United Rentals Annual Report 2003

FY2003 Annual Report · United Rentals
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U N I T E D R E N TA L S , I N C .

2003 Annual Report

I N V E S T I N G I N
O P P O RT U N I T Y

1 LETTER TO SHAREHOLDERS       5 FINANCIAL HIGHLIGHTS       6 CUSTOMERS AND MARKETS       

8 SOUND STRATEGIES FOR GROWTH       22 FINANCIAL STATEMENTS

U N I T E D   R E N TA L S is North America’s largest equipment rental company,
uniquely positioned to serve a diverse customer base that includes construction and

industrial companies, utilities, municipalities, homeowners and others. We offer our

1.9 million customers many beneﬁts:

13,000 knowledgeable employees operating

an integrated network of more than 730 locations in 47 states, seven Canadian

provinces and Mexico

The largest ﬂeet of rental equipment in the world — over

500,000 units with an original cost of $3.5 billion

More than 600 different types

of equipment for rent, including construction equipment, industrial and heavy

machinery, aerial work platforms, trafﬁc control equipment, trench safety equipment

and homeowner items

Quality new and used equipment for sale, contractor 

supplies, parts and service

A well-developed infrastructure that supports our full

range of services, including comprehensive safety training and round-the-clock 

emergency assistance

Industry-leading information technology that electronically

links our branches and gives our customers access to every piece of equipment in our

ﬂeet

Customer-focused industry veterans who run our branches and ensure that

we deliver on our promise of “The Right Equipment, Right Now!”

D E A R F E L L OW

S H A R E H O L D E R S

Despite the improving economy, a weak 
non-residential construction market 
continued to impact our results in 2003. 

Private spending on non-residential construction declined 5 percent, following a 13 percent decline in

2002, and government spending on road and highway construction remained sluggish. 

We grew our revenues 1.6 percent in 2003

to $2.87 billion, despite weak demand. This

equipment leases, debt reﬁnancing, write-off of
notes receivable, and vesting of restricted shares

increase, which outpaced our end markets, was not

granted to executives in 2001. Because of these

sufﬁcient to fully offset higher costs. As a result,

charges, we ended the year with a net loss of 

our proﬁt margins for the year declined. Our

$259 million. If we had not incurred these 

results were also impacted by $331 million of after-

charges, we would have realized operating income 

tax charges for goodwill impairment, buy-out of

of $339 million, net income of $72 million, and

Wayland Hicks 
Chief Executive Ofﬁcer

diluted earnings per share of $0.75.(1)

Although our proﬁtability declined in 2003,

we generated $524 million in cash ﬂow from opera-

tions and the sale of rental equipment. After capital

expenditures of $378 million for ﬂeet and facilities,

our free cash ﬂow was $146 million. 

Faced with a 
difﬁcult year, 
we still realized 
considerable 
accomplishments that 

should help us as we move forward. We raised 
rental rates by more than 2 percent and at the 

same time increased same-store rental revenues by

3.7 percent. We also expanded our market share

with the addition of 200,000 new customers.

(1) For a reconciliation of as-adjusted results and 

GAAP results, please see the footnotes on page ﬁve.

1

“We expect our proﬁtability to be 
substantially better in 2004, even without 
an upswing in our key end market, 
private non-residential construction.”

Wayland Hicks, Chief Executive Ofﬁcer

We continued to beneﬁt from our geo-

part of our debt to 2012 and beyond. This 

graphic diversity, and from our ability to share

reﬁnancing will reduce our interest expense by

equipment among our branches. During 2003,

approximately $30 million in 2004. 

11.5 percent of our rental revenues came from

Last year, our extensive ﬂeet and superior 

equipment sharing, our best result to date. We also

service enabled us to win a large number of rental 

repositioned over $400 million of underutilized

contracts on high proﬁle jobs such as the expansion 

equipment to take advantage of market opportuni-

of Miami International Airport, the modernization 

ties in areas where demand was stronger. 

of Soldier Field in Chicago, and the expansion of the

While we continued to feel pressure on our

Harley-Davidson plant in York, Pennsylvania. We

cost base, we worked hard to become more produc-

served jobsites as diverse as the Honda and Hyundai

tive. We reduced our headcount by 1,000 over the

plants in Alabama, and the Terminator 3 movie, 

past two years while maintaining our customer

which featured our equipment. 

service levels, and ended the year with approxi-

mately 13,000 employees. We also conserved our

capital, extending the average age of our ﬂeet to 40

months by year-end. This is well within our target

range of 35 to 45 months.

In late 2003 and early 2004, we capitalized

on favorable market conditions and completed 

the reﬁnancing of a substantial portion of our 

outstanding debt. As a result, we reduced the 

interest rates and extended the maturity of a large

(from left) 
Michael Kneeland, Executive Vice President – Operations   
Wayland Hicks, Chief Executive Ofﬁcer 
John Milne, President and Chief Financial Ofﬁcer

Our immediate 
priority in 2004 is to
improve the proﬁtability
of the business and 
its return on capital.

We believe that we can substantially improve our

proﬁtability, even without an upswing in our key 

end market, private non-residential construction. 

Let me share some insights into our plans.

3

Raising rental rates is the single most

important action we can take in the near term to

improve our proﬁtability. Even with sluggishness

in our end markets, there is a lot that we are doing

to achieve better rates. In 2004, for example, our

sales force will receive 20,000 hours of training in

value-based negotiation to build on the rate

improvement we accomplished in 2003. 

We will spend $425 million to $450 mil-

lion in replacement capital in 2004 to maintain one

of our most important competitive advantages: the

condition and size of our rental ﬂeet. In addition, we

will spend $100 million to $200 million in growth

capital to expand our ﬂeet. This modest expansion,

combined with higher rental rates, contractor 

supply sales growth and lower interest expense,

should substantially improve our proﬁtability. 

Our 2004 plan 
anticipates diluted
earnings per share,
excluding charges, of
$1.00 to $1.10,(2)

even in a ﬂat operating environment.

Beyond 2004, a sustained rebound in our

principal end market has the potential to drive

revenues signiﬁcantly higher.

Our goal is to double
the size of the business
over ﬁve years given stronger 

demand. We plan to achieve this through organic

growth, additional locations, prudent acquisitions

and expansion of complementary revenue streams
such as contractor supply sales. Our ability to cap-

italize on the substantial operating leverage of this

business should allow us to expand our margins,

resulting in earnings growth that signiﬁcantly 
outpaces our top line growth. 

4

This is my ﬁrst letter
to shareholders since I 

assumed leadership of United Rentals last

December. Our company has an extraordinary 

history of accomplishments under the guidance 

of my friend and predecessor, Brad Jacobs. I am

excited to take the reins of a vibrant organization

with a legacy of being the best in its business. The

stewardship of United Rentals is both a privilege

and a responsibility, and I appreciate the conﬁ-

dence the board has in me. 

We are fortunate to have John Milne, with

whom I have worked closely for over six years, con-

tinue to play a key leadership role as president and

chief ﬁnancial ofﬁcer. We are also fortunate to have

Mike Kneeland join our senior management team

in the newly-created position of executive vice presi-

dent – operations. Mike has more than 25 years’

experience in the equipment rental business, includ-

ing more than ﬁve years with United Rentals.

Finally, I would like to take this opportu-

nity to thank all United Rentals employees for

their enthusiasm and spirit during a difﬁcult year.

Together, we rolled up our sleeves and fought for

every inch of progress. The work ethic of our

employees is a constant inspiration and the

bedrock of our company culture. With their con-

tinued focus we will expand on our strengths,

maintain our industry leadership position, and

carve out new opportunities for United Rentals. 

Wayland Hicks
Chief Executive Ofﬁcer
March 30, 2004

(2) Excludes ﬁrst half reﬁnancing charges, a ﬁrst quarter charge 
for the vesting of restricted shares granted to executives in 
2001, and any non-cash goodwill write-offs and other special
charges that may be required.

F I N A N C I A L   H I G H L I G H TS

The ﬁnancial highlights for 2003, 2002 and 2001 are adjusted to exclude certain charges as explained in the notes to the
table. After giving effect to these charges, operating income, net income (loss) and diluted EPS (loss) in accordance with
accounting principles generally accepted in the United States (“GAAP”), were $30.4 million, $(258.6) million and
$(3.35), respectively, in 2003, $111.9 million, $(397.8) million and $(4.78), respectively, in 2002 and $462.0 million,
$111.3 million and $1.18, respectively, in 2001. See Selected Financial Data on page 23.

(In millions, except per share data)

2001

Revenues  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,886.6
Operating Income, as adjusted (1)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
490.9
Net Income, as adjusted (2)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147.0
Diluted EPS, as adjusted (2)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.56

2002

$2,821.0

388.1     
107.6    
$1.11

2003

$2,867.2
339.1
71.8
$0.75

(1)We had GAAP operating income in 2003 of $30.4 million.  Our operating income, as adjusted, for 2003 excludes: 
(i) a $296.9 million goodwill impairment charge; and (ii) a $11.8 million charge due to vesting of restricted stock 
granted to executives in 2001.

We had GAAP operating income in 2002 of $111.9 million. Our operating income, as adjusted, for 2002 excludes: 
(i) a $28.3 million restructuring charge; and (ii) a $247.9 million goodwill impairment charge.

We had GAAP operating income in 2001 of $462.0 million. Our operating income, as adjusted, for 2001 excludes a
$28.9 million restructuring charge.

(2)We had a GAAP net loss in 2003 of $258.6 million or $3.35 per share. Our net income and diluted EPS, as adjusted, for
2003 excludes the following charges: (i) a $296.9 million goodwill impairment charge (net of tax equal to $238.9 million
or $3.10 per share); (ii) a $95.1 million charge relating to the buy-out of equipment leases (net of tax equal to $57.7 mil-
lion or $0.75 per share); (iii) $28.9 million in reﬁnancing costs (net of tax equal to $17.1 million or $0.22 per share); 
(iv) a $11.1 million charge due to notes receivables write-off (net of tax equal to $6.6 million or $0.09 per share); and 
(v) a $11.8 million charge due to vesting of restricted stock granted to executives in 2001 (net of tax equal to $10.2 million 
or $0.13 per share). The results for 2003 also exclude the positive impacts on diluted earnings per share of repurchases by the
company of its 61/2% convertible quarterly income preferred securities. These repurchases added $0.01 to diluted earnings per
share in 2003. Diluted EPS, as adjusted for 2003, is calculated on a fully diluted shares outstanding basis (96.1 million shares),
whereas the GAAP net loss results are calculated on basic shares outstanding (77.0 million shares).

We had a GAAP net loss in 2002 of $397.8 million or $4.78 per share. Our net income and diluted EPS, as adjusted, 
for 2002 excludes the following charges: (i) a $28.3 million restructuring charge (net of tax equal to $17.3 million or
$0.23 per share); (ii) a $247.9 million goodwill impairment charge (net of tax equal to $198.8 million or $2.62 per share);
(iii) $1.6 million in reﬁnancing costs (net of tax equal to $0.9 million or $0.01 per share); and (iv) a $348.9 million
charge due to a change in accounting principle relating to goodwill (net of tax equal to $288.3 million or $3.80 per
share). The results for 2002 also exclude the positive impacts on diluted earnings per share of repurchases by the company
of its 61/2% convertible quarterly income preferred securities. These repurchases added $0.47 to diluted earnings per share
in 2002. Diluted EPS, as adjusted for 2002, is calculated on a fully diluted shares outstanding basis (96.7 million shares),
whereas the GAAP net loss results are calculated on basic shares outstanding (75.8 million shares).

