 Stock Option Plan. Each option granted
pursuant to the 1998 Stock Option Plan must provide for an exercise price per
share that is at least equal to the fair market value per share of common stock
on the date of grant. No options may be granted under the 1998 Stock Option
Plan after August 20, 2008. As of December 31, 2000 and 1999, options to
purchase an aggregate of 4,200,000 shares of common stock were outstanding
pursuant to this plan to executive officers and directors. The exercise price
of each option, the period during which each option may be exercised and other
terms and conditions of each option are determined by the Board of Directors
(or by a committee appointed by the Board of Directors).
25
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1998 Supplemental Stock Option Plan. The Company has adopted a stock option
plan pursuant to which options, for up to an aggregate of 5,600,000 shares of
common stock, may be granted to employees who are not officers or directors and
to consultants and independent contractors who perform services for the Company
or its subsidiaries. As of December 31, 2000 and 1999, options to purchase an
aggregate of 5,373,509 shares and 4,140,384 shares of common stock,
respectively, were outstanding pursuant to this plan. The exercise price of
each option, the period during which each option may be exercised and other
terms and conditions of each option are determined by the Board of Directors
(or by a committee appointed by the Board of Directors).
1997 Performance Award Plan. Effective February 20, 1997, U.S. Rentals
adopted the 1997 Performance Award Plan under which stock options and other
awards could be granted to key employees and directors at prices and terms
established by U.S. Rentals at the date of grant. The options expire in 2007.
As a result of the Merger, all outstanding options to purchase shares of U.S.
Rentals common stock became fully vested and were converted into options to
purchase the Company's common stock. As of December 31, 2000 and 1999, options
to purchase an aggregate of 2,572,050 shares and 2,581,675 shares of common
stock , respectively, were outstanding pursuant to this plan.
A summary of the transactions within the Company's stock option plans
follows:
Weighted
Average
Exercise
Shares Price
---------- --------
Outstanding at January 1, 1998.. 4,825,699 $19.52
Granted...................... 9,453,718 19.78
Exercised.................... (25,025) 20.78
Canceled..................... (209,578) 22.94
---------- ------
Outstanding at December 31, 1998 14,044,814 19.60
Granted...................... 3,092,462 26.77
Exercised.................... (1,331,528) 20.74
Canceled..................... (152,506) 26.70
---------- ------
Outstanding at December 31, 1999 15,653,242 20.86
Granted...................... 1,921,125 16.56
Exercised.................... (26,307) 16.91
Canceled..................... (451,965) 27.03
---------- ------
Outstanding at December 31, 2000 17,096,095 $20.23
========== ======
Exercisable at December 31, 2000 11,906,938 $19.58
========== ======
Options Outstanding Options Exercisable
-------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Amount Contractual Exercise Amount Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
------------------------ ----------- ----------- -------- ----------- --------
$10.00 - $15.00..... 4,722,077 7.7 years $12.38 4,317,980 $12.30
15.01 - 20.00..... 1,995,359 9.0 years 16.79 293,787 18.72
20.01 - 25.00..... 7,146,663 7.1 years 21.77 5,543,191 21.64
25.01 - 30.00..... 1,821,230 8.2 years 27.33 888,666 27.27
30.01 - 50.00..... 1,410,766 7.4 years 34.67 863,314 35.08
---------- ----------
17,096,095. 7.6 years 20.23 11,906,938 19.58
========== ==========
26
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" in accounting for stock-based employee compensation arrangements
whereby no compensation cost related to stock options is deducted in
determining net income. Had compensation cost for the Company's stock option
plans been determined pursuant to SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and earnings per share would have
differed. The weighted average fair value of options granted was $7.70, $10.99
and $11.94 during 2000, 1999 and 1998, respectively. The fair value is
estimated on the date of grant using the Black-Scholes option pricing model
which uses subjective assumptions which can materially affect fair value
estimates and, therefore, does not necessarily provide a single measure of fair
value of options. Using the Black-Scholes option pricing model and a risk-free
interest rate average of 5.15%, 6.29% and 4.6% in 2000, 1999 and 1998,
respectively, a volatility factor for the market price of the Company's common
stock of 69%, 52% and 85% in 2000, 1999 and 1998, respectively, and a
weighted-average expected life of options of approximately three years in 2000,
1999 and 1998, the Company's net income (loss), basic earnings (loss) per share
and diluted earnings (loss) per share would have been $156.4 million, $2.20 and
$1.69, respectively, for the year ended December 31, 2000, $104.3 million,
$1.46 and $1.12, respectively, for the year ended December 31, 1999, and $(13.3
million), $(0.20) and $(0.20), respectively, for the year ended December 31,
1998. For purposes of these pro forma disclosures, the estimated fair value of
options is amortized over the options' vesting period. Since the number of
options granted and their fair value may vary significantly from year to year,
the pro forma compensation expense in future years may be materially different.
At December 31, 2000 there are (i) 7,094,296 shares of common stock
reserved for the exercise of warrants, (ii) 17,338,256 shares of common stock
reserved for issuance pursuant to options granted and that may be granted in
the future under the Company's stock option plans, (iii) 6,875,580 shares of
common stock reserved for the issuance of outstanding preferred securities of a
subsidiary trust, (iv) 17,000,000 shares of common stock reserved for the
issuance of Series A and Series B preferred stock and (v) 232,586 shares of
common stock reserved for the conversion of convertible debt.
27
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Earnings Per Share
The following table sets forth the computation of historical basic and
diluted earnings per share:
Year Ended December 31
-----------------------------------
2000 1999 1998
----------- ----------- -----------
(In thousands, except share and
per share data)
Numerator:
Income before extraordinary item............ $ 176,375 $ 142,666 $ 34,798
Plus: preferred dividends of a subsidiary
trust, net of taxes....................... 11,406
----------- ----------- -----------
Income available to common stockkholders.... $ 187,781 $ 142,666 $ 34,798
=========== =========== ===========
Denominator:
Denominator for basic earnings per share-
weighted-average shares................... 71,069,174 71,353,127 66,225,492
Effect of dilutive securities:
Employee stock options.................... 1,517,015 4,651,237 2,641,194
Warrants.................................. 2,791,387 3,978,536 4,208,434
Series A Preferred........................ 12,000,000 11,802,740
Series B Preferred........................ 5,000,000 1,250,000
Company-obligated mandatorily
redeemable convertible preferred
securities of a subsidiary trust........ 6,876,003
----------- ----------- -----------
Denominator for dilutive earnings per share-
adjusted weighted-average shares.......... 99,253,579 93,035,640 73,075,120
=========== =========== ===========
Earnings per share-basic:
Income before extraordinary item............ $ 2.48 $ 2.00 $ 0.53
Extraordinary item, net..................... 0.33
----------- ----------- -----------
Net income.................................. $ 2.48 $ 2.00 $ 0.20
=========== =========== ===========
Earnings per share-diluted:
Income before extraordinary item............ $ 1.89 $ 1.53 $ 0.48
Extraordinary item, net..................... 0.30
----------- ----------- -----------
Net income.................................. $ 1.89 $ 1.53 $ 0.18
=========== =========== ===========
28
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Commitments and Contingencies
Operating Leases
The Company leases rental equipment, real estate and certain office
equipment under operating leases. Certain real estate leases require the
Company to pay maintenance, insurance, taxes and certain other expenses in
addition to the stated rentals. Future minimum lease payments, by year and in
the aggregate, for noncancellable operating leases with initial or remaining
terms of one year or more are as follows at December 31, 2000:
Real Rental Other
Estate Equipment Equipment
Leases Leases Leases
-------- --------- ---------
(In thousands)
2001...... $ 51,815 $ 98,158 $17,318
2002...... 46,464 93,864 15,372
2003...... 42,739 77,597 12,076
2004...... 39,706 55,889 10,827
2005...... 34,153 43,352 2,487
Thereafter 108,175 34,830
-------- -------- -------
$323,052 $403,690 $58,080
======== ======== =======
The Company was the seller-lessee in sale-leaseback transactions in 2000
where it sold rental equipment for aggregate proceeds of $218.8 million, in
1999 where it sold rental equipment for aggregate proceeds of $88.0 million and
in 1998 where it sold rental equipment for aggregate proceeds of $35.0 million.
For the 2000 transactions, the Company agreed to lease back the rental
equipment over periods ranging from eight months to five years. In connection
with the 2000 transactions, the Company recognized a gain of approximately
$12.5 million with respect to sale-leaseback transactions where the term of the
lease is for a minor portion of the remaining useful life of the equipment sold
and recorded deferred gains of approximately $4.0 million with respect to
sale-leaseback transactions where the term of the lease is for all or more than
a minor part of the remaining useful life of the equipment sold. For the 1999
transaction, the Company agreed to lease back the rental equipment over a five
year period beginning December 1999, which represented more than a minor part
of the remaining useful life, and will recognize a deferred gain of
approximately $6.3 million over the five year period. For the 1998 transaction,
the Company agreed to lease back the rental equipment over a five year period
beginning December 1998, which represented more than a minor part of the
remaining useful life, and will recognize a deferred gain on the sale of
approximately $0.6 million over the five year period. The future payments under
these leases are included in the table above.
Rent expense under non-cancelable operating leases totaled $137.3 million,
$65.5 million and $20.5 million for the years ended December 31, 2000, 1999 and
1998, respectively. The Company's real estate leases provide for varying terms
and include 24 leases that are on a month-to-month basis and 42 leases that
provide for a remaining term of less than one year and do not provide a renewal
option.
