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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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UNITED RENTALS (NORTH AMERICA), INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 7353 06-1493538
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification No.)
(FOR CO-REGISTRANTS, PLEASE SEE "TABLE OF CO-REGISTRANTS"
ON THE FOLLOWING PAGE)
Five Greenwich Office Park
Greenwich, Connecticut 06830
(203) 622-3131
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-----------------
Michael J. Nolan
United Rentals (North America), Inc.
Five Greenwich Office Park
Greenwich, Connecticut 06830
(203) 622-3131
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
-----------------
A copy of all communications, including communications sent to the agent for
service, should be sent to:
Joseph Ehrenreich, Esq. Malcolm E. Landau, Esq.
Ehrenreich Eilenberg & Krause LLP Weil, Gotshal & Manges LLP
11 East 44th Street 767 Fifth Avenue
New York, New York 10017 New York, New York 10153
(212) 986-9700 (212) 310-8000
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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness of this Registration
Statement and satisfaction of all other conditions to the exchange offer
described in the prospectus included herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered per unit offering price(1) registration fee
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10 3/4% Senior Notes Due 2008, Series B... $450,000,000 100% $450,000,000 $112,500
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Guarantees of the 10 3/4% Senior Notes Due
2008, Series B(2)....................... NA NA NA NA
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(1)The registration fee has been calculated pursuant to Rule 457(f)(2) under
the Securities Act of 1933, as amended (the "Act"). The Proposed Maximum
Aggregate Offering Price is estimated solely for the purpose of calculating
the registration fee.
(2)Represents the guarantees of the 10 3/4% Senior Notes Due 2008, Series B, to
be issued by the Co-Registrants. Pursuant to Rule 457(n) under the Act, no
additional registration fee is being paid in respect of the guarantees. The
guarantees are not traded separately.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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TABLE OF CO-REGISTRANTS
Primary
Standard
Industrial I.R.S. Employer State of
Exact name of Co-Registrant as specified in its charter Classification No. Identification No. Incorporation
------------------------------------------------------- ------------------ ------------------ -------------
Advance Barricades and Signing, Inc................ 7353 59-2080721 Florida
All Cities Trailer Exchange, Inc................... 7353 95-1795263 California
Arrow Equipment Company............................ 7353 36-2748973 Illinois
Coast Line Marking, Inc............................ 7353 59-2148039 Florida
Dealer Services Company............................ 7353 22-1944238 New Jersey
Equipment Leasing Services, Inc.................... 7353 87-03987482 Massachusetts
Frontenac Equipment, Inc........................... 7353 43-1501701 Missouri
Highway Supply Company............................. 7353 85-0331601 New Mexico
Jadco Signing, Inc................................. 7353 59-1358071 Florida
Liddell Management Co., Inc........................ 7353 04-3330504 Massachusetts
Rentals Unlimited, Incorporated.................... 7353 05-0373691 Rhode Island
Russ Enterprises, Inc.............................. 7353 94-2606250 California
Shoring & Supply Company, Inc...................... 7353 48-0761628 Kansas
Thoesen Equipment, Inc............................. 7353 36-3698654 Illinois
Traffic Markings South, Inc........................ 7353 58-2254706 Georgia
United Rentals Gulf, Inc........................... 7353 52-2192449 Delaware
United Equipment Rentals Gulf, L.P................. 7353 74-2930601 Texas
United Rentals Highway Technologies, Inc........... 7353 04-3076608 Massachusetts
United Rentals Highway Technologies Gulf, Inc...... 7353 06-1604996 Delaware
United Rentals Highway Technologies, L.P........... 7353 06-1604997 Texas
United Rentals, Inc................................ 7353 06-1522496 Delaware
United Rentals Northwest, Inc...................... 7353 93-0257120 Oregon
United Rentals Southeast, Inc...................... 7353 52-2192451 Delaware
United Rentals Southeast, L.P...................... 7353 58-2493444 Georgia
Wanamaker Rents, Incorporated...................... 7353 95-2053498 California
Warning Safety Lights, Inc......................... 7353 59-1026388 Florida
Warning Safety Lights of Georgia, Inc.............. 7353 59-1606334 Florida
Woudenberg Enterprises, Inc........................ 7353 86-0180710 Arizona
Highway Rentals, Inc............................... 7353 88-0112016 Nevada
Wynne Systems, Inc................................. 7353 33-0507674 California
The Address, Including Zip Code, and Telephone Number, Including Area Code,
of each of the Co-Registrant's Principal Executive Offices is c/o United
Rentals (North America), Inc., Five Greenwich Office Park, Greenwich,
Connecticut 06830, (203) 622-3131.
The Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent For Service for each of the Co-Registrants is Michael J. Nolan,
c/o United Rentals (North America), Inc., Five Greenwich Office Park,
Greenwich, Connecticut 06830, (203) 622-3131.
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, Dated July 10, 2001
PROSPECTUS
UNITED RENTALS (NORTH AMERICA), INC.
Offer to Exchange
$450,000,000 of 10 3/4% Senior Notes Due 2008, Series B
which have been registered under the Securities Act of 1933
For
$450,000,000 of unregistered 10 3/4% Senior Notes Due 2008, Series A
-----------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME
ON , 2001, UNLESS EXTENDED
We previously issued $450,000,000 aggregate principal amount of our 10 3/4%
Senior Notes due 2008. These securities were not registered under the
Securities Act of 1933. We are now offering you the opportunity to exchange
these unregistered notes for an equivalent amount of registered notes. The
registered notes will be identical in all material respects to the unregistered
notes, except for certain differences relating to transfer restrictions and
registration rights.
We will pay interest on the notes each April 15 and October 15. The first
interest payment will be made on October 15, 2001. We may redeem the notes on
or after April 15, 2005. Prior to April 15, 2004, we may redeem up to 35% of
the notes from the proceeds of equity offerings. There is no sinking fund for
the notes.
Our obligations under the notes will be guaranteed by our parent company,
United Rentals, Inc., and, subject to limited exceptions, our current and
future domestic subsidiaries. Our foreign subsidiaries will not be guarantors.
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INVESTING IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD
CONSIDER IN CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE NOTES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this prospectus is , 2001.
TABLE OF CONTENTS
Page
----
Cautionary Notice Regarding Forward Looking Statements. 1
Where You Can Find More Information.................... 1
Incorporation by Reference............................. 1
Prospectus Summary..................................... 2
Risk Factors........................................... 13
The Exchange Offer..................................... 19
Certain United States Federal Income Tax Considerations 26
Registration Rights Agreement.......................... 27
Use of Proceeds........................................ 29
Selected Consolidated Financial Information............ 30
Description of the Notes............................... 33
Plan of Distribution................................... 71
Legal Matters.......................................... 72
Experts................................................ 72
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We have not authorized anyone to give any information about this exchange
offer that is not included in this prospectus. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
registered notes in any place where, or to any person to whom, it is illegal to
do so. Use of this prospectus does not imply in any way that the information in
this prospectus, and our business affairs generally, have not changed since the
date of this prospectus.
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This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. This
information is available without charge to you upon written or oral request. If
you would like a copy of any of this information, please submit your request to
United Rentals (North America), Inc., Attention: Corporate Secretary, Five
Greenwich Office Park, Greenwich, Connecticut 06830, telephone number: (203)
622-3131.
IN ORDER TO OBTAIN TIMELY DELIVERY OF ANY INFORMATION YOU MAY REQUEST, YOU
MUST SUBMIT YOUR REQUEST NO LATER THAN , 2001, WHICH IS FIVE BUSINESS DAYS
BEFORE THE DATE THE EXCHANGE OFFER EXPIRES.
i
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in, or incorporated by reference in, this
prospectus are forward-looking in nature. Such statements can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "seek," "plan," "intend," or "anticipates" or the negative
thereof or comparable terminology, or by discussions of strategy. You are
cautioned that our business and operations are subject to a variety of risks
and uncertainties and, consequently, our actual results may materially differ
from those projected by any forward-looking statements. Certain of such risks
and uncertainties are discussed below under "Risk Factors." We make no
commitment to revise or update any forward-looking statements in order to
reflect events or circumstances after the date any such statement is made.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements, and other information with the SEC. Such
reports, proxy statements, and other information can be read and copied at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Room. The SEC maintains an internet site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC, including our company.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the documents that we file
with the SEC. This means that we can disclose important information to you by
referring you to those documents. Any information we incorporate in this manner
is considered part of this prospectus. Any information we file with the SEC
after the date of this prospectus and until this exchange offer is completed
will automatically update and supersede the information contained in this
prospectus.
We incorporate by reference the following documents that we have filed with
the SEC and any filings that we will make with the SEC in the future under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
during the period from July 10, 2001 (the date of the initial filing of the
registration statement of which this prospectus forms a part) until this
exchange offer is completed:
. Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
. Annual Report on Form 10-K for the year ended December 31, 2000;
. Current Report on Form 8-K dated April 30, 2001;
. Current Report on Form 8-K dated April 13, 2001;
. Current Report on Form 8-K dated February 28, 2001; and
. Current Report on Form 8-K dated January 2, 2001.
We will provide without charge, upon written or oral request, a copy of any
or all of the documents which are incorporated by reference into this
prospectus. Requests should be directed to: United Rentals (North America),
Inc., Attention: Corporate Secretary, Five Greenwich Office Park, Greenwich,
Connecticut 06830, telephone number: (203) 622-3131.
1
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and the financial statements and related notes that are included
elsewhere in this prospectus or in the documents that we incorporate by
reference into this prospectus.
Unless otherwise indicated, (i) the term "URI" refers to United Rentals
(North America), Inc., the issuer of the notes, (ii) the term "Holdings" refer
to United Rentals, Inc., the parent of URI and a guarantor of the notes, and
(iii) the terms "United Rentals," "we," "us," "our company" or "the company"
refer to Holdings and its subsidiaries.
The Company
United Rentals is the largest equipment rental company in North America with
approximately 750 locations in 47 states, seven Canadian provinces and Mexico.
We offer for rent over 600 different types of equipment to customers that
include construction and industrial companies, manufacturers, utilities,
municipalities, homeowners and others. In 2000, we served more than 1.2 million
customers and completed over 8.4 million rental transactions.
We have the largest fleet of rental equipment in the world, with over
500,000 units having an original purchase price of approximately $3.5 billion.
Our fleet includes:
. General construction and industrial equipment, such as backhoes, skid-steer
loaders, forklifts, earth moving equipment, material handling equipment,
compressors, pumps and generators;
. Aerial work platforms, such as scissor lifts and boom lifts;
. Traffic control equipment, such as barricades, cones, warning lights,
message boards and pavement marking systems;
. Trench safety equipment for below ground work, such as trench shields,
aluminum hydraulic shoring systems, slide rails, crossing plates,
construction lasers and line testing equipment;
. Special event equipment, such as large tents, light towers and power units
used for sporting, corporate and other events; and
. General tools and light equipment, such as power washers, water pumps,
heaters and hand tools.
In addition to renting equipment, we sell used rental equipment, act as a
dealer for new equipment and sell related merchandise, parts and service.
We estimate that the U.S. equipment rental industry has grown from
approximately $6.5 billion in annual rental revenues in 1990 to over $25
billion in 2000, representing a compound annual growth rate of approximately
14.5%. We believe that the principal driver of growth in the equipment rental
industry, in addition to general economic expansion, has been the increasing
recognition by equipment users of the many advantages that equipment rental may
offer compared with ownership. They recognize that by renting they can:
. avoid the large capital investment required for equipment purchases;
. access a broad selection of equipment and select the equipment best suited
for each particular job;
. reduce storage and maintenance costs; and
. access the latest technology without investing in new equipment.
2
While the construction industry has to date been the principal user of
rental equipment, industrial companies, utilities and others are increasingly
using rental equipment for plant maintenance, plant turnarounds and other
functions requiring the periodic use of equipment. The market for rental
equipment is also benefiting from increased government funding for
infrastructure projects, such as funding under the U.S. Transportation Equity
Act for the 21st Century ("TEA-21") and the Aviation Investment and Reform Act
for the 21st Century ("AIR-21"). TEA-21 earmarks $175 billion for highway
construction and $42 billion for transit spending over the 1998-2003 fiscal
period, a 40% increase over the prior six-year period. AIR-21 provides for $40
billion in construction spending over three years to support the FAA's airport
improvement programs.
Competitive Advantages
We believe that we benefit from the following competitive advantages:
Large and Diverse Rental Fleet. Our rental fleet is the largest and most
comprehensive in the industry, which allows us to:
. attract customers by providing "one-stop" shopping;
. serve a diverse customer base and reduce our dependence on any particular
customer or group of customers; and
. serve customers that require substantial quantities or wide varieties of
equipment.
Significant Purchasing Power. We purchase large amounts of equipment,
merchandise and other items, which enables us to negotiate favorable pricing,
warranty and other terms with our vendors. Our purchasing power is further
increased by our ongoing efforts to consolidate our vendor base. For example,
we reduced the number of our primary equipment suppliers from 111 to 28 in
2000. This reduction allowed us to lower our equipment purchase costs by
approximately $150 million in 2000 and should enable us to save additional
amounts in 2001. We expect to realize additional savings by consolidating our
merchandise suppliers and negotiating more favorable warranty terms with key
vendors.
Operating Efficiencies. We generally group our branches into clusters of 10
to 30 locations that are in the same geographic area. Our information
technology systems allow each branch to access all available equipment within a
cluster. We believe that our cluster strategy produces significant operating
efficiencies by enabling us to: (1) market equipment through all branches
within a cluster, (2) cross-market equipment specialties of different branches
within each cluster and (3) reduce costs by consolidating functions that are
common to our more than 750 branches, such as payroll, accounts payable and
credit and collection, into 25 credit offices and three service centers. In
2000, approximately 10.7% of our rental revenue was attributable to equipment
sharing among branches.
Information Technology Systems. Our information technology systems
facilitate our ability to make rapid and informed decisions, respond quickly to
changing market conditions, and share equipment among branches. These systems
allow: (1) management to obtain a wide range of operating and financial data,
(2) branch personnel to access and manage branch level data, such as customer
requirements, equipment availability and maintenance histories, and (3)
customers to access their accounts online. These systems promote equipment
sharing among branches by enabling branch personnel to locate needed equipment
within a geographic region, determine its closest location and arrange for its
delivery to a customer's work site. We have an in-house team of approximately
100 information technology specialists that supports our systems and extends
them to new locations.
Geographic and Customer Diversity. We have approximately 750 branches in 47
states, seven Canadian provinces and Mexico and served more than 1.2 million
customers in 2000. Our customers are diverse, ranging
3
from Fortune 500 companies to small companies and homeowners, and in 2000 our
top ten customers accounted for approximately 2% of our revenues. We believe
that our geographic and customer diversity provide us with many advantages
including: (1) enabling us to better serve National Account customers with
multiple locations, (2) helping us achieve favorable resale prices by allowing
us to access used equipment resale markets across the country, (3) reducing our
dependence on any particular customer and (4) reducing the impact that
fluctuations in regional economic conditions have on our overall financial
performance.
National Account Program. Our National Account sales force is dedicated to
establishing and expanding relationships with larger companies, particularly
those with a national or multi-regional presence. We offer our National Account
customers the benefits of a consistent level of service across North America
and a single point of contact for all their equipment needs. Our National
Account team includes 39 professionals serving over 1,400 National Account
customers, including more than 200 new accounts added in the first quarter of
2001. We estimate that our revenues from National Account customers will
increase to approximately $400.0 million in 2001 from $245.0 million in 2000.
Risk Management and Safety Programs. We place great emphasis on risk
reduction and safety and believe that we have one of the most comprehensive
risk management and safety programs in the industry. Our risk management
department is staffed by 43 experienced professionals and is responsible for
implementing our safety programs and procedures, developing our employee and
customer training programs and managing any claims against us.
Experienced Senior Management. Our senior management team is comprised of
executives with proven track records. Our management team includes Bradley S.
Jacobs, John N. Milne and Michael J. Nolan, who together with others founded
our company in September 1997, and Wayland R. Hicks who joined them shortly
thereafter. Prior to the founding of our company, Mr. Jacobs served as the
Chairman and Chief Executive Officer of United Waste Systems, Inc., which he
founded in 1989, and Messrs. Milne and Nolan served as members of the United
Waste senior management team for periods of seven and six years, respectively.
United Waste was sold in August 1997 and, at the time, was the sixth largest
provider of integrated, non-hazardous solid waste management services in the
United States. Mr. Hicks, prior to joining our company, held senior executive
positions at Xerox Corporation, where he worked for 28 years, including
Executive Vice President, Corporate Operations and Executive Vice President,
Corporate Marketing and Customer Support Operations.
Strong and Motivated Branch Management. Each of our branches has a full-time
branch manager who is supervised by one of our 63 district managers and nine
regional vice presidents. We believe that our managers are among the most
knowledgeable and experienced in the industry, and we empower them--within
budgetary guidelines--to make day-to-day decisions concerning staffing,
pricing, equipment purchasing and other branch matters. Management closely
tracks branch, district and regional performance with extensive systems and
controls, including performance benchmarks and detailed monthly operating
reviews. We promote equipment sharing among branches by linking the
compensation of branch managers and other personnel to their branch's financial
performance and return on assets.
4
Strategy
We have established the following key business strategies:
Enhance Industry Leadership Position. We intend to use our extensive fleet,
broad geographic coverage, advanced information technology systems and depth of
experience of our senior and branch management to generate further growth and
increase our market share by:
. actively managing the composition of our fleet to meet customer needs and
respond to local demand;
. promoting equipment sharing and cross-marketing of equipment specialties
among branches in geographic regions;
. focusing on providing outstanding customer service and support;
. marketing our services to existing and potential National Account customers
that can benefit from our ability to provide a broad selection of equipment
and a consistently high level of service throughout North America;
. marketing our extensive fleet of specialized lines of equipment, including
(1) aerial work platforms for use in large projects requiring significant
amounts of equipment for extended periods of time, (2) traffic control
equipment for use in infrastructure projects and (3) trench safety equipment
required for use in below ground work in order to comply with government
worker safety standards; and
. training our sales force and branch personnel in value-added sales
techniques to achieve customer satisfaction and maximize the value of each
transaction.
Maintain Disciplined Approach to New Branches and Acquisitions. We intend to
continue to selectively open new branches and make acquisitions that will
expand our geographic reach, enhance our operating efficiency and increase our
market share.
Rapidly Adapt to Changing Economic Conditions. We have made significant
investments in new equipment over the past several years and, as a result, have
one of the most modern rental fleets in the industry. The young age of our
fleet gives us the flexibility to respond to an economic downturn by reducing
the rate at which we purchase new equipment and sell used equipment. We
anticipate significantly increasing our free cash flow from operations in 2001
by reducing our equipment expenditures to approximately $400 million, compared
to $962 million in 2000.
5
Background to Issuance of the Notes
In April 2001, we issued $450 million aggregate principal amount of our 10
3/4% Senior Notes Due 2008. At the same time, we obtained a new senior secured
credit facility comprised of a $750 million term loan and a $750 million
revolving credit facility. We used proceeds from the notes and the new secured
credit facility to refinance an aggregate of $1,695.7 million of indebtedness
and other obligations that were outstanding under our old revolving credit
facility, certain term loans and a synthetic lease.
The Exchange Offer
The Exchange Offer The 10 3/4% Senior Notes Due 2008 that we issued
as described above were not registered under the
Securities Act of 1933. At the time we issued
these notes, we entered into a registration
rights agreement which obligated us to offer to
exchange the unregistered notes for registered
notes. In order to satisfy this obligation, we
are now offering you the opportunity to exchange
your unregistered notes for an equivalent amount
of registered notes. The notes may be exchanged
only in multiples of $1,000.
Required Representations In order to participate in this exchange offer,
you will be required to make certain
representations in a letter of transmittal,
including that:
. you are not affiliated with us;
. you are not a broker-dealer that purchased your
notes directly from us;
. you will acquire the registered notes in the
ordinary course of business;
. either (a) you have not agreed with anyone to
distribute the notes or (b) you have not agreed
with us or our affiliates to distribute the
notes and you are a broker-dealer that
purchased unregistered notes for your own
account as part of market-making or trading
activities; and
. if you are holding the notes as nominee for a
beneficial owner, that the beneficial owner has
made the respresentations set forth above.
Resale of the Registered
Notes We believe that the registered notes acquired in
this exchange offer may be freely traded without
compliance with the provisions of the Securities
Act of 1933 that call for registration and
delivery of a prospectus, except as described in
the following paragraph.
If you are a broker-dealer that purchased
unregistered notes for your own account as part
of market-making or trading activities, you must
deliver a prospectus when you sell registered
notes. We have agreed in the registration rights
agreement to allow you to use this prospectus for
such purpose during the 90-day period following
consummation of the exchange offer (subject to
limitations under certain circumstances). We may
be required to extend this 90-day period under
certain circumstances described herein.
6
If you are a broker-dealer, you will be required
to confirm that you will comply with the
prospectus delivery requirements described above.
Accrued Interest on the
Unregistered Original
Notes Any interest that is accrued on an unregistered
original note that is exchanged will be payable
instead on the new registered note received in
the exchange.
Procedures for Exchanging
Notes In order to exchange notes in this exchange
offer, you must, prior to 5:00 p.m. on the
expiration date:
. deliver the notes to the exchange agent using
the book-entry procedures described herein; and
. agree to be bound by the terms of the
accompanying letter of transmittal in
accordance with the procedures described
herein.
The procedures mentioned above are described
under the heading "The Exchange Offer--Procedures
for Tendering."
Expiration Date 5:00 p.m., New York City time, on , 2001,
unless the exchange offer is extended.
Exchange Date We will notify the exchange agent of the date of
acceptance of the notes for exchange.
Withdrawal Rights If you tender your notes for exchange in this
exchange offer and later wish to withdraw them,
you may do so at any time prior to 5:00 p.m., New
York City time, on the day this exchange offer
expires. The procedures for effecting a
withdrawal are described under the heading "The
Exchange Offer--Withdrawal of Tenders."
Acceptance of Original Notes
and Delivery of Registered
Notes We will accept any unregistered original notes
that are properly tendered for exchange prior to
5:00 p.m., New York City time, on the day this
exchange offer expires. The registered notes will
be delivered promptly after expiration of this
exchange offer.
Exchange Offer Conditions This exchange offer is subject to certain
customary conditions concerning, among other
things, changes to existing law and governmental
approvals. We may waive these conditions.
Tax Consequences The exchange of notes in the exchange offer
should not be a taxable event for federal income
tax purposes.
Use of Proceeds We will not receive any cash proceeds from this
exchange offer.
Exchange Agent The Bank of New York is serving as the exchange
agent. Their address and telephone number are
provided under the heading "The Exchange
Offer--Exchange Agent."
7
Effect on Holders of
Unregistered Original
Notes Any unregistered original notes that remain
outstanding after this exchange offer will
continue to be subject to transfer restrictions.
These restrictions provide that notes that are
not registered under the Securities Act of 1933
may not be offered or sold, except in a
transaction that is exempt from or not subject to
the registration requirements of such Act. After
this exchange offer, holders of unregistered
original notes will not have any further right to
have their notes registered (subject to certain
limited exceptions described under the heading
"Registration Rights Agreement.") As a result,
any market for unregistered original notes that
are not exchanged could be adversely affected by
the conclusion of this exchange offer.
8
Summary of Terms of the Registered Notes
This exchange offer applies to $450 million aggregate principal amount of
the original unregistered notes. The terms of the registered notes will be
essentially the same as the original unregistered notes, except that (1) the
registered notes will not be subject to the restrictions on transfer that apply
to the unregistered original notes, and (2) the registration rights relating to
the original unregistered notes are different than those relating to the
registered notes. The registered notes issued in this exchange offer will
evidence the same debt as the original unregistered notes and both series of
notes will be entitled to the benefits of the same indenture and treated as a
single class of debt securities. Unless otherwise indicated, all references in
the summary below to the "notes" refer to both the original unregistered notes
and the registered notes to be issued in this exchange offer.
Issuer United Rentals (North America), Inc.
Notes Offered $450 million aggregate principal amount of 10
3/4% Senior Notes Due 2008 which have been
registered under the Securities Act of 1933.
Maturity April 15, 2008.
Interest Payment Dates Each April 15 and October 15, commencing October
15, 2001.
Optional Redemption We may redeem some or all of the notes at our
option at any time on or after April 15, 2005, at
the redemption prices listed under "Description
of the Notes--Optional Redemption."
In addition, on or before April 15, 2004, we may,
at our option, use the net proceeds from one or
more public equity offerings to redeem up to 35%
of the aggregate principal amount of the notes
originally issued, at a redemption price of
110.75% of the principal amount thereof, plus
accrued but unpaid interest. See "Description of
the Notes--Optional Redemption."
Guarantees The notes are guaranteed on a senior unsecured
basis by URI's parent, and, subject to limited
exceptions, URI's current and future United
States subsidiaries. The notes are not guaranteed
by URI's foreign subsidiaries.
Ranking The effective ranking of the notes and guarantees
is as follows:
. the notes rank equally with any other senior
unsecured indebtedness of URI, and each
guarantee ranks equally with any other senior
unsecured indebtedness of the guarantor;
. the notes are senior to all unsecured
subordinated indebtedness of URI, and each
guarantee is senior to all unsecured
subordinated indebtedness of the guarantor;
. the notes are effectively junior to all secured
indebtedness of URI to the extent of the value
of the collateral, and each guarantee is
effectively junior to all secured indebtedness
of the guarantor to the extent of the value of
the collateral; and
. the notes are effectively junior to all
indebtedness and other obligations, including
trade payables, of all our non-guarantor
subsidiaries.
9
On March 31, 2001, as adjusted for the subsequent
refinancing transactions described under
"--Background to Issuance of the Notes," (1) URI
and the guarantors had outstanding an aggregate
of $1,338.0 million of secured indebtedness that
is effectively senior to the notes, (2) the
non-guarantor subsidiaries had outstanding an
aggregate of $44.6 million of indebtedness and
other obligations that are effectively senior to
the notes and (3) URI and the guarantors had
outstanding an aggregate of $997.0 million of
subordinated indebtedness that ranks junior to
the notes.
The Indenture governing the notes permits URI and
its subsidiaries to incur additional
indebtedness, subject to certain exceptions.
Change of Control If we experience specific kinds of change of
control events, we must offer to repurchase the
notes at a price of 101% of the principal amount
thereof, plus accrued but unpaid interest, if
any, to the date of the repurchase. See
"Description of the Notes--Change of Control."
Certain Covenants The Indenture governing the notes contains
certain covenants, including limitations on (i)
indebtedness, (ii) restricted payments, (iii)
liens, (iv) the disposition of proceeds of asset
sales, (v) issuance of preferred stock of
Restricted Subsidiaries (as defined herein), (vi)
transactions with affiliates, (vii) dividend and
other payment restrictions affecting Restricted
Subsidiaries, (viii) designations of Unrestricted
Subsidiaries (as defined herein), (ix) additional
subsidiary guarantees and (x) mergers,
consolidations or sales of substantially all our
assets. These covenants are subject to important
exceptions and qualifications. See "Description
of the Notes--Certain Covenants" and
"--Consolidation, Merger and Sale of Assets,
Etc."