We had GAAP net income in 2001 of $111.3 million or $1.18 per diluted share. Our net income and diluted EPS, as adjusted,
for 2001 excludes the following charges: (i) a $28.9 million restructuring charge (net tax equal to $19.2 million or $0.20 per
diluted share); and (ii) a $25.9 million charge for reﬁnancing costs (net of tax equal to $16.5 million or $0.18 per diluted share).

R EV E N U E S

O PE R AT I N G
I N CO M E
(as adjusted)

N E T   I N CO M E
(as adjusted)

D I LU T E D   E P S
(as adjusted)

$3,000

2,250

1,500

750

$600

450

300

150

$160

120

80

40

$2.00

1.50

1.00

.50

’01

’02

’03

’01

’02

’03

’01

’02

’03

’01

’02

’03
5

C U S T O M E R S A N D

M A R K E T S

United Rentals is in the business of supply-

ing equipment to construction, renovation and 
facility maintenance jobsites across North America.
The majority of our equipment is used in private
non-residential construction, our primary end mar-
ket. This includes the construction of manufacturing
plants, airports, warehouses and distribution centers,
shopping malls, ofﬁce buildings, utilities and sports
arenas, as well as a variety of smaller projects. We
also rent equipment to contractors who work on
roads, highways and bridges, and to consumers who
need equipment for home projects and remodeling. 

Same-store rental revenues
INCREASED 3.7%

Our growth is primarily dependent on three

factors: the growth of the private non-residential
construction market, a continuation of the trend
toward renting equipment rather than owning it,
and our ability to continue to gain market share 
in a very fragmented industry.

6

Reversed a 4.8% rate 
decline in 2002 to a
2.1%  RATE
INCREASE IN
2003

Our industry’s historical double-digit growth
rate was not sustainable in the weak economy of the
past several years. We ﬁrst saw private non-residential
construction spending slip in 2001, followed by annual
declines of 13 percent and 5 percent. In 2004, we face
ﬂat to very modest market growth according to most
industry estimates. Any uptick in construction activity
has positive implications for our business, since it should
spark demand for our equipment, services and supplies.

We believe that trends toward renting versus
owning equipment will continue. Rented equipment
will account for a greater percentage of all construction
equipment on jobsites in the future, as contractors
increasingly choose to avoid the capital outlays, techno-
logical obsolescence, maintenance, insurance and other
costs of owning equipment. 

1.9 MILLION customers

The equipment rental market in North

America is still very underdeveloped. We estimate
that rented equipment is only about 30 percent of
all construction equipment — far below the 60 to
70 percent penetration of some of the more mature
rental markets overseas. 

While we serve the largest equipment rental

customer base in North America, our revenues 
are estimated to represent less than 10 percent of 
the total industry. We believe that our passionate
customer service, superior equipment and supplies
and strong brand recognition will continue to 
attract market share.

P OW E R F U L C O N N E C T I O N S W I T H
C U S T O M E R S
Throughout 2003, we worked hard to capitalize 
on our strengths. We attracted 200,000 new 
customers, bringing our total base to 1.9 million
and solidifying our industry leadership. We also
communicated a strong message about our ability
to provide customers with superior value per 
dollar. This is important to contractors who value
productivity and safety.

We continued to serve a wide variety of 

customers in 2003: approximately 50 percent of our
rental revenues came from commercial construction
companies, 25 percent from industrial customers,
and 15 percent from infrastructure contractors. As in
past years, the remaining 10 percent came primarily
from homeowner rentals. Our top ten customers
account for less than 3 percent of total revenues.

Our National Account revenues increased for

the ﬁfth straight year as we continued to satisfy the
requirements of industry leaders such as CBS Sports,
Boeing, EMCOR Group, Granite Construction and
Coors Brewing Company. Our National Account cus-
tomers include many Fortune 1000 and Engineering
News Record 400/600 companies with multiple job-
sites and extensive equipment needs.

Although rental equipment demand declined
nationally, we grew our business in areas where con-
struction remained robust. This was particularly true
in areas anchored by large, long-term construction
projects, such as the southeastern United States and
western Canada. Our broad geography and ﬂeet

mobility allow us to capitalize on regional opportuni-
ties such as the Syncrude Aurora Mine Project in
Alberta, Canada, which has utilized about 400 
United Rentals machines.

A N I N T E G R AT E D P R O D U C T A N D
S E RV I C E M I X
In 2003, revenues from equipment rental, our 
primary business, accounted for 76 percent of total
revenues. New equipment sales were 7 percent, used
equipment sales 6 percent, and contractor supply
sales 6 percent. The remainder came from the sale 
of service and other revenues.

In addition to offering general construction

equipment for rental and sale, United Rentals has
invested in ﬂeet, personnel and a network of branches
to serve trench safety, trafﬁc control, and pump and
power customers. We believe that these investments
have the potential to generate superior growth and
cross-selling opportunities. Last year, for example, our
revenues from the rental of trench safety equipment
grew by 22 percent.

United Rentals also offers customers comple-

mentary products and services that reinforce the
convenience of one-stop shopping. About 500 differ-
ent types of contractor supplies are now stocked in
our branches, and hundreds of additional items are
available by catalog. Last year, more than 200,000
customers took advantage of these offerings, which
are cross-sold by our sales force at little incremental
cost to the company. Our contractor supply sales
were $184 million in 2003 and we expect to grow
these sales by at least 20 percent per year over the
next several years.

Contractor supply sales 
PROJECTED TO
GROW 20% per year

Additionally, we continue to explore new
ways to develop our rental business and generate a
higher return on assets. In 2003, for example, we
invested in product niches such as winter heat equip-
ment to supplement our more traditional rental rev-
enues. We also require all locations to cross-promote
a common pool of general construction, aerial, trench
safety and trafﬁc control ﬂeet. Our customers know
that they can turn to United Rentals for changing
equipment needs throughout a project’s lifecycle. 

7

S O U N D S T R AT E G I E S

F O R G R OW T H

Customers put their own success on the

training programs that teach safe practices.

line when choosing a rental company, and view us

Customers want to be productive and cost efﬁcient

as a true partner in their construction activities. 

at the same time. We invest in rental ﬂeet that is

We meet their expectations through ongoing

broad enough to match the individual needs of

investments in our rental equipment, company

each application. We also offer customers our

infrastructure and people. Our strengths in 

URdata® software, which provides detailed track-

these three areas enable United Rentals to satisfy

ing of equipment usage and rental status.

customer needs better than any other equipment

Throughout a challenging economy,

rental company. 

United Rentals has continued to invest in equip-

Customers often want advice, and we 

ment, personnel, software development, retail

staff our branches with knowledgeable people.

inventories, parts and maintenance, safety,

Customers want to work safely, and we offer 

employee training and the sharing of best 

8

“It’s a great feeling to
WO R K   O N E - O N -
O N E with customers
every day. I make sure
that every customer
who comes into the
equipment yard knows
I’m here to help.”

J O H N D AV I S
Customer Service Associate
United Rentals

Scissor lift

9

Telescopic forklift

10

“Our company was 
built on three 
principles: S E RV I C E ,
I N T E G R I T Y   A N D
QUA L I T Y. We look 
for the same thing in 
our suppliers and found 
it in United Rentals.” 

D AV I D H E S L O P
Vice President, Operations
Preston Pipelines, Inc.

2 0 0 , 0 0 0

new customers added

equipment in real time. A branch that needs to

locate a light tower can check availability in a 

matter of seconds — not just within its own ﬂeet,

practices. We see these areas as competitive advan-

but also at other locations in the area. The system

tages that provide our customers with compelling

digs deeper than current availability, telling 

reasons to choose United Rentals. At the same time,

the inquirer when units are due back on open 

we are focused on returning value to shareholders

contracts, how many units are off-rent for repair

through disciplined management of our assets. 

and how many reservations are pending. 

S T R U C T U R E D F O R R E S U LT S

Cradle-to-grave asset management is at the heart of

our business. Has the equipment been purchased at

$250 MILLION

of rental revenues from 
equipment sharing

a favorable price? Is there sufﬁcient demand for it?

Shared equipment, made possible by

Could it generate more revenue somewhere else?

shared information, effectively puts more ﬂeet at

How much does it cost to service the equipment? 

the disposal of more customers. This is a good

To deliver it? Are there any special rate pressures on

example of an efﬁciency that beneﬁts our cus-

that model? Can it be sold at a favorable price at the

tomers and company alike. By treating our equip-

end of its rental life? These are the dynamics that

ment as one asset pool, we improve its availability

drive our business. We understand them very well.

for each rental request. Shared equipment produces

We are just as diligent about ensuring the

satisfaction of our customers through equipment

selection and availability, delivery and pickup, on-

site maintenance, contractor supplies, and operator

training in the safe and productive use of equip-

ment. All of these are important to the customer.

Our employees are trained to communicate that

United Rentals delivers signiﬁcantly higher value —

a modern, well-maintained ﬂeet of enormous scope,

24/7 emergency service, and one-stop convenience. 

Our employees are supported in these

efforts by a single, powerful information system

that integrates our entire network and tracks 

12

Trafﬁc control equipment

“We can make one call
to United Rentals 
and have equipment
available within 
hours, no matter where
we’re working. That
S AV E S   U S  T I M E
A N D   M O N EY.”

J I M D A R N E L L
Safety Engineer
MCM Construction, Inc.

13

“In this business,
S A F E T Y   H A S  TO
CO M E   F I R S T.
Our customers trust
our equipment. We also
spend time on site to
make sure the project
goes smoothly.”

H E I D I VA N H O N S E B R O U C K
Assistant Manager
United Rentals

Steel trench shield

15

“It’s easy to feel proud 
of your job when you
work on the B E S T
R E N TA L   F L E E T  
I N  T H E   I N D U S T RY.
Nothing goes out the 
door until it passes 
our inspection.”

E M M A N U E L R E Y E S
Shop Foreman
United Rentals

16

higher utilization and a greater return on investment.

T H E H U M A N FA C E O F R E N TA L

Last year, equipment sharing generated 11.5 percent

Equipment rental is ultimately a service business,

of rental revenues, or $250 million. From a broader

and therefore a people business. Each rental 

perspective, the use of shared information optimizes

contract is a coordinated customer service effort

asset utilization and deployment. In 2003, for exam-

involving salespeople, mechanics, dispatchers, 

ple, we permanently shifted over $400 million of

drivers, customer service associates, ofﬁce workers,

under-performing ﬂeet to other locations where this

credit personnel and managers. United Rentals is

equipment can generate better returns.

committed to differentiating our brand on the

Our disciplined management approach

basis of quality people and exceptional service. We

includes the use of benchmarking and performance

work to achieve this through effective recruitment,

analysis to drive improvements throughout our

retention and professional development. 

organization. Field managers gain valuable guidance

from key performance indicators and from positive

disciplines such as monthly operating reviews.

1 6 6 , 0 0 0  
H O U R S
of employee training 

In 2003 we continued to add industry

expertise to our organization, supplementing a

workforce that has always had an exceptional

depth of experience. Our district managers, for

example, typically have more than seven years of

experience in the rental industry. 

Drum roller

17

“The word gets around
that United Rentals 
is willing to go the 
extra mile. I make 
sure that EV E RY  
C U S TO M E R   I S
S AT I S F I E D, even 
if it means visiting 
a jobsite at midnight.”  