Employee Benefit Plans
The Company currently sponsors one defined contribution 401(k) retirement
plan which is subject to the provisions of ERISA. The Company also sponsors a
deferred profit sharing plan for the benefit of
29
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the full time employees of its Canadian subsidiaries. Under these plans, the
Company matches a percentage of the participants contributions up to a
specified amount. Company contributions to the plans were $6.2 million, $4.6
million and $1.0 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Legal Matters
The Company is party to legal proceedings and potential claims arising in
the ordinary course of its business. In the opinion of management, the Company
has adequate legal defenses, reserves, or insurance coverage with respect to
these matters so that the ultimate resolution will not have a material adverse
effect on the Company's financial position, results of operations, or cash
flows. The Company had accrued $7.6 million and $13.7 million at December 31,
2000 and 1999, respectively, to cover the uninsured portion of possible costs
arising from these pending claims and other potential unasserted claims.
Environmental Matters
The Company and its operations are subject to various laws and related
regulations governing environmental matters. Under such laws, an owner or
lessee of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances located on or in, or emanating from, such
property, as well as investigation of property damage. The Company incurs
ongoing expenses associated with the removal of underground storage tanks and
the performance of appropriate remediation at certain of its locations. The
Company believes that such removal and remediation will not have a material
adverse effect on the Company's financial position, results of operations, or
cash flows.
14. Segment Information
Each of the Company's branch locations is an operating segment which
consists of the rental and sales of equipment and related merchandise and
parts. Certain of the Company's branches also provide speciality traffic
control services as a product line and the amount of revenue attributable to
such services was $245.0 million and $79.3 million during the years ended
December 31, 2000 and 1999, respectively. All of the Company's branches have
been aggregated into one reportable segment because they offer similar products
and services in similar markets and the factors determining strategic decisions
are comparable.
30
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company operates in the United States, Canada and Mexico. Revenues are
attributable to countries based upon the location of the customers. Geographic
area information for the years ended December 31, 2000, 1999 and 1998 is as
follows:
Year ended December 31
--------------------------------
2000 1999 1998
---------- ---------- ----------
(In thousands)
Revenues from external customers
Domestic..................................... $2,753,266 $2,086,808 $1,168,071
Foreign...................................... 165,595 146,820 52,211
---------- ---------- ----------
Total revenues from external customers........ $2,918,861 $2,233,628 $1,220,282
========== ========== ==========
Rental equipment, net
Domestic..................................... $1,604,191 $1,537,199 $1,099,539
Foreign...................................... 128,644 122,534 43,467
---------- ---------- ----------
Total consolidated rental equipment, net...... $1,732,835 $1,659,733 $1,143,006
========== ========== ==========
Property and equipment, net
Domestic..................................... $ 405,873 $ 285,456 $ 180,777
Foreign...................................... 16,366 19,451 4,734
---------- ---------- ----------
Total consolidated property and equipment, net $ 422,239 $ 304,907 $ 185,511
========== ========== ==========
Intangible assets, net
Domestic..................................... $2,092,882 $1,740,326 $ 867,090
Foreign...................................... 134,126 123,046 54,975
---------- ---------- ----------
Total consolidated intangible assets, net..... $2,227,008 $1,863,372 $ 922,065
========== ========== ==========
15. Quarterly Financial Information (Unaudited)
Selected Financial Data
The following table of quarterly financial information has been prepared
from unaudited financial statements of the Company, and reflects adjustments
which are, in the opinion of management, necessary for a fair presentation of
the interim periods presented.
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(In thousands, except per share data)
For the year ended December 31, 2000:
Total revenues...................... $578,962 $729,946 $859,033 $750,920
Gross profit........................ 205,984 271,798 340,704 270,084
Net income.......................... 17,411 47,199 75,391 36,374
Basic earnings per share............ $ 0.24 $ 0.66 $ 1.07 $ 0.51
Diluted earnings per share.......... 0.19 0.51 0.79 0.40
For the year ended December 31, 1999:
Total revenues...................... $392,309 $503,662 $668,618 $669,039
Gross profit........................ 133,991 184,064 256,979 249,884
Net income.......................... 16,225 25,886 56,208 44,347
Basic earnings per share............ $ 0.24 $ 0.36 $ 0.78 $ 0.62
Diluted earning per share........... 0.18 0.28 0.60 0.48
31
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Condensed Consolidating Financial Information of Guarantor Subsidiaries
Certain indebtedness of URI, a wholly owned subsidiary of Holdings (the
"Parent"), is guaranteed by URI's United States subsidiaries (the "guarantor
subsidiaries") and, in certain cases, also by Parent. However, this
indebtedness is not guaranteed by URI's foreign subsidiaries (the
"non-guarantor subsidiaries"). The guarantor subsidiaries are all wholly-owned
and the guarantees are made on a joint and several basis and are full and
unconditional (subject to subordination provisions and subject to a standard
limitation which provides that the maximum amount guaranteed by each guarantor
will not exceed the maximum amount that can be guaranteed without making the
guarantee void under fraudulent conveyance laws). Separate consolidated
financial statements of the guarantor subsidiaries have not been presented
because management believes that such information would not be material to
investors. However, condensed consolidating financial information as of
December 31, 2000 and 1999, and for each of the three years in the period ended
December 31, 2000, are presented. The condensed consolidating financial
information of the Company and its subsidiaries are as follows:
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
----------- ----------- ------------ ------------- ------------- ------------
(In thousands)
Assets
Cash and cash equivalents...... $ 29,733 $ 4,651 $ 34,384
Accounts receivable, net....... $ 216,444 143,295 109,855 469,594
Intercompany receivable
(payable)..................... 319,423 (55,187) (264,236)
Inventory...................... 54,022 73,979 5,379 133,380
Prepaid expenses and other
assets........................ 28,263 75,633 597 104,493
Rental equipment, net.......... 837,972 766,219 128,644 1,732,835
Property and equipment, net.... $ 34,807 139,871 231,195 16,366 422,239
Investment in subsidiaries..... 1,839,952 2,257,692 $ (4,097,644)
Intangible assets, net......... 960,444 1,132,438 134,126 2,227,008
----------- ----------- ----------- ---------- ------------- -----------
$ 1,874,759 $ 4,814,131 $ 2,397,305 $ 135,382 $ (4,097,644) $ 5,123,933
=========== =========== =========== ========== ============= ===========
Liabilities and Stockholder's
Equity
Liabilities:
Accounts payable............ $ 78,623 $ 165,677 $ 15,855 $ 260,155
Debt........................ $ 300,000 2,647,144 3,484 24,739 $ (300,000) 2,675,367
Deferred taxes.............. 186,091 20,702 (550) 206,243
Accrued expenses and
other liabilities.......... 28,816 86,560 18,862 13,750 (11,763) 136,225
----------- ----------- ----------- ---------- ------------- -----------
Total liabilities........ 328,816 2,998,418 208,725 53,794 (311,763) 3,277,990
Commitments and contingencies
Company-obligated mandatorily
redeemable convertible
preferred securities of a
subsidiary trust.............. 300,000 300,000
Series A and B preferred stock. 430,800 430,800
Stockholder's equity:
Common stock................ 711 711
Additional paid-in capital.. 765,529 1,488,238 1,830,500 65,657 (3,384,395) 765,529
Retained earnings........... 355,850 327,475 358,080 22,878 (708,433) 355,850
Accumulated other
comprehensive
loss....................... (6,947) (6,947) 6,947 (6,947)
----------- ----------- ----------- ---------- ------------- -----------
Total stockholder's
equity.................. 1,115,143 1,815,713 2,188,580 81,588 $ (4,085,881) 1,115,143
----------- ----------- ----------- ---------- ------------- -----------
$1,874,759 $4,814,131 $2,397,305 $135,382 $(4,097,644) $5,123,933
=========== =========== =========== ========== ============= ===========
32
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1999
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
---------- ---------- ------------ ------------- ------------ ------------
(In thousands)
Assets
Cash and cash equivalents...... $ 3,689 $ 16,414 $ 3,708 $ 23,811
Accounts receivable, net....... 200,419 199,981 34,585 434,985
Intercompany receivable
(payable)..................... 142,156 42,906 (185,062)
Inventory...................... 56,086 64,253 9,134 129,473
Prepaid expenses and other
assets........................ $ 31,554 1,020 18,296 17,809 $ 12,778 81,457
Rental equipment, net.......... 747,232 789,967 122,534 1,659,733
Property and equipment, net.... 28,383 150,841 106,232 19,451 304,907
Investment in subsidiaries..... 1,702,802 2,072,115 (3,774,917)
Intangible assets, net......... 792,198 948,128 123,046 1,863,372
---------- ---------- ---------- --------- ----------- ----------
$1,762,739 $4,165,756 $2,186,177 $ 145,205 $(3,762,139) $4,497,738
========== ========== ========== ========= =========== ==========
Liabilities and Stockholder's
Equity
Liabilities:
Accounts payable............ $ 30,381 $ 71,995 $ 120,511 $ 20,059 $ 242,946
Debt........................ 300,000 2,231,923 380 33,845 $ (300,000) 2,266,148
Deferred income taxes....... 80,476 753 81,229
Accrued expenses and
other liabilities.......... 34,872 107,828 53,177 10,802 3,250 209,929
---------- ---------- ---------- --------- ----------- ----------
Total liabilities........ 365,253 2,492,222 174,068 65,459 (296,750) 2,800,252
Commitments and
contingencies
Company-obligated mandatorily
redeemable convertible
preferred securities of a
subsidiary trust.............. 300,000 300,000
Series A and B preferred stock. 430,800 430,800
Stockholder's equity:
Common stock................ 721 721
Additional paid-in capital.. 786,173 1,487,907 1,830,182 65,644 $(3,383,733) 786,173