Absence of Public Market The registered notes that will be issued in this
exchange offer are new securities for which there
is currently no established trading market. We do
not intend to apply for listing of the registered
notes on any securities exchange or for quotation
of such notes through the Nasdaq National Market.
Accordingly, we cannot provide you with any
assurance as to the development or liquidity of
any market for the notes. If a market for the
registered notes develops, the notes could trade
at a discount from their principal amount.
Although the original unregistered notes are
currently eligible for trading in the Private
Offerings, Resale and Trading through Automated
Linkages ("PORTAL") market of the National
Association of Securities Dealers, Inc., the
registered notes will not be eligible for trading
through PORTAL.
10
Risk Factors
See "Risk Factors" beginning on page 13 for a discussion of certain factors
you should carefully consider in connection with this exchange offer and an
investment in the notes.
Summary Consolidated Financial Information
The tables below present selected financial information for our company. You
should read this information together with (1) the information set forth under
"Selected Consolidated Financial Information" and (2) the consolidated
financial statements and the related notes which are included herein.
We refinanced $1,695.7 million of indebtedness in April 2001 as described
under "--Background to Issuance of the Notes." The balance sheet data below
under the heading "Pro Forma" adjusts the historical balance sheet data to give
effect to the borrowings under our old credit facility subsequent to March 31,
2001 and the refinancing transactions, as if such transactions had occurred on
March 31, 2001.
Certain of our acquisitions were accounted for as purchases and certain
acquisitions were accounted for as poolings-of-interests, including our
September 1998 merger with U.S. Rentals, Inc. For further information
concerning the accounting for these acquisitions, see (1) note 3 to our audited
consolidated financial statements included herein and (2) note 2 to our
unaudited consolidated financial statements included herein.
Three Months
Ended
Year Ended December 31, March 31,
----------------------- ------------
1998 1999 2000 2000 2001
------ ------ ------ ---- ----
(dollars in millions)
Income statement data:
Revenues:
Equipment rentals............................................. $ 895 $1,581 $2,057 $400 $461
Sales of rental equipment..................................... 120 236 348 70 39
Sales of equipment and merchandise and other revenues......... 205 417 514 109 119
Total revenues.............................................. 1,220 2,234 2,919 579 619
Gross profit:
Gross profit from equipment rentals........................... 325 623 821 152 154
Gross profit from sales of rental equipment................... 53 99 140 29 16
Gross profit from sales of equipment and merchandise and other
revenues.................................................... 45 103 128 25 33
Total gross profit.......................................... 423 825 1,089 206 203
Operating income............................................... 145 409 548 84 68
Interest expense(1)............................................ 64 140 229 50 57
Preferred dividends of a subsidiary trust...................... 8 20 20 5 5
Income before provision for income taxes and extraordinary item 78 242 301 30 6
Net income..................................................... 13 143 176 17 3
11
Three Months
Year Ended December 31, Ended March 31,
----------------------- ---------------
1998 1999 2000 2000 2001
------- ------- ------- ------- -------
(dollars in millions)
Other financial data:
EBITDA(2)....................................................... $ 404 $ 761 $ 962 $ 178 $ 170
EBITDA margin(3)................................................ 33.1% 34.1% 33.0% 30.7% 27.5%
Depreciation and amortization................................... $ 212 $ 344 $ 414 $ 93 $ 103
Ratio of EBITDA to interest expense............................. 6.3x 5.4x 4.2x 3.6x 3.0x
Ratio of EBITDA to interest expense and preferred dividends of a
subsidiary trust(4)........................................... 5.6x 4..8x 3.9x 3.3x 2.7x
Ratio of total debt to EBITDA................................... 3.3x 3.0x 2.8x 15.1x 16.1x
Ratio of earnings to fixed charges(5)........................... 2.1x 2.5x 2.1x 1.5x 1.1x
Capital expenditures:
Rental.......................................................... $ 480 $ 718 $ 808 $ 193 $ 98
Non-rental...................................................... 85 124 154 31 17
As of March 31, 2001
---------------------
Historical Pro Forma
---------- ---------
(dollars in millions)
Balance sheet data:
Cash and cash equivalents..................................... $ 26 $ 26
Rental equipment, net......................................... 1,720 1,751
Total assets.................................................. 5,112 5,143
Total debt.................................................... 2,751 2,807
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust(4)......................... 300 300
Stockholders' equity.......................................... 1,514 1,514
--------
(1) Interest expense excludes the amortization of deferred financing fees.
(2) EBITDA is defined as net income (excluding (i) non-operating income and
expense, (ii) $47.2 million in merger-related expenses in 1998 related to
the three acquisitions accounted for as pooling-of-interests, including the
merger with U.S. Rentals and (iii) $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 our ability to meet 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 our
operating performance or liquidity.
(3) EBITDA margin is defined as EBITDA as a percentage of total revenues.
(4) These securities are the obligation of a subsidiary trust of Holdings and
are not an obligation of URI. Although not legally obligated to do so, URI
has made, and expects that it will continue to make, cash distributions to
Holdings to enable Holdings to pay dividends on these securities.
(5) For purposes of determining the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes and extraordinary items plus
fixed charges and (ii) fixed charges consist of interest expense,
amortization of debt issuance costs, and the estimated interest portion of
rental expense.
12
RISK FACTORS
You should carefully consider the following factors and the other
information in this prospectus in connection with this exchange offer and an
investment in the notes.
Our substantial indebtedness could adversely affect us.
We have a substantial amount of indebtedness. On March 31, 2001, as adjusted
for the subsequent refinancing transactions described under "Prospectus
Summary--Background to Issuance of the Notes," our total indebtedness was
approximately $2,807.0 million. Our substantial indebtedness has the potential
to affect us adversely in a number of ways. For example, it will or could:
. require us to devote a substantial portion of our cash flow to debt service,
reducing the funds available for other purposes;
. constrain our ability to obtain additional financing; or
. make it difficult for us to cope with a downturn in our business or a
decrease in our cash flow.
In addition, a portion of our indebtedness bears interest at variable rates
that are linked to changing market interest rates. As a result, an increase in
market interest rates would increase our interest expense and our debt service
obligations. On March 31, 2001, as adjusted for the subsequent refinancing
transactions described under "Prospectus Summary--Background to Issuance of the
Notes," we had $1,324.0 million of variable rate indebtedness.
Furthermore, if we are unable to service our indebtedness and fund our
business, we will be forced to adopt an alternative strategy that may include:
. reducing or delaying capital expenditures;
. limiting our growth;
. seeking additional debt financing or equity capital;
. selling assets; or
. restructuring or refinancing our indebtedness.
We cannot assure you that any of these strategies could be effected on
favorable terms or at all.
Although the notes are referred to as "senior notes," they are effectively
subordinated to our secured indebtedness and all obligations of our
non-guarantor subsidiaries.
The notes are unsecured obligations of URI and are guaranteed by (1) URI's
parent and (2) subject to limited exceptions, URI's current and future domestic
subsidiaries. The notes are not guaranteed by URI's foreign subsidiaries. As a
result of this structure, the notes are effectively subordinated to (1) all
secured indebtedness of URI and each guarantor, to the extent of the value of
the collateral, and (2) all indebtedness and other obligations, including trade
payables, of our non-guarantor subsidiaries. The effect of this subordination
is that, in the event of a bankruptcy, liquidation, dissolution, reorganization
or similar proceeding involving us or a subsidiary, the assets of the affected
entity could not be used to pay you until after:
. all secured claims against the affected entity have been fully paid; and
. if the affected entity is a non-guarantor subsidiary, all other claims
against that subsidiary, including trade payables, have been fully paid.
On March 31, 2001, as adjusted for the subsequent refinancing transactions
described under "Prospectus Summary--Background to Issuance of the Notes," (1)
URI and the guarantors had outstanding an aggregate of $1,338.0 million of
secured indebtedness that is effectively senior to the notes and (2) the
non-guarantor subsidiaries had outstanding an aggregate of $44.6 million of
indebtedness and other obligations that are effectively senior to the notes. We
may incur additional secured indebtedness.
13
URI has a holding company structure and will depend on distributions from its
subsidiaries in order to pay the notes and certain provisions of law or
contractual restrictions could limit distributions from its subsidiaries.
URI derives substantially all its operating income from, and holds
substantially all its assets through, its subsidiaries. The effect of this
structure is that URI will depend on the earnings of its subsidiaries, and the
payment or other distribution to URI of these earnings, in order to meet its
obligations under the notes and other outstanding debt. Provisions of law, such
as those requiring that dividends be only paid from surplus, could limit the
ability of URI's subsidiaries to make payments or other distributions to URI.
Furthermore, these subsidiaries could agree to contractual restrictions on
their ability to make distributions.
We may be unable to repurchase the notes as required upon a change of control.
If we experience a change of control, we will be required to make an offer
to purchase all outstanding notes at 101% of their principal amount plus
accrued and unpaid interest, if any, to the date of repurchase. However, we may
be unable to do so because:
. we might not have enough available funds, particularly since a change of
control could cause part or all of our other indebtedness to become due;
and
. the agreements governing our credit facility and other secured
indebtedness would prohibit us from repurchasing the notes, unless we were
able to obtain a waiver or refinance such indebtedness.
A guarantee could be voided if the guarantor fraudulently transferred the
guarantee at the time it incurred the indebtedness, which could result in the
noteholders being able to rely on only URI to satisfy claims.
Under U.S. bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee can be voided, or claims under a guarantee may be
subordinated to all other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by its guarantee:
. intended to hinder, delay or defraud any present or future creditor or
received less than reasonably equivalent value or fair consideration for
the incurrence of the guarantee,
. was insolvent or rendered insolvent by reason of such incurrence;
. was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay those debts as they mature.
In addition, any payment by that guarantor under a guarantee could be voided
and required to be returned to the guarantor or to a fund for the benefit of
the creditors of the guarantor.
The measures of insolvency for purposes of fraudulent transfer laws vary
depending upon the governing law. Generally a guarantor would be considered
insolvent if:
. the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets;
. the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
. it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that the parent guarantee and the subsidiary
guarantees were incurred for proper purposes and in good faith and that
14
the parent guarantor and each subsidiary guarantor, after giving effect to its
guarantee of the notes, will not be insolvent, have unreasonably small capital
for the business in which it is engaged or have incurred debts beyond our
ability to pay those debts as they mature. We cannot be certain, however, that
a court would agree with our conclusions in this regard.
Restrictive covenants could adversely affect our business by limiting our
flexibility.
We are subject to various restrictive financial and operating covenants
under the agreements governing our indebtedness. These covenants limit or
prohibit, among other things, our ability to incur indebtedness, make
prepayments of certain indebtedness, make investments, create liens, make
acquisitions, sell assets and engage in mergers and acquisitions. These
covenants could adversely affect our business by significantly limiting our
operating and financial flexibility.
Our business could be hurt if we are unable to obtain additional capital as
required.
We may require additional capital for, among other purposes, purchasing
rental equipment, completing acquisitions, establishing new rental locations,
and refinancing existing indebtedness. If the cash that we generate from our
business, together with cash that we may borrow under our credit facility, is
not sufficient to fund our capital requirements, we will require additional
debt and/or equity financing. We cannot, however, be certain that any
additional financing will be available or, if available, will be available on
terms that are satisfactory to us. If we are unable to obtain sufficient
additional capital in the future, our business could be adversely affected.
Our business could be hurt by a decline in construction and industrial
activities.
Our equipment is principally used in connection with construction and
industrial activities. Consequently, a downturn in construction or industrial
activity may lead to a decrease in the demand for our equipment or depress
rental rates and the sales prices for the equipment we sell. We have identified
below certain of the factors which may cause such a downturn, either
temporarily or long-term:
. a continuation or a worsening of the recent slow-down of the economy over
the long-term;
. an increase in interest rates; or
. adverse weather conditions which may temporarily affect a particular
region.
In addition, demand for our traffic control equipment may not reach
projected levels in the event that funding for highway and other construction
projects under government programs, such as the Transportation Equity Act for
the 21st Century ("TEA-21") or the Aviation Investment and Reform Act for the
21st Century ("AIR-21"), does not reach expected levels.
The loss of any member of senior management could hurt our business.
We are highly dependent upon our senior management team. Consequently, our
business could be adversely affected in the event that we lose the services of
any member of senior management. We do not maintain "key man" life insurance
with respect to members of senior management.
Our business is highly competitive and competition may increase.
The equipment rental industry is highly fragmented and competitive. Our
competitors primarily include small, independent businesses with one or two
rental locations, regional competitors which operate in one or more states,
public companies or divisions of public companies, and equipment vendors and
dealers who both sell and rent equipment directly to customers. We may in the
future encounter increased competition from our existing competitors or from
new companies. In addition, certain equipment manufacturers may commence or
increase their existing efforts relating to renting and selling equipment
directly to our customers or potential customers.
15
Our operating results may fluctuate which could affect the trading value of the
notes.
We expect that our revenues and operating results may fluctuate from quarter
to quarter or over the longer term due to a number of factors, including:
. seasonal rental patterns of our customers, with rental activity tending to
be lower in the winter;
. our recent acquisition of businesses that specialize in renting traffic
control equipment, which tend to operate at a loss during the first
quarter;
. the timing of expenditures for new equipment and the disposition of used
equipment;
. changes in demand for our equipment or the prices therefor due to changes
in economic conditions, competition or other factors;
. changes in the interest rates applicable to our floating rate debt;
. if we determine that a potential acquisition will not be consummated, the
need to charge against earnings any expenditures relating to such
transaction (such as financing commitment fees, merger and acquisition
advisory fees and professional fees) previously capitalized; and
. the possible need, from time to time, to take other write-offs or special
charges due to a variety of occurrences, such as store consolidations or
closings or the refinancing of existing indebtedness.
Fluctuations in our operating results could adversely affect the trading
value of the notes.
We have made acquisitions, which entails certain risks.
We have grown in part through acquisitions. The making of acquisitions
entails certain risks, including:
. unrecorded liabilities of acquired companies that we fail to discover
during our due diligence investigations;
. difficulty in assimilating the operations and personnel of the acquired
company with our existing operations;
. loss of key employees of the acquired company; and
. difficulty maintaining uniform standards, controls, procedures and
policies.
We depend on our information technology systems, and any disruption in these
systems could hurt our business.
Our ability to monitor and control our operations depends to a large extent
on the proper functioning of our information technology systems. Any disruption
in these systems or the failure of these systems to operate as expected could,
depending on the magnitude and duration of the problem, adversely affect our
business.
We are exposed to various possible claims relating to our business, and our
insurance may not fully protect us.
We are exposed to various possible claims relating to our business. These
possible claims include those relating to (1) personal injury or death caused
by equipment rented or sold by us, (2) motor vehicle accidents involving our
delivery and service personnel and (3) employment related claims. We carry a
broad range of insurance for the protection of our assets and operations.
However, such insurance may not fully protect us for a number of reasons,
including:
. our coverage is subject to a deductible of $1.0 million and limited to a
maximum of $98.0 million per occurrence;
16
. we do not maintain coverage for environmental liability (other than
legally required fuel storage tank coverage), since we believe that the
cost for such coverage is high relative to the benefit that it provides;
and
. certain types of claims, such as claims for punitive damages or for
damages arising from intentional misconduct, which are often alleged in
third party lawsuits, might not be covered by our insurance.
We cannot be certain that insurance will continue to be available to us on
economically reasonable terms, if at all.
We are subject to numerous environmental and safety regulations. Our business
could be hurt if we are required to incur compliance or remediation costs that
are not currently anticipated.
Our operations are subject to numerous laws governing environmental
protection and occupational health and safety matters. These laws regulate such
issues as wastewater, stormwater, solid and hazardous wastes and materials, and
air quality. Under these laws, we may be liable for, among other things, (1)
the costs of investigating and remediating contamination at our sites as well
as sites to which we sent hazardous wastes for disposal or treatment regardless
of fault and (2) fines and penalties for non-compliance. Our operations
generally do not raise significant environmental risks, but we use hazardous
materials to clean and maintain equipment, and dispose of solid and hazardous
waste and wastewater from equipment washing, and store and dispense petroleum
products from underground and above-ground storage tanks located at certain of
our locations.
Based on the conditions currently known to us, we do not believe that any
pending or likely remediation and compliance costs will have a material adverse
effect on our business. We cannot be certain, however, as to the potential
financial impact on our business if new adverse environmental conditions are
discovered or environmental and safety requirements become more stringent. If
we are required to incur environmental compliance or remediation costs that are
not currently anticipated by us, our business could be adversely affected
depending on the magnitude of the cost.
A prolonged labor dispute could hurt our business.
Certain of our employees are represented by unions and covered by collective
bargaining agreements. If we should experience a prolonged labor dispute
involving a significant number of our employees, our business could be
adversely affected.
Our operations outside the United States are subject to the risks normally
associated with international operations.
Our operations outside the United States are subject to the risks normally
associated with international operations. These include the need to convert
currencies, which could result in a gain or loss depending on fluctuations in
exchange rates, and the need to comply with foreign laws.
We cannot guarantee that there will be a trading market for the notes.
We cannot guarantee that there will be an active trading market for the
notes because there currently is no trading market for the notes, and we do not
intend to list the notes on any exchange.
If an active trading market does not develop or is not maintained, the
market price and liquidity of the notes may be adversely affected.
17
The trading price of the notes may be volatile.
The trading price of the notes could be subject to significant fluctuation
in response to, among other factors, changes in our operating results, interest
rates, the market for noninvestment grade securities, general economic
conditions, and securities analysts' recommendations regarding our securities.
Original notes that are not exchanged will have restrictions on their transfer
and could be subject to a reduction in market value.
Any unregistered original notes that remain outstanding after this exchange
offer will continue to be subject to restrictions on their transfer. After this
exchange offer, holders of unregistered original notes will not (with limited
exceptions) have any further rights to have their notes registered. Any market
for unregistered original notes that are not exchanged could be adversely
affected by the conclusion of this exchange offer.
Holders must comply with the exchange procedure.
Issuance of registered notes in exchange for unregistered original notes
will only occur upon completion of the procedure described in this prospectus
under the heading "The Exchange Offer--Procedures for Tendering." Therefore,
holders of unregistered original notes who wish to exchange them for registered
notes should allow sufficient time for timely completion of the exchange
procedure. We are not obligated to notify you of any failure to follow the
proper procedure.
Broker-dealers may be required to deliver a prospectus.
A broker-dealer that purchased unregistered original notes for its own
account as part of market-making or trading activities, must deliver a
prospectus when it sells registered notes. Our obligation to make this
prospectus available to broker-dealers is limited. Consequently, we cannot
guarantee that a proper prospectus will be available to broker-dealers wishing
to resell their registered notes.
Holders will be required to make certain representations.
In order to participate in the exchange offer, you will be required to make
certain representations in a letter of transmittal as described herein. If any
of these representations are falsely made, the notes received in exchange for
your unregistered original notes may be restricted, meaning that they would not
be freely tradable.
18
THE EXCHANGE OFFER
The following summary of certain terms of this exchange offer ("the Exchange
Offer") is qualified in its entirety by reference to the full text of the
documents underlying the Exchange Offer, including the Letter of Transmittal
and the Registration Rights Agreement, copies of which are filed as exhibits to
the registration statement of which this prospectus is a part.
Participation in the Exchange Offer is voluntary, and holders of
unregistered original notes (the "Original Notes") should carefully consider
whether to accept. Holders of Original Notes are urged to consult their
financial and tax advisors in making their decision on what action to take.
Purpose of the Exchange Offer; Effect on Holders of Original Notes
The Exchange Offer is being made in order to satisfy certain of URI's
obligations under a Registration Rights Agreement entered into in connection
with the issuance of the Original Notes (the "Registration Rights Agreement").
See "Registration Rights Agreement."
Upon consummation of the Exchange Offer, the holders of Original Notes will
not have any further registration rights under the Registration Rights
Agreement (subject to limited exceptions as described under "Registration
Rights Agreement"). Holders of the Original Notes who do not tender their
Original Notes in the Exchange Offer will continue to hold such Original Notes
and will be entitled to all the rights and will be subject to all the
limitations applicable thereto under the indenture governing the notes (the
"Indenture"). All Original Notes that remain outstanding upon consummation of
the Exchange Offer will continue to be subject to the restrictions on transfer
provided for in the Original Notes and the Indenture. In general, the Original
Notes may not be offered or sold unless registered under the Securities Act of
1933 (the "Securities Act"), except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. To the extent that the Original Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Original Notes could be
adversely affected.
Required Representations
In connection with any tender of Original Notes pursuant to the Exchange
Offer, the Book-Entry Holder (as defined below) of such Original Notes will be
required to make certain representations in the Letter of Transmittal,
including that (i) it is not affiliate of URI, (ii) it is not a broker-dealer
that purchased such Original Notes directly from URI, (iii) any registered
notes that it acquires in the Exchange Offer (the "Exchange Notes") will be
acquired by it in the ordinary course of its business and (iv) it has no
arrangement with any person to participate in the distribution of the Exchange
Notes; provided, however, that if the Book-Entry Holder is a broker-dealer that
wishes to tender Original Notes that were acquired by it for its own account as
a result of market-making activities or other trading activities, it may
represent, in lieu of the representation set forth in clause (iv), that it has
no arrangement or understanding with URI, or any affiliate of URI, to
participate in the distribution of the Exchange Notes. In addition, a
Book-Entry Holder that holds any Original Notes as nominee will be required to
confirm that the beneficial owner for which it is holding such Original Notes
has made the representations provided for in the preceding sentence.
The term "Book-Entry Holder" with respect to any notes means the participant
in the system of The Depository Trust Company ("DTC") that is listed as the
holder of such notes in the records maintained by DTC.
Resale of Exchange Notes
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, URI believes that (except as provided in the following two
19
paragraphs) the Exchange Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by any holder thereof
(other than an affiliate of URI) without compliance with the registration and
prospectus delivery provisions of the Securities Act (subject to the
representations set forth under "--Required Representations" being made and
being accurate).
Any broker-dealer that receives Exchange Notes in exchange for Original
Notes that were acquired by it for its own account as a result of market-making
activities or other trading activities, must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales by it of any
such Exchange Notes. This prospectus, as it may be amended or supplemented from
time to time, may, if permitted by URI, be used by a broker-dealer in order to
satisfy such prospectus delivery requirements. URI has agreed in the
Registration Rights Agreement that, for a period of 90 days following
consummation of the Exchange Offer (subject to extension under certain
circumstances described under "Plan of Distribution"), it will make this
prospectus available to any broker-dealer for use in connection with any such
resale (subject to limitations on the use of this prospectus under certain
circumstances). Each broker-dealer that participates in the Exchange Offer will
be required to confirm that it will comply with the prospectus delivery
requirements described above. A broker-dealer that delivers a prospectus in
connection with the resale of any Exchange Notes will be subject to certain of
the civil liability provisions under the Securities Act. See "Plan of
Distribution."
In the event that any of the required representations set forth under
"--Required Representations" is not true with respect to a holder that receives
Exchange Notes pursuant to the Exchange Offer, the Exchange Notes received by
such holder may be deemed to be restricted securities and, if so, such Exchange
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
The conclusions set forth in the preceding three paragraphs are based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties. URI does not intend to seek its own no-action letter
with respect to the Exchange Offer and there is no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as it has in such no-action letters to third parties.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying Letter of Transmittal, URI will accept for exchange all
Original Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date (as defined herein). URI will issue $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal amount
of outstanding Original Notes accepted in the Exchange Offer. Holders may
tender some or all of their Original Notes pursuant to the Exchange Offer in
denominations of $1,000 and integral multiples thereof. The Exchange Offer is
not conditioned upon any minimum aggregate principal amount of Original Notes
being tendered.
The terms of the Exchange Notes will be the same in all material respects as
the Original Notes except that (i) the Exchange Notes will be registered under
the Securities Act, and, therefore, will not bear legends restricting the
transfer thereof and (ii) certain of the registration rights, under the
Registration Rights Agreement, relating to the Exchange Notes are different
than those relating to the Original Notes and, therefore, the defaults under
the Registration Rights Agreement that may require URI to pay additional
interest will be different for the Exchange Notes and the Original Notes. See
"Registration Rights Agreement." The Exchange Notes will evidence the same debt
as the Original Notes and both series of notes will be entitled to the benefits
of the Indenture and treated as a single class of debt securities.
In connection with the issuance of the Original Notes, URI arranged for the
Original Notes to be issued and transferable in book-entry form through the
facilities of DTC, acting as depositary. The Exchange Notes will also be
issuable and transferable in book-entry form through DTC. See "Description of
the Notes--Book Entry; Delivery and Form."
20
URI shall be deemed to have accepted validly tendered Original Notes when,
as and if URI has given oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent (as defined herein). The Exchange Agent will act
as agent for URI for the purposes of receiving the Exchange Notes from URI and
delivering Exchange Notes to tendering holders of Original Notes. URI's
obligation to accept Original Notes for exchange pursuant to the Exchange Offer
is subject to certain customary conditions as set forth under "--Conditions."
If any tendered Original Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein, such
unaccepted Original Notes will be returned, without expense, to the tendering
holder thereof as promptly as practicable after the Expiration Date.
Holders of Original Notes who tender pursuant to the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Original Notes pursuant to the Exchange Offer. URI will pay all
such charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offer. See "--Solicitation of Tenders; Fees and Expenses."
Holders of notes do not have appraisal or dissenters' rights under the
Delaware General Corporation Law or under the Indenture in connection with the
Exchange Offer. URI intends to conduct the Exchange Offer in accordance with
the applicable requirements of Regulation 14E under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
NEITHER THE BOARD OF DIRECTORS OF URI NOR URI MAKES ANY RECOMMENDATION TO
HOLDERS OF ORIGINAL NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL
OR ANY PORTION OF THEIR ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER.
MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF ORIGINAL NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL NOTES TO
TENDER, AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The Exchange Offer will remain open for acceptance for a period of not less
than 30 days after the date notice of the Exchange Offer is mailed to holders
of the Original Notes (or longer if required by applicable law). The Expiration
Date will be 5:00 p.m., New York City time, on , 2001, unless URI, in its
sole discretion, extends the Exchange Offer, in which case the Expiration Date
will be the latest business day to which the Exchange Offer is extended. In
order to extend the Expiration Date, URI will notify the Exchange Agent of any
extension by oral (promptly confirmed in writing) or written notice and will
notify the record holders by means of a press release or other public
announcement, prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. During any such extension, all
Original Notes previously tendered and not withdrawn as herein provided will
remain subject to the Exchange Offer and may be accepted for exchange by URI on
the Expiration Date.
Interest on the Exchange Notes
Interest on the notes is payable semi-annually on April 15 and October 15 of
each year, commencing October 15, 2001, at the rate of 10 3/4% per annum. The
Exchange Notes will bear interest from and including the last interest payment
date on the Original Notes (or, if none has yet occurred, the date of issuance
of such Original Notes).