R A N D Y PA R K S
Sales Coordinator
United Rentals

18

Light tower

“We work within strict
timeframes and budgets.
United Rentals gives me
exactly what I ask for
every time, no surprises.
That M A K E S   M Y    
J O B   E A S I E R .”

J E N N I F E R E L L I S
Facilities Planning
California Department of Corrections

20

We also invested heavily in our existing

Early in our company’s development we

employee base. Our employees received a total of

recognized the importance of communicating

166,000 hours of professional training in 2003, in

individual knowledge as a way to drive total per-

skills ranging from workplace safety to value-based

formance. Every person who works for United

negotiation and retail sales methods. Our Coaching

Rentals is encouraged to share best practices.

Call trainers, for example, call each of our 1,200

District success stories are analyzed and transferred

sales coordinators at least six times a year to test

to other areas of the country. Training programs

their customer service and communication skills.

are reﬁned based on input during implementation.

This year we will launch an e-learning initiative

By sharing best practices within the world’s largest

that will be the foundation for our employee 

and most experienced equipment rental workforce,

training program going forward.

we become a better company every day.

1 3 , 0 0 0

dedicated employees

In six short years, United Rentals has

grown to be the leader in a highly attractive and

customer-driven industry. Our company is

grounded in sound strategies, a resilient business

model and a culture of continuous improvement.

These strengths, together with a remarkable 

and energetic employee base, will continue to 

propel our growth. 

On-site contractor supply trailer

21

CO N T E N TS

23 SELECTED FINANCIAL DATA  

24 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND

RESULTS OF OPERATIONS  

38 REPORT OF INDEPENDENT AUDITORS  

39 CONSOLIDATED BALANCE SHEETS  

40 CONSOLIDATED STATEMENTS OF OPERATIONS  

41 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY  

42 CONSOLIDATED STATEMENTS OF CASH FLOWS  

44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

62 UNITED RENTALS LOCATIONS  

64 CORPORATE INFORMATION  

22

S E L E C T E D F I N A N C I A L D ATA

We completed a number of acquisitions during the periods presented below. We accounted for these acquisitions as purchases.
This means that the results of operations of the acquired company are included in our ﬁnancial statements only from the date of
acquisition. We believe that our results for the periods presented below are not directly comparable because of the impact of the
acquisitions accounted for as purchases. For additional information, see note 3 of our notes to consolidated ﬁnancial statements
included elsewhere in this report.

Year Ended December 31

(In thousands, except per share data)

1999

2000

2001

2002

2003

I N CO M E  S TAT E M E N T  D ATA :
Total revenues  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses  . . . . . . . . . . . . . . . . . . .
Goodwill impairment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization  . . . . . . . . . . . . . . . . . . . .
Operating income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends of a subsidiary trust  . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before provision (beneﬁt) for income taxes 

and cumulative effect of change in accounting principle . . . . . . . .
Provision (beneﬁt) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before cumulative effect of change in 

accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle, net (1) . . . . . . . .
Net income (loss) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic earnings (loss) available to common stockholders before 

cumulative effect of change in accounting principle per share (2)  .

Diluted earnings (loss) available to common stockholders before 

cumulative effect of change in accounting principle per share (2)  . .
Basic earnings (loss) available to common stockholders per share (2)  .
Diluted earnings (loss) available to common stockholders 

per share(2)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OT H E R   F I N A N C I A L   D ATA :
Depreciation and amortization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,233,628
1,408,710
824,918
352,595

$2,918,861
1,830,291
1,088,570
454,330

$2,886,605
1,847,135
1,039,470
441,751

62,867
409,456
139,828
19,500
8,321

241,807
99,141

86,301
547,939
228,779
19,500
(1,836)

301,496
125,121

28,922
106,763
462,034
221,563
19,500
24,497

196,474
85,218

142,666

176,375

111,256

$ 142,666

$ 176,375

$ 111,256

$2,820,989
1,934,712
886,277
438,918
247,913
28,262
59,301
111,883
195,961
18,206
(900)

$2,867,236
2,019,268
847,968
451,347
296,873

69,300
30,448
209,328
14,590
133,051

(101,384)
8,102

(326,521)
(67,940)

(109,486)
(288,339)
$ (397,825)

(258,581)

$ (258,581)

$2.00

$1.53
$2.00

$1.53

$2.48

$1.89
$2.48

$1.89

$1.54

$1.18
$1.54

$1.18

$(0.98)

$(0.98)
$(4.78)

$(4.78)

$(3.35)

$(3.35)
$(3.35)

$(3.35)

$ 343,508
—

$ 414,432
—

$ 427,726
—

$ 384,849
—

$ 401,910
—

December 31

(In thousands)

1999

2000

2001

2002

2003

B A L A N C E   S H E E T   D ATA :
Cash and cash equivalents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated convertible debentures (4)  . . . . . . . . . . . . . . . . . . . . . . .
Company-obligated mandatorily redeemable convertible preferred 

securities of a subsidiary trust (4)  . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A and B preferred stock (5)  . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,811
$
1,659,733
1,853,279
4,497,738
2,266,148

34,384
$
1,732,835
2,215,532
5,123,933
2,675,367

27,326
$
1,747,182
2,199,774
5,061,516
2,459,522

19,231
$
1,845,675
1,705,191
4,690,557
2,512,798

$

79,449
2,071,492
1,437,809
4,722,141
2,817,088
221,550

300,000
430,800
966,686

300,000
430,800
1,115,143

300,000

226,550

1,625,510

1,331,505

1,140,875

(1) The cumulative effect of change in accounting principle in 2002 resulted from a goodwill impairment charge recognized upon the adoption of a new accounting standard. See

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Goodwill and Other Intangible Assets” and note 4 to our notes to consolidated ﬁnan-
cial statements included elsewhere in this report.

(2) Our earnings during 1999 were impacted by $18.2 million ($10.8 million net of tax or $0.12 per diluted share) of expenses incurred related to a terminated tender offer. Our earn-
ings during 2001 were impacted by a restructuring charge of $28.9 million ($19.2 million net of tax or $0.20 per diluted share) and a $25.9 million ($16.5 million net of tax or
$0.18 per diluted share) charge, recorded in other expense, relating to reﬁnancing costs. Our earnings during 2002 were impacted by a restructuring charge of $28.3 million ($17.3
million net of tax or $0.23 per share), a $247.9 million goodwill impairment charge ($198.8 million net of tax or $2.62 per share), a $1.6 million charge ($0.9 million net of tax or
$0.01 per share) recorded in other expense relating to reﬁnancing costs, and a cumulative effect of change in accounting principle (net of tax) of $288.3 million ($3.80 per share).
Our earnings during 2003 were impacted by a $296.9 million goodwill impairment charge ($238.9 million net of tax or $3.10 per share), a $95.1 million charge ($57.7 million net
of tax or $0.75 per share) recorded in other expense relating to the buy-out of equipment leases, a $28.9 million charge ($17.1 million net of tax or $0.22 per share) recorded in
other expense relating to reﬁnancing costs, an $11.1 million charge ($6.6 million net of tax or $0.09 per share) recorded in other expense relating to the write-off of certain notes
receivable and an $11.8 million charge ($10.2 million net of tax or $0.13 per share) for the vesting of restricted shares granted to executives in 2001.

(3) Goodwill is deﬁned as the excess of cost over the fair value of identiﬁable net assets of businesses acquired. Until January 1, 2002, we amortized our goodwill on a straight-line basis
over forty years. Beginning January 1, 2002, in accordance with the adoption of a new accounting standard, we no longer amortize goodwill. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Goodwill and Other Intangible Assets” and note 4 to our notes to consolidated ﬁnancial statements included else-
where in this report.

(4) A subsidiary trust issued trust preferred securities in 1998 and we recorded such preferred securities as a separate category on our balance sheet. In 2003, the FASB issued FIN 46

and upon adoption of this standard as of December 31, 2003, we deconsolidated the trust. Upon deconsolidation, the trust preferred securities were removed from our consolidated
balance sheets at December 31, 2003 and the subordinated convertible debentures that we issued to the subsidiary trust, which previously had been eliminated in our consolidated
balance sheets, were no longer eliminated in our consolidated balance sheets at December 31, 2003. The carrying amount of the trust preferred securities removed from the consol-
idated balance sheets was the same as the carrying amount of the subordinated convertible debentures added to the consolidated balance sheets. However, the subordinated con-
vertible debentures are reﬂected as a component of liabilities on the consolidated balance sheets at December 31, 2003, whereas the trust preferred securities were reﬂected as a
separate category prior to December 31, 2003. See “—Impact of Recently Issued Accounting Standards” and note 11 to our notes to consolidated ﬁnancial statements included else-
where in this report.

(5) We issued series A and B perpetual convertible preferred stock in 1999 and included such preferred stock in stockholders’ equity. In July 2001, the SEC issued guidance to all public
companies as to when redeemable preferred stock may be classiﬁed as stockholders’ equity. Under this guidance, the series A and B preferred would not be included in stockholders’
equity because this stock would be subject to mandatory redemption on a hostile change of control. On September 28, 2001, we entered into an agreement effecting the exchange
of new series C and D perpetual convertible preferred stock for the series A and B preferred. The series C and D preferred is not subject to mandatory redemption on a hostile
change of control, and is included in stockholders’ equity under the recent SEC guidance. The effect of the foregoing is that our perpetual convertible preferred stock is included in
stockholders’ equity as of September 28, 2001 and thereafter, but is outside of stockholders’ equity for earlier dates.

23

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S O F F I N A N C I A L
C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S

You should read the following data together with the
Consolidated Financial Statements and related Notes.

Certain statements contained in this report are forward-
looking in nature. Such statements can be identiﬁed by the
use of forward-looking terminology such as “believe,”
“expect,” “may,” “will,” “should,” “seek,” “on-track,”
“plan,” “intend” or “anticipate,” or the negative thereof or
comparable terminology, or by discussions of strategy. You
are cautioned that our business and operations are subject
to a variety of risks and uncertainties and, consequently,
our actual results may materially differ from those pro-
jected by any forward-looking statements. Factors that
could cause actual results to differ from those projected
include, but are not limited to, the following: (i) unfavor-
able economic and industry conditions can reduce demand
and prices for our products and services; (ii) governmental
funding for highway and other construction projects may
not reach expected levels; (iii) we may not have access to
capital that we may require; and (iv) any companies that we
acquire could have undiscovered liabilities and may be difﬁ-
cult to integrate. These risks and uncertainties, as well as
others, are discussed in greater detail in our ﬁlings with the
Securities and Exchange Commission (“SEC”), including
our most recent report on Form 10-K. We make no com-
mitment to revise or update any forward-looking state-
ments in order to reﬂect events or circumstances after the
date any such statement is made.

We ﬁle reports and other information with the SEC
pursuant to the information requirements of the Securities
Exchange Act of 1934. Readers may read and copy any
document we ﬁle at the SEC’s public reference room in
Washington, D.C. Please call the SEC at 1-800-SEC-0330
for further information on the public reference room. Our
ﬁlings are also available to the public from commercial
document retrieval services and at the SEC’s website
at www.sec.gov.

We make available on our internet website free of charge
our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to
such reports as soon as practicable after we electronically
ﬁle such reports with the SEC. Our website address is
www.unitedrentals.com. The information contained in our
website is not incorporated by reference in this report.