Retained earnings........... 179,475 185,627 181,927 13,785 (381,339) 179,475
Accumulated other
comprehensive income....... 317 317 (317) 317
---------- ---------- ---------- --------- ----------- ----------
Total stockholder's
equity.................. 966,686 1,673,534 2,012,109 79,746 (3,765,389) 966,686
---------- ---------- ---------- --------- ----------- ----------
$1,762,739 $4,165,756 $2,186,177 $ 145,205 $(3,762,139) $4,497,738
========== ========== ========== ========= =========== ==========
33
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- ---------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals............... $ 851,541 $1,094,613 $ 110,529 $2,056,683
Sales of rental equipment....... 145,519 178,576 23,583 347,678
Sales of equipment and
merchandise and other
revenues....................... 253,798 229,219 31,483 514,500
-------- ---------- ---------- ---------- ---------- ----------
Total revenues.................... 1,250,858 1,502,408 165,595 2,918,861
Cost of revenues:
Cost of equipment rentals,
excluding depreciation......... 364,047 494,350 49,080 907,477
Depreciation of rental
equipment...................... 152,640 155,239 20,252 328,131
Cost of rental equipment sales.. 87,161 106,617 14,404 208,182
Cost of equipment and
merchandise sales and other
operating costs................ 197,190 164,186 25,125 386,501
-------- ---------- ---------- ---------- ---------- ----------
Total cost of revenues............ 801,038 920,392 108,861 1,830,291
-------- ---------- ---------- ---------- ---------- ----------
Gross profit...................... 449,820 582,016 56,734 1,088,570
Selling, general and
administrative expenses.......... 184,135 245,431 24,764 454,330
Non-rental depreciation and
amortization..................... $ 7,718 33,692 39,618 5,273 86,301
-------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)........... (7,718) 231,993 296,967 26,697 547,939
Interest expense.................. 19,500 217,904 135 10,740 $ (19,500) 228,779
Preferred dividends of a
subsidiary trust................. 19,500 19,500
Other (income) expense, net....... 2,129 (4,285) 320 (1,836)
-------- ---------- ---------- ---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes....... (27,218) 11,960 301,117 15,637 301,496
Provision (benefit) for income
taxes............................ (11,295) 4,908 124,964 6,544 125,121
-------- ---------- ---------- ---------- ---------- ----------
Income (loss) before equity in net
earnings of subsidiaries......... (15,923) 7,052 176,153 9,093 176,375
Equity in net earnings of
subsidiaries..................... 192,298 185,246 $ (377,544)
-------- ---------- ---------- ---------- ---------- ----------
Net income........................ $176,375 $ 192,298 $ 176,153 $ 9,093 $ (377,544) $ 176,375
======== ========== ========== ========== ========== ==========
34
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- -------- ------------ ------------- ------------ ------------
(In thousand)
Revenues:
Equipment rentals..................... $600,431 $ 880,182 $100,413 $1,581,026
Sales of rental equipment............. 113,982 106,737 14,959 235,678
Sales of equipment and merchandise
and other revenues................... 195,647 189,829 31,448 416,924
-------- -------- ---------- -------- --------- ----------
Total revenues.......................... 910,060 1,176,748 146,820 2,233,628
Cost of revenues:
Cost of equipment rentals, excluding
depreciation......................... 250,959 381,718 44,295 676,972
Depreciation of rental equipment...... 116,385 146,622 17,634 280,641
Cost of rental equipment sales........ 62,972 64,945 8,761 136,678
Cost of equipment and merchandise
sales and other operating costs...... 161,902 128,328 24,189 314,419
-------- -------- ---------- -------- --------- ----------
Total cost of revenues.................. 592,218 721,613 94,879 1,408,710
-------- -------- ---------- -------- --------- ----------
Gross profit............................ 317,842 455,135 51,941 824,918
Selling, general and administrative
expenses............................... $ 8,267 144,341 177,456 22,531 352,595
Non-rental depreciation and
amortization........................... 4,926 29,667 24,617 3,657 62,867
-------- -------- ---------- -------- --------- ----------
Operating income (loss)................. (13,193) 143,834 253,062 25,753 409,456
Interest expense........................ 19,500 132,929 1,428 5,471 $ (19,500) 139,828
Preferred dividends of a subsidiary
trust.................................. 19,500 19,500
Other (income) expense, net............. 9,689 (1,549) (524) 427 278 8,321
-------- -------- ---------- -------- --------- ----------
Income (loss) before provision (benefit)
for income taxes....................... (42,382) 12,454 252,158 19,855 (278) 241,807
Provision (benefit) for income taxes.... (17,487) 3,039 105,531 8,058 99,141
-------- -------- ---------- -------- --------- ----------
Income (loss) before equity in net
earnings of subsidiaries............... (24,895) 9,415 146,627 11,797 (278) 142,666
Equity in net earnings of subsidiaries.. 167,561 158,424 (325,985)
-------- -------- ---------- -------- --------- ----------
Net income.............................. $142,666 $167,839 $ 146,627 $ 11,797 $(326,263) $ 142,666
======== ======== ========== ======== ========= ==========
35
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
------- -------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals..................... $213,823 $649,508 $32,135 $ 895,466
Sales of rental equipment............. 17,992 96,739 4,889 119,620
Sales of equipment and merchandise
and other revenues................... 58,582 131,427 15,187 205,196
------- -------- -------- ------- -------- ----------
Total revenues........................... 290,397 877,674 52,211 1,220,282
Cost of revenues:
Cost of equipment rentals,
excluding depreciation............... 91,100 289,892 13,758 394,750
Depreciation of rental equipment...... 45,602 125,810 4,498 175,910
Cost of rental equipment sales........ 8,586 54,805 2,745 66,136
Cost of equipment and
merchandise sales and other
operating costs...................... 49,754 98,332 11,952 160,038
------- -------- -------- ------- -------- ----------
Total cost of revenues................... 195,042 568,839 32,953 796,834
------- -------- -------- ------- -------- ----------
Gross profit............................. 95,355 308,835 19,258 423,448
Selling, general and administrative
expenses................................ 31,092 155,512 9,016 195,620
Merger-related expenses.................. 47,178 47,178
Non-rental depreciation and
amortization............................ $ 561 8,682 24,769 1,233 $ 3 35,248
------- -------- -------- ------- -------- ----------
Operating income (loss).................. (561) 55,581 81,376 9,009 (3) 145,402
Interest expense......................... 7,854 33,006 24,193 6,958 (7,854) 64,157
Preferred dividends of a subsidiary trust 7,854 7,854
Other (income) expense, net.............. (2,481) (2,605) (11) 191 (4,906)
------- -------- -------- ------- -------- ----------
Income (loss) before provision (benefit)
for income taxes and extraordinary
item.................................... (8,415) 25,056 59,788 2,062 (194) 78,297
Provision (benefit) for income taxes..... (3,472) 13,850 33,047 74 43,499
------- -------- -------- ------- -------- ----------
Income (loss) before extraordinary item
and equity in net earnings of
subsidiaries............................ (4,943) 11,206 26,741 1,988 (194) 34,798
Extraordinary item, net.................. 21,337 21,337
------- -------- -------- ------- -------- ----------
Income (loss) before equity in net
earnings of subsidiaries................ (4,943) 11,206 5,404 1,988 (194) 13,461
Equity in net earnings of subsidiaries... 18,404 7,392 (25,796)
------- -------- -------- ------- -------- ----------
Net income............................... $13,461 $ 18,598 $ 5,404 $ 1,988 $(25,990) $ 13,461
======= ======== ======== ======= ======== ==========
36
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- --------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities.............................. $(37,379) $ 243,759 $ 227,855 $ 43,066 $ 35,420 $ 512,721
Cash Flows From Investing Activities:
Purchases of rental equipment......... (489,259) (283,488) (35,457) (808,204)
Purchases of property and equipment... (13,071) (34,477) (102,510) (3,712) (153,770)
Proceeds from sales of rental
equipment............................ 145,519 178,576 23,583 347,678
Proceeds from sale of businesses...... 16,246 3,000 19,246
Payments of contingent purchase
price................................ (3,030) (13,236) (16,266)
Purchases of other companies.......... (337,257) (10,080) (347,337)
Capital contributed to subsidiary..... (331) 331
In-process acquisition costs.......... (4,285) (4,285)
-------- --------- --------- -------- -------- ---------
Net cash used in investing
activities........................ (13,402) (702,258) (217,658) (25,666) (3,954) (962,938)
Cash Flows from Financing Activities:
Shares repurchased and retired........ (30,950) (30,950)
Dividend distributions to Parent...... (50,450) 50,450
Proceeds from debt.................... 452,912 3,290 456,202
Repayments of debt.................... (125,238) (168) (9,193) (134,599)
Proceeds from sale-leaseback.......... 193,478 193,478
Payments of financing costs........... (16,223) (185) (16,408)
Capital contributions by parent....... 331 (331)
Proceeds from the exercise of stock
options.............................. 331 331
Proceeds from dividends from
subsidiary........................... 50,450 (50,450)
-------- --------- --------- -------- -------- ---------
Net cash provided by financing
activities........................ 50,781 454,810 3,122 (9,193) (31,466) 468,054
Effect of foreign exchange rates...... (7,264) (7,264)
-------- --------- --------- -------- -------- ---------
Net increase (decrease) in cash and cash
equivalents............................. (3,689) 13,319 943 10,573
Cash and cash equivalents at beginning
of period............................... 3,689 16,414 3,708 23,811
-------- --------- --------- -------- -------- ---------
Cash and cash equivalents at end of
period.................................. $ $ 29,733 $ 4,651 $ 34,384
======== ========= ========= ======== ======== =========
Supplemental disclosure of cash flow
information:
Cash paid for interest................... $ 19,500 $ 218,346 $ 135 $ 10,782 $ 248,763
Cash paid for income taxes............... $ 19,833 $ 3,913 $ 23,746
Supplemental disclosure of non-cash
investing and financing activities:
The Company acquired the net assets
and assumed certain liabilities of other
companies as follows:
Assets, net of cash acquired.......... $ 554,077 $ 11,037 $ 565,114
Liabilities assumed................... (141,320) (957) (142,277)
Less:.................................