Procedures for Tendering
Only a Book-Entry Holder of Original Notes may tender such Original Notes
pursuant to the Exchange Offer. To tender any Original Notes pursuant to the
Exchange Offer, the Book-Entry Holder of such Original
21
Notes must make book-entry delivery of such Original Notes by causing DTC to
transfer such Original Notes to the account of the Exchange Agent at DTC in
accordance with DTC's Automated Tender Offer Program ("ATOP") prior to 5:00
p.m., New York City time, on the Expiration Date. In addition, either (i) DTC
must deliver an Agent's Message (as defined below) prior to 5:00 p.m., New York
City time, on the Expiration Date, indicating that DTC has received from such
Book-Entry Holder an express acknowledgment that such Book-Entry Holder has
received and agrees to be bound by the terms of the Letter of Transmittal or
(ii) such Book-Entry Holder must complete, sign and date the Letter of
Transmittal or a facsimile thereof, in accordance with the instructions
contained herein and therein, and deliver such Letter of Transmittal, or such
facsimile, and any other required documentation to the Exchange Agent at the
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming part of the book-entry confirmation
relating to a book-entry transfer of Original Notes through ATOP, which states
that DTC has received an express acknowledgment from the DTC participant that
is tendering the Original Notes which are the subject of such book entry
confirmation, that such DTC participant has received and agrees to be bound by
the terms of the Letter of Transmittal.
The tender by a holder of Original Notes and the acceptance thereof by URI
will constitute an agreement between such holder and URI in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR
HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL SHOULD BE SENT TO URI OR DTC.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by URI in its sole discretion, which
determination will be final and binding. URI reserves the absolute right to
reject any and all Original Notes not properly tendered or any Original Notes
URI's acceptance of which would, in the opinion of counsel for URI, be
unlawful. URI also reserves the right to waive any irregularities or conditions
of tender as to particular Original Notes. URI's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Original Notes must be
cured within such time as URI shall determine. Neither URI, the Exchange Agent
nor any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Original Notes, nor shall any of them
incur any liability for failure to give such notification. Tenders of Original
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Original Notes received by the Exchange Agent that are not
properly tendered or the tender of which is otherwise rejected by URI and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the Book-Entry Holder that tendered such
Original Notes (by crediting an account maintained at DTC designated by such
Book-Entry Holder) as soon as practicable following the Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Original Notes pursuant to the Exchange Offer, the
Book-Entry Holder that tendered such Original Notes must, prior to 5:00 p.m.,
New York City time, on the Expiration Date, either
22
(i) withdraw such tender in accordance with the appropriate procedures of the
ATOP system or (ii) deliver to the Exchange Agent a written or facsimile
transmission notice of withdrawal at the address set forth herein. Any such
notice of withdrawal must contain the name and number of the Book-Entry Holder,
the amount of Original Notes to which such withdrawal relates, the account at
DTC to be credited with the withdrawn Original Notes and the signature of the
Book-Entry Holder. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices will be determined by
URI in its sole discretion, whose determination will be final and binding on
all parties. Any Original Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer, and no Exchange Notes will
be issued with respect thereto unless the Original Notes so withdrawn are
validly retendered. Any Original Notes which have been tendered but which are
withdrawn will be returned by the Exchange Agent to the Book-Entry Holder that
tendered such Original Notes (by crediting an account maintained at DTC
designated by such Book-Entry Holder) as soon as practicable after withdrawal.
Properly withdrawn Original Notes may be retendered at any time prior to the
Expiration Date by following the procedures described under "--Procedures for
Tendering."
Conditions
Notwithstanding any other term of the Exchange Offer, URI shall not be
required to accept for exchange, or to exchange Exchange Notes for, any
Original Notes, and may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Original Notes, if:
(a)any action or proceeding is instituted or threatened in any court or by
or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of URI, might impair the ability of URI to
proceed with the Exchange Offer; or
(b)any law, statute, rule, regulation or interpretation by the Staff of the
Commission is proposed, adopted or enacted, which, in the reasonable
judgment of URI, might materially impair the ability of URI to proceed
with the Exchange Offer; or
(c)there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law, statute, rule
or regulation) which, in the sole judgment of URI, might materially
impair the ability of URI to proceed with the Exchange Offer.
If URI determines in its reasonable judgment that any of the conditions set
forth above are not satisfied, URI may (i) terminate the Exchange Offer and
refuse to accept any Original Notes and return all tendered Original Notes to
the tendering holders, (ii) extend the Exchange Offer and retain all Original
Notes tendered prior to the expiration of the Exchange Offer subject, however,
to the rights of holders to withdraw such Original Notes (see "--Withdrawals of
Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Original Notes which have not
been withdrawn. Moreover, regardless of whether any of such conditions has
occurred, URI may amend the Exchange Offer in any manner which, in its good
faith judgment, is advantageous to holders of the Original Notes.
The foregoing conditions are for the sole benefit of URI and may be asserted
by URI regardless of the circumstances giving rise to any such condition or may
be waived by URI in whole or in part at any time and from time to time in its
sole discretion. The failure by URI at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. If a waiver constitutes a material change in the Exchange
Offer, URI will disclose such change by means of a supplement to this
prospectus that will be distributed to each Book-Entry Holder, and URI will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
Book-Entry Holders, if the Exchange Offer would otherwise expire during such
period. Any determination by URI concerning the events described above will be
final and binding upon all parties.
23
In addition, URI will not accept for exchange any Original Notes tendered,
and no Exchange Notes will be issued in exchange for any such Original Notes,
if at such time any stop order shall be threatened or in effect with respect to
the registration statement of which this prospectus is a part or if the
Indenture is not qualified under the Trust Indenture Act of 1939, as amended.
URI is required to use every reasonable effort to obtain the withdrawal of any
such stop order at the earliest possible time.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
The Exchange Offer is not conditioned upon any minimum principal amount of
Original Notes being tendered for exchange.
Exchange Agent
The Bank of New York, the Trustee under the Indenture, has been appointed as
Exchange Agent for the Exchange Offer. In such capacity, the Exchange Agent has
no fiduciary duties to the holders of the notes and will be acting solely on
the basis of directions of URI. All executed Letters of Transmittal must be
delivered to the Exchange Agent at the applicable address set forth below.
Questions and requests for assistance and requests for additional copies of
this prospectus or the Letter of Transmittal should be directed to the Exchange
Agent addressed as follows:
By Mail: By Facsimile Transmission: By Overnight or Hand
(registered or certified (for Eligible Institutions only) Delivery:
recommended) The Bank of New York The Bank of New York
The Bank of New York [ ] Reorganization Section
Reorganization Section Attention: [ ] 101 Barclay Street
101 Barclay Street Confirm by Telephone: Floor 7E
Floor 7E [ ] New York, New York 10286
New York, New York 10286 Attention: [ ]
Attention: [ ]
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER
OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Solicitation of Tenders; Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by URI. The principal solicitation for tenders pursuant to the Exchange
Offer is being made by mail; however, additional solicitations may be made by
telegraph, facsimile, telephone or in person by officers and regular employees
of URI and its affiliates.
URI has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. URI will, however, pay the
Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith and pay other expenses of the Exchange Offer, including
fees and expenses of the Trustee, filing fees, and URI's accounting and legal
fees and printing and distribution expenses. URI may also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Original
Notes and in handling or forwarding tenders for exchange.
24
URI will pay all transfer taxes, if any, applicable to the exchange of
Original Notes pursuant to the Exchange Offer. If, however, Exchange Notes or
Original Notes for principal amounts not tendered or accepted for exchange are
to be delivered to, or are to be registered or issued in the name of, any
person other than the Book-Entry Holder of the Original Notes tendered, or if a
transfer tax is imposed for any reason other than the exchange of Original
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the Book-Entry Holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the
Original Notes for which they are exchanged, which is the aggregate principal
amount of the Original Notes, as reflected in URI's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized in connection with the Exchange Offer. The cost of the Exchange
Offer will be deferred and amortized over the term of the Exchange Notes.
Other
URI may in the future seek to acquire untendered Original Notes, to the
extent permitted by applicable law, in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. URI has no
present plans to acquire any Original Notes that are not tendered in the
Exchange Offer or to file a registration statement to permit resales of any
untendered Original Notes.
25
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations relating to the exchange of Original Notes for Exchange Notes in
the Exchange Offer. It does not contain a complete analysis of all the
potential tax considerations relating thereto. This summary is limited to
holders of Original Notes who hold the Original Notes as "capital assets" (in
general, assets held for investment). Special situations, such as the
following, are not addressed:
. tax consequences to holders who may be subject to special tax treatment,
such as tax-exempt entities, dealers in securities or currencies,
financial institutions, insurance companies, regulated investment
companies, traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings or corporations that
accumulate earnings to avoid U.S. federal income tax;
. tax consequences to persons holding notes as part of a hedging,
integrated, constructive sale or conversion transaction or a straddle or
other risk reduction transaction;
. tax consequences to holders whose "functional currency" is not the U.S.
dollar;
. tax consequences to persons who hold notes through a partnership or
similar pass-through entity;
. tax consequences to holders who have ceased to be United States citizens
or to be taxed as resident aliens;
. alternative minimum tax consequences, if any; or
. any state, local or foreign tax consequences.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended, existing and proposed Treasury regulations
promulgated thereunder, and rulings, judicial decisions and administrative
interpretations thereunder, as of the date hereof. Those authorities may be
changed, perhaps retroactively, so as to result in U.S. federal income tax
consequences different from those discussed below.
Consequences of Tendering Notes
The exchange of Original Notes for Exchange Notes in the Exchange Offer
should not constitute a taxable exchange for federal income tax purposes.
Accordingly, the Exchange Offer should have no federal income tax consequences
to you. Your tax basis and holding period in the Exchange Notes should be the
same as your Original Notes.
The preceding discussion of certain U.S. federal income tax considerations
is for general information only and is not tax advice. Accordingly, each
investor should consult its own tax advisor as to particular tax consequences
to it of exchanging Original Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws, and of any
proposed changes in applicable laws.
26
REGISTRATION RIGHTS AGREEMENT
In connection with the issuance of the Original Notes, URI entered into a
Registration Rights Agreement (the "Registration Rights Agreement") with the
initial purchasers of the Original Notes. Set forth below is a summary of
certain provisions of the Registration Rights Agreement. Such summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the registration statement of which this
prospectus forms a part.
We agreed pursuant to the Registration Rights Agreement that we would,
subject to certain exceptions:
(1) within 90 days after the issue date of the Original Notes, file a
registration statement (the "Exchange Offer Registration Statement") with
the SEC with respect to a registered offer (the "Exchange Offer") to
exchange the Original Notes for new notes of URI (the "Exchange Notes")
having terms substantially identical in all material respects to the
Original Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions and will have different registration
rights);
(2) use our best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 150 days
after the issue date of the Original Notes;
(3) as soon as practicable after the effectiveness of the Exchange Offer
Registration Statement (the "Effectiveness Date"), offer the Exchange Notes
in exchange for surrender of the Original Notes; and
(4) keep the Exchange Offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the holders of the notes.
The Exchange Offer being made hereby is intended to satisfy our obligations
under the Registration Rights Agreement described in the preceding paragraph.
In the event that:
(1) applicable interpretations of the staff of the SEC do not permit us
to effect the Exchange Offer; or
(2) for any other reason we do not consummate the Exchange Offer within
180 days of the issue date of the Original Notes; or
(3) an initial purchaser of the Original Notes shall notify us following
consummation of the Exchange Offer that notes held by it are not eligible to
be exchanged for Exchange Notes in the Exchange Offer; or
(4) certain holders are prohibited by law or SEC policy from
participating in the Exchange Offer or may not resell the Exchange Notes
acquired by them in the Exchange Offer to the public without delivering a
prospectus;
then, we will, subject to certain exceptions,
(1) use our best efforts to file a shelf registration statement (the
"Shelf Registration Statement") covering resales of the notes or the
Exchange Notes, as the case may be, on or prior to the 90th day after such
filing obligation arises;
(2) use our best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act on or prior to the 150th
calendar day after such filing obligation arises; provided, however, that if
the obligation to file the Shelf Registration Statement arises because the
Exchange Offer has not been consummated within 180 days after the issue date
of the Original Notes, then we will use our best efforts to file the Shelf
Registration Statement on or prior to the 30th day after such filing
obligation arises; and
(3) keep the Shelf Registration Statement effective until the earliest
of:
(A) the time when the notes covered by the Shelf Registration
Statement can be sold pursuant to Rule 144 without any limitations under
clauses (c), (e), (f) and (h) of Rule 144;
27
(B) two years from the effective date of the Shelf Registration
Statement; and
(C) the date on which all notes registered thereunder are disposed of
in accordance therewith.
We will, in the event that a Shelf Registration Statement is filed, among
other things, provide to each holder for whom such Shelf Registration Statement
was filed copies of the prospectus which is a part of the Shelf Registration
Statement, notify each holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Original Notes or the Exchange Notes, as the case may be. A
holder selling such Original Notes or Exchange Notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
holder (including certain indemnification obligations).
If any of the following events occur (each such event a "Registration
Default"), we will pay additional cash interest on the applicable Original
Notes or Exchange Notes, subject to certain exceptions, from and including the
date on which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured:
(1) we fail to file any of the registration statements required by the
Registration Rights Agreement on or prior to the date specified for such
filing;
(2) any of such registration statements is not declared effective by the
SEC on or prior to the date specified for such effectiveness;
(3) the Exchange Offer is required to be consummated under the
Registration Rights Agreement and is not consummated within 180 days after
the issue date of the Original Notes;
(4) the Shelf Registration Statement is declared effective but
thereafter, during the period for which we are required to maintain the
effectiveness of such registration statement, it ceases to be effective or
usable in connection with the resale of the Original Notes or the Exchange
Notes, as the case may be, covered by such registration statement for a
period of 60 days, whether or not consecutive; or
(5) the Exchange Offer Registration Statement is declared effective but
thereafter, during the period in which we are required to make this
prospectus available for use by broker-dealers (as described under "Plan of
Distribution"), it ceases to be effective (or we restrict the use of the
prospectus included therein) for a period of 60 days, whether or not
consecutive.
Notwithstanding the foregoing, any Registration Default specified in clause
(1), (2) or (3) of the preceding sentence that relates to the Exchange Offer
Registration Statement or the Exchange Offer shall be deemed cured at such time
as the Shelf Registration Statement is declared effective by the SEC.
If a Registration Default exists, the interest rate on the Specified Notes
(as defined below) will increase by 0.25% per annum, with respect to the first
90 day period (or portion thereof) while a Registration Default is continuing
immediately following the occurrence of such Registration Default. Such
interest rate will increase by an additional 0.25% per annum at the beginning
of each subsequent 90-day period (or portion thereof) while a Registration
Default is continuing until all Registration Defaults have been cured, up to a
maximum rate of additional interest of 1.00% per annum. Following the cure of
all Registration Defaults, the accrual of additional interest on the Specified
Notes will terminate and the interest rate will revert to the original rate.
The Indenture provides that additional interest as aforesaid will constitute
liquidated damages and will be the exclusive monetary remedy available to
holders of the notes in respect of any Registration Default.
"Specified Notes" means the Original Notes (and not the Exchange Notes);
provided, however, that, if the Registration Default relates solely to a Shelf
Registration Statement, then (i) if such Shelf Registration Statement is
required to cover both Original Notes and Exchange Notes, "Specified Notes"
shall mean both the Original
28
Notes and Exchange Notes and (ii) if such Shelf Registration Statement is
required to cover only Exchange Notes, "Specified Notes" shall mean only the
Exchange Notes; provided further, however, that, if the Registration Default
relates to an Exchange Offer Registration Statement that is unavailable for use
during the period in which we are required to make this prospectus available
for use by broker-dealers (as described under "Plan of Distribution"),
"Specified Notes" shall mean the Exchange Notes.
All references in the Indenture, in any context, to any interest or other
amount payable on or with respect to the notes shall be deemed to include any
additional interest pursuant to the Registration Rights Agreement.
USE OF PROCEEDS
URI will not receive any cash proceeds from the issuance of the Exchange
Notes. In consideration for issuing the Exchange Notes as contemplated in this
prospectus, URI will receive in exchange Original Notes in like principal
amount, which will be cancelled. As such, this Exchange Offer will not result
in any increase or decrease in indebtedness of URI.
29
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The tables below present selected financial information for our company. You
should read this information together with the information set forth in the
consolidated financial statements and the related notes which are included in
the financial statements of our company included or incorporated by reference
herein.
The balance sheet data presented below as of December 31, 2000, and 1999 and
the income statement data for the years ended December 31, 2000, 1999 and 1998
are derived from our audited consolidated financial statements of our company
which are included herein. The balance sheet data presented below as of
December 31, 1998, 1997 and 1996 and the income statement data for the years
ended December 31, 1997 and 1996 are derived from audited consolidated
financial statements of our company which are not included or incorporated by
reference in this prospectus. The balance sheet data presented below as of
March 31, 2001 and the income statement data for the three-month periods ended
March 31, 2001 and 2000 are derived from our unaudited consolidated financial
statements which are included herein. These unaudited consolidated financial
statements include, in the opinion of our management, all adjustments necessary
to present fairly our results of operations and financial position of our
company for the periods and dates presented. These adjustments consist only of
normal recurring adjustments.
We refinanced $1,695.7 million of indebtedness and other obligations in
April 2001 as described under "Prospectus Summary--Background to Issuance of
the Notes." The balance sheet data below under the heading "Pro Forma" adjusts
the historical balance sheet data to give effect to the borrowings under our
old credit facility subsequent to March 31, 2001 and the refinancing
transactions, as if such transactions had occurred on March 31, 2001.
Certain of our acquisitions were accounted for as purchases and certain
acquisitions were accounted for as poolings-of-interests, including our
September 1998 merger with U.S. Rentals, Inc. For further information
concerning the accounting for these acquisitions, see (1) note 3 to the audited
consolidated financial statements of our company included herein and (2) note 2
to the unaudited consolidated financial statements of our company included
herein.
30
Selected Consolidated Financial Information
Three Months Ended
Year Ended December 31, March 31,
------------------------------------- --------------------
1996 1997 1998 1999 2000 2000 2001
------ ------ ------- ------- ------- ---------- ---------
(dollars in millions)
Income statement data:
Revenues:
Equipment rentals........................................ $ 295 $ 388 $ 895 $1,581 $2,057 $ 400 $ 461
Sales of rentals equipment............................... 25 42 120 236 348 70 39
Sales of equipment and merchandise and other revenues.... 34 60 205 417 514 109 119
Total revenues.......................................... 354 490 1,220 2,234 2,919 579 619
Total cost of operations................................... 241 341 797 1,409 1,830 373 416
Gross profit:
Gross profit from equipment rentals...................... 92 116 325 623 821 152 154
Gross profit from sales of rental equipment.............. 15 21 53 99 140 29 16
Gross profit from sales of equipment and merchandise and
other revenues.......................................... 6 12 45 103 128 25 33
Total gross profit...................................... 113 149 423 825 1,089 206 203
Selling, general and administrative expenses............... 55 71 196 353 454 102 109
Merger-related expenses.................................... 47
Non-rental depreciation and amortization................... 9 13 35 63 87 20 26
Termination cost of deferred compensation agreements....... 20
----- ----- ------ ------ ------ ------ ------
Operating income........................................... 49 45 145 409 548 84 68
Interest expense (1)....................................... 11 12 64 140 229 50 57
Preferred dividends of a subsidiary trust.................. 8 20 20 5 5
Other (income) expense..................................... (2) (5) 7 (2) (1)
----- ----- ------ ------ ------ ------ ------
Income before provision for income taxes and extraordinary
items..................................................... 38 35 78 242 301 30 6
Provision for income taxes................................. 30 44 99 125 13 3
----- ----- ------ ------ ------ ------ ------
Income before extraordinary items.......................... 38 5 34 143 176 17 3
Extraordinary items, net (2)............................... 1 21
----- ----- ------ ------ ------ ------ ------
Net income................................................. $ 38 $ 4 $ 13 $ 143 $ 176 $ 17 $ 3
===== ===== ====== ====== ====== ====== ======
Pro forma provision for income taxes before extraordinary
items (3)................................................. $ 15 $ 14 $ 44
Pro forma income before extraordinary items (3)............ 23 21 34
Other financial data:
EBITDA (4)................................................. $ 124 $ 161 $ 404 $ 761 $ 962 $ 178 $ 170
EBITDA margin (5).......................................... 34.9% 32.8% 33.1% 34.1% 33.0% 30.7% 27.5%
Depreciation and amortization.............................. $ 75 $ 96 $ 212 $ 344 $ 414 $ 93 $ 103
Ratio of EBITDA to interest expense........................ 11.0x 13.6x 6.3x 5.4x 4.2x 3.6x 3.0x
Ratio of EBITDA to interest expense and preferred dividends
of a subsidiary trust..................................... 11.0x 13.6x 5.6x 4.8x 3.9x 3.3x 2.7x
Ratio of total debt to EBITDA.............................. 1.7x 1.6x 3.3x 3.0x 2.8x 15.1x 16.1x
Ratio of earnings to fixed charges (6)..................... 4.0x 3.4x 2.1x 2.5x 2.1x 1.5x 1.1x
As of December 31, As of March 31, 2001
------------------------------------- --------------------
1996 1997 1998 1999 2000 Historical Pro Forma
------ ------ ------- ------- ------- ---------- ---------
(dollars in millions)
Balance sheet data:
Cash and cash equivalents.................................. $ 3 $ 72 $ 20 $ 24 $ 34 $ 26 $ 26
Rental equipment, net...................................... 235 461 1,143 1,660 1,733 1,720 1,751
Total assets............................................... 381 826 2,635 4,498 5,124 5,112 5,143
Total debt................................................. 214 265 1,315 2,266 2,675 2,751 2,807
Company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust (7)............ 300 300 300 300 300
Stockholders' equity....................................... 105 446 726 1,397 1,546 1,514 1,514
--------
(1)Interest expense excludes the amortization of deferred financing fees.
(2)The charge in 1997 resulted from the prepayment of debt by U.S. Rentals. The
charge in 1998 resulted from the early extinguishment of certain debt and
primarily reflected prepayment penalties on certain debt of U.S. Rentals.
(3)U.S. Rentals was taxed as a Subchapter S Corporation until its initial
public offering in February 1997, and another company that we acquired in a
pooling-of-interests transaction was taxed as a Subchapter S Corporation
until being acquired by us 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
reflects 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.
31
(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 our ability
to meet 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 our operating performance or liquidity.
(5)EBITDA margin is defined as EBITDA as a percentage of total revenues.
(6)For purposes of determining the ratio of earnings to fixed charges. (i)
earnings consist of income before income taxes and extraordinary items plus
fixed charges and (ii) fixed charges consist of interest expense,
amortization of debt issuance costs, and the estimated interest portion of
rental expense.
(7)These securities are the obligation of a subsidiary trust of Holdings and
are not an obligation of URI. Although not legally obligated to do so, URI
has made, and expects that it will continue to make cash distributions to
Holdings to enable Holdings to pay dividends on these securities.
32
DESCRIPTION OF THE NOTES
The Exchange Notes offered hereby will be issued, and the Original Notes
were issued, under an Indenture dated as of April 20, 2001 (the "Indenture"),
among URI, the Guarantors and The Bank of New York, as trustee (the "Trustee"),
a copy of which has been filed as an exhibit to the registration statement of
which this prospectus forms a part. References to the notes include both the
Original Notes and the Exchange Notes. Upon the effectiveness of the
registration statement of which this prospectus is a part, the Indenture will
be subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
The following summary of the material provisions of the Indenture and the
notes does not purport to be complete and is subject to, and qualified in its
entirety by, reference to the provisions of the Indenture and the notes,
including the definitions of certain terms contained therein and those terms
made part of the Indenture by reference to the Trust Indenture Act. The
definition of certain capitalized terms used in the following summary are set
forth below under "--Certain Definitions." All references to "we", "our", "us"
or "the Company" in the following summary refer exclusively to URI, and not to
any of its subsidiaries or Holdings.
Original Notes and Exchange Notes Will Represent Same Debt
The Exchange Notes will be issued solely in exchange for an equal principal
amount of Original Notes pursuant to the Exchange Offer. The Exchange Notes
will evidence the same debt as the Original Notes and both series of notes will
be entitled to the benefits of the Indenture and treated as a single class of
debt securities. The terms of the Exchange Notes will be the same in all
material respects as the Original Notes except that (i) the Exchange Notes will
be registered under the Securities Act, and therefore, will not bear legends
restricting the transfer thereof and (ii) certain of the registration rights,
under the Registration Rights Agreement, relating to the Exchange Notes are
different than those relating to the Original Notes. See "Registration Rights
Agreement."
If the Exchange Offer is consummated, holders of Original Notes who do not
exchange their Original Notes for Exchange Notes will vote together with
holders of the Exchange Notes for all relevant purposes under the Indenture.
Accordingly, all references herein to specified percentages in aggregate
principal amount of the outstanding notes shall be deemed to mean, at any time
after the Exchange Offer is consummated, such percentages in aggregate
principal amount of the Original Notes and the Exchange Notes then outstanding.
Brief Description of the Notes
The notes:
. are unsecured senior obligations of the Company;
. are senior in right of payment to any Subordinated Indebtedness of the
Company; and
. are guaranteed on a senior basis by Holdings and each Subsidiary
Guarantor.
Maturity, Interest and Principal
The Company issued the notes initially in an aggregate principal amount of
$450 million. The notes will mature on April 15, 2008. Subject to our
compliance with the covenant described under the subheading "--Certain
Covenants--Limitation on Indebtedness", we are permitted to issue more notes
under the Indenture (the "Additional Notes"). The notes and the Additional
Notes, if any, will be treated as a single class for all purposes of the
Indenture, including waivers, amendments, redemptions and offers to purchase.
Unless the context otherwise requires, for all purposes of the Indenture and
this "Description of the Notes," references to the notes include any Additional
Notes actually issued. Interest on the notes accrues at the rate of 10.75% per
annum
33
and is payable semiannually in arrears on each April 15 and October 15,
commencing October 15, 2001, to the holders of record of notes at the close of
business on the April 1 and October 1, respectively, immediately preceding such
interest payment date. Interest on the notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
Issue Date. Interest will be computed on the basis of a 360-day year
constituted of twelve 30-day months.
The notes are issued only in registered form without coupons, in
denominations of $1,000 and integral multiples thereof. Principal of, premium,
if any, and interest on the notes is payable, and the notes are transferable,
at the principal corporate trust office or agency of the Trustee in the City of
New York maintained for such purposes. In addition, interest may be paid at the
option of the Company by check mailed to the person entitled thereto as shown
on the security register. No service charge will be made for any transfer,
exchange or redemption of notes, except in certain circumstances for any tax or
other governmental charge that may be imposed in connection therewith.
The notes are expected to trade in the Same-Day Funds Settlement System of
The Depository Trust Company ("DTC") until maturity, and secondary market
trading activity for the notes will therefore settle in same day funds.