24

G E N E R A L

United Rentals is the largest equipment rental company
in North America. Our revenues are divided into 
three categories:

• Equipment rentals —This category includes our revenues
from renting equipment. This category also includes
related revenues such as the fees we charge for equip-
ment delivery, fuel, repair of rental equipment and
damage waivers.

• Sales of rental equipment —This category includes our

revenues from the sale of used rental equipment.

• Sales of equipment and merchandise and other revenues —
This category principally includes our revenues from the
following sources: (i) the sale of new equipment; (ii) the
sale of contractor supplies and merchandise; (iii) repair
services and the sale of parts for equipment owned by
customers; and (iv) the operations of our subsidiary that
develops and markets software for use by equipment
rental companies in managing and operating multiple
branch locations.

Our cost of operations consists primarily of: (i) deprecia-
tion costs relating to the rental equipment that we own and
lease payments for the rental equipment that we hold under
operating leases; (ii) the cost of repairing and maintaining
rental equipment; (iii) the cost of the items that we sell
including new and used equipment and related parts, mer-
chandise and supplies; and (iv) personnel costs, occupancy
costs and supply costs.

We record rental equipment expenditures at cost and
depreciate equipment using the straight-line method over
the estimated useful life (which ranges from two to ten
years), after giving effect to an estimated salvage value of
0% to 10% of cost.

Selling, general and administrative expenses primarily
include: (i) sales force compensation; (ii) bad debt expense;
(iii) advertising and marketing expenses; (iv) management
salaries; and (v) clerical and administrative overhead.

Non-rental depreciation and amortization includes:
(i) depreciation expense associated with equipment that
is not offered for rent (such as vehicles, computers and
ofﬁce equipment) and amortization expense associated
with leasehold improvements; (ii) the amortization of
deferred ﬁnancing costs; and (iii) the amortization of other
intangible assets. Our other intangible assets consist of
non-compete agreements. As described below, effective
January 1, 2002, we no longer amortize goodwill.

We completed acquisitions in each of 2001, 2002 and
2003. See note 3 to our notes to consolidated ﬁnancial
statements included elsewhere in this report. In view of the
fact that our operating results for these years were affected
by acquisitions, we believe that our results for these periods
are not directly comparable.

G O O DW I L L  A N D  OT H E R
I N TA N G I B L E A S S E TS

Prior to January 1, 2002, we amortized our goodwill over a
40-year period in accordance with accounting standards
then in effect. Our goodwill amortization in 2001
amounted to approximately $58.4 million.

Effective January 1, 2002, we adopted Statement of Finan-
cial Accounting Standards (“SFAS”) No. 142, “Goodwill
and Other Intangible Assets” issued by the Financial
Accountants Standards Board (“FASB”). Under this stan-
dard, we no longer amortize our goodwill over a ﬁxed
period. Instead, we are required to periodically review our
goodwill for impairment. In general, this means that we
must determine whether the fair value of the goodwill,
calculated in accordance with applicable accounting stan-
dards, is at least equal to the recorded value shown on our
balance sheet. If the fair value of the goodwill is less than
the recorded value, we are required to write off the excess
goodwill as an operating expense.

This new standard only impacts our goodwill. We continue
to amortize our other intangible assets over their estimated
useful lives. As of December 31, 2003, we had other net
intangible assets of approximately $3.2 million.

We completed our initial impairment analysis in the ﬁrst
quarter of 2002 and recorded a non-cash charge of approxi-
mately $348.9 million ($288.3 million, net of tax). The
charge associated with the initial impairment analysis is
reﬂected on our statement of operations as a “Cumulative
effect of change in accounting principle.” We completed
subsequent impairment analyses in the fourth quarter of
2002 and fourth quarter of 2003 and recorded additional
non-cash impairment charges. The additional charge in the
fourth quarter of 2002 was approximately $247.9 million
($198.8 million, net of tax), and the additional charge in the
fourth quarter of 2003 was approximately $296.9 million
($238.9 million, net of tax). These charges are reﬂected on
our statement of operations as “goodwill impairment.”

The number of branches at which there was some impair-
ment in 2003 represented approximately 25% of our total
branches. However, a substantial part of the total impair-
ment charge in 2003 (approximately 85%) reﬂected
impairment at approximately 11% of our total branches.

We will be required to review our goodwill for further
impairment at least annually. We test for goodwill impair-
ment on a branch-by-branch basis rather than on an aggre-
gate basis. This means that a goodwill write-off is required
even if only one or a limited number of our branches has
impairment as of the annual testing date or at any other
date when an indicator of impairment may exist and even if
there is no impairment for all our branches on an aggregate
basis. In addition, we assess impairment solely on the basis
of recent historical performance and without reference to
expected future performance. This means that, if the his-
torical data for a branch indicates impairment, a goodwill
write-off is required even when we believe that branch’s
future performance will be signiﬁcantly better. The fact
that we test for impairment on a branch-by-branch basis
and use only historical ﬁnancial data in assessing impair-

ment increases the likelihood that we will be required to
take additional non-cash goodwill write-offs in the future,
although we cannot quantify at this time the magnitude
of any future write-offs. Future goodwill write-offs, if
required, may have a material adverse effect on our results.

C R I T I C A L  ACCO U N T I N G  P O L I C I E S

We prepare our ﬁnancial statements in accordance with
accounting principles generally accepted in the United
States. A summary of our signiﬁcant accounting policies is
contained in note 2 to our notes to consolidated ﬁnancial
statements included elsewhere in this report. In applying
many accounting principles, we need to make assumptions,
estimates and/or judgments. These assumptions, estimates
and judgments are often subjective and may change based
on changing circumstances or changes in our analysis.
Material changes in these assumptions, estimates and judg-
ments have the potential to materially alter our results of
operations. We have identiﬁed below those of our account-
ing policies that we believe could potentially produce mate-
rially different results were we to change underlying
assumptions, estimates and judgments.

A L LOWA N C E  F O R  D O U B T F U L  ACCO U N TS
We maintain allowances for doubtful accounts. These
allowances reﬂect our estimate of the amount of our receiv-
ables that we will be unable to collect. We make such esti-
mate based upon a combination of an analysis of our
accounts receivable on a speciﬁc accounts basis and histori-
cal write-off experience. Our estimate could require change
based on changing circumstances, including changes in the
economy or in the particular circumstances of individual
customers. Accordingly, we may be required to increase or
decrease our allowance.

U S E F U L  L I V E S  O F  R E N TA L  E QU I P M E N T  A N D

P RO PE RT Y  A N D E QU I P M E N T
We depreciate rental equipment and property and equip-
ment over their estimated useful lives, after giving effect to
an estimated salvage value of 0% to 10% of cost. The useful
life of an asset is determined based on our estimate of the
period the asset will generate revenues, and the salvage
value is determined based on our estimate of the minimum
value we will realize from the asset after such period. We
may be required to change these estimates based on
changes in our industry or other changing circumstances.
If these estimates change in the future, we may be required
to recognize increased or decreased depreciation expense
for these assets.

I M PA I R M E N T  O F  G O O DW I L L
As described above, we must periodically determine
whether the fair value of our goodwill is at least equal to
the recorded value shown on our balance sheet. See “—
Goodwill and Other Intangible Assets.” We must make
estimates and assumptions in evaluating the fair value of
goodwill. We may be required to change these estimates
and assumptions based on changes in economic conditions,
changes in our business prospects or other changing cir-
cumstances. If these estimates change in the future, we
may be required to record additional impairment charges
for goodwill.

25

I M PA I R M E N T  O F  LO N G - L I V E D  A S S E TS
We review the valuation of our long-lived assets on an
ongoing basis and assess 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, then the carrying value is reduced
to its estimated fair value. The determination of recover-
ability is based upon a nondiscounted cash ﬂow analysis
over the asset’s remaining useful life. We must make esti-
mates and assumptions when applying the nondiscounted
cash ﬂow analysis. These estimates and assumptions may
prove to be inaccurate due to factors such as changes in
economic conditions, changes in our business prospects or
other changing circumstances. If these estimates change in
the future, we may be required to recognize write-downs on
our long-lived assets.

D E F E R R E D  I N CO M E  TA X E S
We have not provided a valuation allowance related to our
deferred tax assets because we believe such assets will be
recovered during the carryforward period. If sufﬁcient evi-
dence becomes apparent that it is more likely than not that
our deferred tax assets will not be utilized, we may be
required to record a valuation allowance for such assets
resulting in additional income tax expense.

R E S E RV E S  F O R  C L A I M S
We are exposed to various claims relating to our business.
These may include claims relating to: (i) personal injury or
death caused by equipment rented or sold by us; (ii) motor
vehicle accidents involving our delivery and service person-
nel; and (iii) employment related claims. We establish
reserves for reported claims that are asserted against us
and for claims that we believe have been incurred but not
reported. These reserves reﬂect our estimate of the amounts
that we will be required to pay in connection with these
claims net of expected insurance recoveries. Our estimate
of reserves is based upon our judgment as to the probability
of losses and our historical payment experience related to
claims settlements. These estimates may change based on,
among other things, changes in our claims history or receipt
of additional information relevant to assessing the claims.
Furthermore, these estimates may prove to be inaccurate
due to factors such as adverse judicial determinations or
settlements at higher than estimated amounts. Accordingly,
we may be required to increase or decrease our reserves.

R E S T RU C T U R I N G
During 2001 and 2002, we recorded reserves in connec-
tion with the restructuring plans described below. These
reserves include estimates pertaining to workforce reduc-
tion costs and costs of vacating facilities and related settle-
ments of contractual obligations. Although we do not
anticipate signiﬁcant changes, the actual costs may differ
from these estimates and we may be required to record
additional expense not previously recorded.

R E S T RU C T U R I N G  P L A N S  I N  2 0 0 1
A N D 2 0 0 2

We adopted a restructuring plan in April 2001 and a sec-
ond restructuring plan in October 2002 as described
below. These plans were adopted in response to adverse

26

changes in economic conditions and in branch perfor-
mance in certain of our markets. In connection with these
plans, we recorded a restructuring charge of $28.9 million
in 2001 (including a non-cash component of approximately
$10.9 million) and $28.3 million in the fourth quarter of
2002 (including a non-cash component of approximately
$2.5 million).

The 2001 plan involved the following principal elements:
(i) 31 underperforming branches and ﬁve administrative
ofﬁces were closed or consolidated with other locations;
(ii) the reduction of our workforce by 489 through the
termination of branch and administrative personnel; and
(iii) certain information technology hardware and software
was no longer used.

The 2002 plan involved the following principal elements:
(i) 40 underperforming branches and ﬁve administrative
ofﬁces were closed or consolidated with other locations;
(ii) the reduction of our workforce by 412 through the
termination of branch and administrative personnel;
and (iii) a certain information technology project 
was abandoned.

The aggregate annual revenues from the 40 branches
that were eliminated as part of the 2002 restructuring
amounted to approximately $80 million. The portion of
these revenues that we were able to retain was signiﬁcantly
less than we had originally anticipated primarily because
continued weakness in our end markets limited the amount
of equipment from the closed branches that we were able to
redeploy to other branches.

The table below provides certain information concerning
our restructuring charges. For additional information, see
note 5 to our notes to consolidated ﬁnancial statements
included elsewhere herein. Components of our restructur-
ing charges follows:

(In thousands)

Balance

Balance
December 31, Activity in  December 31,

2002(1)

2003(2)

2003(3)

Costs to vacate facilities(4) . . . . . $22,258
Workforce reduction costs(5)  . . .
3,462
Information 

$7,298
1,706

$14,960
1,756

technology costs(6)  . . . . . . . .