Amounts paid in common stock and
warrants of Parent................... (10,000) (10,000)
Amounts paid through issuance of
debt................................. (65,500) (65,500)
-------- --------- --------- -------- -------- ---------
Net cash paid......................... $ 337,257 $ 10,080 $ 347,337
======== ========= ========= ======== ======== =========
37
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 1999
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
--------- ----------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities................................ $ (4,824) $ 292,412 $ 13,185 $ 119,585 $ 1,002 $ 421,360
Cash Flows From Investing Activities:
Purchases of rental equipment........... (539,775) (99,365) (78,972) (718,112)
Purchases of property and equipment..... (14,181) (74,634) (20,366) (14,468) (123,649)
Proceeds from sales of rental
equipment.............................. 113,982 106,737 14,959 235,678
Proceeds from sale of
businesses............................. 1,040 2,354 3,127 6,521
Payments of contingent purchase price... (2,387) (4,265) (1,564) (8,216)
Purchases of other companies............ (915,937) (70,853) (986,790)
Capital contributed to subsidiary....... (522,985) 522,985
In-process acquisition costs............ (1,002) (1,002)
--------- ----------- -------- --------- --------- -----------
Net cash used in investing
activities.......................... (537,166) (1,417,711) (14,905) (147,771) 521,983 (1,595,570)
Cash Flows from Financing Activities:
Dividend distributions to Parent........ (19,500) 19,500
Proceeds from debt...................... 1,025,843 26,524 31,249 1,083,616
Repayments of debt...................... (474,808) (20,958) (1,884) (497,650)
Proceeds from sale-leaseback............ 88,000 88,000
Payments of financing costs............. (18,995) (448) (19,443)
Capital contributions by parent......... 522,985 (522,985)
Proceeds from issuance of common
stock and warrants, net of issuance
costs.................................. 64,701 64,701
Proceeds from issuance of Series A and
B preferred stock, net of issuance
costs.................................. 430,800 430,800
Proceeds from the exercise of stock
options................................ 26,989 26,989
Proceeds from dividends from
subsidiary............................. 19,500 (19,500)
--------- ----------- -------- --------- --------- -----------
Net cash provided by financing
activities.......................... 541,990 1,123,525 5,566 28,917 (522,985) 1,177,013
Effect of foreign exchange rates........ 598 598
--------- ----------- -------- --------- --------- -----------
Net increase (decrease) in cash and cash
equivalents............................... (1,774) 3,846 1,329 3,401
Cash and cash equivalents at beginning of
period.................................... 1,774 16,257 2,379 20,410
--------- ----------- -------- --------- --------- -----------
Cash and cash equivalents at end of period. $ $ $ 20,103 $ 3,708 $ 23,811
========= =========== ======== ========= ========= ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest..................... $ 19,500 $ 98,728 $ 1,194 $ 4,863 $ 124,285
Cash paid for income taxes................. $ 16,372 $ 1,137 $ 17,509
Supplemental disclosure of non-cash
investing and financing activities:
The Company acquired the net assets and
assumed certain liabilities of other
companies as follows:
Assets, net of cash acquired............ $ 1,371,807 $ 96,760 $ 1,468,567
Liabilities assumed..................... (448,685) (23,697) (472,382)
Less:
Amounts paid through issuance
of debt................................ (7,185) (2,210) (9,395)
--------- ----------- -------- --------- --------- -----------
Net cash paid........................... $ 915,937 $ 70,853 $ 986,790
========= =========== ======== ========= ========= ===========
38
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 1998
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
--------- ----------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities.............................. $ (4,157) $ (63,760) $ 206,996 $ 67,370 $ 9,680 $ 216,129
Cash Flows From Investing Activities:
Purchases of rental equipment......... (415,140) (50,494) (13,900) (479,534)
Purchases of property and equipment... (15,535) (65,742) (2,851) (1,050) 561 (84,617)
Proceeds from sales of rental
equipment............................ 17,992 96,739 4,889 119,620
Proceeds from sale of businesses...... 10,640 10,640
Payments of contingent purchase
price................................ (2,800) (1,156) (3,956)
Purchases of other companies.......... (840,730) (12,510) (58,597) (911,837)
Capital contributed to subsidiary..... (492,590) 492,590
In-process acquisition costs.......... (241) (241)
--------- ----------- --------- -------- ---------- -----------
Net cash provided by (used in)
investing activities.............. (508,125) (1,292,980) 28,084 (69,814) 492,910 (1,349,925)
Cash Flows from Financing Activities:
Dividend distributions to Parent...... (4,658) 4,658
Proceeds from debt.................... 300,000 1,225,586 10,187 27,864 (300,000) 1,263,637
Repayments of debt.................... (432,222) (230,685) (22,760) (685,667)
Proceeds from sale-leaseback.......... 35,000 35,000
Payments of financing costs........... (24,982) (10,000) (34,982)
Capital contributions by parent....... 492,590 (492,590)
Distributions to stockholders......... (3,536) (3,536)
Proceeds from issuance of common
stock and warrants, net of issuance
costs................................ 207,005 207,005
Proceeds from the exercise of stock
options.............................. 619 619
Proceeds from issuance of redeemable
convertible preferred securities..... 300,000 300,000
Proceeds from dividends from
subsidiary........................... 4,658 (4,658)
--------- ----------- --------- -------- ---------- -----------
Net cash provided by (used in)
financing activities.............. 512,282 1,291,314 (224,034) 5,104 (502,590) 1,082,076
Effect of foreign exchange rates...... (281) (281)
--------- ----------- --------- -------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents............................. (65,426) 11,046 2,379 (52,001)
Cash and cash equivalents at beginning of
period.................................. 67,200 5,211 72,411
--------- ----------- --------- -------- ---------- -----------
Cash and cash equivalents at end of
period.................................. $ $ 1,774 $ 16,257 $ 2,379 $ 20,410
========= =========== ========= ======== ========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest................... $ 4,658 $ 27,085 $ 11,098 $ 316 $ 43,157
Cash paid for income taxes............... $ 8,034 $ 2,190 $ 10,224
Supplemental disclosure of non-cash
investing and financing activities:
The Company acquired the net assets and
assumed certain liabilities of other
companies as follows:
Assets, net of cash acquired.......... $ 1,409,516 $ 12,510 $ 79,441 $ 1,501,467
Liabilities assumed................... (500,228) (18,633) (518,861)
Less:
Amounts paid in common stock and
warrants of Parent................... (58,093) (2,211) (60,304)
Amounts paid through issuance of
debt................................. (10,465) (10,465)
--------- ----------- --------- -------- ---------- -----------
Net cash paid......................... $ 840,730 $ 12,510 $ 58,597 $ 911,837
========= =========== ========= ======== ========== ===========
39
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
17. Subsequent Events
New Preferred Stock. On September 28, 2001, the Company entered into an
agreement effecting an exchange of the Company's outstanding Series A Preferred
for an equal number of shares of Series C Preferred and the exchange of the
Company's Series B Preferred for an equal number of shares of Series D
Preferred. Except as described below, the material terms of the new Series C
Preferred are the same as the old Series A Preferred and the material terms of
the new Series D Preferred are the same as the old Series B Preferred.
The certificates of designation for the Series A Preferred and Series B
Preferred (the "Prior Preferred") provide that, upon the occurrence of a Change
of Control (as defined in these certificates of designation), the Company is
required to redeem the Prior Preferred. The term "Change of Control," as
defined in these certificates of designation, would have included certain
transactions that were disapproved by the Company's board. The certificates of
designation for Series C Preferred and Series D Preferred (the "New Preferred")
change these provisions by excluding from the definition of "Change of Control"
transactions that are defined as "Non-Approved Changes of Control." In general,
a Non-Approved Change of Control transaction is a change of control transaction
that the board has disapproved and which the board has not facilitated by such
actions as weakening or eliminating the Company's Stockholder Rights Plan.
If a Non-Approved Change of Control occurs, the holders of the New
Preferred obtain the following additional rights, but only if, prior to the
transaction, the board does not elect to offer the holders of the New Preferred
essentially the same redemption rights that apply to an approved Change of
Control transaction:
. The holder of the Series C Preferred would elect a majority of the board
for a specified period and, during such period, the unanimous vote of the
board would be required to approve any optional redemption of the New
Preferred or to declare, pay, or change the accrual rate of, any
dividends on the New Preferred.
. Upon liquidation, the holders of the New Preferred would receive, in
addition to the liquidation preference and accrued dividends, an amount
equal to 6.25% of the liquidation preference, compounded annually from
the date the Series A Preferred was issued, in the case of the Series C
Preferred, or the date the Series B was issued, in the case of the Series
D Preferred, and ending on the date of the Non Approved Change of
Control. In addition, after holders of the Common Stock have received the
equivalent amount, the holders of the New Preferred would participate
with the holders of the Common Stock in any remaining amounts available
for distribution (based upon the number of shares of Common Stock into
which such Preferred shares would then be convertible).
. Dividends would begin to accrue on the New Preferred. Accrued dividends
would not be payable until liquidation or sale of the Company, unless the
board by unanimous vote approves earlier payment. The dividend rate would
be 10% per annum of the liquidation preference, compounded annually. If
these dividends are not paid quarterly, additional dividends would accrue
at the rate of 8% per annum of the liquidation preference, compounded
annually. Any regular or additional dividends that are not paid quarterly
would be added to the liquidation preference.