Optional Redemption
Optional Redemption. The notes will be redeemable at our option, in whole or
in part, at any time on or after April 15, 2005, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued
and unpaid interest, if any, to the redemption date, if redeemed during the
12-month period beginning April 15 of the years indicated below:
Redemption
Year Price
---- ----------
2005 105.3750%
2006 102.6875%
2007 100.0000%
In addition, at any time, or from time to time, on or prior to April 15,
2004, we may, at our option, use the net cash proceeds of one or more Public
Equity Offerings (as defined below) to redeem up to an aggregate of 35% of the
principal amount of the notes (which includes Additional Notes, if any), at a
redemption price equal to 110.75% of the principal amount of the notes, plus
accrued and unpaid interest, if any, thereon to the redemption date; provided,
however, that at least 65% of the aggregate principal amount of notes (which
includes Additional Notes, if any) remains outstanding immediately after the
occurrence of such redemption. In order to effect the foregoing redemption with
the proceeds of any Public Equity Offering we shall send a redemption notice to
the Trustee not later than 90 days after the consummation of any such Public
Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Common Stock pursuant to a registration
statement filed with the Commission in accordance with the Securities Act, the
net cash proceeds of which are contributed to the Company as common equity
capital.
Selection and Notice. In the event that less than all of the notes are to
be redeemed at any time, selection of such notes for redemption will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed or, if the notes are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate (subject to
the rules of DTC); provided, however, that notes shall only be redeemable in
principal amounts of $1,000 or an integral multiple of $1,000. Notice of
redemption shall be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each holder of notes to be redeemed at its
registered address. If any note is to be redeemed in part only, the notice of
redemption that relates to such note shall state the portion of the principal
amount thereof to be redeemed. A new note in a principal amount equal to the
unredeemed
34
portion thereof will be issued in the name of the holder thereof upon surrender
for cancellation of the original note. On and after the redemption date,
interest will cease to accrue on notes or portions thereof called for
redemption, unless we default in the payment of the redemption price.
Sinking Fund
The notes are not entitled to the benefit of any mandatory sinking fund.
Ranking
Senior Indebtedness versus Notes
The indebtedness evidenced by these notes and the guarantees thereof is
unsecured and ranks pari passu in right of payment to the Senior Indebtedness
of the Company and the Guarantors, as the case may be.
As of March 31, 2001, as adjusted for the subsequent refinancing
transactions described under "Prospectus Summary--Background to Issuance of the
Notes," the Senior Indebtedness of the Company and the Guarantors was
approximately $1,788.0 million, including $1,338.0 million of secured
indebtedness.
Virtually all of the Senior Indebtedness of the Guarantors consists of their
respective guarantees of Senior Indebtedness of the Company under the Credit
Agreement and with respect to the notes. Secured debt and other secured
obligations of the Company (including obligations with respect to the Credit
Agreement) are effectively senior to the notes to the extent of the value of
the assets securing such debt or other obligations.
Senior Subordinated Indebtedness versus Notes
The indebtedness evidenced by the notes and the guarantees thereof ranks
senior in right of payment to the Senior Subordinated Indebtedness of the
Company and the Guarantors, as the case may be.
As of March 31, 2001, the Senior Subordinated Indebtedness of the Company
and the Guarantors was approximately $951.0 million.
All of the Senior Subordinated Indebtedness of the Guarantors consists of
their respective guarantees of Senior Subordinated Indebtedness of the Company
with respect to the 91/2% Notes, 8.80% Notes, 91/4% Notes and 9% Notes.
Liabilities of Subsidiaries versus Notes
A substantial portion of our operations are conducted through our
subsidiaries. Claims of creditors of such subsidiaries that are not Subsidiary
Guarantors, including trade creditors and creditors holding indebtedness or
guarantees issued by such subsidiaries, and claims of preferred stockholders of
such subsidiaries generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of our creditors, including
holders of the notes. Accordingly, the notes are effectively subordinated to
creditors (including trade creditors) and preferred stockholders, if any, of
our subsidiaries that are not Subsidiary Guarantors.
At March 31, 2001, the total liabilities of our subsidiaries that are not
Subsidiary Guarantors were approximately $44.6 million, including trade
payables. Although the Indenture limits the incurrence of Indebtedness and
preferred stock of certain of our subsidiaries, such limitation is subject to a
number of significant qualifications. Moreover, the Indenture does not impose
any limitation on the incurrence by such subsidiaries of liabilities that are
not considered Indebtedness under the Indenture. See "--Certain Covenants
--Limitation on Indebtedness."
Guarantees
Holdings and the Subsidiary Guarantors have fully and unconditionally
guaranteed, on a senior unsecured basis, jointly and severally, to each holder
and the Trustee, the full and prompt performance of the Company's
35
obligations under the Indenture and the notes, including the payment of
principal of and interest on the notes. Subject to limited exceptions, the
Subsidiary Guarantors are the current and future United States subsidiaries of
the Company.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount which, after giving effect to all other contingent and fixed liabilities
of such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its guarantee or
pursuant to its contribution obligations under the Indenture, will result in
the obligations of such Subsidiary Guarantor under the guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. See "Risk Factors--A guarantee could be voided if the guarantor
fraudulently transferred the guarantee at the time it incurred the
indebtedness, which could result in the noteholders being able to rely on only
URI to satisfy claims."
Each Subsidiary Guarantor that makes a payment under its guarantee will be
entitled to a contribution from each other Guarantor in an amount equal to such
other Guarantor's pro rata portion of such payment based on the respective net
assets of all the Guarantors at the time of such payment determined in
accordance with GAAP (for purposes hereof, Holdings' net assets shall be those
of all its consolidated Subsidiaries other than the Subsidiary Guarantors),
provided, however, that during a Default, such right of contribution shall be
suspended until the payment in full of all guaranteed obligations under the
Indenture.
The guarantee of a Subsidiary Guarantor will be released:
(1) upon the sale or other disposition (including by way of consolidation
or merger) of such Subsidiary Guarantor other than to the Company or a
Restricted Subsidiary of the Company and as permitted by the Indenture;
(2) upon the sale or disposition of all or substantially all the assets
of such Subsidiary Guarantor other than to the Company or a Restricted
Subsidiary of the Company and as permitted by the Indenture;
(3) upon defeasance or covenant defeasance; or
(4) if the Company properly designates any Restricted Subsidiary that is
a Subsidiary Guarantor as an Unrestricted Subsidiary.
Change of Control
Upon the occurrence of a Change of Control, we shall be obligated to make an
offer to purchase (a "Change of Control Offer"), on a business day (the "Change
of Control Purchase Date") not more than 60 nor less than 30 days following the
occurrence of the Change of Control, all of the then outstanding notes tendered
at a purchase price in cash (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
thereon to the Change of Control Purchase Date. We shall be required to
purchase all notes tendered pursuant to the Change of Control Offer and not
withdrawn. The Change of Control Offer is required to remain open for at least
20 business days.
In order to effect such Change of Control Offer, we shall, not later than
the 30th day after the Change of Control, mail to each holder of notes notice
of the Change of Control Offer, which notice shall govern the terms of the
Change of Control Offer and shall state, among other things, the procedures
that holders of notes must follow to accept the Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that we will
have available funds sufficient to pay the Change of Control Purchase Price for
all of the notes that might be delivered by holders of notes seeking to accept
the Change of Control Offer. In addition, there can be no assurance that our
debt instruments will permit such offer to be made. The Credit Agreement
prohibits us, subject to certain exceptions, from purchasing any notes prior to
the repayment of all principal (including letter of credit disbursements),
interest and
36
fees, and the expiration or termination of all letters of credit and
commitments, under the Credit Agreement. In order to make a Change of Control
Offer at a time when we are prohibited from purchasing notes, we would be
required to refinance the Credit Agreement or seek a waiver from the lenders
thereunder, and the occurrence of a Change of Control is also an event of
default under the Credit Agreement and would entitle the lenders to accelerate
all amounts owing thereunder. Failure to make a Change of Control Offer, even
if prohibited by our debt instruments, also would constitute a default under
the Indenture. Pursuant to the indentures governing the 91/2% Notes, the 8.80%
Notes, the 91/4% Notes and the 9% Notes, we are also required to make an offer
to repurchase the 91/2% Notes, the 8.80% Notes, the 91/4% Notes and the 9%
Notes upon a Change of Control, and our failure to make such an offer is an
event of default under those indentures. See "Risk Factors--We may be unable to
repurchase the notes as required upon a change of control." We shall not be
required to make a Change of Control Offer upon a Change of Control if a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements applicable to a Change of Control
Offer made by the Company and purchases all notes validly tendered and not
withdrawn under such Change of Control Offer.
The Change of Control purchase feature of the notes may in certain
circumstances make more difficult or discourage a sale or takeover of our
company and, thus, the removal of incumbent management. The Change of Control
purchase feature is a result of negotiations between us and the initial
purchasers of the Original Notes. We have no present intention to engage in a
transaction involving a Change of Control, although it is possible that we
could decide to do so in the future. Subject to the limitations discussed
below, we could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the Indenture, but that could increase the
amount of indebtedness outstanding at such time or otherwise affect our capital
structure or credit ratings. The Indenture contains restrictions on our ability
to incur additional Indebtedness, as described under "--Certain
Covenants--Limitation on Indebtedness", "--Limitation on Liens" and
"--Limitation on Sale/Leaseback Transactions." Such restrictions can only be
waived with the consent of the holders of a majority in principal amount of the
notes then outstanding. Except for the limitations contained in such covenants,
however, the Indenture does not contain any covenants or provisions that may
afford holders of the notes protection in the event of a highly leveraged
transaction. The definition of "Change of Control" excludes certain
transactions by Permitted Holders, including a direct or indirect sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company to Permitted Holders.
The use of the term "all or substantially all" in provisions of the
Indenture such as clause (b) of the definition of "Change of Control" and under
"--Consolidation, Merger, Sale of Assets, Etc." has no clearly established
meaning under New York law (which governs the Indenture) and has been the
subject of limited judicial interpretation in only a few jurisdictions.
Accordingly, there may be a degree of uncertainty in ascertaining whether any
particular transaction would involve a disposition of "all or substantially
all" of the assets of a person, which uncertainty should be considered by
prospective purchasers of notes.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws or
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase notes as described above.
Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require the repurchase of such indebtedness upon a Change of Control. Moreover,
the exercise by the holders of their right to require us to repurchase the
notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on us.
Certain Covenants
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any manner become directly or indirectly
37
liable, contingently or otherwise (in each case, to "incur"), for the payment
of any Indebtedness (including any Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that (i) the Company and any Subsidiary
Guarantor will be permitted to incur Indebtedness (including Acquired
Indebtedness), and (ii) a Restricted Subsidiary will be permitted to incur
Acquired Indebtedness, if in each case the Consolidated Fixed Charge Coverage
Ratio of the Company is at least 2:1, after giving pro forma effect to:
(1) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness were incurred at the beginning of the
four full fiscal quarters immediately preceding such incurrence, taken as
one period;
(2) the incurrence, repayment or retirement of any other Indebtedness by
the Company and its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired
at the beginning of such four-quarter period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during such four-quarter period); and
(3) any Asset Sale or Asset Acquisition occurring since the first day of
such four-quarter period (including to the date of calculation) as if such
acquisition or disposition occurred at the beginning of such four-quarter
period.
Limitation on Restricted Payments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Company or any of its Restricted
Subsidiaries or make any payment to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
options, warrants or other rights to purchase Capital Stock of the Company
(other than Redeemable Capital Stock)) (other than the declaration or
payment of dividends or other distributions to the extent declared or paid
to the Company or any Restricted Subsidiary);
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Restricted Subsidiaries or
any options, warrants, or other rights to purchase any such Capital Stock
(other than any such securities owned by the Company or a Restricted
Subsidiary);
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Subordinated Indebtedness owned by the Company or a Restricted Subsidiary);
or
(d) make any Investment (other than any Permitted Investment) in any
person,
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, after
giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the Fair Market Value of the
asset(s) proposed to be transferred by the Company or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment):
(A) no Default or Event of Default shall have occurred and be continuing;
(B) immediately after giving effect to such Restricted Payment, the
Company would be able to incur $1.00 of additional Indebtedness, (other than
Permitted Indebtedness) (assuming a market rate of interest with respect to
such additional Indebtedness); and
(C) the aggregate amount of all Restricted Payments declared or made from
and after May 22, 1998 would not exceed the sum of:
(1) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis during the period (treated as one
accounting period) beginning on May 22, 1998 and ending on
38
the last day of the fiscal quarter of the Company immediately preceding
the date of such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income of the Company for such period shall
be a deficit, minus 100% of such deficit);
(2) the aggregate net cash proceeds received by the Company as
capital contributions to the Company after May 22, 1998 and which
constitute shareholders' equity of the Company in accordance with GAAP;
(3) the aggregate net cash proceeds received by the Company from the
issuance or sale of Capital Stock (excluding Redeemable Capital Stock of
the Company) of the Company to any person (other than an issuance or
sale to a Subsidiary of the Company and other than an issuance or sale
to an employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their employees)
after May 22, 1998;
(4) the aggregate net cash proceeds received by the Company from any
person (other than a Subsidiary of the Company) upon the exercise of any
options, warrants or rights to purchase shares of Capital Stock (other
than Redeemable Capital Stock) of the Company after May 22, 1998;
(5) the aggregate net cash proceeds received after May 22, 1998 by
the Company from any person (other than a Subsidiary of the Company) for
debt securities that have been converted or exchanged into or for
Capital Stock of the Company (other than Redeemable Capital Stock) (to
the extent such debt securities were originally sold for cash) plus the
aggregate amount of cash received by the Company (other than from a
Subsidiary of the Company) in connection with such conversion or
exchange;
(6) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment after May 22, 1998, an amount equal to
the lesser of the return of capital with respect to such Investment and
the initial amount of such Investment, in either case, less the cost of
the disposition of such Investment; and
(7) so long as the Designation thereof was treated as a Restricted
Payment made after May 22, 1998, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
the Issue Date in accordance with "--Limitation on Designations of
Unrestricted Subsidiaries" below, the Fair Market Value of the Company's
interest in such Subsidiary, provided, however, that such amount shall
not in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation, minus the Designation Amount
(measured as of the date of Designation) with respect to any Restricted
Subsidiary of the Company which has been designated as an Unrestricted
Subsidiary after May 22, 1998 in accordance with "--Limitations on
Designations of Unrestricted Subsidiaries" below.
For purposes of the preceding clause (C)(4), the value of the aggregate net
proceeds received by the Company upon the issuance of Capital Stock upon the
exercise of options, warrants or rights will be the net cash proceeds received
upon the issuance of such options, warrants or rights plus the incremental
amount received by the Company upon the exercise thereof.
None of the foregoing provisions will prohibit, so long, in the case of
clauses (ii), (iii), (v), (vi), (vii), (viii), (ix) and (xi) below, as there is
no Default or Event of Default continuing:
(i) the payment of any dividend or distribution within 60 days after the
date of its declaration, if at the date of declaration such payment would be
permitted by the first paragraph of this covenant;
(ii) the redemption, repurchase or other acquisition or retirement of any
shares of any class of Capital Stock of the Company in exchange for, or out
of the net cash proceeds of, a substantially concurrent issue and sale of
other shares of Capital Stock of the Company (other than Redeemable Capital
Stock of the Company) to any person (other than to a Subsidiary of the
Company); provided, however, that such net cash proceeds are excluded from
clause (C) of the first paragraph of this covenant;
39
(iii) any redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness by exchange for, or out of the net cash proceeds
of, a substantially concurrent issue and sale of:
(1) Capital Stock (other than Redeemable Capital Stock of the
Company) of the Company to any person (other than to a Subsidiary of the
Company); provided, however, that any such net cash proceeds are
excluded from clause (C) of the first paragraph of this covenant; or
(2) Indebtedness of the Company so long as such Indebtedness is
Subordinated Indebtedness which:
(x) has no scheduled principal payment prior to the 91st day after
the Maturity Date;
(y) has an Average Life to Stated Maturity greater than the
remaining Average Life to Stated Maturity of the notes; and
(z) is subordinated to the notes in the same manner and to the
same extent as the Subordinated Indebtedness so purchased, exchanged,
redeemed, acquired or retired;
(iv) Investments constituting Restricted Payments made as a result of the
receipt of non-cash consideration from any Asset Sale or other sale of
assets or property made pursuant to and in compliance with the Indenture;
(v) payments to purchase Capital Stock of the Company or Holdings from
officers of the Company or Holdings, pursuant to agreements in effect as of
the Issue Date, in an amount not to exceed $15 million in the aggregate;
(vi) payments (other than those covered by clause (v)) to purchase
Capital Stock of the Company or Holdings from management or employees of the
Company or any of its Subsidiaries, or their authorized representatives,
upon the death, disability or termination of employment of such employees,
in aggregate amounts under this clause not to exceed $1 million in any
fiscal year of the Company;
(vii) payments to Holdings in an amount sufficient to permit it to make
scheduled payments of interest on its 61/2% Convertible Subordinated
Debentures due August 1, 2028, issued to United Rentals Trust I;
(viii) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to repurchase the notes pursuant to the
covenant described under "--Change of Control" above (including the purchase
of the notes tendered), any purchase or redemption of Subordinated
Indebtedness or any Capital Stock of Holdings, the Company or any Restricted
Subsidiaries required pursuant to the terms thereof as a result of such
Change of Control at a purchase or redemption price not to exceed 101% of
the outstanding principal amount or liquidation amount thereof, plus accrued
and unpaid interest or dividends (if any); provided, however, that at the
time of such purchase or redemption no Default shall have occurred and be
continuing (or would result therefrom);
(ix) upon the occurrence of an Asset Sale and within 60 days after the
completion of an Asset Sale Offer to repurchase the Notes pursuant to the
covenant described under "--Certain Covenants--Disposition of Proceeds of
Asset Sales" below (including the purchase of the notes tendered), any
purchase or redemption of Subordinated Indebtedness or any Capital Stock of
Holdings, the Company or any Restricted Subsidiaries required pursuant to
the terms thereof as a result of such Asset Sale at a purchase or redemption
price not to exceed 100% of the outstanding principal amount or liquidation
amount thereof, plus accrued and unpaid interest or dividends (if any);
provided, however, that at the time of such purchase or redemption no
Default shall have occurred and be continuing (or would result therefrom);
(x) payments to Holdings in an amount sufficient to enable Holdings to
pay:
(1) its taxes, legal, accounting, payroll, benefits and corporate
overhead expenses (including SEC, stock exchange and transfer agency
fees and expenses), and expenses of United Rentals Trust I payable by
Holdings pursuant to the terms of the trust agreement governing such
trust;
40
(2) trade, lease, payroll, benefits and other obligations in respect
of goods to be delivered to, services (including management and
consulting services) performed for and properties used by, the Company
and its Restricted Subsidiaries;
(3) the purchase price for Investments in other persons, provided,
however, that promptly following such Investment either:
(x) such other person either becomes a Restricted Subsidiary or is
merged or consolidated with, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted
Subsidiary; or
(y) such Investment would otherwise be permitted under the
Indenture if made by the Company and such Investment is contributed
or transferred by Holdings to the Company or a Restricted Subsidiary;
and
(4) reasonable and customary incidental expenses as determined in
good faith by the Board of Directors of Holdings;
(xi) cash payments in lieu of the issuance of fractional shares in
connection with the exercise of any warrants, options or other securities
convertible into or exchangeable for Capital Stock of Holdings, the Company
or any of its Restricted Subsidiaries;
(xii) the deemed repurchase of Capital Stock on the cashless exercise of
stock options;
(xiii) the payment of any dividend or distribution by a Restricted
Subsidiary to the holders of its Capital Stock on a pro rata basis; and
(xiv) any Investment made in a Special Purpose Vehicle in connection with
a Securitization Transaction, which Investment consists of the assets
described in the definition of "Equipment Securitization Transaction" or
"Receivables Securitization Transaction."
Any payments made pursuant to clauses (i), (v), (vi), (vii), (viii) or (ix) of
this paragraph shall be taken into account in calculating the amount of
Restricted Payments made in accordance with this covenant.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien
(the "Initial Lien") of any kind against or upon any of its property or assets,
or any proceeds therefrom, unless the notes are equally and ratably secured
(except that Liens securing Subordinated Indebtedness shall be expressly
subordinate to Liens securing the notes to the same extent such Subordinated
Indebtedness is subordinate to the notes), except for Permitted Liens. Any Lien
created for the benefit of the Holders of the notes pursuant to the preceding
sentence shall provide by its terms that such Lien shall be automatically and
unconditionally released and discharged upon the release and discharge of the
Initial Lien.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless:
(1) the Company or such Restricted Subsidiary would be entitled to:
(A) Incur Indebtedness in an amount equal to the Attributable Debt
with respect to such Sale/Leaseback Transaction pursuant to the covenant
described under "--Limitation on Indebtedness;" and
(B) create a Lien on such property securing such Attributable Debt
without equally and ratably securing the Notes pursuant to the covenant
described under "--Limitation on Liens;"
(2) the net proceeds received by the Company or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to the
fair value (as determined by the Board of Directors) of such property; and
41
(3) the Company applies the proceeds of such transaction in compliance
with the covenant described under "--Dispositions of Proceeds of Asset
Sales."
Notwithstanding clauses 1(B), 2 and 3 above, the Company and the Restricted
Subsidiaries may enter into Sale/Leaseback Transactions with respect to rental
fleet equipment.
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any of its Restricted Subsidiaries to, make any Asset Sale unless:
(a) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the shares or assets sold or otherwise disposed of; and
(b) at least 75% of such consideration consists of cash or Cash
Equivalents or Replacement Assets (as defined below); provided, however,
that the amount of any liabilities (as shown on the most recent balance
sheet of the Company or such Restricted Subsidiary) of the Company or such
Restricted Subsidiary that are assumed by the transferee of such assets and
any securities, notes or other obligations received by the Company or such
Restricted Subsidiary from such transferee that are converted within 30 days
into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents
received) shall be deemed to be cash for the purposes of this provision;
provided further, that the 75% limitation referred to in clause (b) will not
apply to any Asset Sale in which the cash or Cash Equivalent portion of the
consideration received therefrom, determined in accordance with the
foregoing provision, is equal to or greater than what the after-tax proceeds
would have been had such Asset Sale complied with the aforementioned 75%
limitation.
To the extent that the Net Cash Proceeds of any Asset Sale are not required
to be applied to repay, and permanently reduce the commitments under, Senior
Indebtedness of the Company or any Restricted Subsidiary, or are not so
applied, the Company or such Restricted Subsidiary, as the case may be, may
apply the Net Cash Proceeds from such Asset Sale, within 360 days of such Asset
Sale, to an investment in properties and assets that replace the properties and
assets that were the subject of such Asset Sale or in properties and assets
that are used or useful in the business of the Company and its Restricted
Subsidiaries conducted at such time or in businesses reasonably related thereto
or in Capital Stock of a person, the principal portion of whose assets consist
of such property or assets (collectively, "Replacement Assets"). Any Net Cash
Proceeds from any Asset Sale that are neither used to repay, and permanently
reduce the commitments under, Senior Indebtedness nor invested in Replacement
Assets within such 360-day period constitute "Excess Proceeds" subject to
disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $10 million,
the Company shall make an offer to purchase (an "Asset Sale Offer"), from all
holders of the notes, an aggregate principal amount of notes equal to such
Excess Proceeds, at a price in cash equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest, if any, to the purchase date
(the "Asset Sale Offer Price"). To the extent that the aggregate principal
amount of notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use such deficiency for general corporate
purposes. The notes shall be purchased by the Company, at the option of the
holder thereof, in whole or in part in integral multiples of $1,000, on a date
that is not earlier than 30 days and not later than 60 days from the date the
notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act. If the
aggregate principal amount of notes validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, notes to be purchased will be
selected on a pro rata basis.
Notwithstanding the foregoing, if the Company is required to commence an
Asset Sale Offer at any time when securities of the Company ranking pari passu
in right of payment with the notes are outstanding and the terms of such
securities provide that a similar offer must be made with respect to such other
securities, then the Asset Sale Offer for the notes shall be made concurrently
with such other offers and securities of each issue will be accepted on a pro
rata basis in proportion to the aggregate principal amount of securities of
each issue which
42
the holders thereof elect to have purchased. Any Asset Sale Offer will be made
only to the extent permitted under, and subject to prior compliance with, the
terms of agreements governing Senior Indebtedness. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase notes as described above.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any Restricted Subsidiary to issue any Preferred Stock other than
Preferred Stock issued to the Company or a Wholly Owned Restricted Subsidiary.
The Company will not sell, transfer or otherwise dispose of Preferred Stock
issued by a Restricted Subsidiary of the Company or permit a Restricted
Subsidiary to sell, transfer or otherwise dispose of Preferred Stock issued by
a Restricted Subsidiary, other than to the Company or a Wholly Owned Restricted
Subsidiary. Notwithstanding the foregoing, nothing in such covenant will
prohibit Preferred Stock (other than Redeemable Capital Stock) issued by a
person prior to the time:
(A) such person becomes a Restricted Subsidiary of the Company;
(B) such person merges with or into a Restricted Subsidiary of the
Company; or
(C) a Restricted Subsidiary of the Company merges with or into such
person;
provided, however, that such Preferred Stock was not issued or incurred by such
person in anticipation of a transaction contemplated by subclause (A), (B), or
(C) above.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any of its
Affiliates (other than Restricted Subsidiaries), except:
(a) on terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than those which could have been obtained in
a comparable transaction at such time from persons who are not Affiliates of
the Company;
(b) with respect to a transaction or series of related transactions
involving aggregate payments or value equal to or greater than $2 million,
the Company shall have delivered an officer's certificate to the Trustee
certifying that such transaction or transactions comply with the preceding
clause (a); and
(c) with respect to a transaction or series of related transactions
involving aggregate payments or value equal to or greater than $5 million,
such transaction or transactions shall have been approved by a majority of
the Disinterested Members of the Board of Directors of the Company.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to:
(i) transactions with or among the Company and the Restricted
Subsidiaries;
(ii) customary directors' fees, indemnification and similar arrangements,
consulting fees, employee salaries, bonuses or employment agreements,
compensation or employee benefit arrangements and incentive arrangements
with any officer, director or employee of the Company or any Restricted
Subsidiary entered into in the ordinary course of business;
(iii) any dividends, payments or investments made in compliance with
"--Limitation on Restricted Payments" above;
(iv) loans and advances to officers, directors and employees of the
Company or any Restricted Subsidiary for travel, entertainment, moving and
other relocation expenses, in each case made in the ordinary course of
business;
43
(v) the incurrence of intercompany Indebtedness which constitutes
Permitted Indebtedness;
(vi) transactions pursuant to agreements in effect on the Issue Date;
(vii) the purchase of equipment for its Fair Market Value from Terex
Corporation or its Affiliates in the ordinary course of business of each of
Terex Corporation and the Company;
(viii) any sale, conveyance or other transfer of assets customarily
transferred in a Securitization Transaction to a Special Purpose Vehicle;
(ix) transactions with customers, clients, suppliers, joint venture
partners, joint ventures, including their members or partners, or purchasers
or sellers of goods or services, in each case in the ordinary course of
business, including pursuant to joint venture agreements, and otherwise in
compliance with the terms of the Indenture which are, in the aggregate
(taking into account all the costs and benefits associated with such
transactions), materially no less favorable to the Company or the applicable
Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or that Restricted Subsidiary with an
unrelated person or entity, in the good faith determination of the Company's
board of directors or our senior management, or are on terms at least as
favorable as might reasonably have been obtained at such time from an
unaffiliated party; and
(x) transactions described in or permitted by clauses (vii) and (x) of
the last paragraph under the caption "--Limitation on Restricted Payments."