1,395

782

613

Total . . . . . . . . . . . . . . . . . . . . . $27,115

$9,786

$17,329

(1) Represents the aggregate balance of the 2001 and 2002 charges that had not

been utilized as of December 31, 2002.

(2) Represents: (i) the non-cash component of the 2002 charge that relates to the
elements of the 2002 restructuring plan that were implemented in 2003; and
(ii) the cash components of the 2001 and 2002 charges that were paid in 2003.

(3) Represents the aggregate balance of the 2001 and 2002 charges that had not

been utilized as of December 31, 2003.

(4) These costs primarily represent: (i) payment of obligations under leases

offset by estimated sublease opportunities; and (ii) the write-off of capital
improvements made to such facilities.
(5) These costs primarily represent severance.
(6) These costs primarily represent the abandonment of certain information

technology projects and the payment of obligations under equipment leases
relating to such projects.

As indicated in the table above, the aggregate balance of the
2001 and 2002 charges was $17.3 million as of December
31, 2003. We estimate that approximately $6.8 million of
the remaining 2001 and 2002 charges will be paid by
December 31, 2004 and approximately $10.5 million in
future periods. These payments will not affect our future
earnings because the charges associated with these pay-
ments have already been recorded in our 2002 or 2001

results. We expect to make these payments with cash from
our operations.

C H A RG E S  R E L AT E D  TO  D E B T
R E F I N A N C I N G S ,  L E A S E  B U Y- O U TS  A N D
N OT E S  W R I T E - O F F

Transactions in 2001. We reﬁnanced an aggregate of
$1,695.7 million of indebtedness and other obligations in
April 2001. In connection with this transaction, we
recorded the following charges: (i) a pre-tax charge of
$18.1 million ($11.3 million, net of tax) that relates to the
reﬁnancing of indebtedness and primarily reﬂects the
write-off of deferred ﬁnancing fees attributable to the debt
that was reﬁnanced; and (ii) a pre-tax charge of $7.8 mil-
lion ($5.2 million, net of tax) that relates to the reﬁnancing
of a synthetic lease. When the foregoing charges were origi-
nally recorded, we recorded the $18.1 million charge as an
extraordinary item and the other charge as other (income)
expense, net. However, upon adoption of SFAS No. 145 on
January 1, 2003, we reclassiﬁed the $18.1 charge to other
(income) expense, net. See “—Impact of Recently Issued
Accounting Standards.”

Transactions in 2002. We reﬁnanced approximately
$199.4 million of indebtedness in December 2002. In con-
nection with this transaction, we recorded a $1.6 million
charge ($0.9 million, net of tax) for the write-off of deferred
ﬁnancing fees attributable to the debt that was reﬁnanced.
This charge is recorded in other (income) expense, net.

Transactions in 2003. During the fourth quarter of 2003,
we sold new notes and used the proceeds to redeem
$405.0 million face amount of previously issued senior sub-
ordinated notes and buy out existing equipment leases. See
“—Liquidity and Capital Resources—Recent Financing
Transactions.” We recorded a pre-tax charge of $28.9 mil-
lion ($17.1 million, net of tax) in connection with such
redemption of notes and a pre-tax charge of $95.1 million
($57.7 million, net of tax) in connection with such buy-out
of equipment leases. The charge related to the redemption
of notes primarily reﬂects the redemption price premium
and the write-off of previously capitalized ﬁnancing costs
relating to such notes. The charge relating to the buy-out
of equipment leases primarily reﬂects the excess of the buy-
out price over the fair value of the equipment purchased,
early termination fees and the write-off of previously capi-
talized ﬁnancing costs related to such leases. All such
charges are recorded in other (income) expense, net.

During the fourth quarter of 2003, we wrote off notes
receivable that were deemed to be impaired. We received
these notes as consideration for non-core assets that we dis-
posed of in prior years. In connection with these write-offs,
we recorded a pre-tax charge of $11.1 million ($6.6 million,
net of tax) in other (income) expense, net.

E X PE C T E D  C H A RG E S  I N  F I R S T  QUA RT E R
O F  2 0 0 4

During the ﬁrst quarter of 2004, we reﬁnanced approxi-
mately $2.1 billion of our debt. See “—Liquidity and Capi-

tal Resources—Recent Financing Transactions.” In connec-
tion with the foregoing, we estimate that we will incur
aggregate pre-tax charges in 2004 of approximately $175
million to approximately $185 million attributable to: (i)
the redemption premium for notes redeemed as part of the
reﬁnancing; and (ii) the write-off of previously capitalized
costs relating to the debt reﬁnanced. These charges will be
recorded in other (income) expense, net.

We incurred a pre-tax non-cash charge of approximately
$7.0 million in the ﬁrst quarter of 2004 due to the vesting
of restricted shares granted to senior executives in 2001.
This charge represents the unamortized portion of the
deferred compensation charge associated with the award
of such shares.

R E S U LTS  O F  O PE R AT I O N S

G E N E R A L LY  ACC E P T E D  ACCO U N T I N G  P R I N C I P L E S

( “ G A A P ” )  R E S U LTS  A N D  A D J U S T E D  R E S U LTS
We had a net loss in 2003 of $258.6 million compared with a
net loss of $397.8 million for 2002. The loss in 2003 reﬂects
$330.5 million of charges, net of tax, relating to goodwill
impairment, buy-out of equipment leases, debt reﬁnancing,
notes receivable write-off and vesting of restricted shares
granted to executives in 2001. The loss in 2002 reﬂects
$505.4 million of charges, net of tax, relating to goodwill
impairment, restructuring costs, debt reﬁnancing and a
change in accounting principle relating to goodwill.

Excluding the charges described above for each period, we
would have had adjusted net income in 2003 of $71.8 mil-
lion compared with adjusted net income of $107.6 million
in 2002. We provide this adjusted data because we believe
that this data may be useful to investors in analyzing the
period-to-period changes in our results that are due to
changes in business conditions and that are not due to the
writeoff of goodwill or other assets. The table below recon-
ciles the adjusted results with our results in accordance
with GAAP.

(In millions)

Net loss as reported  . . . . . . . . . . . . . . . . . .
Goodwill impairment  . . . . . . . . . . . . . . . .
Buy out of equipment leases  . . . . . . . . . . .
Reﬁnancing costs  . . . . . . . . . . . . . . . . . . .
Write off of notes receivable  . . . . . . . . . . .
Vesting of restricted shares granted to 

executives in 2001  . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . .
Tax effect of above items  . . . . . . . . . . . . . .
Cumulative effect of accounting change, 

net of tax  . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31

2003

2002

$(258.6)
296.9
95.1
28.9
11.1

11.8
—
(113.4)

$(397.8)
247.9
—
1.6
—

—
28.3
(60.7)

—

288.3

Income, as adjusted  . . . . . . . . . . . . . . . . . .

$ 71.8

$ 107.6

OV E RV I EW  O F  2 0 0 3  A S  A D J U S T E D  R E S U LTS
Our rental rates increased 2.1% in 2003, and same-store
rental revenues increased 3.7%. The rate increases primar-
ily occurred in the second half of the year as rental rates in
the third quarter and fourth quarter of 2003 increased
3.4% and 5.6%, respectively, on a year-over-year basis. The
increase in same-store rental revenues was partially offset by

27

revenues lost due to branch closings and a reduction in the
size of our rental ﬂeet. The net effect was that our total
revenues for the year increased by 1.6% to $2.87 billion.

Our ability to increase revenues was constrained by contin-
ued weakness in our principal end market. According to
Department of Commerce data, private non-residential con-
struction activity declined 5.2% in 2003 following a decline
of 13.2% in 2002. In addition, government spending on
road and highway construction remained sluggish.

The 1.6% increase in our revenues in 2003 was more than
offset by a 4.4% increase in our cost of revenues. This
increase was attributable to higher costs in several cate-
gories, including insurance and claims, ﬂeet repair and
maintenance, fuel and delivery, and depreciation of rental
equipment. The increase in cost of revenues, and in partic-
ular the cost of rental revenues, resulted in gross proﬁts
decreasing to $848.0 million, or 29.6% of revenues in
2003, from $886.3 million, or 31.4% of revenues in 2002.

We also had increases in non-rental depreciation and amor-
tization and interest expense of $10.0 million and $9.8 mil-
lion, respectively. The increase in non-rental depreciation
and amortization was primarily attributable to upgrades to
our delivery ﬂeet and facilities. The increase in interest
expense was primarily due to the additional interest expense
attributable to the senior notes we issued in December 2002
and April 2003. As described below, in the ﬁrst quarter of
2004 we reﬁnanced these senior notes with lower interest
rate notes.

The cost increases described above, net of taxes, were the
primary reason that income, as adjusted, in 2003 decreased
to $71.8 million from income, as adjusted, of $107.6 million
in 2002.

Y E A R S  E N D E D  D E C E M B E R  3 1 ,  2 0 0 3  A N D  2 0 0 2

R EV E N U E S
We had total revenues of $2,867.2 million in 2003, repre-
senting an increase of 1.6% from total revenues of $2,821.0
million in 2002. The different components of our revenues
are discussed below:

1. Equipment Rentals. Our revenues from equipment rentals
were $2,177.5 million in 2003, representing an increase of
1.1% from $2,154.7 million in 2002. These revenues
accounted for 75.9% of our total revenues in 2003 com-
pared with 76.4% of our total revenues in 2002. Our
equipment dollar utilization rate in 2003 was 57.1% com-
pared to 57.0% in 2002. The 1.1% increase in rental rev-
enues principally reﬂected the following:

• Our rental revenues from locations open more than one
year, or same-store rental revenues, increased by approx-
imately 3.7%. This increase reﬂected the 2.1% increase
in rental rates discussed above and a 1.6% increase in
the net volume of rental activity. The volume increase
was primarily driven by the transfer to these locations
of equipment that had previously been deployed at
branches that were closed or consolidated. Although
our same-store rental volume increased on an overall
basis, the volume of trafﬁc equipment rentals decreased

28

primarily due to continued weakness in state spending
for infrastructure projects.

• We lost revenues due to the closing or sale of branches
and added revenues through acquisitions and start-ups.
The net effect of these two factors was a loss of
revenues that partially offset the increase in same-store
rental revenues.

2. Sales of Rental Equipment. Our revenues from the sale of
rental equipment were $181.3 million in 2003, represent-
ing an increase of 2.9% from $176.2 million in 2002.
These revenues accounted for 6.3% of our total revenues in
2003 compared with 6.2% of our total revenues in 2002.
The increase in these revenues in 2003 reﬂected an increase
in the volume of equipment sold as used equipment prices
remained relatively ﬂat.

3. Sales of Equipment and Merchandise and Other Revenues.
Our revenues from “sale of equipment and merchandise
and other revenues” were $508.5 million in 2003, repre-
senting an increase of 3.7% from $490.1 million in 2002.
These revenues accounted for 17.7% of our total revenues
in 2003 compared with 17.4% of our total revenues in
2002. The increase in these revenues in 2003 principally
reﬂected an increase in the volume of merchandise and
contractor supplies sold partially offset by a decrease in
sales of new equipment.