Stockholders Rights Plan. The Company adopted a Stockholders Rights Plan on
September 28, 2001 (with a record date of October 19, 2001). This plan and
other provisions of the Company's charter and bylaws may have the effect of
deferring hostile takeovers or delaying or preventing changes in control or
management of the Company, including transactions in which the shareholders of
the Company might otherwise receive a premium for their shares over then
current market prices. The rights expire on September 27, 2011.
40
REPORT OF INDEPENDENT AUDITORS
Board of Directors
United Rentals, Inc. (Parent Company of United Rentals (North America), Inc.)
We have audited the accompanying consolidated balance sheets of United
Rentals (North America), Inc. as of December 31, 2000 and 1999 and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 2000. These
consolidated financial statements are the responsibility of the management of
United Rentals (North America), Inc. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of United Rentals (North America), Inc. at December 31, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
MetroPark, New Jersey
February 23, 2001
41
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED BALANCE SHEETS
December 31
----------------------
2000 1999
---------- ----------
(In thousands,
except share data)
Assets
Cash and cash equivalents................................................. $ 34,384 $ 23,811
Accounts receivable, net of allowance for doubtful accounts of $55,624 and
$58,376 at 2000 and 1999, respectively.................................. 469,594 434,985
Inventory................................................................. 133,380 129,473
Prepaid expenses and other assets......................................... 104,493 37,125
Rental equipment, net..................................................... 1,732,835 1,659,733
Property and equipment, net............................................... 387,432 276,524
Goodwill, net of accumulated amortization of $103,219 and $49,556 at 2000
and 1999, respectively.................................................. 2,215,532 1,853,279
Other intangible assets, net.............................................. 11,476 10,093
---------- ----------
$5,089,126 $4,425,023
========== ==========
Liabilities and Stockholder's Equity
Liabilities:
Accounts payable....................................................... $ 260,155 $ 212,565
Debt................................................................... 2,675,367 2,266,148
Deferred taxes......................................................... 206,243 81,229
Accrued expenses and other liabilities................................. 119,172 171,807
---------- ----------
Total liabilities.................................................. 3,260,937 2,731,749
Commitments and contingencies
Stockholder's equity:
Common stock--$.01 par value, 3,000 shares authorized, 1,000
shares issued and outstanding........................................
Additional paid-in capital............................................. 1,507,661 1,507,330
Retained earnings...................................................... 327,475 185,627
Accumulated other comprehensive (loss) income.......................... (6,947) 317
---------- ----------
Total stockholder's equity......................................... 1,828,189 1,693,274
---------- ----------
$5,089,126 $4,425,023
========== ==========
See accompanying notes.
42
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31
----------------------------------
2000 1999 1998
---------- ---------- ----------
(In thousands)
Revenues:
Equipment rentals.................................... $2,056,683 $1,581,026 $ 895,466
Sales of rental equipment............................ 347,678 235,678 119,620
Sales of equipment and merchandise and other revenues 514,500 416,924 205,196
---------- ---------- ----------
Total revenues........................................ 2,918,861 2,233,628 1,220,282
Cost of revenues:
Cost of equipment rentals, excluding depreciation.... 907,477 676,972 394,750
Depreciation of rental equipment..................... 328,131 280,641 175,910
Cost of rental equipment sales....................... 208,182 136,678 66,136
Cost of equipment and merchandise sales and other
operating costs.................................... 386,501 314,419 160,038
---------- ---------- ----------
Total cost of revenues................................ 1,830,291 1,408,710 796,834
---------- ---------- ----------
Gross profit.......................................... 1,088,570 824,918 423,448
Selling, general and administrative expenses.......... 454,330 344,328 195,620
Merger-related expenses............................... 47,178
Non-rental depreciation and amortization.............. 78,583 57,941 34,684
---------- ---------- ----------
Operating income...................................... 555,657 422,649 145,966
Interest expense...................................... 228,779 139,828 64,157
Other (income) expense, net........................... (1,836) (1,646) (5,097)
---------- ---------- ----------
Income before provision for income taxes and
extraordinary item.................................. 328,714 284,467 86,906
Provision for income taxes............................ 136,416 116,628 46,971
---------- ---------- ----------
Income before extraordinary item...................... 192,298 167,839 39,935
Extraordinary item, net of tax benefit of $14,255..... 21,337
---------- ---------- ----------
Net income............................................ $ 192,298 $ 167,839 $ 18,598
========== ========== ==========
See accompanying notes.
43
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Common Stock Accumulated
---------------- Additional Other
Number Paid-in Retained Comprehensive Comprehensive
of Shares Amount Capital Earnings Income (Loss) Income
--------- ------ ---------- -------- ------------- -------------
(In thousands except share amounts)
Balance, December 31, 1997............. 1,000 $ 402,320 $ 44,068
Comprehensive Income:
Net income.......................... 18,598 $ 18,598
Other comprehensive income:
Foreign currency translation
adjustments-.................... (281) $ (281)
--------
Comprehensive income................ $ 18,317
========
Contributed capital from Parent..... 563,045
Reclassification of Subchapter S
accumulated earnings to
capital from Parent................ 18,979 (18,979)
Pooling-of-interests................ 1 1,795
Subchapter S distributions of a
pooled entity...................... (3,536)
Dividend distribution to Parent..... (4,658)
----- --- ---------- -------- -------
Balance, December 31, 1998............. 1,000 984,345 37,288 (281)
Comprehensive income:
Net income.......................... 167,839 $167,839
Other comprehensive income:
Foreign currency translation
adjustments..................... 598 598
--------
Comprehensive income................ $168,437
========
Contributed capital from parent..... 522,985
Dividend distributions to parent.... (19,500)
----- --- ---------- -------- -------
Balance, December 31, 1999............. 1,000 1,507,330 185,627 317
Comprehensive income:
Net income.......................... 192,298 192,298
Other comprehensive income:
Foreign currency translation
adjustments..................... (7,264) (7,264)
--------
Comprehensive income................ $185,034
========
Contributed capital from parent..... 331
Dividend distributions to parent.... (50,450)
----- --- ---------- -------- -------
Balance, December 31, 2000............. 1,000 $1,507,661 $327,475 $(6,947)
===== === ========== ======== =======
See accompanying notes.
44
UNITED RENTALS (NORTH AMERICA), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-----------------------------------
2000 1999 1998
--------- ----------- -----------
(In thousands)
Cash Flows From Operating Activities:
Net income....................................................................... $ 192,298 $ 167,839 $ 18,598
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................. 406,714 342,403 211,747
Gain on sales of rental equipment.............................................. (139,496) (99,000) (53,484)
Gain on sale of businesses..................................................... (4,084) (1,842) (4,189)
Write down of assets held for sale............................................. 4,040
Extraordinary item............................................................. 35,592
Deferred taxes................................................................. 109,280 41,820 27,345
Changes in operating assets and liabilities:
Accounts receivable........................................................... 8,613 (93,716) (53,368)
Inventory..................................................................... 69,706 (6,544) (6,392)
Prepaid expenses and other assets............................................. (77,579) 34,701 12,693
Accounts payable.............................................................. 14,290 47,586 25,737
Accrued expenses and other liabilities........................................ (65,062) (8,065) (7,713)
--------- ----------- -----------
Net cash provided by operating activities.................................. 514,680 425,182 210,606
--------- ----------- -----------
Cash Flows From Investing Activities:
Purchases of rental equipment.................................................... (808,204) (718,112) (479,534)
Purchases of property and equipment.............................................. (140,699) (109,468) (69,643)
Proceeds from sales of rental equipment.......................................... 347,678 235,678 119,620
Proceeds from sale of businesses................................................. 19,246 6,521 10,640
Purchases of other companies..................................................... (347,337) (986,790) (911,837)
Payments of contingent purchase price............................................ (16,266) (8,216) (3,956)
--------- ----------- -----------
Net cash used in investing activities...................................... (945,582) (1,580,387) (1,334,710)
--------- ----------- -----------
Cash Flows From Financing Activities:
Capital contributions by Parent.................................................. 331 522,985 492,590
Proceeds from debt............................................................... 456,202 1,083,616 1,263,637
Payments on debt................................................................. (134,599) (497,650) (685,667)
Proceeds from sale-leaseback..................................................... 193,478 88,000 35,000
Dividend distributions to Parent................................................. (50,450) (19,500) (4,658)
Subchapter S distributions of a pooled entity.................................... (3,536)
Payments of financing costs...................................................... (16,223) (19,443) (24,982)
--------- ----------- -----------
Net cash provided by financing activities.................................. 448,739 1,158,008 1,072,384
Effect of foreign exchange rates................................................. (7,264) 598 (281)
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents............................. 10,573 3,401 (52,001)
Cash and cash equivalents at beginning of year................................... 23,811 20,410 72,411
--------- ----------- -----------
Cash and cash equivalents at end of year......................................... $ 34,384 $ 23,811 $ 20,410
========= =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest........................................................... $ 229,263 $ 104,785 $ 38,499
Cash paid for taxes, net of refunds.............................................. $ 23,746 $ 17,509 $ 10,224
Supplemental schedule of non cash investing and financing activities:
The Company acquired the net assets and assumed certain liabilities of other
companies as follows:
Assets, net of cash acquired................................................... $ 565,114 $ 1,468,567 $ 1,501,467
Liabilities assumed............................................................ (142,277) (472,382) (518,861)
Less:
Amounts paid in common stock and warrants of the Parent....................... (10,000) (60,304)
Amounts paid through issuance of debt......................................... (65,500) (9,395) (10,465)
--------- ----------- -----------
Net cash paid.................................................................... $ 347,337 $ 986,790 $ 911,837
========= =========== ===========
See accompanying notes.