Limitation on Dividends and other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to:
(a) pay dividends, in cash or otherwise, or make any other distributions
on or in respect of its Capital Stock or any other interest or participation
in, or measured by, its profits;
(b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary of the Company;
(c) make loans or advances to the Company or any other Restricted
Subsidiary of the Company;
(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary of the Company; or
(e) guarantee any Indebtedness of the Company or any other Restricted
Subsidiary of the Company ,
except for such encumbrances or restrictions existing under or by reason of:
(i) applicable law or any applicable rule, regulation or order;
(ii) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of the Company or any Restricted Subsidiary
of the Company;
(iii) customary restrictions on transfers of property subject to a Lien
permitted under the Indenture;
(iv) the Credit Agreement as in effect on the Issue Date;
(v) any agreement or other instrument of a person acquired by the Company
or any Restricted Subsidiary of the Company in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired;
(vi) an agreement entered into for the sale or disposition of Capital
Stock or assets of a Restricted Subsidiary or an agreement entered into for
the sale of specified assets (in either case, so long as such encumbrance or
restriction, by its terms, terminates on the earlier of the termination of
such agreement or the consummation of such agreement and so long as such
restriction applies only to the Capital Stock or assets to be sold);
44
(vii) any agreement in effect on the Issue Date;
(viii) the Indenture and the guarantees thereunder;
(ix) the indentures governing the 91/2% Notes, the 8.80% Notes, the 91/4%
Notes and the 9% Notes;
(x) joint venture agreements and other similar agreements entered into
in the ordinary course of business that prohibit actions of the type
described in clauses (a), (c), (d) and (e) above;
(xi) any agreement entered into with respect to a Special Purpose Vehicle
in connection with a Securitization Transaction, containing customary
restrictions required by the institutional sponsor or arranger of such
Securitization Transaction in similar types of documents relating to the
purchase of similar assets in connection with the financing thereof;
(xii) restrictions relating to Foreign Subsidiaries contained in
Indebtedness Incurred pursuant to clause (k) of the definition of "Permitted
Indebtedness;" and
(xiii) any agreement that amends, extends, refinances, renews or replaces
any agreement described in the foregoing clauses, provided, however, that
the terms and conditions of any such agreement are not materially less
favorable, taken as a whole, to the holders of the notes with respect to
such dividend and payment restrictions than those under or pursuant to the
agreement amended, extended, refinanced, renewed or replaced.
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate after the Issue Date any Restricted Subsidiary as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other than a
Permitted Investment, except a Permitted Investment covered by clause (xii)
of the definition thereof) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"--Limitation on Restricted Payments" above in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's interest in such
Subsidiary on such date calculated in accordance with GAAP; and
(iii) the Company would be permitted under the Indenture to incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "--Limitation on Indebtedness" at the time of
such Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"--Limitation on Restricted Payments" for all purposes of the Indenture in the
Designation Amount.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time:
(x) provide credit support for or subject any of its property or assets
(other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness);
(y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary; or
(z) be directly or indirectly liable for any Indebtedness which provides
that the holder thereof may (upon notice, lapse of time or both) declare a
default thereon or cause the payment thereof to be accelerated or payable
prior to its final scheduled maturity upon the occurrence of a default with
respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary),
except any non-recourse guarantee given solely to support the pledge by the
Company or any Restricted Subsidiary of the Capital Stock of an Unrestricted
Subsidiary.
45
All Subsidiaries of Unrestricted Subsidiaries shall automatically be deemed
to be Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
Additional Subsidiary Guarantees. The Company will cause each United States
Restricted Subsidiary that guarantees any Indebtedness of the Company or any
other Restricted Subsidiary to at the same time execute and deliver to the
Trustee a Guaranty Agreement pursuant to which such Restricted Subsidiary will
guarantee payment of the notes on the same terms and conditions as those set
forth in the Indenture. This covenant shall not apply to any of the Company's
Subsidiaries that have been properly designated as an Unrestricted Subsidiary
or as a Special Purpose Vehicle.
Reporting Requirements. For so long as the notes are outstanding, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, or
any successor provision thereto, the Company shall file with the SEC (if
permitted by SEC practice and applicable law and regulations) the annual
reports, quarterly reports and other documents which the Company would have
been required to file with the SEC pursuant to such Section 13(a) or 15(d) or
any successor provision thereto if the Company were so subject, such documents
to be filed with the SEC on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject. If, notwithstanding the preceding
sentence, filing such documents by the Company with the SEC is not permitted by
SEC practice or applicable law or regulations, the Company shall transmit (or
cause to be transmitted) by mail to all holders of notes, as their names and
addresses appear in the note register, copies of such documents within 15 days
after the Required Filing Date. In addition, for so long as any notes remain
outstanding, the Company will furnish to the holders of notes and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act,
and, to any beneficial holder of notes, if not obtainable from the SEC,
information of the type that would be filed with the SEC pursuant to the
foregoing provisions upon the request of any such holder.
Consolidation, Merger, Sale of Assets, Etc.
The Company will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any person or persons, and the Company will not permit any of its
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Restricted Subsidiaries, taken as a whole, to
any other person or persons, unless at the time and after giving effect
thereto:
(a) either:
(i) if the transaction or transactions is a merger or consolidation,
the Company or such Restricted Subsidiary, as the case may be, shall be
the surviving person of such merger or consolidation; or
(ii) the person formed by such consolidation or into which the
Company, or such Restricted Subsidiary, as the case may be, is merged or
to which the properties and assets of the Company or such
46
Restricted Subsidiary, as the case may be, substantially as an entirety,
are transferred (any such surviving person or transferee person being
the "Surviving Entity") shall be a corporation organized and existing
under the laws of the United States of America, any state thereof or the
District of Columbia and shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company or such Restricted
Subsidiary, as the case may be, under the notes, the Indenture and the
Registration Rights Agreement, and in each case, the Indenture shall
remain in full force and effect;
(b) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event
of Default shall have occurred and be continuing; and
(c) except in the case of any merger of the Company with any wholly owned
Subsidiary of the Company or any merger of Subsidiary Guarantors (and, in
each case, no other persons), the Company or the Surviving Entity, as the
case may be, after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) (assuming a
market rate of interest with respect to such additional Indebtedness).
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under the Indenture.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties
and assets of the Company in accordance with the immediately preceding
paragraphs, the successor person formed by such consolidation or into which the
Company or a Restricted Subsidiary, as the case may be, is merged or the
successor person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of the Company under the notes, the Indenture and/or the
Registration Rights Agreement, as the case may be, with the same effect as if
such successor had been named as the Company in the notes, the Indenture and/or
in the Registration Rights Agreement, as the case may be and, except in the
case of a lease, the Company or such Restricted Subsidiary shall be released
and discharged from its obligations thereunder.
The Indenture provides that for all purposes of the Indenture and the notes
(including the provision of this covenant and the covenants described in
"--Certain Covenants--Limitation on Indebtedness," "--Limitation on Restricted
Payments," and "--Limitation on Liens"), Subsidiaries of any surviving person
shall, upon such transaction or series of related transactions, become
Restricted Subsidiaries unless and until designated Unrestricted Subsidiaries
pursuant to and in accordance with "--Limitation on Designations of
Unrestricted Subsidiaries" and all Indebtedness, and all Liens on property or
assets, of the Company and the Restricted Subsidiaries in existence immediately
after such transaction or series of related transactions will be deemed to have
been incurred upon such transaction or series of related transactions.
Events of Default
The following are "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, when
due and payable, on any of the Notes (at Stated Maturity, upon optional
redemption, required purchase or otherwise); or
47
(ii) default in the payment of an installment of interest on any of the
notes, when due and payable, for 30 days; or
(iii) default in the performance, or breach, of any covenant or agreement
of the Company under the Indenture (other than a default in the performance
or breach of a covenant or agreement which is specifically dealt with in
clauses (i), (ii) or (iv)) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified mail:
(x) to the Company by the Trustee; or
(y) to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding notes; or
(iv) (a) there shall be a default in the performance or breach of the
provisions of "--Consolidation, Merger and Sale of Assets, Etc.;"
(b) the Company shall have failed to make or consummate an Asset Sale
Offer in accordance with the provisions of the Indenture described under
"--Certain Covenants--Dispositions of Proceeds of Asset Sales;" or
(c) the Company shall have failed to make or consummate a Change of
Control Offer in accordance with the provisions of the Indenture
described under "--Change of Control;" or
(v) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Restricted Subsidiary of the Company then has outstanding
Indebtedness in excess of $15 million, individually or in the aggregate, and
either:
(a) such Indebtedness is already due and payable in full; or
(b) such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness; or
(vi) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $15 million, either individually or in the aggregate, shall be
entered against the Company or any Restricted Subsidiary of the Company or
any of their respective properties and shall not be discharged and there
shall have been a period of 60 days after the date on which any period for
appeal has expired and during which a stay of enforcement of such judgment,
order or decree, shall not be in effect; or
(vii) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under the Federal Bankruptcy
Code or any other federal, state or foreign bankruptcy, insolvency,
reorganization or similar law, or (B) adjudging the Company or any
Significant Subsidiary bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or
any Significant Subsidiary under the Federal Bankruptcy Code or any other
similar federal, state or foreign law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Company or any Significant Subsidiary or of any substantial part of any
of their properties, or ordering the winding up or liquidation of any of
their affairs, and the continuance of any such decree or order unstayed and
in effect for a period of 60 consecutive days; or
(viii) the institution by the Company or any Significant Subsidiary of a
voluntary case or proceeding under the Federal Bankruptcy Code or any other
similar federal, state or foreign law or any other case or proceedings to be
adjudicated a bankrupt or insolvent, or the consent by the Company or any
Significant Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Significant Subsidiary in any involuntary case
or proceeding under the Federal Bankruptcy Code or any other similar
federal, state or foreign law or to the institution of bankruptcy or
insolvency proceedings against the
48
Company or any Significant Subsidiary, or the filing by the Company or any
Significant Subsidiary of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
similar federal, state or foreign law, or the consent by it to the filing of
any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of any of the Company or any Significant Subsidiary or of
any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due or the taking of
corporate action by the Company or any Significant Subsidiary in furtherance
of any such action; or
(ix) any of the guarantees of the notes ceases to be in full force and
effect or any of such guarantees is declared to be null and void and
unenforceable or any of such guarantees is found to be invalid or any of the
Guarantors denies its liability under its guarantee (other than by reason of
release of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than those covered by clause (vii) or (viii)
above with respect to the Company) shall occur and be continuing, the Trustee,
by notice to the Company, or the holders of at least 25% in aggregate principal
amount of the notes then outstanding, by notice to the Trustee and the Company,
may declare the principal of, premium, if any, and accrued and unpaid interest,
if any, on all of the outstanding notes due and payable immediately. If an
Event of Default specified in clause (vii) or (viii) above with respect to the
Company occurs and is continuing, then the principal of, premium, if any, and
accrued and unpaid interest, if any, on all the outstanding notes shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder of notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding notes, by written notice to the Company and the Trustee, may
rescind such declaration if:
(a) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(i) all sums paid or advanced by the Trustee under the Indenture and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(ii) all overdue interest on all notes;
(iii) the principal of and premium, if any, on any notes which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the notes; and
(iv) to the extent that payment of such interest is lawful, interest
upon overdue interest and overdue principal at the rate borne by the
Notes which has become due otherwise than by such declaration of
acceleration;
(b) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and
(c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the notes that has become due solely by
such declaration of acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of the
outstanding notes may on behalf of the holders of all the notes waive any past
defaults under the Indenture, except a default in the payment of the principal
of, premium, if any, or interest on any note, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each note outstanding.
No holder of any of the notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the notes and the Indenture, the Trustee has
failed to institute such proceeding within 45 days after receipt of such notice
and the Trustee, within such 45 day period, has not received directions
inconsistent with
49
such written request by holders of a majority in aggregate principal amount of
the outstanding notes. Such limitations do not apply, however, to a suit
instituted by a holder of a note for the enforcement of the payment of the
principal of, premium, if any, or interest on such note on or after the
respective due dates expressed in such note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders unless such holders shall have offered to the Trustee security or
indemnity satisfactory to it. Subject to certain provisions concerning the
rights of the Trustee, the holders of a majority in aggregate principal amount
of the outstanding notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee shall mail to each holder of the notes notice of the
Default or Event of Default within 90 days after obtaining knowledge thereof.
Except in the case of a Default or an Event of Default in payment of principal
of, premium, if any, or interest on any notes, the Trustee may withhold the
notice to the holders of such notes if its board of directors, the executive
committee or a committee of its directors or trust officers in good faith
determines that withholding the notice is in the interest of the noteholders.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company of its obligations under the Indenture and as to
any default in such performance. The Company is also required to notify the
Trustee within five days of any event which is, or after notice or lapse of
time or both would become, an Event of Default.
No Liability For Certain Persons
No director, officer, employee or stockholder of Holdings or the Company,
nor any director, officer or employee of any Guarantor, as such, will have any
liability for any obligations of the Company or any Guarantor under the notes,
the guarantees thereof or the Indenture based on or by reason of such
obligations or their creation. Each holder by accepting a note waives and
releases all such liability. The foregoing waiver and release are an integral
part of the consideration for the issuance of the notes. Such waiver may not be
effective to waive liabilities under the federal securities laws.
Defeasance or Covenant Defeasance of Indenture
The Company may, at its option and at any time, terminate the obligations of
the Company with respect to the outstanding notes ("defeasance") to the extent
set forth below. Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
notes, except for:
(i) the rights of holders of outstanding notes to receive payment in
respect of the principal of, premium, if any, and interest on such notes
when such payments are due;
(ii) the Company's obligations to issue temporary notes, register the
transfer or exchange of any notes, replace mutilated, destroyed, lost or
stolen notes and maintain an office or agency for payments in respect of the
notes;
(iii) the rights, powers, trusts, duties and immunities of the Trustee;
and
(iv) the defeasance provisions of the Indenture.
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In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company with respect to certain covenants that are set
forth in the Indenture, some of which are described under "--Change of Control"
and "--Certain Covenants" above, and any subsequent failure to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding notes to
redemption or maturity (except lost, stolen or destroyed notes which have
been replaced or paid);
(ii) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred (in the case of defeasance, such opinion must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a default under the
Indenture caused by the incurrence of Indebtedness to make such deposit);
(iv) such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest with respect to any securities of the
Company;
(v) such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a default under, any material agreement or
instrument to which the Company is a party or by which it is bound (other
than a default under the Indenture caused by the incurrence of Indebtedness
to make such deposit);
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(vii) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the notes over the other creditors of
the Company with the intent of hindering, delaying or defrauding creditors
of the Company or others;
(viii) no event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on
the notes on the date of such deposit or at any time ending on the 91st day
after the date of such deposit; and
(ix) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the Indenture to either defeasance or covenant defeasance,
as the case may be, have been complied with.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the Indenture) as to all outstanding notes
when:
(i) either:
(a) all the notes theretofore authenticated and delivered (except
lost, stolen or destroyed notes which have been replaced or repaid and
notes for whose payment money has theretofore been
51
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation; or
(b) all notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed notes which have been
replaced or paid) have become due and payable or will become due and
payable within one year under arrangements acceptable to the Trustee,
and the Company has irrevocably deposited or caused to be deposited with
the Trustee funds in an amount sufficient to pay and discharge the
entire Indebtedness on the notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and
interest on the notes to the date of deposit together with irrevocable
instructions from the Company directing the Trustee to apply such funds
to the payment thereof at maturity or redemption, as the case may be;
(ii) the Company has paid all other sums payable under the Indenture by
the Company; and
(iii) the Company has delivered to the Trustee an officers' certificate
and an opinion of counsel stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
Amendments and Waivers
From time to time, the Company, when authorized by a resolution of its Board
of Directors, and the Trustee may, without the consent of the holders of any
outstanding notes, amend, waive or supplement the Indenture or the notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act, or making any change that does not
adversely affect the rights of any holder of notes. Other amendments and
modifications of the Indenture or the notes may be made by the Company and the
Trustee with the consent of the holders of not less than a majority of the
aggregate principal amount of the outstanding notes; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding note affected thereby:
(i) reduce the principal amount of, extend the fixed maturity of or alter
the redemption provisions of, the notes;
(ii) change the currency in which any notes or any premium or the
interest thereon is payable;
(iii) reduce the percentage in principal amount of outstanding notes that
must consent to an amendment, supplement or waiver or consent to take any
action under the Indenture or the notes;
(iv) impair the right to institute suit for the enforcement of any
payment on or with respect to the notes;
(v) waive a default in payment with respect to the notes;
(vi) amend, change or modify the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate the offer with respect to any Asset Sale or modify any
of the provisions or definitions with respect thereto;
(vii) reduce or change the rate or time for payment of interest on the
notes; or
(viii) modify or change any provision of the Indenture affecting the
ranking of the notes in a manner adverse to the holders of the notes.
The Trustee
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
52
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage
in other transactions; provided, however, that if it acquires any conflicting
interest (as defined in such Act) it must eliminate such conflict or resign.
Governing Law
The Indenture and the notes are governed by the laws of the State of New
York, without regard to the principles of conflicts of law.
Book-Entry, Delivery and Form
The Original Notes were issued, and the Exchange Notes will be initially
issued, in the form of one or more global notes (the "Global Notes"). Each
Global Note is deposited with, or on behalf of, DTC and registered in the name
of DTC or its nominee. Except as set forth below, the Global Note may be
transferred, in whole and not in part, only to DTC or another nominee of DTC.
You may hold your beneficial interests in the Global Note directly through DTC
if you have an account with DTC or indirectly through organizations which have
accounts with DTC.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and "a clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. DTC's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's book-entry system is also available to others such as banks, brokers,
dealers and trust companies (collectively, the "indirect participants") that
clear through or maintain a custodial relationship with a participant, whether
directly or indirectly.
The Company expects that pursuant to procedures established by DTC, upon the
deposit of the Global Note with DTC, DTC will credit, on its book-entry
registration and transfer system, the principal amount of notes represented by
such Global Note to the accounts of participants. Ownership of beneficial
interests in the Global Note will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests in
the Global Note will be shown on, and the transfer of those ownership interests
will be effected only through, records maintained by DTC (with respect to
participants' interests), the participants and the indirect participants (with
respect to the owners of beneficial interests in the Global Note other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as DTC, or its nominee, is the registered holder and owner of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole legal owner and holder of any related notes evidenced by the Global Note
for all purposes of such notes and the Indenture. Except as set forth below, as
an owner of a beneficial interest in the Global Note, you will not be entitled
to have the notes represented by the Global Note registered in your name, will
not receive or be entitled to receive physical delivery of certificated notes
and will not be considered to be the owner or holder of any notes under the
Global Note. We understand that under existing industry practice, in the event
an owner of a beneficial interest in the Global Note desires to take any action
that DTC, as the holder of the Global Note, is entitled to take, DTC would
authorize the participants to take such action, and the participants would
authorize beneficial owners owning through such participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
53
We will make payments of principal of, premium, if any, and interest on
notes represented by the Global Note registered in the name of and held by DTC
or its nominee to DTC or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the Global Note will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Note as shown on the records of
DTC or its nominee. We also expect that payments by participants or indirect
participants to owners of beneficial interests in the Global Note held through
such participants or indirect participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants or indirect participants. We will not have any responsibility or
liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the Global Note for any note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for any other aspect of the relationship
between DTC and its participants or indirect participants or the relationship
between such participants or indirect participants and the owners of beneficial
interests in the Global Note owning through such participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Trustee nor the Company
will have any responsibility or liability for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
Certificated Notes
Subject to certain conditions, the notes represented by the Global Note are
exchangeable for certificated notes in definitive form of like tenor in
denominations of $1,000 and integral multiples thereof if:
(1) DTC notifies us that it is unwilling or unable to continue as
depository for the Global Note or DTC ceases to be a clearing agency
registered under the Exchange Act and, in either case, we are unable to
locate a qualified successor within 90 days;
(2) we in our discretion at any time determine not to have all the notes
represented by the Global Note; or
(3) a default entitling the holders of the notes to accelerate the
maturity thereof has occurred and is continuing.
Any note that is exchangeable as above is exchangeable for certificated
notes issuable in authorized denominations and registered in such names as DTC
shall direct. Subject to the foregoing, the Global Note is not exchangeable,
except for a Global Note of the same aggregate denomination to be registered in
the name of DTC or its nominee.
Certain Definitions
"8.80% Notes" means the $205 million aggregate principal amount of 8.80%
Senior Subordinated Notes due 2008 issued by the Company under the indenture,
dated as of August 12, 1998, among the Company, as issuer, its United States
subsidiaries, as guarantors, and State Street Bank and Trust Company, as
trustee.
"9% Notes" means the $250 million aggregate principal amount of 9% Senior
Subordinated Notes due 2009 issued by the Company under the indenture dated as
of March 23, 1999, among the Company, as issuer, its United States
subsidiaries, as guarantors, and The Bank of New York, as trustee.
"91/4% Notes" means the $300 million aggregate principal amount of 91/4%
Senior Subordinated Notes due 2009 issued by the Company under the indenture,
dated as of December 15, 1998, among the Company, as issuer, its United States
subsidiaries, as guarantors, and State Street Bank and Trust Company, as
trustee.
54
"91/2% Notes" means the $200 million aggregate principal amount of 91/2%
Senior Subordinated Notes due 2008 issued by the Company under the indenture,
dated as of May 22, 1998, among the Company, as issuer, its United States
subsidiaries, as guarantors, and State Street Bank and Trust Company, as
trustee.
"Acquired Indebtedness" means Indebtedness of a person:
(a) assumed in connection with an Asset Acquisition from such person; or
(b) existing at the time such person becomes a Subsidiary of any other
person and not incurred in connection with, or in contemplation of, such
Asset Acquisition or such person becoming a Subsidiary.
"Affiliate" means, with respect to any specified person:
(i) any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person;
(ii) any other person that owns, directly or indirectly, 10% or more of
such specified person's Capital Stock; or
(iii) any officer or director of:
(A) any such specified person;
(B) any Subsidiary of such specified person; or
(C) any person described in clauses (i) or (ii) above.
"Asset Acquisition" means:
(a) an Investment by the Company or any Restricted Subsidiary of the
Company in any other person pursuant to which such person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company; or
(b) the acquisition by the Company or any Restricted Subsidiary of the
Company of the assets of any person which constitute all or substantially
all of the assets of such person, any division or line of business of such
person or any other properties or assets of such person other than in the
ordinary course of business.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition by the Company or any Restricted Subsidiary of the Company to any
person other than the Company or a Restricted Subsidiary of the Company, of:
(a) any Capital Stock of any Restricted Subsidiary of the Company;
(b) all or substantially all of the properties and assets of any division
or line of business of the Company or any Restricted Subsidiary of the
Company; or
(c) any other properties or assets of the Company or any Restricted
Subsidiary of the Company,
(other than, in the case of clauses (a), (b) or (c) above,
(i) sales of obsolete, damaged or used equipment or other equipment
or inventory sales in the ordinary course of business;
(ii) sales of assets in one or a series of related transactions for
an aggregate consideration of less than $1 million; and
(iii) for purposes of the covenant described under "--Certain
Covenants--Disposition of Proceeds of Asset Sales" only, (x) a
disposition that constitutes a Restricted Payment permitted by the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments" or a Permitted Investment, (y) a disposition of all or
substantially all the assets of the Company in accordance with the
55
covenant described under "--Consolidation, Merger, Sale of Assets, Etc."
and (z) any sale, issuance, conveyance, transfer, lease or other
disposition of properties or assets in connection with a Securitization
Transaction).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended); provided, however, that if such Sale/Leaseback Transaction results
in a Capitalized Lease Obligation, the amount of Indebtedness represented
thereby will be determined in accordance with the definition of "Capitalized
Lease Obligation."
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing:
(i) the sum of the products of:
(a) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness; and
(b) the amount of each such principal payment; by
(ii) the sum of all such principal payments.
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company, general partners
of a partnership or trustees of a business trust, or any duly authorized
committee thereof.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock or equity participations, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock and, including, without
limitation, with respect to partnerships, limited liability companies or
business trusts, ownership interests (whether general or limited) and any other
interest or participation that confers on a person the right to receive a share
of the profits and losses of, or distributions of assets of, such partnerships,
limited liability companies or business trusts.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof
at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year after
such time, issued or guaranteed by the United States Government or any
agency thereof;
(b) commercial paper, maturing not more than one year from the date of
issue, or corporate demand notes, in each case rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service, Inc.;
(c) any certificate of deposit (or time deposits represented by such
certificates of deposit) or bankers acceptance, maturing not more than one
year after such time, or overnight Federal Funds transactions that are
issued or sold by a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and undivided
profits of not less than $500 million;
(d) any repurchase agreement entered into with any commercial banking
institution of the stature referred to in clause (c) which:
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c); and
56
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of such
commercial banking institution thereunder;
(e) investments in short term asset management accounts managed by any
bank party to the Credit Agreement which are invested in indebtedness of any
state or municipality of the United States or of the District of Columbia
and which are rated under one of the two highest ratings then obtainable
from Standard & Poor's Ratings Group or by Moody's Investors Service, Inc.
or investments of the types described in clauses (a) through (d) above; and
(f) investments in funds investing primarily in investments of the types
described in clauses (a) through (e) above.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company or
Holdings; provided, however, that a "Change of Control" shall not be deemed
to have occurred under this subclause (a) unless the Permitted Holders do
not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of the
Company or Holdings;
(b) the Company or Holdings consolidates with, or merges with or into,
another person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or any
person consolidates with, or merges with or into, the Company (or Holdings),
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company or Holdings is converted into or exchanged for cash,
securities or other property, other than any such transaction where:
(i) the outstanding Voting Stock of the Company or Holdings is
converted into or exchanged for Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation; and
(ii) immediately after such transaction no "person" or "group" (as
such terms are used in Section 13(d) and 14(d) of the Exchange Act),
excluding Permitted Holders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall
be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of more than 50% of the total Voting Stock of the surviving or
transferee corporation;
(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
or Holdings (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the
Company or Holdings was approved by a vote of 66 2/3% of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Company or Holdings then in office; or
(d) the Company is liquidated or dissolved or adopts a plan of
liquidation.
"Common Stock" means the common stock, par value $.01 per share, of
Holdings.