G RO S S  P RO F I T  
Gross proﬁt decreased to $848.0 million in 2003 from
$886.3 million in 2002. This decrease primarily reﬂected
the decrease in gross proﬁt margin described below from
equipment rentals. Information concerning our gross proﬁt
margin by source of revenue is set forth below:

1. Equipment Rentals. Our gross proﬁt margin from equip-
ment rental revenues was 30.0% in 2003 and 32.1% in
2002. The decrease in 2003 principally reﬂected cost
increases and the decrease in trafﬁc equipment rentals
described above. The cost increases were attributable to
several factors including: (i) higher costs for insurance and
claims, ﬂeet repair and maintenance, and fuel and delivery;
and (ii) an increase in depreciation expense.

2. Sales of Rental Equipment. Our gross proﬁt margin from
sales of rental equipment was 32.7% in 2003 and 33.7% in
2002. The decrease in 2003 primarily reﬂected a change in
the mix of types of equipments sold.

3. Sales of Equipment and Merchandise and Other Revenues.
Our gross proﬁt margin from “sales of equipment and mer-
chandise and other revenues” was 26.8% in 2003 and
27.6% in 2002. The decrease in gross proﬁt margin in
2003 primarily reﬂected a change in the mix of types of
new equipment sold and, to a lesser extent, the mix of types
of merchandise and contractor supplies sold.

S E L L I N G ,  G E N E R A L  A N D

A D M I N I S T R AT I V E E X PE N S E S  
Selling, general and administrative expenses (“SG&A”)
were $451.3 million, or 15.7% of total revenues, in 2003
and $438.9 million, or 15.6% of total revenues, in 2002.
The increase in 2003 was primarily attributable to the
accelerated vesting of restricted shares granted in 2001.

G O O DW I L L  I M PA I R M E N T  
We recorded a goodwill impairment charge of $296.9 mil-
lion in 2003 and $247.9 million in 2002. See “—Goodwill
and Other Intangible Assets” for additional information.

R E S T RU C T U R I N G  C H A RG E
We recorded a restructuring charge of $28.3 million in
2002. See “—Restructuring Plans in 2001 and 2002” for
additional information.

N O N - R E N TA L  D E P R E C I AT I O N  A N D  A M O RT I Z AT I O N
Non-rental depreciation and amortization was $69.3 mil-
lion, or 2.4% of total revenues, in 2003 and $59.3 million,
or 2.1% of total revenues, in 2002. The increase in 2003
was primarily attributable to an upgrade in transportation
equipment and an increase in leasehold improvements in
connection with branch upgrades.

O PE R AT I N G  I N CO M E
We recorded operating income of $30.4 million in 2003
compared with operating income of $111.9 million in
2002. The principal reasons for the decrease in 2003 were
the decline in gross proﬁt, the higher goodwill impairment
charge and the higher non-rental depreciation and amorti-
zation described above.

I N T E R E S T  E X PE N S E  
Interest expense increased to $209.3 million in 2003 from
$196.0 million in 2002. This increase primarily reﬂected
higher interest costs related to the senior notes we issued in
December 2002 and April 2003, partially offset by lower
interest rates on our variable rate debt. As described below,
in the ﬁrst quarter of 2004 we reﬁnanced these senior notes
with lower interest rate notes.

P R E F E R R E D  D I V I D E N D S  O F  A  S U B S I D I A RY  T RU S T
Preferred dividends of a subsidiary trust were $14.6 million
during 2003 as compared to $18.2 million during 2002.
The decrease in 2003 reﬂects our repurchase of a portion of
our outstanding trust preferred securities, primarily in the
fourth quarter of 2002.

OT H E R  ( I N CO M E )  E X PE N S E
Other expense was $133.1 million in 2003 compared with
other income of $0.9 million in 2002. The other expense
in 2003 primarily reﬂects the charges described under “—
Charges Related to Debt Reﬁnancings, Lease Buy-Outs
and Notes Write-Off.” Excluding these charges, other
income would have been $2.1 million in 2003 primarily
reﬂecting gains related to the sale of non-rental assets. The
other income in 2002 was primarily attributable to the
favorable settlement of a lawsuit for net proceeds of
$4.0 million, partially offset by other expenses including
the write-off of $1.6 million of deferred ﬁnancing fees
described under “—Charges Related to Debt Reﬁnancings,
Lease Buy-Outs and Notes Write-Off.”

I N CO M E  TA X E S
Income taxes were a beneﬁt of $67.9 million in 2003 com-
pared with a provision of $8.1 million in 2002. The effec-
tive tax rates during the two periods are not comparable
because: (i) a portion of the goodwill impairment charge
in each such period was not deductible for income tax pur-
poses; (ii) certain expenses in 2003 associated with the
amortization of deferred compensation expense attributable

to restricted stock awards were not deductible for income
tax purposes; and (iii) the 2003 rate was impacted by the
charges relating to the buy-out of equipment leases, debt
reﬁnancing, and notes receivables write-off and the 2002
rate was impacted by restructuring costs and charges asso-
ciated with debt reﬁnancing. Excluding the foregoing
expenses and charges, our effective tax rate would have
been approximately 39% in 2003 and 2002.

LO S S  B E F O R E  C U M U L AT I V E  E F F E C T  O F  C H A N G E

I N  ACCO U N T I N G  P R I N C I P L E
We had a loss before cumulative effect of change in
accounting principle of $258.6 million in 2003 compared
with a loss before cumulative effect of change in accounting
principle of $109.5 million in 2002. The higher loss in
2003 principally reﬂects the decrease in operating income
and the charges reﬂected in other expense described above.

Y E A R S  E N D E D  D E C E M B E R  3 1 ,  2 0 0 2  A N D  2 0 0 1

R EV E N U E S
We had total revenues of $2,821.0 million in 2002, repre-
senting a decrease of 2.2% from total revenues of $2,886.6
million in 2001. The different components of our revenues
are discussed below:

1. Equipment Rentals. Our revenues from equipment
rentals were $2,154.7 million in 2002, representing a
decrease of 2.6% from $2,212.9 million in 2001. These
revenues accounted for 76.4% of our total revenues in
2002 compared with 76.7% of our total revenues in
2001. The decrease in rental revenues principally
reﬂected the following:

• Our rental revenues from locations open more than one
year, or same-store rental revenues, decreased by approx-
imately 2.7%. This decrease reﬂected a 4.8% decrease
in rental rates, which was partially offset by a 2.1%
increase in the net volume of rental activity. The
decrease in rental rates principally reﬂected continued
weakness in non-residential construction spending.

• The decrease in same-store rental revenues was partially

offset by additional revenues attributable to new locations
that we acquired or opened. These additional revenues,
net of revenues lost due to locations sold or closed, caused
our overall decline in rental revenues to be 0.1 percentage
point less than it would otherwise have been.

2. Sales of Rental Equipment. Our revenues from the sale of
rental equipment were $176.2 million in 2002, represent-
ing an increase of 19.8% from $147.1 million in 2001.
These revenues accounted for 6.2% of our total revenues in
2002 compared with 5.1% of our total revenues in 2001.
The increase in these revenues in 2002 reﬂected an increase
in volume partially offset by weaker pricing.

3. Sales of Equipment and Merchandise and Other Revenues.
Our revenues from “sale of equipment and merchandise
and other revenues” were $490.1 million in 2002, repre-
senting a decrease of 6.9% from $526.6 million in 2001.
These revenues accounted for 17.4% of our total revenues
in 2002 compared with 18.2% of our total revenues in
2001. The decrease in these revenues in 2002 principally
reﬂected a decrease in the volume of new equipment sales.

29

G RO S S  P RO F I T  
Gross proﬁt decreased to $886.3 million in 2002 from
$1,039.5 million in 2001. This decrease reﬂected the
decrease in total revenues discussed above, as well as the
decrease in gross proﬁt margin described below from
equipment rentals and the sale of rental equipment. Infor-
mation concerning our gross proﬁt margin by source of
revenue is set forth below:

1. Equipment Rentals. Our gross proﬁt margin from equip-
ment rental revenues was 32.1% in 2002 and 37.9% in
2001. The decrease in 2002 principally reﬂected the
decrease in rental rates described above and, to a lesser
extent, higher costs related to employee beneﬁts, ﬂeet
maintenance and delivery, and facilities.

2. Sales of Rental Equipment. Our gross proﬁt margin from
sales of rental equipment was 33.7% in 2002 and 39.7% in
2001. The decrease in 2002 primarily reﬂected continued
price weakness in the used equipment market.

3. Sales of Equipment and Merchandise and Other Revenues.
Our gross proﬁt margin from “sales of equipment and mer-
chandise and other revenues” was 27.6% in 2002 and 27.1%
in 2001. The increase in the gross proﬁt margin in 2002
primarily reﬂected better margins for our service revenue.

S E L L I N G ,  G E N E R A L  A N D

A D M I N I S T R AT I V E E X PE N S E S
SG&A was $438.9 million, or 15.6% of total revenues,
in 2002 and $441.8 million, or 15.3% of total revenues,
in 2001. Our bad debt expense, which is a component of
SG&A, was approximately $9.5 million higher in 2002
than in 2001, primarily reﬂecting an increase in our
allowance for doubtful accounts. Without this increase
in bad debt expense, our SG&A as a percentage of revenues
would have decreased to 15.2% of total revenues in 2002
from 15.6% in 2001. This decrease in SG&A, excluding
the change in bad debt expense, primarily reﬂected our
ongoing efforts at cutting costs, including reducing the
number of administrative personnel, reducing discretionary
expenditures and consolidating certain credit and collec-
tion facilities.

G O O DW I L L  I M PA I R M E N T
We recorded a goodwill impairment charge of $247.9 mil-
lion in the fourth quarter of 2002. See “—Goodwill and
Other Intangible Assets” for additional information.

R E S T RU C T U R I N G  C H A RG E
We recorded a restructuring charge of $28.3 million in
2002 and $28.9 million in 2001. See “—Restructuring
Plans in 2001 and 2002” for additional information.

N O N - R E N TA L  D E P R E C I AT I O N  A N D  A M O RT I Z AT I O N
Non-rental depreciation and amortization was $59.3 mil-
lion, or 2.1% of total revenues, in 2002 and $106.8 million,
or 3.7% of total revenues, in 2001. This decrease was
primarily attributable to a new accounting standard (see 
“—Goodwill and Other Intangible Assets”) which elimi-
nated the amortization of goodwill effective January 1,
2002. If goodwill amortization had been eliminated in
2001, then non-rental depreciation and amortization
would have been $48.5 million, or 1.7% of total revenues,
in 2001. The increase in non-rental depreciation and

30

amortization in 2002 as compared to the amount in 2001,
after eliminating goodwill amortization, primarily reﬂected
an increase in our non-rental assets such as facilities and
transportation equipment.

O PE R AT I N G  I N CO M E
We recorded operating income of $111.9 million in 2002
compared with operating income of $462.0 million in 2001.
The principal reason for the decrease in 2002 was the
$247.9 million non-cash goodwill impairment charge that
we recorded in 2002. However, after excluding that charge
our operating income was still lower by approximately
$102.2 million from the 2001 level. The principal reason for
this decrease was the declines in revenues and gross proﬁt
described above. The adverse effects of these factors were
partially offset by the decrease in non-rental depreciation
and amortization described above.

I N T E R E S T  E X PE N S E
Interest expense decreased to $196.0 million in 2002 from
$221.6 million in 2001. This decrease primarily reﬂected
lower interest rates on our variable rate debt.