45
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
United Rentals (North America), Inc., ("URI") and subsidiaries is a wholly
owned subsidiary of United Rentals, Inc., which is principally a holding
company ("Holdings" or "Parent"). Holdings was incorporated in July 1998 and
became the parent of URI on August 5, 1998, pursuant to the reorganization of
the legal structure of URI. Prior to such reorganization, the name of URI was
United Rentals, Inc. References herein to the "Company" refer to URI and its
subsidiaries.
Certain footnotes are not provided for the accompanying financial
statements as the information in Notes 1 through 9, 11 and 13 through 15 to the
consolidated financial statements of United Rentals, Inc. included elsewhere in
this report is substantially equivalent to that required for the consolidated
financial statements of URI and its subsidiaries. Earnings per share data is
not provided for the operating results of URI and subsidiaries, as they are
wholly owned subsidiaries of Holdings. URI's various credit agreements and debt
instruments place restrictions on its ability to transfer funds to its
shareholder.
Holdings provides certain services to URI in connection with its
operations. These services principally include: (i) senior management services,
(ii) finance related services and support, (iii) information technology systems
and support and (iv) acquisition related services. 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 the
Company. 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, and
expects that it will in the future, make distributions to Holdings for, among
other things, enabling Holdings to pay dividends on its preferred securities.
2. Capital Stock and Contributions
At December 31, 2000, the Company has authorized 3,000 shares of its $0.01
par value common stock of which 1,000 shares are issued and outstanding. All of
the issued and outstanding common shares are owned by its Parent.
Pursuant to the reorganization described in Note 1, the net proceeds from
the Company's initial public offering completed in December 1997 and the public
offering completed in March 1998 have been reflected as Contributed Capital
from the Parent in the accompanying statement of stockholder's equity. Holdings
also contributed the net proceeds from the issuance of redeemable convertible
preferred securities in August 1998 to URI. During 1999, Holdings contributed
the net proceeds from the issuance of common stock in a public offering and the
net proceeds from the issuance of perpetual convertible preferred stock to URI.
3. Condensed Consolidating Financial Information of Guarantor Subsidiaries
Certain indebtedness of URI is guaranteed by URI's United States
subsidiaries (the "guarantor subsidiaries") but is not guaranteed by URI's
foreign subsidiaries (the "non-guarantor subsidiaries"). The guarantor
subsidiaries are all wholly-owned and the guarantees are made on a joint and
several basis and are full and unconditional (subject to subordination
provisions and subject to a standard limitation which provides that the maximum
amount guaranteed by each guarantor will not exceed the maximum amount that can
be guaranteed without making the guarantee void under fraudulent
46
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
conveyance laws). All expenses incurred by URI have been charged by URI to its
guarantor and non-guarantor subsidiaries. Separate consolidated financial
statements of the guarantor subsidiaries have not been presented because
management believes that such information would not be material to investors.
However, condensed consolidating financial information as of December 31, 2000
and 1999, and for each of the three years in the period ended December 31,
2000, are presented. The condensed consolidating financial information of URI
and its subsidiaries are as follows:
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2000
Guarantor Non-Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ------------- ------------ ------------
(In thousands)
Assets
Cash and cash equivalents.................. $ 29,733 $ 4,651 $ 34,384
Accounts receivable, net................... $ 216,444 143,295 109,855 469,594
Intercompany receivable (payable).......... 319,423 (55,187) (264,236)
Inventory.................................. 54,022 73,979 5,379 133,380
Prepaid expenses and other assets.......... 28,263 75,633 597 104,493
Rental equipment, net...................... 837,972 766,219 128,644 1,732,835
Property and equipment, net................ 139,871 231,195 16,366 387,432
Investment in subsidiaries................. 2,257,692 $(2,257,962)
Intangible assets, net..................... 960,444 1,132,438 134,126 2,227,008
---------- ---------- ---------- ----------- ----------
$4,814,131 $2,397,305 $ 135,382 $(2,257,962) $5,089,126
========== ========== ========== =========== ==========
Liabilities and Stockholder's Equity
Liabilities:
Accounts payable........................ $ 78,623 $ 165,677 $ 15,855 $ 260,155
Debt.................................... 2,647,144 3,484 24,739 2,675,367
Deferred taxes.......................... 186,091 20,702 (550) 206,243
Accrued expenses and other liabilities.. 86,560 18,862 13,750 119,172
---------- ---------- ---------- ----------- ----------
Total liabilities.................... 2,998,418 208,725 53,794 3,260,937
Commitments and contingencies
Stockholder's equity:
Common stock............................
Additional paid-in capital.............. 1,488,238 1,830,500 65,657 (1,876,734) 1,507,661
Retained earnings....................... 327,475 358,080 22,878 (380,958) 327,475
Accumulated other comprehensive
loss................................... (6,947) (6,947)
---------- ---------- ---------- ----------- ----------
Total stockholder's equity........... 1,815,713 2,188,580 81,588 $(2,257,692) 1,828,189
---------- ---------- ---------- ----------- ----------
$4,814,131 $2,397,305 $ 135,382 $(2,257,692) $5,089,126
========== ========== ========== =========== ==========
47
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 1999
---------------------------------------------------------------
Guarantor Non-Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ------------- ------------ ------------
(In thousands)
Assets
Cash and cash equivalents.................. $ 3,689 $ 16,414 $ 3,708 $ 23,811
Accounts receivable, net................... 200,419 199,981 34,585 434,985
Intercompany receivable (payable).......... 142,156 42,906 (185,062)
Inventory.................................. 56,086 64,253 9,134 129,473
Prepaid expenses and other assets.......... 1,020 18,296 17,809 37,125
Rental equipment, net...................... 747,232 789,967 122,534 1,659,733
Property and equipment, net................ 150,841 106,232 19,451 276,524
Investment in subsidiaries................. 2,072,115 $(2,072,115)
Intangible assets, net..................... 792,198 948,128 123,046 1,863,372
---------- ---------- --------- ----------- ----------
$4,165,756 $2,186,177 $ 145,205 $(2,072,115) $4,425,023
========== ========== ========= =========== ==========
Liabilities and Stockholder's Equity
Liabilities:
Accounts payable........................ $ 71,995 $ 120,511 $ 20,059 $ 212,565
Debt.................................... 2,231,923 380 33,845 2,266,148
Deferred income taxes................... 80,476 753 81,229
Accrued expenses and other liabilities.. 107,828 53,177 10,802 171,807
---------- ---------- --------- ----------- ----------
Total liabilities.................... 2,492,222 174,068 65,459 2,731,749
Commitments and contingencies
Stockholder's equity:
Common stock............................
Additional paid-in capital.............. 1,487,907 1,830,182 65,644 $(1,876,403) 1,507,330
Retained earnings....................... 185,627 181,927 13,785 (195,712) 185,627
Accumulated other comprehensive
income................................. 317 317
---------- ---------- --------- ----------- ----------
Total stockholder's equity........... 1,673,534 2,012,109 79,746 (2,072,115) 1,693,274
---------- ---------- --------- ----------- ----------
$4,165,756 $2,186,177 $ 145,205 $(2,072,115) $4,425,023
========== ========== ========= =========== ==========
48
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2000
Guarantor Non-Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals......................... $ 851,541 $1,094,613 $ 110,529 $2,056,683
Sales of rental equipment................. 145,519 178,576 23,583 347,678
Sales of equipment and merchandise and
other revenues........................... 253,798 229,219 31,483 514,500
---------- ---------- ---------- ---------- ----------
Total revenues.............................. 1,250,858 1,502,408 165,595 2,918,861
Cost of revenues:
Cost of equipment rentals, excluding
depreciation............................. 364,047 494,350 49,080 907,477
Depreciation of rental equipment.......... 152,640 155,239 20,252 328,131
Cost of rental equipment sales............ 87,161 106,617 14,404 208,182
Cost of equipment and merchandise sales
and other operating costs................ 197,190 164,186 25,125 386,501
---------- ---------- ---------- ---------- ----------
Total cost of revenues...................... 801,038 920,392 108,861 1,830,291
---------- ---------- ---------- ---------- ----------
Gross profit................................ 449,820 582,016 56,734 1,088,570
Selling, general and administrative expenses 184,135 245,431 24,764 454,330
Non-rental depreciation and amortization.... 33,692 39,618 5,273 78,583
---------- ---------- ---------- ---------- ----------
Operating income............................ 231,993 296,967 26,697 555,657
Interest expense............................ 217,904 135 10,740 228,779
Other (income) expense, net................. 2,129 (4,285) 320 (1,836)
---------- ---------- ---------- ---------- ----------
Income before provision for income taxes.... 11,960 301,117 15,637 328,714
Provision for income taxes.................. 4,908 124,964 6,544 136,416
---------- ---------- ---------- ---------- ----------
Income before equity in net earnings of
subsidiaries............................... 7,052 176,153 9,093 $ (185,246) 7,052
Equity in net earnings of subsidiaries...... 185,246 185,246
---------- ---------- ---------- ---------- ----------
Net income.................................. $ 192,298 $ 176,153 $ 9,093 $ (185,246) $ 192,298
========== ========== ========== ========== ==========
49
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
Guarantor Non-Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals......................... $600,431 $ 880,182 $100,413 $1,581,026
Sales of rental equipment................. 113,982 106,737 14,959 235,678
Sales of equipment and merchandise and
other revenues........................... 195,647 189,829 31,448 416,924
-------- ---------- -------- --------- ----------
Total revenues.............................. 910,060 1,176,748 146,820 2,233,628
Cost of revenues:
Cost of equipment rentals, excluding
depreciation............................. 250,959 381,718 44,295 676,972
Depreciation of rental equipment.......... 116,385 146,622 17,634 280,641
Cost of rental equipment sales............ 62,972 64,945 8,761 136,678
Cost of equipment and merchandise sales
and other operating costs................ 161,902 128,328 24,189 314,419
-------- ---------- -------- --------- ----------
Total cost of revenues...................... 592,218 721,613 94,879 1,408,710
-------- ---------- -------- --------- ----------
Gross profit................................ 317,842 455,135 51,941 824,918
Selling, general and administrative expenses 144,341 177,456 22,531 344,328
Non-rental depreciation and amortization.... 29,667 24,617 3,657 57,941
-------- ---------- -------- --------- ----------
Operating income............................ 143,834 253,062 25,753 422,649