"Company" means United Rentals (North America), Inc., a Delaware
corporation.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect to
any person for any period:
(i) the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of:
(a) Consolidated Net Income;
57
(b) Consolidated Non-cash Charges;
(c) Consolidated Interest Expense;
(d) Consolidated Income Tax Expense (other than income tax expense
(either positive or negative) attributable to extraordinary gains or
losses);
(e) one-third of Consolidated Rental Payments; and
(f) if any Asset Sale or Asset Acquisition shall have occurred since
the first day of any four quarter period for which "Consolidated Cash
Flow Available for Fixed Charges" is being calculated (including to the
date of calculation):
(A) the cost of any compensation, remuneration or other benefit
paid or provided to any employee, consultant, Affiliate or equity
owner of the entity involved in any such Asset Acquisition to the
extent such costs are eliminated or reduced (or public announcement
has been made of the intent to eliminate or reduce such costs) prior
to the date of such calculation and not replaced; and
(B) the amount of any reduction in general, administrative or
overhead costs of the entity involved in any such Asset Acquisition
or Asset Sale, to the extent such amounts under clauses (A) and (B)
would be permitted to be eliminated in a pro forma income statement
prepared in accordance with Rule 11-02 of Regulation S-X, less:
(ii) (x) non-cash items increasing Consolidated Net Income; and
(y) all cash payments during such period relating to non-cash charges
that were added back in determining Consolidated Cash Flow Available for
Fixed Charges in the most recent Four Quarter Period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the four full fiscal quarters, treated as
one period, for which financial information in respect thereof is available
immediately preceding the date of the transaction (the "Transaction Date")
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (such four full fiscal quarter period being referred to herein as the
"Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of
such person for the Four Quarter Period. In calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio:"
(i) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction
Date; and
(ii) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of
a prime or similar rate, a eurocurrency interbank offered rate, or other
rates, then the interest rate in effect on the Transaction Date will be
deemed to have been in effect during the Four Quarter Period.
If such person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third person, the above clause shall give effect
to the incurrence of such guaranteed Indebtedness as if such person or such
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of:
(i) Consolidated Interest Expense;
(ii) the aggregate amount of dividends and other distributions paid or
accrued during such period in respect of Redeemable Capital Stock of such
person and its Restricted Subsidiaries on a consolidated basis; and
58
(iii) one-third of Consolidated Rental Payments.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of
such person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of:
(i) the interest expense of such person and its Restricted Subsidiaries
for such period as determined on a consolidated basis in accordance with
GAAP, including, without limitation:
(a) any amortization of debt discount;
(b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts);
(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financing or similar
facilities; and
(e) all accrued interest; and
(ii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any period,
the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income, by excluding, without
duplication:
(i) all extraordinary gains or losses (net of fees and expenses relating
to the transaction giving rise thereto);
(ii) the portion of net income of such person and its Restricted
Subsidiaries allocable to minority interests in unconsolidated persons or to
Investments in Unrestricted Subsidiaries to the extent that cash dividends
or distributions have not actually been received by such person or one of
its Restricted Subsidiaries;
(iii) net income (or loss) of any person combined with such person or one
of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination;
(iv) gains or losses in respect of any Asset Sales by such person or one
of its Restricted Subsidiaries (net of fees and expenses relating to the
transaction giving rise thereto), on an after-tax basis;
(v) the net income of any Restricted Subsidiary of such person to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time permitted, directly
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders;
and
(vi) any gain or loss realized as a result of the cumulative effect of a
change in accounting principles.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash expenses of such person and
its Restricted Subsidiaries reducing Consolidated Net Income of such person and
its Restricted Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss).
59
"Consolidated Rental Payments" of any person means, for any period, the
aggregate rental obligations of such person and its Restricted Subsidiaries
(not including taxes, insurance, maintenance and similar expenses that the
lessee is obligated to pay under the terms of the relevant leases), determined
on a consolidated basis in accordance with GAAP, payable in respect of such
period (net of income from subleases thereof, not including taxes, insurance,
maintenance and similar expenses that the sublessee is obligated to pay under
the terms of such sublease), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of such person and
its Restricted Subsidiaries or in the notes thereto, excluding, however, in any
event:
(i) that portion of Consolidated Interest Expense of such person
representing payments by such person or any of its Restricted Subsidiaries
in respect of Capitalized Lease Obligations (net of payments to such person
or any of its Restricted Subsidiaries under subleases qualifying as
capitalized lease subleases to the extent that such payments would be
deducted in determining Consolidated Interest Expense); and
(ii) the aggregate amount of amortization of obligations of such person
and its Restricted Subsidiaries in respect of such Capitalized Lease
Obligations for such period (net of payments to such person or any of its
Restricted Subsidiaries and subleases qualifying as capitalized lease
subleases to the extent that such payments could be deducted in determining
such amortization amount).
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Credit Agreement" means the Amended and Restated Credit Agreement dated as
of April 20, 2001 by and among Holdings, the Company, a Canadian subsidiary of
the Company, the lenders referred to therein, The Chase Manhattan Bank, as
Administrative Agent, The Chase Manhattan Bank of Canada, as Canadian
Administrative Agent, and Bank of America, N.A., as Syndication Agent, together
with the related documents thereto (including the term loans and revolving
loans thereunder, any guarantees and any security documents), as amended,
extended, renewed, restated, supplemented or otherwise modified (in whole or in
part, and without limitation as to amount, terms, conditions, covenants and
other provisions) from time to time, and any agreement (and related documents)
governing Indebtedness incurred to refinance or replace, in whole or in part,
the borrowings and commitments at any time outstanding or permitted to be
outstanding under such Credit Agreement or a successor Credit Agreement,
whether by the same or any other lender or group of lenders and whether to the
same borrower or different borrowers.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Member of the Board of Directors of the Company" means, with
respect to any transaction or series of transactions, a member of the Board of
Directors of the Company other than a member who has any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions or is an Affiliate, or an officer, director or an employee of any
person (other than the Company or Holdings) who has any direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Equipment Securitization Transaction" means any sale, assignment, pledge or
other transfer (a) by the Company or any Subsidiary of the Company of rental
fleet equipment, (b) by any ES Special Purpose Vehicle of leases or rental
agreements between the Company and/or any Subsidiary of the Company, as lessee,
on the one hand, and such ES Special Purpose Vehicle, as lessor, on the other
hand, relating to such rental fleet equipment and lease receivables arising
under such leases and rental agreements and (c) by the Company or any
Subsidiary of the Company of any interest in any of the foregoing, together in
each case with (i) any and all proceeds thereof (including all collections
relating thereto, all payments and other rights under insurance policies or
warranties relating thereto, all disposition proceeds received upon a sale
thereof, and all rights under manufacturers' repurchase programs or guaranteed
depreciation programs relating thereto), (ii) any collection or deposit account
relating thereto and (iii) any collateral, guarantees, credit enhancement or
other property or claims supporting or securing payment on, or otherwise
relating to, any such leases, rental agreements or lease receivables.
60
"ES Special Purpose Vehicle" means a trust, bankruptcy remote entity or
other special purpose entity which is a Subsidiary of the Company (or, if not a
Subsidiary of the Company, the common equity of which is wholly owned, directly
or indirectly, by the Company) and which is formed for the purpose of, and
engages in no material business other than, acting as a lessor, issuer or
depositor in an Equipment Securitization Transaction (and, in connection
therewith, owning the rental fleet equipment, leases, rental agreements, lease
receivables, rights to payment and other interests, rights and assets described
in the definition of Equipment Securitization Transaction, and pledging or
transferring any of the foregoing or interests therein).
"Event of Default" has the meaning set forth under "--Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction. Fair Market Value shall be determined
by the Board of Directors of the Company in good faith.
"Foreign Subsidiary" means any Restricted Subsidiary not created or
organized in the United States or any state thereof or the District of Columbia
and that conducts substantially all its operations outside of the United
States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable at the date of
the Indenture.
"guarantee" means, as applied to any obligation:
(i) a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any
manner, of any part or all of such obligation; and
(ii) an agreement, direct or indirect, contingent or otherwise, the
practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of nonperformance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts available to be drawn down under letters of credit of another
person.
The term "guarantee" used as a verb has a corresponding meaning.
"Guarantor" means Holdings and each Subsidiary Guarantor.
"Guaranty Agreement" means a supplemental indenture, in a form satisfactory
to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the
Company's obligations with respect to the notes on the terms provided for in
the Indenture.
"Holdings" means United Rentals, Inc., a Delaware corporation.
"Indebtedness" means, with respect to any person, without duplication:
(a) all liabilities of such person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and
other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such person in connection with any letters of credit, banker's
acceptance or other similar credit transaction;
61
(b) all obligations of such person evidenced by bonds, notes, debentures
or other similar instruments;
(c) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
person (even if the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such property), but excluding trade accounts payable arising in the ordinary
course of business;
(d) all Capitalized Lease Obligations of such person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such person;
(e) all Indebtedness referred to in the preceding clauses of other
persons and all dividends of other persons, the payment of which is secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon property
(including, without limitation, accounts and contract rights) owned by such
person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to
be the lesser of the value of such property or asset or the amount of the
obligation so secured);
(f) all guarantees of Indebtedness referred to in this definition by such
person;
(g) all Redeemable Capital Stock of such person valued at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued
dividends;
(h) all obligations under or in respect of Interest Rate Protection
Obligations of such person, and
(i) any amendment, supplement, modification, deferral, renewal,
extension, refinancing or refunding of any liability of the types referred
to in clauses (a) through (h) above;
provided, however, that Indebtedness shall not include:
(x) any holdback or escrow of the purchase price of property, services,
businesses or assets or
(y) any contingent payment obligations incurred in connection with the
acquisition of assets or businesses, which are contingent on the performance
of the assets or businesses so acquired.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be approved in good faith by the board of
directors of the issuer of such Redeemable Capital Stock. In the case of
Indebtedness of other persons, the payment of which is secured by a Lien on
property owned by a person as referred to in clause (e) above, the amount of
the Indebtedness of such person attributable to such Lien at any date shall be
the lesser of the Fair Market Value at such date of any asset subject to such
Lien and the amount of the Indebtedness secured.
"Interest Rate Protection Agreement" means, with respect to any person, any
arrangement with any other person whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any Interest Rate Protection Agreements.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of indebtedness
issued by, any other person.
"Issue Date" means April 20, 2001.
62
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity Date" means April 15, 2008.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net
of:
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers,
recording fees, transfer fees and appraisers' fees) related to such Asset
Sale;
(ii) provisions for all taxes payable as a result of such Asset Sale;
(iii) amounts required to be paid to any person (other than the Company
or any Restricted Subsidiary of the Company) owning a beneficial interest in
the assets subject to the Asset Sale;
(iv) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such
Asset Sale; and
(v) appropriate amounts to be provided by the Company or any Restricted
Subsidiary of the Company, as the case may be, as a reserve required in
accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary of the Company, as
the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related
to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an
officers' certificate delivered to the Trustee.
"Permitted Holder" means:
(i) Holdings; and
(ii) Bradley S. Jacobs, John N. Milne, Michael J. Nolan and their
respective Affiliates, and trusts established for the benefit of a Permitted
Holder or members of his immediate family.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of the Company and the Guarantors related to the notes
issued on the Issue Date and the Exchange Notes related thereto and the
guarantees of those notes (other than any Additional Notes);
(b) Indebtedness incurred by the Company and Restricted Subsidiaries
pursuant to the Credit Agreement; provided, however, that, immediately after
giving effect to any such incurrence, the aggregate principal amount of all
Indebtedness incurred under this clause (b) and then outstanding does not
exceed the greater of (A) $1.5 billion and (B) 100% of Tangible Assets,
less, in either case, any amounts permanently repaid or commitments
permanently reduced in accordance with the covenant described under
"--Certain Covenants--Dispositions of Proceeds of Asset Sales;"
(c) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the Issue Date, including the 91/2% Notes, the 8.80% Notes, the 91/4%
Notes, the 9% Notes and the respective guarantees thereof;
(d) Indebtedness of the Company or any Restricted Subsidiary of the
Company incurred in respect of performance bonds, bankers' acceptances and
letters of credit in the ordinary course of business, including Indebtedness
evidenced by letters of credit issued in the ordinary course of business
consistent with past
63
practice to support the insurance or self-insurance obligations of the
Company or any of its Restricted Subsidiaries (including to secure workers'
compensation and other similar insurance coverages), in the aggregate amount
not to exceed $10 million at any time; but excluding letters of credit
issued in respect of or to secure money borrowed;
(e) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company; and (ii) Interest Rate Protection Obligations
of any Restricted Subsidiary covering Permitted Indebtedness of such
Restricted Subsidiary; provided, however, that, in the case of either clause
(i) or (ii):
(x) any Indebtedness to which any such Interest Rate Protection
Obligations correspond bears interest at fluctuating interest rates
and is otherwise permitted to be incurred under "--Certain
Covenants--Limitation on Indebtedness;" and
(y) the notional principal amount of any such Interest Rate
Protection Obligations that exceeds the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations
relate shall not constitute Permitted Indebtedness;
(f) Indebtedness of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary, except that:
(i) any transfer of such Indebtedness by the Company or a Restricted
Subsidiary (other than to the Company or another Restricted Subsidiary);
and
(ii) the sale, transfer or other disposition by the Company or any
Restricted Subsidiary of the Company of Capital Stock of a Restricted
Subsidiary (other than to the Company or a Restricted Subsidiary) which
is owed Indebtedness of another Restricted Subsidiary shall, in each
case, be an incurrence of Indebtedness by such Restricted Subsidiary
subject to the other provisions of the Indenture;
(g) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right of payment to the
payment and performance of the obligations of the Company under the
Indenture and the notes, except that:
(i) any transfer of such Indebtedness by the Company or a Restricted
Subsidiary (other than to another Restricted Subsidiary); and
(ii) the sale, transfer or other disposition by the Company or any
Restricted Subsidiary of the Company (other than to the Company or a
Restricted Subsidiary) of Capital Stock of a Restricted Subsidiary which
is owed Indebtedness of the Company shall, in each case, be an
incurrence of Indebtedness by the Company, subject to the other
provisions of the Indenture;
(h) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within five business days of incurrence;
(i) Indebtedness of the Company or any Restricted Subsidiary under
equipment purchase or lines of credit or for Capitalized Lease Obligations
not to exceed $100 million in aggregate principal amount outstanding at any
time;
(j) (i) Indebtedness of the Company the proceeds of which are used solely
to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Restricted Subsidiaries; and
(ii) Indebtedness of any Restricted Subsidiary of the Company the
proceeds of which are used solely to refinance (whether by amendment,
renewal, extension or refunding) Indebtedness of such Restricted
Subsidiary; provided, however, that:
(x) the principal amount of Indebtedness incurred pursuant to this
clause (j) (or, if such Indebtedness provides for an amount less than
the principal amount thereof to be due and payable
64
upon a declaration of acceleration of the maturity thereof, the
original issue price of such Indebtedness) shall not exceed the sum
of the principal amount of Indebtedness so refinanced, plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of such Indebtedness or the amount
of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated purchase, plus the amount of expenses in connection
therewith; and
(y) in the case of Indebtedness incurred by the Company pursuant
to this clause (j) to refinance Subordinated Indebtedness, such
Indebtedness;
(A) has no scheduled principal payment prior to the 91st day
after the Maturity Date;
(B) has an Average Life to Stated Maturity greater than the
remaining Average Life to Stated Maturity of the notes; and
(C) is subordinated to the notes in the same manner and to the
same extent that the Subordinated Indebtedness being refinanced
is subordinated to the notes;
(k) Indebtedness of a Foreign Subsidiary incurred to finance the working
capital of such Foreign Subsidiary;
(l) Indebtedness arising from agreements of the Company or any Restricted
Subsidiary providing for indemnification, adjustment or holdback of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the acquisition or disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Subsidiary for the
purpose of financing such acquisition;
(m) Indebtedness of a Special Purpose Vehicle that is not recourse to the
Company or any of its Restricted Subsidiaries (other than with respect to
Standard Securitization Undertakings) in connection with a Securitization
Transaction; provided, however, that in the event such Special Purpose
Vehicle ceases to qualify as a Special Purpose Vehicle or such Indebtedness
ceases to be non-recourse to the Company or any of its Restricted
Subsidiaries, such Indebtedness will be deemed, in each case, to be incurred
at such time; provided further, however, that Indebtedness incurred under
this paragraph (m) with respect to Equipment Securitization Transactions
shall not exceed 15% of Tangible Assets after giving effect to such
Equipment Securitization Transaction;
(n) guarantees by the Company or a Restricted Subsidiary of Indebtedness
that was permitted to be incurred by the Company or any Restricted
Subsidiary under the Indenture; and
(o) Indebtedness of the Company or any Restricted Subsidiary, in addition
to that described in clauses (a) through (n) of this definition, in an
aggregate principal amount outstanding at any time not to exceed $50
million.
"Permitted Investments" means any of the following:
(i) Investments in the Company or in a Restricted Subsidiary;
(ii) Investments in another person, if as a result of such Investment:
(A) such other person becomes a Restricted Subsidiary; or
(B) such other person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets, to the
Company or a Restricted Subsidiary;
(iii) Investments representing Capital Stock or obligations issued to the
Company or any of its Restricted Subsidiaries in settlement of claims
against any other person by reason of a composition or readjustment of debt
or a reorganization of any debtor of the Company or such Restricted
Subsidiary;
(iv) Investments in Interest Rate Protection Agreements on commercially
reasonable terms entered into by the Company or any of its Subsidiaries in
the ordinary course of business in connection with the
65
operations of the business of the Company or its Restricted Subsidiaries to
hedge against fluctuations in interest rates on its outstanding
Indebtedness;
(v) Investments in the notes;
(vi) Investments in Cash Equivalents;
(vii) Investments acquired by the Company or any Restricted Subsidiary in
connection with an Asset Sale permitted under "--Certain
Covenants--Disposition of Proceeds of Asset Sales" to the extent such
Investments are non-cash proceeds as permitted under such covenant;
(viii) advances to employees or officers of the Company in the ordinary
course of business and additional loans to employees or officers, in an
aggregate amount at any time outstanding not to exceed $10 million;
(ix) any Investment to the extent that the consideration therefor is
Capital Stock (other than Redeemable Capital Stock) of the Company;
(x) guarantees (including guarantees of the notes) of Indebtedness
permitted to be incurred under the "--Limitation on Indebtedness" covenant;
(xi) any acquisition of assets solely in exchange for the issuance of
Capital Stock (other than Redeemable Capital Stock) of Holdings or the
Company; and
(xii) other Investments not to exceed $20 million at any time
outstanding.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of the Indenture;
(b) Liens securing Indebtedness permitted under the provisions described
in clauses (b) and (k) under the definition of "Permitted Indebtedness;"
(c) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary, if such Lien does
not attach to any property or assets of the Company or any Restricted
Subsidiary other than the property or assets subject to the Lien prior to
such incurrence;
(d) Liens in favor of the Company or a Restricted Subsidiary;
(e) Liens on and pledges of the assets or Capital Stock of any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary;
(f) Liens for taxes, assessments or governmental charges or claims
either:
(i) not delinquent; or
(ii) thereafter payable without penalty or contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(g) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(h) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance
66
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(i) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(j) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company or
any of its Restricted Subsidiaries;
(k) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(l) Liens securing Indebtedness incurred to finance the construction,
purchase or lease of, or repairs, improvements or additions to, property,
plant or equipment of the Company or any Restricted Subsidiary; provided,
however, that the Lien may not extend to any other property owned by the
Company or any Restricted Subsidiary at the time the Lien is incurred (other
than assets and property affixed or appurtenant thereto), and the
Indebtedness (other than any interest thereon) secured by the Lien may not
be incurred more than 180 days after the later of the acquisition,
completion of construction, repair, improvement, addition or commencement of
full operation of the property subject to the Lien;
(m) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(n) Liens securing refinancing Indebtedness permitted under clause (j) of
the definition of "Permitted Indebtedness," provided such Liens do not
exceed the Liens replaced in connection with such refinanced Indebtedness;
(o) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(p) Liens securing Interest Rate Protection Obligations which Interest
Rate Protection Obligations relate to Indebtedness that is secured by Liens
otherwise permitted under this Indenture;
(q) customary Liens on assets of a Special Purpose Vehicle arising in
connection with a Securitization Transaction;
(r) Liens created in favor of the Trustee for the notes as provided in
the Indenture; and
(s) Liens incurred by the Company or any Restricted Subsidiary with
respect to obligations that do not exceed $25 million at any time
outstanding.
"person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock," as applied to any person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over shares
of Capital Stock of any other class of such person.
"Receivables Securitization Transaction" means any sale, assignment or other
transfer by the Company or any Subsidiary of the Company of accounts
receivable, lease receivables or other payment obligations owing to
67
the Company or such Subsidiary of the Company or any interest in any of the
foregoing, together in each case with any collections and other proceeds
thereof, any collection or deposit account related thereto, and any collateral,
guarantees or other property or claims supporting or securing payment by the
obligor thereon of, or otherwise related to, or subject to leases giving rise
to, any such receivables.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the
Maturity Date or is redeemable at the option of the holder thereof at any time
prior to the Maturity Date, or is convertible into or exchangeable for debt
securities at any time prior to the Maturity Date; provided, however, that
Capital Stock will not constitute Redeemable Capital Stock solely because the
holders thereof have the right to require the Company to repurchase or redeem
such Capital Stock upon the occurrence of a "change of control" or an "asset
sale."
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary or a Special Purpose Vehicle.
"RS Special PurposeVehicle" means a trust, bankruptcy remote entity or other
special purpose entity which is a Subsidiary of the Company (or, if not a
Subsidiary of the Company, the common equity of which is wholly owned, directly
or indirectly, by the Company) and which is formed for the purpose of, and
engages in no material business other than, acting as an issuer or a depositor
in a Receivables Securitization Transaction (and, in connection therewith,
owning accounts receivable, lease receivables, other rights to payment, leases
and related assets and pledging or transferring any of the foregoing or
interests therein).
"Sale/Leaseback Transaction" means an arrangement relating to property owned
by the Company or a Restricted Subsidiary on the Issue Date or thereafter
acquired by the Company or a Restricted Subsidiary whereby the Company or a
Restricted Subsidiary transfers such property to a person and the Company or a
Restricted Subsidiary leases it from such person.
"Securitization Transaction" means an Equipment Securitization Transaction
or a Receivables Securitization Transaction.
"Senior Indebtedness" means with respect to any person:
(1) Indebtedness of such person, whether outstanding on the Issue Date or
thereafter created, incurred or assumed; and
(2) accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to
such person whether or not post-filing interest is allowed in such
proceeding) in respect of (A) indebtedness of such person for money borrowed
and (B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such person is responsible or liable,
unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
expressly provided that such obligations are subordinate in right of payment to
the notes or the guarantee of such person, as the case may be.
Without limiting the generality of the foregoing, "Senior Indebtedness"
shall include the principal of, premium, if any, and interest on all
obligations of every nature of any person from time to time owed to the lenders
under the Credit Agreement, including, without limitation, principal of and
interest on, any loans and letter of credit disbursements outstanding, and all
fees, indemnities and expenses payable, under the Credit Agreement.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include:
(a) any Indebtedness of such person (and any accrued and unpaid interest
in respect thereof) that is subordinate or junior in any respect to any
other Indebtedness or other obligation of such person;
68
(b) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse
to such person;
(c) Indebtedness which is represented by Redeemable Capital Stock;
(d) any accounts payable or other liability to trade creditors arising in
the ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities);
(e) Indebtedness of or amounts owed by such person for compensation to
employees or for services rendered to such person;
(f) any liability for federal, state, local or other taxes owed or owing
by such person;
(g) Indebtedness of such person to a Subsidiary or any other Affiliate or
any of such Affiliate's Subsidiaries; and
(h) that portion of any Indebtedness which is incurred in violation of
the Indenture.
"Senior Subordinated Indebtedness" means the 91/2% Notes, 8.80% Notes, 91/4%
Notes and 9% Notes, guarantees thereof and any other Indebtedness of the
Company that specifically provides that such Indebtedness is to rank junior to
the notes in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness of the Company.
"Significant Subsidiary" of any person means a Restricted Subsidiary of such
person which would be a significant subsidiary of such person as determined in
accordance with the definition in Rule 1-02(w) of Article 1 of Regulation S-X
promulgated by the Commission and as in effect on the date of the Indenture.
"Special Purpose Vehicle" means an ES Special Purpose Vehicle or an RS
Special Purpose Vehicle.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any of its Restricted
Subsidiaries that are reasonably customary in a Securitization Transaction.
"Stated Maturity" means, when used with respect to any note or any
installment of interest thereon, the date specified in such note as the fixed
date on which the principal of such note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to a person, Indebtedness of
such person (whether incurred on the Issue Date or thereafter incurred) which
is subordinate or junior in right of payment to the notes or a guarantee of
such person, as the case may be, pursuant to a written agreement to that
effect.
"Subsidiary" means, with respect to any person:
(i) a corporation a majority of whose Voting Stock is at the time,
directly or indirectly, owned by such person, by one or more Subsidiaries of
such person or by such person and one or more Subsidiaries thereof; and
(ii) any other person (other than a corporation), including, without
limitation, a partnership, limited liability company, business trust or
joint venture, in which such person, one or more Subsidiaries thereof or
such person and one or more Subsidiaries thereof, directly or indirectly, at
the date of determination thereof, has at least majority ownership interest
entitled to vote in the election of directors, managers or trustees thereof
(or other person performing similar functions).
For purposes of this definition, any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
69
"Subsidiary Guarantors" means the current United States Restricted
Subsidiaries as shown in the Indenture.
"Tangible Assets" means all assets of the Company and its Restricted
Subsidiaries, excluding all Intangible Assets and any assets subject to a
Securitization Transaction. For purposes of the foregoing, "Intangible Assets"
means goodwill, patents, trade names, trade marks, copyrights, franchises,
experimental expense, organization expenses and any other assets properly
classified as intangible assets in accordance with GAAP.
"Unrestricted Subsidiary" means each Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries" and each
Subsidiary of such Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of the
Company of which 100% of the outstanding Capital Stock is owned by the Company
or another Wholly Owned Restricted Subsidiary of the Company. For purposes of
this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
70
PLAN OF DISTRIBUTION
Any broker-dealer (a "Participating Broker-Dealer") that, pursuant to the
Exchange Offer, receives Exchange Notes in exchange for Original Notes that
were acquired by it for its own account as a result of market-making activities
or other trading activities, will be required to deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales by it of
any such Exchange Notes. Each Participating Broker-Dealer will be required to
acknowledge in the Letter of Transmittal that it will comply with such
prospectus delivery requirement in connection with any resale of Exchange
Notes. The Letter of Transmittal states that by making such acknowledgment a
Participating Dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
Based on interpretations by the Staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that this
prospectus, as it may be amended or supplemented from time to time, may, if
permitted by the Company, be used by Participating Broker-Dealers in order to
satisfy the prospectus delivery requirements applicable to Participating
Broker-Dealers in connection with the resale of Exchange Notes as described
above. The Company has agreed in the Registration Rights Agreement that it will
use its best efforts to make this prospectus available to each Participating
Broker-Dealer for use in connection with any resales of such Exchange Notes
(subject to the limitations on the use of this prospectus under certain
circumstances specified in the Registration Rights Agreement). The obligation
of the Company to make this prospectus available as aforesaid will commence on
the day that the Exchange Offer is consummated and continue in effect for a
90-day period (the "Broker Prospectus Period"); provided, however, that, if for
any day during such period the Company restricts the use of such prospectus,
the Broker Prospectus Period shall be extended on a day-for-day basis.