P R E F E R R E D  D I V I D E N D S  O F  A  S U B S I D I A RY  T RU S T
Preferred dividends of a subsidiary trust were $18.2 million
during 2002 as compared to $19.5 million during 2001.
The decrease in 2002 reﬂects our repurchase of a portion of
our outstanding trust preferred securities.

OT H E R  ( I N CO M E )  E X PE N S E
Other income was $0.9 million in 2002 compared with
other expense of $24.5 million in 2001. The other income
in 2002 was primarily attributable to the favorable settle-
ment of a lawsuit for net proceeds of $4.0 million, partially
offset by other charges including the write-off of $1.6 mil-
lion of deferred ﬁnancing fees as described above. The other
expense in 2001 was primarily attributable to $25.9 million
of charges relating to debt and other indebtedness reﬁnanc-
ings. See “—Charges Related to Debt Reﬁnancings, Lease
Buy-Outs and Notes Write-Off.”

I N CO M E  TA X E S
Income taxes were $8.1 million in 2002 compared with
$85.2 million in 2001. Although we had a loss in 2002, we
recorded income tax expense because a portion of our
$247.9 million goodwill impairment charge was not
deductible for federal income tax purposes. If you exclude
the goodwill impairment charge in calculating our income,
then our effective tax rate in 2002 would have been
39.0% compared with 43.4% in 2001. The decrease in
such effective rate in 2002 reﬂects the elimination of
goodwill amortization in 2002 and the non-deductibility
for income tax purposes of certain costs included in the
2001 restructuring charge.

LO S S  B E F O R E  C U M U L AT I V E  E F F E C T  O F  C H A N G E

I N  ACCO U N T I N G  P R I N C I P L E
We had a loss before cumulative effect of change in
accounting principle of $109.5 million in 2002 compared
with income before cumulative effect of change in account-
ing principle of $111.3 million in 2001. The loss in 2002
principally reﬂects the decrease in operating income
described above.

C U M U L AT I V E  E F F E C T  O F  C H A N G E  I N

ACCO U N T I N G  P R I N C I P L E  
As described under “—Goodwill and Other Intangible
Assets,” we recorded an amount of $288.3 million, net of
tax, for impairment of goodwill as part of our transitional
impairment test upon the adoption of SFAS No. 142.

L I QU I D I T Y  A N D  C A PI TA L  R E S O U RC E S

R E C E N T  F I N A N C I N G  T R A N S AC T I O N S

T R A N S AC T I O N S  CO M P L E T E D  I N  T H E  F O U RT H

QUA RT E R  O F  2 0 0 3
17⁄ 8% Convertible Senior Subordinated Notes. In October
and December 2003, we sold $143.8 million aggregate
principal amount of 17⁄8% Convertible Senior Subordinated
Notes due October 15, 2023. We used substantially all of
the net proceeds from the sale of these notes to buy out
existing equipment leases. These notes were issued by
United Rentals (North America), Inc. (“URI”), a wholly
owned subsidiary of United Rentals, Inc. (“Holdings”),
and guaranteed by Holdings.

7 3⁄4% Senior Subordinated Notes. In November 2003, we
sold $525 million aggregate principal amount of 73⁄4%
Senior Subordinated Notes due 2013. We used the net pro-
ceeds from the sale of these notes to: (i) redeem or repur-
chase $205 million face amount of our outstanding 8.8%
Senior Subordinated Notes due 2008; (ii) redeem or repur-
chase $200 million face amount of our outstanding 91⁄2%
Senior Subordinated Notes due 2008; and (iii) buy out
existing equipment leases. These notes were issued by URI
and guaranteed by Holdings and, subject to limited excep-
tions, our domestic subsidiaries.

T R A N S AC T I O N S  CO M P L E T E D  I N  2 0 0 4
In the ﬁrst quarter of 2004, we reﬁnanced approximately
$2.1 billion of our debt. The purpose of this reﬁnancing
was to reduce our interest expense and extend the maturi-
ties on a substantial amount of our debt. As part of this
reﬁnancing, we:

• obtained a new senior secured credit facility to replace
the senior secured credit facility we previously had
in place;

• sold $1 billion of 61⁄2% Senior Notes due 2012;

• sold $375 million of 7% Senior Subordinated Notes

due 2014;

• repaid $639 million of term loans and $52 million of

borrowings that were outstanding under our old
credit facility;

• repurchased $845 million principal amount of our
103⁄4% Senior Notes due 2008, pursuant to a tender
offer, for aggregate consideration of $970 million;

• redeemed $300 million principal amount of our out-
standing 91⁄4% Senior Subordinated Notes due 2009
at an aggregate redemption price of $314 million; and

• called for redemption $250 million principal amount
of our outstanding 9% Senior Subordinated Notes due
2009 at an aggregate redemption price of $261 million

(with such redemption scheduled to be completed on
April 1, 2004).

The new notes described above were issued by URI and
guaranteed by Holdings and, subject to limited exceptions,
our domestic subsidiaries.

The following table shows our actual debt at December 31,
2003 and such debt as adjusted for completion of the fore-
going reﬁnancing:

(in millions)

Revolving credit facility  . . .
Term loan . . . . . . . . . . . . . .
Receivables securitization . .
6.5% Senior notes  . . . . . . .
7% Senior 

subordinated notes  . . . . .

7.75% Senior 

$

Actual

52.6
639.0
—
—

As
Adjusted

Scheduled
Maturity

$ 147.4
750.0

February 2009
February 2011
— September 2006
February 2012

1,000.0

—

375.0

February 2014

subordinated notes  . . . . .

525.0

525.0 November 2013

17⁄ 8% Convertible senior 

subordinated notes  . . . . .
10.75% Senior notes  . . . . .
9.25% Senior 

143.8
860.9

143.8
15.2

October 2023
April 2008

subordinated notes  . . . . .

300.0

9% Senior 

subordinated notes  . . . . .
Other debt  . . . . . . . . . . . . .

250.0
45.8

—

—
43.6

Total debt . . . . . . . . . . . . . .

$2,817.1

$3,000.0

C E RTA I N  A D D I T I O N A L  I N F O R M AT I O N

CO N C E R N I N G  O U R  N EW  C R E D I T  FAC I L I T Y
Our new senior secured credit facility includes: (i) a $650
million revolving credit facility; (ii) a $150 million institu-
tional letter of credit facility; and (iii) a $750 million term
loan. The revolving credit facility, institutional letter of
credit facility and term loan are governed by the same
credit agreement. 

Set forth below is certain additional information concern-
ing the revolving credit facility, institutional letter of credit
facility and term loan.

R EVO LV I N G  C R E D I T  FAC I L I T Y
The revolving credit facility enables URI to borrow up to
$650 million on a revolving basis and enables certain of our
Canadian subsidiaries to borrow up to $150 million (pro-
vided that the aggregate borrowings of URI and the Cana-
dian subsidiaries may not exceed $650 million). A portion of
the revolving credit facility, up to $250 million, is available in
the form of letters of credit. The revolving credit facility is
scheduled to mature and terminate in February 2009.

I N S T I T U T I O N A L  L E T T E R  O F  C R E D I T

FAC I L I T Y ( “ I LC F ” )
The ILCF provides for up to $150 million in letters of
credit. The ILCF is in addition to the letter of credit capac-
ity under the revolving credit facility. The total combined
letter of credit capacity under the revolving credit facility
and the ILCF is $400 million. Subject to certain conditions,
all or part of the ILCF may be converted into term loans.
The ILCF is scheduled to terminate in February 2011.

T E R M  LOA N
The term loan will be obtained in two draws. An initial draw
of $550 million was obtained upon the closing of the credit

31

facility in February 2004, and an additional $200 million is
expected to be obtained on April 1, 2004. Amounts repaid in
respect of the term loan may not be reborrowed.

The term loan must be repaid in installments as follows:
(i) during the period from and including June 30, 2004 to
and including March 31, 2010, URI must repay on each
March 31, June 30, September 30 and December 31 of
each year an amount equal to one-fourth of 1% of the
original aggregate principal amount of the term loan; and
(ii) URI must repay on each of June 30, 2010, September
30, 2010, December 31, 2010, and February 14, 2011 an
amount equal to 23.5% of the original aggregate principal
amount of the term loan.

I N T E R E S T
As of February 17, 2004, borrowings by URI under the
revolving credit facility accrue interest, at URI’s option, at
either (a) the ABR rate (which is equal to the greater of:
(i) the Federal Funds Rate plus 0.5%; and (ii) JPMorgan
Chase Bank’s prime rate) plus a margin of 1.25%, or (b) an
adjusted LIBOR rate plus a margin of 2.25%. The above
interest rate margins are adjusted quarterly based on our
Funded Debt to Cash Flow Ratio, up to the maximum mar-
gins described in the preceding sentence and down to mini-
mum margins of 0.75% and 1.75% for revolving loans based
on the ABR rate and the adjusted LIBOR rate, respectively.

As of February 17, 2004, Canadian dollar borrowings under
the revolving credit facility accrue interest, at the borrower’s
option, at either (a) the Canadian prime rate (which is
equal to the greater of: (i) the CDOR rate plus 1% and
(ii) JPMorgan Chase Bank, Toronto Branch’s prime rate)
plus a margin of 1.25%; or (b) the B/A rate (which is equal
to JPMorgan Chase Bank, Toronto Branch’s B/A rate) plus
a margin of 2.25%. These above interest rate margins are
adjusted quarterly based on our Funded Debt to Cash Flow
Ratio, up to the maximum margins described in the pre-
ceding sentence and down to minimum margins of 0.75%
and 1.75% for revolving loans based on the Canadian
prime rate and the B/A rate, respectively.

URI is also required to pay the lenders a commitment fee
equal to 0.5% per annum in respect of undrawn commit-
ments under the revolving credit facility.

As of February 17, 2004, borrowings under the term loan
accrue interest, at URI’s option, at either (a) the ABR rate
(which is equal to the greater of: (i) the Federal Funds Rate
plus 0.5%; and (ii) JPMorgan Chase Bank’s prime rate)
plus a margin of 1.25%, or (b) an adjusted LIBOR rate plus
a margin of 2.25% (which margins may be reduced to
1.00% and 2.00%, respectively, for certain periods based
on our Funded Debt to Cash Flow Ratio).

If at any time an event of default under the credit agree-
ment exists, the interest rate applicable to each revolving
loan and term loan will be based on the highest margins
described above plus 2%.

URI is also required to pay a fee at the rate of 0.10% per
annum on the amount of the ILCF. In addition, URI is
required to pay participation fees and fronting fees in
respect of letters of credit. For letters of credit obtained

32

under the ILCF, these fees accrue at the rate of 2.25% and
0.25% per annum, respectively.

C E RTA I N  I N F O R M AT I O N  CO N C E R N I N G

R E C E I VA B L E S  S E C U R I T I Z AT I O N
We have an accounts receivable securitization facility under
which one of our subsidiaries can borrow up to $250 mil-
lion against a collateral pool of accounts receivable. The
borrowings under this facility and the receivables in the
collateral pool are included in the liabilities and assets,
respectively, reﬂected on our consolidated balance sheet.
However, such assets are only available to satisfy the
obligations of the borrower subsidiary.

Key terms of this facility include:

• borrowings may be made only to the extent that the face
amount of the receivables in the collateral pool exceeds
the outstanding loans by a speciﬁed amount;

• the facility is structured so that the receivables in the

collateral pool are the lenders’ only source of repayment;

• prior to expiration or early termination of the facility,

amounts collected on the receivables may, subject to cer-
tain conditions, be retained by the borrower, provided
that the remaining receivables in the collateral pool are
sufﬁcient to secure the then outstanding borrowings; and

• after expiration or early termination of the facility, no new
amounts will be advanced under the facility and collec-
tions on the receivables securing the facility will be used
to repay the outstanding borrowings.