Interest expense............................ 132,929 1,428 5,471 139,828
Other (income) expense, net................. (1,549) (524) 427 (1,646)
-------- ---------- -------- --------- ----------
Income before provision for income taxes.... 12,454 252,158 19,855 284,467
Provision for income taxes.................. 3,039 105,531 8,058 116,628
-------- ---------- -------- --------- ----------
Income before equity in net earnings of
subsidiaries............................... 9,415 146,627 11,797 $(158,424) 9,415
Equity in net earnings of subsidiaries...... 158,424 158,424
-------- ---------- -------- --------- ----------
Net income.................................. $167,839 $ 146,627 $ 11,797 $(158,424) $ 167,839
======== ========== ======== ========= ==========
50
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
Guarantor Non-Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals.......................... $213,823 $649,508 $32,135 $ 895,466
Sales of rental equipment.................. 17,992 96,739 4,889 119,620
Sales of equipment and merchandise and
other revenues............................ 58.582 131,427 15,187 205,196
-------- -------- ------- ------- ----------
Total revenues................................ 290,397 877,674 52,211 1,220,282
Cost of revenues:
Cost of equipment rentals, excluding
depreciation.............................. 91,100 289,892 13,758 394,750
Depreciation of rental equipment........... 45,602 125,810 4,498 175,910
Cost of rental equipment sales............. 8,586 54,805 2,745 66,136
Cost of equipment and merchandise sales
and other operating costs................. 49,754 98,332 11,952 160,038
-------- -------- ------- ------- ----------
Total cost of revenues........................ 195,042 568,839 32,953 796,834
-------- -------- ------- ------- ----------
Gross profit.................................. 95,355 308,835 19,258 423,448
Selling, general and administrative expenses.. 31,092 155,512 9,016 195,620
Merger-related expenses....................... 47,178 47,178
Non-rental depreciation and amortization...... 8,682 24,769 1,233 34,684
-------- -------- ------- ------- ----------
Operating income.............................. 55,581 81,376 9,009 145,966
Interest expense.............................. 33,006 24,193 6,958 64,157
Other (income) expense, net................... (2,481) (2,605) (11) (5,097)
-------- -------- ------- ------- ----------
Income before provision for income taxes and
extraordinary item........................... 25,056 59,788 2,062 86,906
Provision for income taxes.................... 13,850 33,047 74 46,971
-------- -------- ------- ------- ----------
Income before extraordinary item and equity in
net earnings of subsidiaries................. 11,206 26,741 1,988 39,935
Extraordinary item, net....................... 21,337 21,337
-------- -------- ------- ------- ----------
Income before equity in net earnings of
subsidiaries................................. 11,206 5,404 1,988 $(7,392) 11,206
Equity in net earnings of subsidiaries........ 7,392 7,392
-------- -------- ------- ------- ----------
Net income.................................... $ 18,598 $ 5,404 $ 1,988 $(7,392) $ 18,598
======== ======== ======= ======= ==========
51
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2000
Guarantor Non-Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
--------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by operating activities... $ 243,759 $ 227,855 $ 43,066 $ 514,680
Cash Flows From Investing Activities:
Purchases of rental equipment............ (489,259) (283,488) (35,457) (808,204)
Purchases of property and equipment...... (34,477) (102,510) (3,712) (140,699)
Proceeds from sales of rental equipment.. 145,519 178,576 23,583 347,678
Proceeds from sale of businesses......... 16,246 3,000 19,246
Payments of contingent purchase price.... (3,030) (13,236) (16,266)
Purchases of other companies............. (337,257) (10,080) (347,337)
--------- --------- -------- ---- ---------
Net cash used in investing
activities........................... (702,258) (217,658) (25,666) (945,582)
Cash Flows from Financing Activities:
Dividend distributions to Parent......... (50,450) (50,450)
Proceeds from debt....................... 452,912 3,290 456,202
Repayments of debt....................... (125,238) (168) (9,193) (134,599)
Proceeds from sale-leaseback............. 193,478 193,478
Payments of financing costs.............. (16,223) (16,223)
Capital contributions by parent.......... 331 331
--------- --------- -------- ---- ---------
Net cash provided by financing
activities........................... 454,810 3,122 (9,193) 448,739
Effect of foreign exchange rates......... (7,264) (7,264)
--------- --------- -------- ---- ---------
Net increase (decrease) in cash and cash
equivalents................................ (3,689) 13,319 943 10,573
Cash and cash equivalents at beginning of
period..................................... 3,689 16,414 3,708 23,811
--------- --------- -------- ---- ---------
Cash and cash equivalents at end of
period..................................... $ $ 29,733 $ 4,651 $ 34,384
========= ========= ======== ==== =========
Supplemental disclosure of cash flow
information:
Cash paid for interest...................... $ 218,346 $ 135 $ 10,782 $ 229,263
Cash paid for income taxes.................. $ 19,833 $ 3,913 $ 23,746
Supplemental disclosure of non-cash
investing and financing activities:
The Company acquired the net assets and
assumed certain liabilities of other
companies as follows:
Assets, net of cash acquired............. $ 554,077 $ 11,037 $ 565,114
Liabilities assumed...................... (141,320) (957) (142,277)
Less:
Amounts paid in common stock and
warrants of Parent...................... (10,000) (10,000)
Amounts paid through issuance
of debt................................. (65,500) (65,500)
--------- --------- -------- ---- ---------
Net cash paid............................ $ 337,257 $ 10,080 $ 347,337
========= ========= ======== ==== =========
52
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 1999
Guarantor Non-Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by operating activities. $ 292,412 $ 13,185 $ 119,585 $ 425,182
Cash Flows From Investing Activities:
Purchases of rental equipment.......... (539,775) (99,365) (78,972) (718,112)
Purchases of property and equipment.... (74,634) (20,366) (14,468) (109,468)
Proceeds from sales of rental
equipment............................. 113,982 106,737 14,959 235,678
Proceeds from sale of businesses....... 1,040 2,354 3,127 6,521
Payments of contingent purchase price.. (2,387) (4,265) (1,564) (8,216)
Purchases of other companies........... (915,937) (70,853) (986,790)
----------- -------- --------- ----- -----------
Net cash used in investing
activities......................... (1,417,711) (14,905) (147,771) (1,580,387)
Cash Flows from Financing Activities:
Dividend distributions to Parent....... (19,500) (19,500)
Proceeds from debt..................... 1,025,843 26,524 31,249 1,083,616
Repayments of debt..................... (474,808) (20,958) (1,884) (497,650)
Proceeds from sale-leaseback........... 88,000 88,000
Payments of financing costs............ (18,995) (448) (19,443)
Capital contributions by parent........ 522,985 522,985
----------- -------- --------- ----- -----------
Net cash provided by financing
activities......................... 1,123,525 5,566 28,917 1,158,008
Effect of foreign exchange rates....... 598 598
----------- -------- --------- ----- -----------
Net increase (decrease) in cash and cash
equivalents.............................. (1,774) 3,846 1,329 3,401
Cash and cash equivalents at beginning of
period................................... 1,774 16,257 2,379 20,410
----------- -------- --------- ----- -----------
Cash and cash equivalents at end of
period................................... $ $ 20,103 $ 3,708 $ 23,811
=========== ======== ========= ===== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest.................... $ 98,728 $ 1,194 $ 4,863 $ 104,785
Cash paid for income taxes................ $ 16,372 $ 1,137 $ 17,509
Supplemental disclosure of non-cash
investing and financing activities:
The Company acquired the net assets and
assumed certain liabilities of other
companies as follows:
Assets, net of cash acquired........... $ 1,371,807 $ 96,760 $ 1,468,567
Liabilities assumed.................... (448,685) (23,697) (472,382)
Less:
Amounts paid through issuance of
debt.................................. (7,185) (2,210) (9,395)
----------- -------- --------- ----- -----------
Net cash paid.......................... $ 915,937 $ 70,853 $ 986,790
=========== ======== ========= ===== ===========
53
UNITED RENTALS (NORTH AMERICA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 1998
Non-
Guarantor Guarantor Consolidated
URI Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------ ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities.................................... $ (63,760) $ 206,996 $ 67,370 $ 210,606
Cash Flows From Investing Activities:
Purchases of rental equipment............... (415,140) (50,494) (13,900) (479,534)
Purchases of property and equipment......... (65,742) (2,851) (1,050) (69,643)
Proceeds from sales of rental
equipment.................................. 17,992 96,739 4,889 119,620
Proceeds from sale of businesses............ 10,640 10,640
Payments of contingent purchase price....... (2,800) (1,156) (3,956)
Purchases of other companies................ (840,730) (12,510) (58,597) (911,837)
----------- --------- -------- ----- -----------
Net cash used in investing
activities.............................. (1,292,980) 28,084 (69,814) (1,334,710)
Cash Flows from Financing Activities:
Dividend distributions to Parent............ (4,658) (4,658)
Proceeds from debt.......................... 1,225,586 10,187 27,864 1,263,637
Repayments of debt.......................... (432,222) (230,685) (22,760) (685,667)
Proceeds from sale-leaseback................ 35,000 35,000
Payments of financing costs................. (24,982) (24,982)
Capital contributions by parent............. 492,590 492,590
Distributions to stockholders............... (3,536) (3,536)
----------- --------- -------- ----- -----------
Net cash provided by (used in)
financing activities.................... 1,291,314 (224,034) 5,104 1,072,384
Effect of foreign exchange rates............ (281) (281)
----------- --------- -------- ----- -----------
Net increase (decrease) in cash and cash
equivalents................................... (65,426) 11,046 2,379 (52,001)
Cash and cash equivalents at beginning of
period........................................ 67,200 5,211 72,411
----------- --------- -------- ----- -----------
Cash and cash equivalents at end of period..... $ 1,774 $ 16,257 $ 2,379 $ 20,410
=========== ========= ======== ===== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest......................... $ 27,085 $ 11,098 $ 316 $ 38,499
Cash paid for income taxes..................... $ 8,034 $ 2,190 $ 10,224
Supplemental disclosure of non-cash
investing and financing activities:
The Company acquired the net assets and
assumed certain liabilities of other companies
as follows:
Assets, net of cash acquired................ $ 1,409,516 $ 12,510 $ 79,441 $ 1,501,467
Liabilities assumed......................... (500,228) (18,633) (518,861)
Less:
Amounts paid in common stock and
warrants of Parent......................... (58,093) (2,211) (60,304)
Amounts paid through issuance of debt....... (10,465) (10,465)
----------- --------- -------- ----- -----------
Net cash paid............................... $ 840,730 $ 12,510 $ 58,597 $ 911,837
=========== ========= ======== ===== ===========
54
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES
Board of Directors
United Rentals, Inc.