Any sale of Exchange Notes by Participating Broker-Dealers will be for their
own account, and the Company will not receive any proceeds of such sales.
Participating Broker-Dealers may from time to time sell Exchange Notes that
were received by them in the Exchange Offer in one or more transactions in the
over-the-counter market, in privately negotiated transactions, through the
writing of options on the Exchange Notes or otherwise, and such sales may be
made at the market price prevailing at the time of sale, a price related to
such prevailing market price or a negotiated price. Such sales of Exchange
Notes may be made directly to purchasers or, alternatively, may be offered from
time to time through agents, brokers, dealers or underwriters, who may receive
compensation in the form of concessions or commissions from the Participating
Broker-Dealers or purchasers of the Exchange Notes (which compensation may be
in excess of customary commissions). Any agents, brokers or dealers that
participate in the distribution of the Exchange Notes may be deemed to be
underwriters and any commissions received by them and any profit on the resale
of such Exchange Notes sold by them might be deemed to be underwriting
discounts and commissions under the Securities Act.
During the Broker Prospectus Period, the Company will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any Participating Broker-Dealer that requests such documents
(subject to the limitations on the use of this prospectus under certain
circumstances specified in the Registration Rights Agreement). Any such
requests should be directed to United Rentals (North America), Inc., Attention:
Corporate Secretary, Five Greenwich Office Park, Greenwich, Connecticut 06830,
telephone: (203) 622-3131.
The Company has agreed in the Registration Rights Agreement to indemnify
each Participating Broker-Dealer that resells Exchange Notes pursuant to this
prospectus, and their officers, directors and controlling persons, against
certain liabilities in connection with the offer and sale of the Exchange
Notes, including liabilities under the Securities Act.
71
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will be passed
upon for the Company by Weil, Gotshal & Manges LLP, and Ehrenreich Eilenberg &
Krause LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 2000 and 1999, and for each of the three
years in the period ended December 31, 2000, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
72
INDEX TO FINANCIAL STATEMENTS
Page
-----
I: Unaudited Consolidated Financial Statements of United Rentals, Inc.
Consolidated Balance Sheets--March 31, 2001 (unaudited) and December 31, 2000.................. F-2
Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000
(unaudited).................................................................................. F-3
Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2001
(unaudited).................................................................................. F-4
Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000
(unaudited).................................................................................. F-5
Notes to Unaudited Consolidated Financial Statements........................................... F-6
II: Consolidated Financial Statements of United Rentals, Inc.
Report of Independent Auditors................................................................. F-15
Consolidated Balance Sheets--December 31, 2000 and 1999........................................ F-16
Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998..... F-17
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000,
1999 and 1998................................................................................ F-18
Consolidated Statements of Cash Flows for the years ended to December 31, 2000, 1999 and
1998......................................................................................... F-19
Notes to Consolidated Financial Statements..................................................... F-21
F-1
UNITED RENTALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2001 2000
----------- ------------
(In thousands,
except share data)
ASSETS
Cash and cash equivalents.......................................................... $ 26,202 $ 34,384
Accounts receivable, net of allowance for doubtful accounts of $53,444 in 2001 and
$55,624 in 2000.................................................................. 420,579 469,594
Inventory.......................................................................... 127,829 133,380
Prepaid expenses and other assets.................................................. 167,807 104,493
Rental equipment, net.............................................................. 1,719,676 1,732,835
Property and equipment, net........................................................ 428,125 422,239
Intangible assets, net of accumulated amortization of $123,385 in 2001 and $108,066
in 2000.......................................................................... 2,221,894 2,227,008
---------- ----------
$5,112,112 $5,123,933
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable................................................................ $ 205,864 $ 260,155
Debt............................................................................ 2,751,190 2,675,367
Deferred taxes.................................................................. 214,784 206,243
Accrued expenses and other liabilities.......................................... 125,850 136,225
---------- ----------
Total liabilities........................................................... 3,297,688 3,277,990
Commitments and contingencies
Company-obligated mandatorily redeemable convertible preferred securities of
a subsidiary trust............................................................... 300,000 300,000
Stockholders' equity:
Preferred stock--$.01 par value, 5,000,000 shares authorized:...................
Series A perpetual convertible preferred stock--$300,000 liquidation
preference, 300,000 shares issued and outstanding........................... 3 3
Series B perpetual convertible preferred stock--$150,000 liquidation
preference, 150,000 shares issued and outstanding........................... 2 2
Common stock--$.01 par value, 500,000,000 shares authorized, 69,813,652
shares issued and outstanding in 2001 and 71,065,707 in 2000.................. 698 711
Additional paid-in capital...................................................... 1,173,419 1,196,324
Retained earnings............................................................... 359,262 355,850
Accumulated other comprehensive loss............................................ (18,960) (6,947)
---------- ----------
Total stockholders' equity.................................................. 1,514,424 1,545,943
---------- ----------
$5,112,112 $5,123,933
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
---------------------
2001 2000
--------- ---------
(In thousands, except
per share data)
Revenues:
Equipment rentals................................................. $461,382 $400,098
Sales of rental equipment......................................... 39,122 70,332
Sales of equipment and merchandise and other revenues............. 118,600 108,532
-------- --------
Total revenues....................................................... 619,104 578,962
Cost of revenues:
Cost of equipment rentals, excluding depreciation................. 230,033 174,300
Depreciation of rental equipment.................................. 76,801 73,503
Cost of rental equipment sales.................................... 23,076 41,086
Cost of equipment and merchandise sales and other operating costs. 86,627 84,089
-------- --------
Total cost of revenues............................................... 416,537 372,978
-------- --------
Gross profit......................................................... 202,567 205,984
Selling, general and administrative expenses......................... 108,893 101,850
Non-rental depreciation and amortization............................. 26,107 20,018
-------- --------
Operating income..................................................... 67,567 84,116
Interest expense..................................................... 57,530 49,683
Preferred dividends of a subsidiary trust............................ 4,875 4,875
Other (income) expense, net.......................................... (670) (204)
-------- --------
Income before provision for income taxes............................. 5,832 29,762
Provision for income taxes........................................... 2,420 12,351
-------- --------
Net income........................................................... $ 3,412 $ 17,411
======== ========
Basic earnings per share............................................. $ 0.05 $ 0.24
======== ========
Diluted earnings per share........................................... $ 0.04 $ 0.19
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
UNITED RENTALS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Series A Series B
Perpetual Perpetual
Convertible Convertible Common
Preferred Stock Preferred Stock Stock
---------------- ---------------- ------------------ Additional
Number of Number of Number Paid-in Retained Comprehensive
Shares Amount Shares Amount of Shares Amount Capital Earnings Loss
--------- ------ --------- ------ ----------- ------ ----------- -------- -------------
(In thousands, except share data)
Balance, December 31, 2000.... 300,000 $3 150,000 $2 71,065,707 $711 $1,196,324 $355,850
Comprehensive income:.........
Net income................. 3,412 $ 3,412
Other comprehensive loss:..
Foreign currency
translation
adjustments............. (12,013)
--------
Comprehensive loss............ $ (8,601)
========
Issuance of common stock...... 2,770 50
Exercise of common
stock options................ 15,775 208
Shares repurchased and
retired...................... (1,270,600) (13) (23,163)
------- -- ------- -- ---------- ---- ---------- --------
Balance, March 31, 2001....... 300,000 $3 150,000 $2 69,813,652 $698 $1,173,419 $359,262
======= == ======= == ========== ==== ========== ========
Accumulated
Other
Comprehensive
Loss
-------------
Balance, December 31, 2000.... $ (6,947)
Comprehensive income:.........
Net income.................
Other comprehensive loss:..
Foreign currency
translation
adjustments............. (12,013)
Comprehensive loss............
Issuance of common stock......
Exercise of common
stock options................
Shares repurchased and
retired......................
--------
Balance, March 31, 2001....... $(18,960)
========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
---------------------
2001 2000
---------- ----------
(In thousands)
Cash Flows From Operating Activities:
Net income........................................................................................ $ 3,412 $ 17,411
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................................... 102,908 93,521
Gain on sales of rental equipment............................................................... (16,046) (29,246)
Deferred taxes.................................................................................. 2,105 3,088
Changes in operating assets and liabilities:
Accounts receivable............................................................................ 49,467 50,331
Inventory...................................................................................... 6,096 (10,787)
Prepaid expenses and other assets.............................................................. (38,752) (16,942)
Accounts payable............................................................................... (54,583) 59,315
Accrued expenses and other liabilities......................................................... 1,460 (73,125)
--------- ---------
Net cash provided by operating activities................................................ 56,067 93,566
Cash Flows From Investing Activities:
Purchases of rental equipment..................................................................... (98,347) (193,020)
Purchases of property and equipment............................................................... (16,722) (30,848)
Proceeds from sales of rental equipment........................................................... 39,122 70,332
In-process acquisition costs...................................................................... (719) (1,926)
Payments of contingent purchase price............................................................. (6,403)
Purchases of other companies...................................................................... (27,695) (128,651)
--------- ---------
Net cash used in investing activities.................................................... (104,361) (290,516)
Cash Flows From Financing Activities:
Proceeds from debt................................................................................ 95,155 231,278
Payments of debt.................................................................................. (19,645) (34,476)
Proceeds from sale-leaseback...................................................................... 12,000
Payments of financing costs....................................................................... (381) (86)
Proceeds from the exercise of common stock options................................................ 172 95
Shares repurchased and retired.................................................................... (23,176)
--------- ---------
Net cash provided by financing activities................................................ 52,125 208,811
Effect of foreign exchange rates.................................................................. (12,013) (770)
--------- ---------
Net increase (decrease) in cash and cash equivalents.............................................. (8,182) 11,091
Cash and cash equivalents at beginning of period.................................................. 34,384 23,811
--------- ---------
Cash and cash equivalents at end of period........................................................ $ 26,202 $ 34,902
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest............................................................................ $ 62,604 $ 55,154
Cash paid for income taxes, net of refunds........................................................ $ 765 $ 35,900
Supplemental disclosure of non-cash investing and financing activities:
The Company acquired the net assets and assumed certain liabilities of other companies as follows:
Assets, net of cash acquired................................................................... $ 5,457 $ 192,580
Liabilities assumed............................................................................ (1,036) (63,929)
Less:..........................................................................................
Amounts paid through issuance of debt....................................................... (600)
--------- ---------
3,821 128,651
Due to seller payments......................................................................... 23,874
--------- ---------
Net cash paid............................................................................ $ 27,695 $ 128,651
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
General
United Rentals, Inc., is principally a holding company ("Holdings" or the
"Company") and conducts its operations primarily through its wholly owned
subsidiary United Rentals (North America), Inc. ("URI") and subsidiaries of
URI. Separate footnote information is not presented for the financial
statements of URI and subsidiaries as that information is substantially
equivalent to that presented below. Earnings per share data is not provided for
the operating results of URI and its subsidiaries as they are wholly owned
subsidiaries of Holdings.
The Consolidated Financial Statements of the Company included herein are
unaudited and, in the opinion of management, such financial statements reflect
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the results of the interim periods presented. Interim financial
statements do not require all disclosures normally presented in year-end
financial statements, and, accordingly, certain disclosures have been omitted.
Results of operations for the three month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. The Consolidated Financial Statements included herein should
be read in conjunction with the Company's Consolidated Financial Statements and
related Notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000.
Impact of Recently Issued Accounting Standards
In 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. 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 adopted SFAS No. 133 on January 1, 2001 and it did not 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.
Reclassifications
Certain prior year balances have been reclassified to conform to the 2001
presentation.
2. Acquisitions
During the three months ended March 31, 2001 and the year ended December 31,
2000, the Company completed two acquisitions and 53 acquisitions, respectively,
that were accounted for as purchases. The results of operations of the
businesses acquired in these acquisitions have been included in the Company's
results of operations from their respective acquisition dates.
F-6
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The purchase prices for such acquisitions have been allocated to the assets
acquired and liabilities assumed based on their respective fair values at their
respective acquisition dates. However, the Company has not completed its
valuation of all of its purchases and, accordingly, the purchase price
allocations are subject to change when additional information concerning asset
and liability valuations are completed.
The following table summarizes, on an unaudited pro forma basis, the results
of operations of the Company for the three months ended March 31, 2000 as
though each acquisition which was consummated during the period January 1, 2000
to March 31, 2001 as mentioned above and in Note 3 to the Notes to Consolidated
Financial Statements included in the Company's 2000 Annual Report on Form 10-K
was made on January 1, 2000 (in thousands, except per share data):
Revenues.................. $640,403
Net income................ 18,228
Basic earnings per share.. $ 0.25
Diluted earnings per share $ 0.19
Since the acquisitions made during the three months ended March 31, 2001 did
not have a material impact on the Company's pro forma results of operations,
the pro forma results of operations for the first quarter of 2001 are not
shown.
The unaudited pro forma results are based upon certain assumptions and
estimates, which are subject to change. These results are not necessarily
indicative of the actual results of operations that might have occurred, nor
are they necessarily indicative of expected results in the future.
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):
Three Months
Ended
March 31
---------------
2001 2000
------- -------
Numerator:
Net income.................................................. $ 3,412 $17,411
Denominator:
Denominator for basic earnings per share--
weighted-average shares.................................... 70,731 72,059
Effect of dilutive securities:
Employee stock options................................... 1,315 1,234
Warrants................................................. 2,563 2,558
Series A perpetual convertible preferred stock........... 12,000 12,000
Series B perpetual convertible preferred stock........... 5,000 5,000
------- -------
Denominator for diluted earnings per share--
adjusted weighted-average shares........................... 91,609 92,851
======= =======
Basic earnings per share........................................ $ 0.05 $ 0.24
======= =======
Diluted earnings per share...................................... $ 0.04 $ 0.19
======= =======
F-7
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Condensed Consolidating Financial Information of Guarantor Subsidiaries
Certain indebtedness of URI, a wholly-owned subsidiary of Holdings (the
"Parent"), is guaranteed by URI's United States subsidiaries (the "guarantor
subsidiaries") and, in certain cases, also by Parent. However, this
indebtedness is not guaranteed by URI's foreign subsidiaries (the
"non-guarantor subsidiaries"). The guarantor subsidiaries are all wholly-owned
and the guarantees are made on a joint and several basis and are full and
unconditional (subject to subordination provisions and subject to a standard
limitation which provides that the maximum amount guaranteed by each guarantor
will not exceed the maximum amount that can be guaranteed without making the
guarantee void under fraudulent conveyance laws). Separate consolidated
financial statements of the guarantor subsidiaries have not been presented
because management believes such information would not be material to
investors. However, condensed consolidating financial information as of March
31, 2001 and December 31, 2000 and for the three months ended March 31, 2001
and 2000, are presented. The condensed consolidating financial information of
URI and its subsidiaries are as follows:
CONDENSED CONSOLIDATING BALANCE SHEET
March 31, 2001
--------------------------------------------------------------
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
----------- ---------- ------------ ------------ ------------ ------------
(In thousands)
ASSETS
Cash and cash equivalents................... $ 23,519 $ 2,683 $ 26,202
Accounts receivable, net.................... $ 201,538 121,075 97,966 420,579
Intercompany receivable (payable)........... 267,929 (9,603) (258,326)
Inventory................................... 55,796 66,878 5,155 127,829
Prepaid expenses and other assets........... 50,848 115,725 1,234 167,807
Rental equipment, net....................... 856,703 741,287 121,686 1,719,676
Property and equipment, net................. $ 34,612 141,834 235,758 15,921 428,125
Investment in subsidiaries.................. 1,792,518 2,280,195 $(4,072,713)
Intangible assets, net...................... 950,681 1,144,042 127,171 2,221,894
---------- ---------- ---------- --------- ----------- ----------
$1,827,130 $4,805,524 $2,438,681 $ 113,490 $(4,072,713) $5,112,112
========== ========== ========== ========= =========== ==========
LIABILITIES AND STOCKHOLDER'S
EQUITY
Liabilities:
Accounts payable......................... $ 36,566 $ 160,345 $ 8,953 $ 205,864
Debt..................................... $ 300,000 2,726,313 2,921 21,956 $ (300,000) 2,751,190
Deferred income taxes.................... 214,734 50 214,784
Accrued expenses and other liabilities... 12,706 32,606 63,647 13,641 3,250 125,850
---------- ---------- ---------- --------- ----------- ----------
Total liabilities...................... 312,706 3,010,219 226,963 44,550 (296,750) 3,297,688
Commitments and contingencies
Company-obligated mandatorily redeemable
convertible preferred securities of a
subsidiary trust........................... 300,000 300,000
Stockholders' equity:
Preferred stock.......................... 5 5
Common stock............................. 698 698
Additional paid-in capital............... 1,173,419 1,488,410 1,830,667 65,662 (3,384,739) 1,173,419
Retained earnings........................ 359,262 306,895 381,051 22,238 (710,184) 359,262
Accumulated other comprehensive
income.................................. (18,960) (18,960) 18,960 (18,960)
---------- ---------- ---------- --------- ----------- ----------
Total stockholders' equity............. 1,514,424 1,795,305 2,211,718 68,940 (4,075,963) 1,514,424
---------- ---------- ---------- --------- ----------- ----------
$1,827,130 $4,805,524 $2,438,681 $ 113,490 $(4,072,713) $5,112,112
========== ========== ========== ========= =========== ==========
F-8
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
----------- ---------- ------------ ------------- ------------ ------------
(In thousands)
Assets
Cash and cash equivalents.................. $ 29,733 $ 4,651 $ 34,384
Accounts receivable, net................... $ 216,444 143,295 109,855 469,594
Intercompany receivable (payable).......... 319,423 (55,187) (264,236)
Inventory.................................. 54,022 73,979 5,379 133,380
Prepaid expenses and other assets.......... 28,263 75,633 597 104,493
Rental equipment, net...................... 837,972 766,219 128,644 1,732,835
Property and equipment, net................ $ 34,807 139,871 231,195 16,366 422,239
Investment in subsidiaries................. 1,839,952 2,257,692 $(4,097,644)
Intangible assets, net..................... 960,444 1,132,438 134,126 2,227,008
---------- ---------- ---------- ---------- ----------- ----------
$1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933
========== ========== ========== ========== =========== ==========
Liabilities and Stockholder's Equity
Liabilities:
Accounts payable........................ $ 78,623 $ 165,677 $ 15,855 $ 260,155
Debt.................................... $ 300,000 2,647,144 3,484 24,739 $ (300,000) 2,675,367
Deferred taxes.......................... 186,091 20,702 (550) 206,243
Accrued expenses and other liabilities.. 28,816 86,560 18,862 13,750 (11,763) 136,225
---------- ---------- ---------- ---------- ----------- ----------
Total liabilities.................... 328,816 2,998,418 208,725 53,794 (311,763) 3,277,990
Commitments and contingencies
Company-obligated mandatorily
redeemable convertible preferred
securities of a subsidiary trust.......... 300,000 300,000
Stockholder's equity:
Preferred stock......................... 5 5
Common stock............................ 711 711
Additional paid-in capital.............. 1,196,324 1,488,238 1,830,500 65,657 (3,384,395) 1,196,324
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........... 1,545,943 1,815,713 2,188,580 81,588 $(4,085,881) 1,545,943
---------- ---------- ---------- ---------- ----------- ----------
$1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933
========== ========== ========== ========== =========== ==========
F-9
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2001
----------------------------------------------------------------------
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- --------- ------------ ------------ ------------ ------------
(In thousands)
Revenues:
Equipment rentals..................... $207,473 $233,354 $20,555 $461,382
Sales of rental equipment............. 28,195 8,059 2,868 39,122
Sales of equipment and merchandise
and other revenues.................. 56,541 54,650 7,409 118,600
------- -------- -------- ------- -------- --------
Total revenues........................... 292,209 296,063 30,832 619,104
Cost of revenues:
Cost of equipment rentals, excluding
depreciation........................ 98,811 119,675 11,547 230,033
Depreciation of rental equipment...... 37,411 34,296 5,094 76,801
Cost of rental equipment sales........ 16,584 4,902 1,590 23,076
Cost of equipment and merchandise
sales and other operating costs..... 42,672 38,508 5,447 86,627
------- -------- -------- ------- -------- --------
Total cost of revenues................... 195,478 197,381 23,678 416,537
------- -------- -------- ------- -------- --------
Gross profit............................. 96,731 98,682 7,154 202,567
Selling, general and administrative
expenses............................... 48,249 54,608 6,036 108,893
Non-rental depreciation and amortization. $ 2,064 10,837 11,756 1,450 26,107
------- -------- -------- ------- -------- --------
Operating income (loss).................. (2,064) 37,645 32,318 (332) 67,567
Interest expense......................... 4,875 56,847 436 247 $ (4,875) 57,530
Preferred dividends of a subsidiary trust 4,875 4,875
Other (income) expense, net.............. 6,200 (7,385) 515 (670)
------- -------- -------- ------- -------- --------
Income (loss) before provision (benefit)
for income taxes....................... (6,939) (25,402) 39,267 (1,094) 5,832
Provision (benefit) for income taxes..... (2,880) (10,542) 16,296 (454) 2,420
------- -------- -------- ------- -------- --------
Income (loss) before equity in net
earnings of subsidiaries............... (4,059) (14,860) 22,971 (640) 3,412
Equity in net earnings of subsidiaries... 7,471 22,331 $(29,802)
------- -------- -------- ------- -------- --------
Net income (loss)........................ $ 3,412 $ 7,471 $ 22,971 $ (640) $(29,802) $ 3,412
======= ======== ======== ======= ======== ========
F-10
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2000
----------------------------------------------------------------------
Non-
Guarantor Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
-------- --------- ------------ ------------ ------------ ------------
(In thousands)
Revenues:
Equipment rentals..................... $172,673 $205,962 $21,463 $400,098
Sales of rental equipment............. 29,511 34,345 6,476 70,332
Sales of equipment and
merchandise and other revenues...... 57,426 43,681 7,425 108,532
------- -------- -------- ------- -------- --------
Total revenues........................... 259,610 283,988 35,364 578,962
Cost of revenues:
Cost of equipment rentals,
excluding depreciation.............. 73,121 89,950 11,229 174,300
Depreciation of rental equipment...... 35,385 33,575 4,543 73,503
Cost of rental equipment sales........ 18,652 18,130 4,304 41,086
Cost of equipment and merchandise
sales and other operating costs..... 45,876 31,994 6,219 84,089
------- -------- -------- ------- -------- --------
Total cost of revenues................... 173,034 173,649 26,295 372,978
------- -------- -------- ------- -------- --------
Gross profit............................. 86,576 110,339 9,069 205,984
Selling, general and administrative
expenses............................... 41,502 55,021 5,327 101,850
Non-rental depreciation and amortization. $ 1,701 9,020 8,024 1,273 20,018
------- -------- -------- ------- -------- --------
Operating income (loss).................. (1,701) 36,054 47,294 2,469 84,116
Interest expense......................... 4,875 48,822 41 820 $ (4,875) 49,683
Preferred dividends of a subsidiary trust 4,875 4,875
Other (income) expense, net.............. 1,774 (1,725) (253) (204)
------- -------- -------- ------- -------- --------
Income (loss) before provision (benefit)
for income taxes....................... (6,576) (14,542) 48,978 1,902 29,762
Provision (benefit) for income taxes..... (2,778) (6,035) 20,374 790 12,351
------- -------- -------- ------- -------- --------
Income (loss) before equity in net
earnings of subsidiaries............... (3,798) (8,507) 28,604 1,112 17,411
Equity in net earnings of subsidiaries... 21,209 29,716 $(50,925)
------- -------- -------- ------- -------- --------
Net income............................... $17,411 $ 21,209 $ 28,604 $ 1,112 $(50,925) $ 17,411
======= ======== ======== ======= ======== ========
F-11
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Three Months Ended March 31, 2001
------------------------------------------------------------------------
Guarantor Non-guarantor Other and
Parent URI Subsidiaries Subsidiaries Eliminations Consolidated
--------- --------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by (used in) operating
activities....................................... $ (2,435) $ 21,233 $ 20,403 $ 16,866 $ 56,067
Cash flows from investing activities:
Purchases of rental equipment................. (66,761) (26,650) (4,936) (98,347)
Purchases of property and equipment........... (1,721) (6,188) (7,482) (1,331) (16,722)
Proceeds from sales of rental equipment....... 28,195 8,059 2,868 39,122
Capital contributed to subsidiary............. (172) $ 172
Purchases of other companies.................. (27,056) (639) (27,695)
In-process acquisition costs.................. (719) (719)
-------- -------- -------- -------- -------- ---------
Net cash used in investing activities....... (2,612) (71,810) (26,073) (4,038) 172 (104,361)
Cash flows from financing activities:
Proceeds from debt............................ 95,144 11 95,155
Payments of debt.............................. (16,307) (555) (2,783) (19,645)
Payments of financing costs................... (381) (381)
Capital contributions by parent............... 172 (172)
Dividend distributions to parent.............. (28,051) 28,051
Shares repurchased and retired................ (23,176) (23,176)
Proceeds from the exercise of
common stock options......................... 172 172
Proceeds from dividends from
subsidiary................................... 28,051 (28,051)
-------- -------- -------- -------- -------- ---------
Net cash provided by (used in)
financing activities........................ 5,047 50,577 (544) (2,783) (172) 52,125
Effect of foreign exchange rates.............. (12,013) (12,013)
-------- -------- -------- -------- -------- ---------
Net decrease in cash and cash
equivalents................................... (6,214) (1,968) (8,182)
Cash and cash equivalents at beginning of
period........................................ 29,733 4,651 34,384
-------- -------- -------- -------- -------- ---------
Cash and cash equivalents at end of
period........................................ $ 23,519 $ 2,683 $ 26,202
======== ======== ======== ======== ======== =========
Supplemental disclosure of cash flow
information:
Cash paid for interest........................ $ 4,875 $ 53,026 $ 4,133 $ 570 $ 62,604
Cash paid for income taxes, net of refunds.... $ 538 $ 227 $ 765
Supplemental disclosure of non-cash investing
and financing activities:
The Company acquired the net assets and
assumed certain liabilities of other companies as
follows:
Assets, net of cash acquired.................. $ 4,624 $ 833 $ 5,457
Liabilities assumed........................... (842) (194) (1,036)
Less:.........................................
Amounts paid through issuance of
debt........................................ (600) (600)
-------- -------- -------- -------- -------- ---------
3,182 639 3,821
Due to seller payments...................... 23,874 23,874
-------- -------- -------- -------- -------- ---------
Net cash paid............................ $ 27,056 $ 639 $ 27,695
======== ======== ======== ======== ======== =========
F-12
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Three Months Ended March 31, 2000
------------------------------------------------------------------------
Guarantor Non-guarantor Other and
Parent URI Subsidiaries Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------- ------------ ------------
(In thousands)
Net cash provided by operating activities........ $ 1,587 $ 71,328 $ 16,502 $ 2,223 $ 1,926 $ 93,566
Cash flows from investing activities:
Purchases of rental equipment................. (147,683) (38,799) (6,538) (193,020)
Purchases of property and equipment........... (6,462) (17,842) (5,582) (962) (30,848)
Proceeds from sales of rental equipment....... 29,511 34,345 6,476 70,332
Capital contributed to subsidiary............. (95) 95
Payments of contingent purchase price......... (803) (5,600) (6,403)
Purchases of other companies.................. (128,651) (128,651)
In-process acquisition costs.................. (1,926) (1,926)
------- --------- -------- ------- ------- ---------
Net cash used in investing activities....... (6,557) (265,468) (15,636) (1,024) (1,831) (290,516)
Cash flows from financing activities:
Proceeds from debt............................ 211,625 19,653 231,278
Payments of debt.............................. (28,308) (4,145) (2,023) (34,476)
Proceeds from sale-leaseback.................. 12,000 12,000
Payments of financing costs................... (86) (86)
Capital contributions by parent............... 95 (95)
Dividend distributions to parent.............. (4,875) 4,875
Proceeds from the exercise of common
stock options................................. 95 95
Proceeds from dividends from
subsidiary.................................... 4,875 (4,875)
------- --------- -------- ------- ------- ---------
Net cash provided by (used in)
financing activities........................ 4,970 190,451 15,508 (2,023) (95) 208,811
Effect of foreign exchange rates.............. (770) (770)
------- --------- -------- ------- ------- ---------
Net increase (decrease) in cash and
cash equivalents.............................. (3,689) 16,374 (1,594) 11,091
Cash and cash equivalents at beginning of
period........................................ 3,689 16,414 3,708 23,811
------- --------- -------- ------- ------- ---------
Cash and cash equivalents at end of
period........................................ $ 32,788 $ 2,114 $ 34,902
======= ========= ======== ======= ======= =========
Supplemental disclosure of cash flow
information:
Cash paid for interest........................ $ 4,875 $ 49,479 $ 194 $ 606 $ 55,154
Cash paid for income taxes....................
$ 29,702 $ 6,198 $ 35,900
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.................. $ 192,580 $ 192,580
Liabilities assumed........................... (63,929) (63,929)
------- --------- -------- ------- ------- ---------
Net cash paid............................ $ 128,651 $ 128,651
======= ========= ======== ======= ======= =========
F-13
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
5. Subsequent Event
In April 2001, URI issued $450.0 million aggregate principal amount of 10
3/4% senior notes. Concurrent with the issuance of the senior notes, URI
entered into a new senior secured credit facility. The new credit facility is
comprised of a $750.0 million term loan and a $750.0 million revolving credit
facility. The proceeds from the new senior notes and new senior secured credit
facility were used to refinance outstanding secured indebtedness of
approximately $1,664.5 million and obligations under a synthetic lease of $31.2
million. For additional information concerning these transactions, see "--Item
2 Management's Discussion and Analysis of Financial Condition and Results of
Operations--Information Concerning Recent Financing Transactions" in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, which is
incorporated by reference herein.
As a result of the refinancing, the Company will record in the second
quarter of 2001 a pretax extraordinary charge of approximately $17.0 million,
primarily related to the write-off of financing fees.
F-14
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
F-15
UNITED RENTALS, 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 81,457
Rental equipment, net...................................................... 1,732,835 1,659,733
Property and equipment, net................................................ 422,239 304,907
Intangible assets, net of accumulated amortization of $108,066 and
$51,231 at 2000 and 1999, respectively................................... 2,227,008 1,863,372
---------- ----------
$5,123,933 $4,497,738
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable........................................................ $ 260,155 $ 242,946
Debt.................................................................... 2,675,367 2,266,148
Deferred taxes.......................................................... 206,243 81,229
Accrued expenses and other liabilities.................................. 136,225 209,929
---------- ----------
Total liabilities................................................... 3,277,990 2,800,252
Commitments and contingencies
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust......................................... 300,000 300,000
Stockholders' equity:
Preferred stock--$.01 par value, 5,000,000 shares authorized:
Series A perpetual convertible preferred stock--$300,000
liquidation preference, 300,000 shares issued and outstanding
in 2000 and 1999.................................................... 3 3
Series B perpetual convertible preferred stock--$150,000
liquidation preference, 150,000 shares issued and outstanding
in 2000 and 1999.................................................... 2 2
Common stock--$.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...................... 711 721
Additional paid-in capital.............................................. 1,196,324 1,216,968
Retained earnings....................................................... 355,850 179,475
Accumulated other comprehensive (loss) income........................... (6,947) 317
---------- ----------
Total stockholders' equity.......................................... 1,545,943 1,397,486
---------- ----------
$5,123,933 $4,497,738
========== ==========
See accompanying notes.
F-16
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.
F-17
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Series A Series B
Perpetual Perpetual
Convertible Convertible
Preferred Stock Preferred Stock Common Stock
--------------- --------------- ------------------
Number Number Number Additional
of of of Paid-in Retained
Shares Amount Shares Amount Shares Amount Capital Earnings
------- ------ ------- ------ ----------- ------ ----------- ---------
(In thousands, except share amounts)
Balance, December 31, 1997...................... 56,239,375 $562 $ 401,758 $ 44,068
Comprehensive income:
Net income................................... 13,461
Other comprehensive income:
Foreign currency translation adjustments....
Comprehensive income..........................
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
Other comprehensive income:
Foreign currency translation adjustments....
Comprehensive income..........................
Issuance of Series A perpetual convertible
preferred stock.............................. 300,000 $3 286,997
Issuance of Series B perpetual convertible
preferred stock.............................. 150,000 $2 143,798
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...................... 300,000 3 150,000 2 72,051,095 721 1,216,968 179,475
Comprehensive income:
Net income................................... 176,375
Other comprehensive income:
Foreign currency translation adjustments....
Comprehensive income..........................
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...................... 300,000 $3 150,000 $2 71,065,707 $711 $1,196,324 $355,850
======= == ======= == ========== ==== ========== ========
Accumulated
Compre- Other
hensive Comprehensive
Income (Loss) Income
--------- -------------
Balance, December 31, 1997......................
Comprehensive income:
Net income................................... $ 13,461
Other comprehensive income:
Foreign currency translation adjustments.... (281) $ (281)
--------
Comprehensive income.......................... $ 13,180
========
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................................... $142,666
Other comprehensive income:
Foreign currency translation adjustments.... 598 598
--------
Comprehensive income.......................... $143,264
========
Issuance of Series A perpetual convertible
preferred stock..............................
Issuance of Series B perpetual convertible
preferred stock..............................
Issuance of common stock......................
Exercise of common stock options..............
-------
Balance, December 31, 1999...................... 317
Comprehensive income:
Net income................................... $176,375
Other comprehensive income:
Foreign currency translation adjustments.... (7,264) (7,264)
--------
Comprehensive income.......................... $169,111
========
Issuance of common stock......................
Exercise of common stock options..............
Shares repurchased and retired................
-------
Balance, December 31, 2000...................... $(6,947)
=======
See accompanying notes.
F-18
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 Preferred, net of issuance costs.......... 287,000
Proceeds from the issuance of Series B Preferred, net of issuance costs.......... 143,800
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.
F-19
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.
F-20
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.
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.
F-21
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
Senior subordinated notes....... 951,153 702,500 950,653 906,400
Other debt...................... 94,086 94,086 73,745 73,745
Revenue Recognition
Revenue related to the sale of equipment and merchandise is recognized at
the time of delivery to, or pick-up by, the customer. Revenue related to rental
equipment is recognized over the contract term.
F-22
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Advertising Expense
The Company advertises primarily through trade publications and yellow
pages. Advertising costs are expensed as incurred and totaled $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.
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.
F-23
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-24
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-25
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 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.
F-26
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
---------- ----------
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
======== ========
F-27
UNITED RENTALS, INC.
NOTES TO UNAUDITED 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
Facility) exists, the interest rate applicable to each loan will increase by 2%
per annum. The
F-28
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
F-29
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
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.
F-30
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
======== ======= =======
F-31
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
F-32
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 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
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.
11. Capital Stock
Series A Perpetual Convertible Preferred Stock. On January 7, 1999, Holdings
sold 300,000 shares of its Series A Perpetual Convertible Preferred Stock
("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
F-33
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
Series B Perpetual Convertible Preferred Stock. On September 30, 1999,
Holdings sold 150,000 shares of its Series B Perpetual Convertible Preferred
Stock ("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 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.
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
F-34
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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).
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
========== ======
F-35
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
========== ==========
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.
F-36
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
=========== =========== ===========
F-37
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 $12.5 million and
recorded deferred gains on the sales of approximately $4.0 million. For the
1999 transaction, the Company agreed to lease back the rental equipment over a
five year period beginning December 1999 and will recognize a deferred gain on
the sale 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 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 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
F-38
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
The Company operates in one industry segment consisting of the rental and
sales of equipment and related merchandise and parts. The Company's operations
are managed as one segment, or strategic unit, because it offers similar
products and services in similar markets and the factors determining strategic
decisions are comparable for all products and services.
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
========== ========== ==========
F-39
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
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") 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 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:
F-40
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
----------- ---------- ------------ ------------- ------------ ------------
(In thousands)
Assets
Cash and cash equivalents............ $ 29,733 $ 4,651 $ 34,384
Accounts receivable, net............. $ 216,444 143,295 109,855 469,594
Intercompany receivable (payable).... 319,423 (55,187) (264,236)
Inventory............................ 54,022 73,979 5,379 133,380
Prepaid expenses and other assets.... 28,263 75,633 597 104,493
Rental equipment, net................ 837,972 766,219 128,644 1,732,835
Property and equipment, net.......... $ 34,807 139,871 231,195 16,366 422,239
Investment in subsidiaries........... 1,839,952 2,257,692 $(4,097,644)
Intangible assets, net............... 960,444 1,132,438 134,126 2,227,008
---------- ---------- ---------- ---------- ----------- ----------
$1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933
========== ========== ========== ========== =========== ==========
Liabilities and Stockholder's Equity
Liabilities:
Accounts payable.................. $ 78,623 $ 165,677 $ 15,855 $ 260,155
Debt.............................. $ 300,000 2,647,144 3,484 24,739 $ (300,000) 2,675,367
Deferred taxes.................... 186,091 20,702 (550) 206,243
Accrued expenses and other
liabilities...................... 28,816 86,560 18,862 13,750 (11,763) 136,225
---------- ---------- ---------- ---------- ----------- ----------
Total liabilities.............. 328,816 2,998,418 208,725 53,794 (311,763) 3,277,990
Commitments and contingencies
Company-obligated mandatorily
redeemable convertible preferred
securities of a subsidiary trust.... 300,000 300,000
Stockholder's equity:
Preferred stock................... 5 5
Common stock...................... 711 711
Additional paid-in capital........ 1,196,324 1,488,238 1,830,500 65,657 (3,384,395) 1,196,324
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..... 1,545,943 1,815,713 2,188,580 81,588 $(4,085,881) 1,545,943
---------- ---------- ---------- ---------- ----------- ----------
$1,874,759 $4,814,131 $2,397,305 $ 135,382 $(4,097,644) $5,123,933
========== ========== ========== ========== =========== ==========
F-41
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
Stockholder's equity:
Preferred stock................... 5 5
Common stock...................... 721 721
Additional paid-in capital........ 1,216,968 1,487,907 1,830,182 65,644 $(3,383,733) 1,216,968
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..... 1,397,486 1,673,534 2,012,109 79,746 (3,765,389) 1,397,486
---------- ---------- ---------- --------- ----------- ----------
$1,762,739 $4,165,756 $2,186,177 $ 145,205 $(3,762,139) $4,497,738
========== ========== ========== ========= =========== ==========
F-42
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2000
Guarantor Non-Guarantor Other and Consolidated
Parent URI Subsidiaries Subsidiaries Eliminations Total
--------- ---------- ------------ ------------- ------------ ------------
(In thousands)
Revenues:
Equipment rentals........................... $ 851,541 $1,094,613 $ 110,529 $2,056,683
Sales of rental equipment................... 145,519 178,576 23,583 347,678
Sales of equipment and merchandise and
other revenues............................. 253,798 229,219 31,483 514,500
-------- ---------- ---------- ---------- ---------- ----------
Total revenues................................ 1,250,858 1,502,408 165,595 2,918,861
Cost of revenues:
Cost of equipment rentals, excluding
depreciation............................... 364,047 494,350 49,080 907,477
Depreciation of rental equipment............ 152,640 155,239 20,252 328,131
Cost of rental equipment sales.............. 87,161 106,617 14,404 208,182
Cost of equipment and merchandise sales
and other operating costs.................. 197,190 164,186 25,125 386,501
-------- ---------- ---------- ---------- ---------- ----------
Total cost of revenues........................ 801,038 920,392 108,861 1,830,291
-------- ---------- ---------- ---------- ---------- ----------
Gross profit.................................. 449,820 582,016 56,734 1,088,570
Selling, general and administrative expenses.. 184,135 245,431 24,764 454,330
Non-rental depreciation and amortization...... $ 7,718 33,692 39,618 5,273 86,301
-------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)....................... (7,718) 231,993 296,967 26,697 547,939
Interest expense.............................. 19,500 217,904 135 10,740 $ (19,500) 228,779
Preferred dividends of a subsidiary trust..... 19,500 19,500
Other (income) expense, net................... 2,129 (4,285) 320 (1,836)
-------- ---------- ---------- ---------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes................................. (27,218) 11,960 301,117 15,637 301,496
Provision (benefit) for income taxes.......... (11,295) 4,908 124,964 6,544 125,121
-------- ---------- ---------- ---------- ---------- ----------
Income (loss) before equity in net earnings of
subsidiaries................................. (15,923) 7,052 176,153 9,093 176,375
Equity in net earnings of subsidiaries........ 192,298 185,246 $ (377,544)
-------- ---------- ---------- ---------- ---------- ----------
Net income.................................... $176,375 $ 192,298 $ 176,153 $ 9,093 $ (377,544) $ 176,375
======== ========== ========== ========== ========== ==========
F-43
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
======== ======== ========== ======== ========= ==========
F-44
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
======= ======== ======== ======= ======== ==========
F-45
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
======== ========= ========= ======== ======== =========
F-46
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 preferred stock, net
of issuance costs............................... 430,800 430,800
Proceeds from the exercise of stock options...... 26,989 26,989
Proceeds from dividends from subsidiary.......... 19,500 (19,500)
--------- ----------- -------- --------- --------- -----------
Net cash provided by financing activities..... 541,990 1,123,525 5,566 28,917 (522,985) 1,177,013
Effect of foreign exchange rates................. 598 598
--------- ----------- -------- --------- --------- -----------
Net increase (decrease) in cash and cash
equivalents........................................ (1,774) 3,846 1,329 3,401
Cash and cash equivalents at beginning of period.... 1,774 16,257 2,379 20,410
--------- ----------- -------- --------- --------- -----------
Cash and cash equivalents at end of period.......... $ $ $ 20,103 $ 3,708 $ 23,811
========= =========== ======== ========= ========= ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest.............................. $ 19,500 $ 98,728 $ 1,194 $ 4,863 $ 124,285
Cash paid for income taxes.......................... $ 16,372 $ 1,137 $ 17,509
Supplemental disclosure of non-cash investing
and financing activities:
The Company acquired the net assets and assumed
certain liabilities of other companies as follows:
Assets, net of cash acquired..................... $ 1,371,807 $ 96,760 $ 1,468,567
Liabilities assumed.............................. (448,685) (23,697) (472,382)
Less:
Amounts paid through issuance of debt............ (7,185) (2,210) (9,395)
--------- ----------- -------- --------- --------- -----------
Net cash paid.................................... $ 915,937 $ 70,853 $ 986,790
========= =========== ======== ========= ========= ===========
F-47
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
Parent URI Subsidiaries Subsidiaries Eliminations
---------- ------------ ------------ ------------- ------------
(In thousands)
Net cash provided by (used in) operating activities.. $ (4,157) $ (63,760) $ 206,996 $ 67,370 $ 9,680
Cash Flows From Investing Activities:
Purchases of rental equipment..................... (415,140) (50,494) (13,900)
Purchases of property and equipment............... (15,535) (65,742) (2,851) (1,050) 561
Proceeds from sales of rental
equipment........................................ 17,992 96,739 4,889
Proceeds from sale of businesses.................. 10,640
Payments of contingent purchase
price............................................ (2,800) (1,156)
Purchases of other companies...................... (840,730) (12,510) (58,597)
Capital contributed to subsidiary................. (492,590) 492,590
In-process acquisition costs...................... (241)
--------- ----------- --------- -------- ----------
Net cash provided by (used in) investing
activities.................................... (508,125) (1,292,980) 28,084 (69,814) 492,910
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)
Repayments of debt................................ (432,222) (230,685) (22,760)
Proceeds from sale-leaseback...................... 35,000
Payments of financing costs....................... (24,982) (10,000)
Capital contributions by parent................... 492,590 (492,590)
Distributions to stockholders..................... (3,536)
Proceeds from issuance of common stock and
warrants, net of issuance costs.................. 207,005
Proceeds from the exercise of stock options....... 619
Proceeds from issuance of redeemable convertible
preferred securities............................. 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)
Effect of foreign exchange rates.................. (281)
--------- ----------- --------- -------- ----------
Net increase (decrease) in cash and cash
equivalents......................................... (65,426) 11,046 2,379
Cash and cash equivalents at beginning of period..... 67,200 5,211
--------- ----------- --------- -------- ----------
Cash and cash equivalents at end of
period.............................................. $ $ 1,774 $ 16,257 $ 2,379
========= =========== ========= ======== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest............................... $ 4,658 $ 27,085 $ 11,098 $ 316
Cash paid for income taxes........................... $ 8,034 $ 2,190
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
Liabilities assumed............................... (500,228) (18,633)
Less:
Amounts paid in common stock and warrants of
Parent........................................... (58,093) (2,211)
Amounts paid through issuance of
debt............................................. (10,465)
--------- ----------- --------- -------- ----------
Net cash paid..................................... $ 840,730 $ 12,510 $ 58,597
========= =========== ========= ======== ==========
Consolidated
Total
------------
Net cash provided by (used in) operating activities.. $ 216,129
Cash Flows From Investing Activities:
Purchases of rental equipment..................... (479,534)
Purchases of property and equipment............... (84,617)
Proceeds from sales of rental
equipment........................................ 119,620
Proceeds from sale of businesses.................. 10,640
Payments of contingent purchase
price............................................ (3,956)
Purchases of other companies...................... (911,837)
Capital contributed to subsidiary.................
In-process acquisition costs...................... (241)
-----------
Net cash provided by (used in) investing
activities.................................... (1,349,925)
Cash Flows from Financing Activities:
Dividend distributions to Parent..................
Proceeds from debt................................ 1,263,637
Repayments of debt................................ (685,667)
Proceeds from sale-leaseback...................... 35,000
Payments of financing costs....................... (34,982)
Capital contributions by parent...................
Distributions to stockholders..................... (3,536)
Proceeds from issuance of common stock and
warrants, net of issuance costs.................. 207,005
Proceeds from the exercise of stock options....... 619
Proceeds from issuance of redeemable convertible
preferred securities............................. 300,000
Proceeds from dividends from subsidiary...........
-----------
Net cash provided by (used in) financing
activities.................................... 1,082,076
Effect of foreign exchange rates.................. (281)
-----------
Net increase (decrease) in cash and cash
equivalents......................................... (52,001)
Cash and cash equivalents at beginning of period..... 72,411
-----------
Cash and cash equivalents at end of
period.............................................. $ 20,410
===========
Supplemental disclosure of cash flow information:
Cash paid for interest............................... $ 43,157
Cash paid for income taxes........................... $ 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...................... $ 1,501,467
Liabilities assumed............................... (518,861)
Less:
Amounts paid in common stock and warrants of
Parent........................................... (60,304)
Amounts paid through issuance of
debt............................................. (10,465)
-----------
Net cash paid..................................... $ 911,837
===========
F-48
Item 20. Indemnification of Directors and Officers
The Certificate of Incorporation (the "Certificate") of the company provides
that a director will not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law (the "Delaware
Law"), which concerns unlawful payments of dividends, stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware Law is subsequently amended to
permit further limitation of the personal liability of directors, the liability
of a director of the Company will be eliminated or limited to the fullest
extent permitted by the Delaware Law as amended.
The Registrant, as a Delaware corporation, is empowered by Section 145 of
the Delaware Law, subject to the procedures and limitation stated therein, to
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or proceeding
in which such person is made a party by reason of his being or having been a
director, officer, employee or agent of the Registrant. The statute provides
that indemnification pursuant to its provisions is not exclusive of other
rights of indemnification to which a person may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors, or otherwise. The
Company has entered into indemnification agreements with certain of its
directors and officers. In general, these agreements require the Company to
indemnify each of such persons against expenses, judgments, fines, settlements
and other liabilities incurred in connection with any proceeding (including a
derivative action) to which such person may be made a party by reason of the
fact that such person is or was a director, officer or employee of the Company
or guaranteed any obligations of the Company, provided that the right of an
indemnitee to receive indemnification is subject to the following limitations:
(i) an indemnitee is not entitled to indemnification unless he acted in good
faith and in a manner that he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful and
(ii) in the case of a derivative action, an indemnitee is not entitled to
indemnification in the event that he is judged in a final non-appealable
decision of a court of competent jurisdiction to be liable to the Company due
to willful misconduct in the performance of his duties to the Company (unless
and only to the extent that the court determines that the indemnitee is fairly
and reasonably entitled to indemnification).
Pursuant to Section 145 of the Delaware Law, the Registrant has purchased
insurance on behalf of its present and former directors and officers against
any liability asserted against or incurred by them in such capacity or arising
out of their status as such. The Registrant has entered into indemnification
agreements with certain members of its management in the form filed as an
exhibit to this registration statement.
Item 21. Exhibits and Financial Statement Schedules
Exhibit
Number Description of Exhibit
------ ----------------------
4(a) Indenture dated as of April 20, 2001, among the Registrant, the Guarantors named therein and The
Bank of New York, as trustee (incorporated by reference to Exhibit 10(b) of the Report on Form 10-
Q filed by the Registrant for the quarter ended March 31, 2001)
4(b) Registration Rights Agreement dated as of April 20, 2001, among the Registrant, the Guarantors
named therein, and the initial purchasers named therein (incorporated by reference to Exhibit 10(d)
of the Report on Form 10-Q filed by the Registrant for the quarter ended March 31, 2001)
5(a) Opinion of Ehrenreich Eilenberg & Krause LLP
12(a) Statement re computation of ratios of earnings to fixed charges
23(a) Consent of Ehrenreich Eilenberg & Krause LLP (included in opinion filed as Exhibit 5(a))
II-1
Exhibit
Number Description of Exhibit
------ ----------------------
23(b) Consent of Ernst & Young LLP
24(a) Power of Attorney (included in Part II of the Registration Statement under the caption "Signatures")
25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York
99(a) Form of Letter of Transmittal
Item 22. Undertakings
A. The registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145, the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415,
will be filed as a
II-2
part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expense incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted against the registrant by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
D. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
E. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of United
Rentals (North America), on its own behalf and as general partner on behalf of
each co-registrant that is a limited partnership, and United Rentals, Inc., as
co-registrant, has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on July 10, 2001.
UNITED RENTALS (NORTH AMERICA), INC.
UNITED RENTALS, INC.
/S/ MICHAEL J. NOLAN
By: _________________________________
Michael J. Nolan
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities and on the respective dates indicated. Each person whose
signature appears below hereby authorizes Bradley S. Jacobs, John N. Milne and
Michael J. Nolan and each with full power of substitution, to execute in the
name and on behalf of such person any amendment or any post-effective amendment
to this Registration Statement and to file the same, with exhibits thereto, and
other documents in connection therewith, making such changes in this
Registration Statement as the Registrant deems appropriate, and appoints each
of Bradley S. Jacobs, John N. Milne and Michael J. Nolan, each with full power
of substitution, attorney-in-fact to sign any amendment and any post-effective
amendment to this Registration Statement and to file the same, with exhibits
thereto, and other documents in connection therewith.
Signatures Title Date
---------- ----- ----
/S/ BRADLEY S. JACOBS Chairman, Chief Executive Officer July 10, 2001
----------------------- and Director (Principal Executive
Bradley S. Jacobs Officer)
/S/ WAYLAND R. HICKS Director July 10, 2001
-----------------------
Wayland R. Hicks
/S/ JOHN N. MILNE Director July 10, 2001
-----------------------
John N. Milne
----------------------- Director July 10, 2001
Leon D. Black
/S/ RICHARD D. COLBURN Director July 10, 2001
-----------------------
Richard D. Colburn
/S/ RONALD M. DEFEO Director July 10, 2001
-----------------------
Ronald M. DeFeo
----------------------- Director July 10, 2001
Michael S. Gross
/S/ RICHARD J. HECKMANN Director July 10, 2001
-----------------------
Richard J. Heckmann
II-4
Signatures Title Date
---------- ----- ----
---------------------- Director* July 10, 2001
David C. Katz
---------------------- Director July 10, 2001
John S. McKinney
/S/ GERALD TSAI, JR. Director July 10, 2001
----------------------
Gerald Tsai, Jr.
/S/ TIMOTHY J. TULLY Director July 10, 2001
----------------------
Timothy J. Tully
/S/ CHRISTIAN M. WEYER Director July 10, 2001
----------------------
Christian M. Weyer
/S/ MICHAEL J. NOLAN Chief Financial Officer (Principal July 10, 2001
---------------------- Financial Officer and Principal
Michael J. Nolan Accounting Officer)
* Mr. Katz is signing in his capacity as Director of United Rentals (North
America), Inc.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
co-registrant listed on the cover page of this Registration Statement that is a
corporation other than United Rentals, Inc., has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on July 10, 2001.
THE CO-REGISTRANTS LISTED ON
THE COVER PAGE OF THIS REGISTRATION
STATEMENT THAT ARE CORPORATIONS OTHER
THAN UNITED RENTALS, INC.
/S/ MICHAEL J. NOLAN
By: _________________________________
Michael J. Nolan
Vice President
of each Co-Registrant
Signatures Title Date
---------- ----- ----
/S/ JOHN N. MILNE President and Director of each Co- July 10, 2001
-------------------- Registrant (Principal Executive
John N. Milne Officer)
/S/ MICHAEL J. NOLAN Vice President of each July 10, 2001
-------------------- Co-Registrant (Principal
Michael J. Nolan Financial Officer and Principal
Acounting Officer)
II-6