We have audited the consolidated financial statements of United Rentals,
Inc. as of December 31, 2000 and 1999, and for each of the three years in the
period ended December 31, 2000, and have issued our report thereon dated
February 23, 2001, except for Note 2, paragraphs 9, 10 and 11, and Note 17 as
to which the date is September 28, 2001, included elsewhere in this Amendment
No. 1 on Form 10-K/A. Our audits also included the financial statement
schedules listed in Item 14(a)(2). These schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
February 23, 2001, except for
Note 4 as to which the date
is September 28, 2001
55
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
UNITED RENTALS, INC.
CONDENSED BALANCE SHEET
December 31
----------------------
2000 1999
---------- ----------
Restated (see Note 4)
(In thousands)
Assets
Prepaid expenses and other assets................ $ 31,554
Property and equipment, net...................... $ 34,807 28,383
Investment in and advances to subsidiaries....... 1,839,952 1,702,802
---------- ----------
$1,874,759 $1,762,739
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable.............................. $ 30,381
Debt.......................................... $ 300,000 300,000
Accrued expenses and other liabilities........ 28,816 34,872
---------- ----------
Total liabilities......................... 328,816 365,253
Commitments and contingencies
Series A and B preferred stock................... 430,800 430,800
Stockholders' equity:
Common stock.................................. 711 721
Additional paid-in capital.................... 765,529 786,173
Retained earnings............................. 355,850 179,475
Accumulated other comprehensive (loss) income. (6,947) 317
---------- ----------
Total stockholders' equity................ 1,115,143 966,686
---------- ----------
$1,874,759 $1,762,739
========== ==========
See accompanying notes.
56
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
UNITED RENTALS, INC.
CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31
---------------------------
2000 1999 1998
-------- -------- -------
(In thousands)
Selling, general and administrative expenses...... $ 8,267
Non-rental depreciation and amortization.......... $ 7,718 4,926 $ 561
-------- -------- -------
Operating loss.................................... (7,718) (13,193) (561)
Interest expense.................................. 19,500 19,500 7,854
Other (income) expense, net....................... 9,689
-------- -------- -------
Loss before benefit for income taxes.............. (27,218) (42,382) (8,415)
Benefit for income taxes.......................... 11,295 17,487 3,472
-------- -------- -------
Net loss before equity in earnings of subsidiaries (15,923) (24,895) (4,943)
Equity in earnings of subsidiaries................ 192,298 167,561 18,404
-------- -------- -------
Net income........................................ $176,375 $142,666 $13,461
======== ======== =======
See accompanying notes.
57
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
UNITED RENTALS, INC.
CONDENSED CASH FLOW INFORMATION
Year Ended December 31,
------------------------------
2000 1999 1998
-------- --------- ---------
(In thousands)
Net cash used in operating activities................ $(37,379) $ (4,824) $ (4,157)
Cash Flows from Investing Activities:
Purchase of property and equipment................ (13,071) (14,181) (15,535)
Capital contributed to subsidiary................. (331) (522,985) (492,590)
-------- --------- ---------
Net cash used in investing activities......... (13,402) (537,166) (508,125)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock and
warrants, net of issuance costs................. 64,701 207,005
Proceeds from the issuance of Series A and B
preferred stock, net of issuance costs.......... 430,800
Proceeds from debt................................ 300,000
Proceeds from the exercise of stock options....... 331 26,989 619
Proceeds from dividends from subsidiary........... 50,450 19,500 4,658
-------- --------- ---------
Net cash provided by financing activities..... 50,781 541,990 512,282
-------- --------- ---------
Net increase in cash and cash equivalents.........
Cash and cash equivalents at beginning of
period..........................................
-------- --------- ---------
Cash and cash equivalents at end of
period...................................... $ $ $
======== ========= =========
See accompanying notes.
58
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
UNITED RENTALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
United Rentals, Inc. is principally a holding company ("Holdings") and
conducts its operations primarily through its wholly owned subsidiary United
Rentals (North America), Inc. ("URI") and subsidiaries. In the parent
company-only financial statements, Holdings, investment in subsidiaries is
stated at cost plus equity in undistributed earnings of subsidiaries since the
date of acquisition. Holdings share of net income of its unconsolidated
subsidiaries is included in consolidated income using the equity method. The
parent company-only financial statements should be read in conjunction with the
Company's consolidated financial statements.
2. Debt
See Note 10 to the Consolidated Financial Statements for information
concerning debt.
3. Guarantee
See Note 10 to the Consolidated Financial Statements for information
concerning the guarantee.
4. Preferred Stock
See Note 2 to the Consolidated Financial Statements for certain information
concerning the Series A and B preferred stock.
59
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
UNITED RENTALS, INC.
(In thousands)
Additions
------------------
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Other Deductions of Period
----------- ---------- ---------- ------- ---------- ---------
Year ended December 31, 2000:
Allowance for doubtful accounts.................. $58,376 $38,431 $14,791(a) $55,974(c) $55,624
Reserve for inventory obsolescence and shrinkage. 16,782 9,124 11,302(b) 21,747(d) 15,461
Insurance reserves............................... 22,750 30,027 37,333(e) 15,444
Year ended December 31, 1999:
Allowance for doubtful accounts.................. 43,481 46,121 23,568(a) 54,794(c) 58,376
Reserve for inventory obsolescence and shrinkage. 9,288 6,857 11,975(b) 11,338(d) 16,782
Insurance reserves............................... 20,553 49,223 47,026(e) 22,750
Year ended December 31, 1998:
Allowance for doubtful accounts.................. 11,085 24,810 19,079(a) 11,493(c) 43,481
Reserve for inventory obsolescence and shrinkage. 620 3,254 6,068(b) 654(d) 9,288
Insurance reserves............................... 11,665 16,456 7,568(e) 11,665
--------
(a)Represents allowance for doubtful accounts established through acquisitions.
(b)Represents reserve for inventory obsolescence and shrinkage assumed through
acquisitions.
(c)Represents write-offs of accounts, net of recoveries.
(d)Represents write-offs of inventory items.
(e)Represents payments.
60
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Consolidated Financial Statements:
Report of Independent Auditors
United Rentals, Inc. Consolidated Balance Sheets--December 31, 2000 and 1999
United Rentals, Inc. Consolidated Statements of Operations for the years ended December 31,
2000, 1999 and 1998
United Rentals, Inc. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2000, 1999 and 1998
United Rentals, Inc. Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Auditors
United Rentals (North America), Inc. Consolidated Balance Sheets--December 31, 2000 and
1999
United Rentals (North America), Inc. Consolidated Statements of Operations for the years
ended December 31, 2000, 1999 and 1998
United Rentals (North America), Inc. Consolidated Statements of Stockholder's Equity for the
years ended December 31, 2000, 1999 and 1998
United Rentals (North America), Inc. Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules:
Report of Independent Auditors on Financial Statement Schedules
Schedule I Condensed Financial Information of the Registrant
Schedule II Valuation and Qualifying Accounts
Schedules other than those listed are omitted as they are not applicable or
the required or equivalent information has been included in the financial
statements or notes thereto.
(a)(3) Exhibits:
A revised version of Exhibit 23 is being filed with this amendment.
(b) Reports on Form 8-K:
1. Form 8-K dated December 18, 2000 (earliest event reported December 18,
2000); Item 5 was reported.
2. Form 8-K dated December 18, 2000 (earliest event reported December 18,
2000); Item 5 was reported.
61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.
UNITED RENTALS, INC.
Date: October 9, 2001
/S/ MICHAEL J. NOLAN
By: _________________________________
Michael J. Nolan
Chief Financial Officer
62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.
UNITED RENTALS (NORTH AMERICA), INC.
Date: October 9, 2001 /s/ MICHAEL J. NOLAN
By: _________________________________
Michael J. Nolan
Chief Financial Officer
63