Outstanding borrowings under the facility generally accrue
interest at the commercial paper rate plus 1%. However, after
expiration or early termination of the facility, outstanding
borrowings will accrue interest at 0.5% plus the greater of:
(i) the prime rate; and (ii) the Federal Funds Rate plus 0.5%.
We are also required to pay a commitment fee of 0.45% per
annum in respect of undrawn commitments under the facil-
ity. As of March 1, 2004 and December 31, 2003, there were
no outstanding borrowings under this facility.

The agreement governing this facility is scheduled to expire
on September 30, 2006. However, the lenders under this
facility, at their option, may terminate the facility earlier
upon the occurrence of certain events, including: (i) the
long-term senior secured debt rating of United Rentals
(North America), Inc. or, subject to certain conditions,
United Rentals, Inc., is downgraded to be at or below “B”
by Standard & Poor’s Rating Services; (ii) the long-term
senior unsecured debt rating of United Rentals (North
America), Inc. or, subject to certain conditions, United
Rentals, Inc., is downgraded to be at or below “CCC+”
by Standard & Poor’s Rating Services; (iii) the long-term
issuer rating of United Rentals (North America), Inc.
or, subject to certain conditions, United Rentals, Inc., is
downgraded to be at or below “Caa” by Moody’s Investors
Service; (iv) the long-term senior implied rating of United
Rentals (North America), Inc. or, subject to certain condi-
tions, United Rentals, Inc., is downgraded to be at or below
“B3” by Moody’s Investors Service; or (v) either Standard
& Poor’s Rating Services or Moody’s Investors Service
ceases to provide any such rating.

C E RTA I N  B A L A N C E  S H E E T  C H A N G E S
The increase in rental equipment at December 31, 2003 as
compared to December 31, 2002 was primarily attributable
to the buy-out of equipment leases in 2003. The decrease
in goodwill at December 31, 2003 as compared to Decem-
ber 31, 2002 was attributable to the goodwill impairment
recognized in 2003 as further described under “—Goodwill
and Other Intangible Assets.” The increase in debt at
December 31, 2003 as compared to December 31, 2002
was primarily attributable to the debt reﬁnancings in
the fourth quarter of 2003 as further described under 
“—Liquidity and Capital Resources—Recent Financing
Transactions.” The increase in subordinated convertible
debentures, and corresponding decrease in company-
obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust, at December 31, 2003 as
compared to December 31, 2002 was due to the deconsoli-
dation of a subsidiary trust as further described under 
“—Impact of Recently Issued Accounting Standards.”
The decrease in retained earnings and stockholders’ equity
at December 31, 2003 as compared to December 31, 2002,
primarily reﬂects our net loss in 2003.

S O U RC E S  A N D  U S E S  O F  C A S H
During 2003, we: (i) generated cash from operations of
$342.3 million; (ii) generated cash from the sale of rental
equipment of $181.3 million; and (iii) obtained cash from
borrowings, net of repayments and ﬁnancing costs, of
approximately $257.4 million. Our cash ﬂow from opera-
tions during 2003 was reduced by $88.3 million of cash
charges related to our buy-out of equipment leases. We
used cash during this period principally to: (i) purchase
rental equipment of $335.9 million; (ii) buy-out equip-
ment leases of $335.4 million (excluding the $88.3 million
charge relating thereto described above); and (iii) purchase
other property and equipment of $42.0 million.

C A S H  R E QU I R E M E N TS  R E L AT E D  TO  O PE R AT I O N S
Our principal existing sources of cash are cash generated
from operations and from the sale of rental equipment and
borrowings available under our revolving credit facility and
receivables securitization facility. As of March 1, 2004, we
had $516.6 million of borrowing capacity available under
our $650 million revolving credit facility (reﬂecting out-
standing loans of approximately $92.1 million and out-
standing letters of credit in the amount of approximately
$41.3 million). We believe that our existing sources of cash
will be sufﬁcient to support our existing operations over the
next twelve months.

We expect that our principal needs for cash relating to our
existing operations over the next twelve months will be to
fund: (i) operating activities and working capital; (ii) the
purchase of rental equipment and inventory items offered
for sale; (iii) payments due under operating leases; (iv) debt
service; and (v) costs relating to our restructuring plans.
We plan to fund such cash requirements relating to our
existing operations from our existing sources of cash
described above. In addition, we may seek additional ﬁnanc-
ing through the securitization of some of our equipment
or through the use of additional operating leases. For infor-
mation on the scheduled principal payments coming due
on our outstanding debt and on the payments coming
due under our existing operating leases, see “—Certain
Information Concerning Contractual Obligations.”

The amount of our future capital expenditures will depend
on a number of factors, including general economic condi-
tions and growth prospects. Based on current conditions,
we estimate that capital expenditures for the year 2004
will be approximately $575 million to $700 million for our
existing operations. These expenditures are comprised of
approximately: (i) $425 million to $450 million of expendi-
tures to replace rental equipment sold; (ii) $100 million to
$200 million of discretionary expenditures to increase the
size of our rental ﬂeet; and (iii) $50 million of expenditures
for the purchase of property and equipment. We expect that
we will fund such expenditures from proceeds from the sale
of used equipment, cash generated from operations and, if
required, borrowings available under our revolving credit
facility and receivables securitization facility.

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

33

C E RTA I N  I N F O R M AT I O N  CO N C E R N I N G  CO N T R AC T UA L  O B L I G AT I O N S

The table below provides certain information concerning the payments coming due under certain categories of our existing con-
tractual obligations. The information is as of December 31, 2003, as adjusted to give effect to the $2.1 billion reﬁnancing that we
completed in the ﬁrst quarter of 2004 as described under “—Liquidity and Capital Resources—Recent Financing Transactions.”

(In thousands)

Debt excluding capital leases(1)  . . . . . . . . . . . . . . . . .
Capital leases(1)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases(1):

Real estate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Other equipment  . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations  . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities reﬂected on balance 

sheet in accordance with GAAP(2)  . . . . . . . . . . . .

2004

$ 13,291
12,210

66,139
64,099
23,384

2005

7,720
9,750

$

59,816
38,628
12,486

2006

7,500
5,733

$

54,750
41,558
9,181

2007

2008

Thereafter

Total

$ 7,500
3,340

$22,700
944

$2,909,269
21

$2,967,980
31,998

50,237
18,304
5,080

40,449
8,737
3,272

102,966
4,523
382

374,357
175,849
53,785

221,550

221,550

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$179,123

$128,400

$118,722

$84,461

$76,102

$3,238,711

$3,825,519

(1) The payments due with respect to a period represent: (i) in the case of debt and capital leases, the scheduled principal payments due in such period; and (ii) in the case of
operating leases, the minimum lease payments due in such period under non-cancelable operating leases plus the maximum potential guarantee amounts discussed below
under “—Certain Information Concerning Off-Balance Sheet Arrangements.”

(2) Represents subordinated convertible debentures. See note 11 to our notes to consolidated ﬁnancial statements included elsewhere in this report for further information.

C E RTA I N  I N F O R M AT I O N  CO N C E R N I N G
O F F - B A L A N C E  S H E E T  A R R A N G E M E N TS

R E S T R I C T E D  S TO C K
We have granted to employees other than executive ofﬁcers
and directors approximately 1,200,000 shares of restricted
stock that contain the following provisions. The shares vest
in 2004, 2005 or 2006 or earlier upon a change in control
of the Company, death, disability, retirement or certain ter-
minations of employment, and are subject to forfeiture
prior to vesting on certain other terminations of employ-
ment, the violation of non-compete provisions and certain
other events. If a holder of restricted stock sells his stock
and receives sales proceeds that are less than a speciﬁed
guaranteed amount set forth in the grant instrument, we
have agreed to pay the holder the shortfall between the
amount received and such speciﬁed amount. However,
the foregoing only applies to sales that are made within
ﬁve trading days of the vesting date. The speciﬁed guaran-
teed amounts are: (i) $15.17 per share with respect to
approximately 500,000 shares scheduled to vest in 2004;
(ii) $27.26 per share with respect to approximately 300,000
shares scheduled to vest in 2005; and (iii) $9.18 per share
with respect to approximately 400,000 shares scheduled
to vest in 2006.

O PE R AT I N G  L E A S E S
We lease real estate, rental equipment and non-rental
equipment under operating leases as a regular business
activity. As part of many of our equipment operating leases,
we guarantee that the value of the equipment at the end of
the term will not be less than a speciﬁed projected residual
value. The use of these guarantees helps to lower our
monthly operating lease payments. We do not know at this
time the extent to which the actual residual values may be
less than the guaranteed residual values and, accordingly,
cannot quantify the amount that we ultimately will be
required to pay, if any, under these guarantees. However,
under current circumstances we do not anticipate paying
signiﬁcant amounts under these guarantees in the future. If
the actual residual value for all equipment subject to such
guarantees were to be zero, then our maximum potential

34

liability under these guarantees would be approximately
$36.5 million. This potential liability was not reﬂected on
our balance sheet as of December 31, 2003 or any prior
date. For additional information concerning lease payment
obligations under our operating leases, see “—Certain
Information Concerning Contractual Obligations” above.

C E RTA I N  I N F O R M AT I O N  CO N C E R N I N G
S U B O R D I N AT E D  CO N V E RT I B L E
D E B E N T U R E S

In August 1998, a subsidiary trust of United Rentals, Inc.
sold six million shares of 61⁄2% Convertible Quarterly
Income Preferred Securities (“Trust Preferred Securities”)
for aggregate consideration of $300 million. The trust used
the proceeds from the sale of the Trust Preferred Securities
to purchase 61⁄2% subordinated convertible debentures due
2028 from Holdings which resulted in Holdings receiving
all of the net proceeds of the sale. Upon the adoption as of
December 31, 2003 of a recently issued accounting stan-
dard, we deconsolidated the subsidiary trust that had
issued the Trust Preferred Securities. As a result of such
deconsolidation: (i) the Trust Preferred Securities were
removed from our consolidated balance sheets at December
31, 2003; and (ii) the subordinated convertible debentures
that we issued to the subsidiary trust, which previously had
been eliminated in our consolidated balance sheets, were
no longer eliminated in our consolidated balance sheets at
December 31, 2003. However, the subordinated convert-
ible debentures are reﬂected as a component of liabilities on
the consolidated balance sheets at December 31, 2003,
whereas the Trust Preferred Securities were reﬂected
as a separate category prior to December 31, 2003. See 
“—Impact of Recently Issued Accounting Standards” and
note 11 to our notes to consolidated ﬁnancial statements
included elsewhere in this report. During 2003, the trust
repurchased 100,000 of these shares for aggregate consider-
ation of approximately $3.6 million, which represents a
discount of approximately 29% relative to the aggregate
liquidation preference of approximately $5.0 million. Dur-
ing 2002, the trust repurchased 1,469,000 of these shares

for aggregate consideration of approximately $38.1 million,
which represents a discount of approximately 48% relative
to the aggregate liquidation preference of approximately
$73.5 million.

conditions, competition or other factors; (viii) changes in
interest rates applicable to our ﬂoating rate debt; and
(ix) the possible need, from time to time, to take goodwill
write-offs or special charges.

R E L AT I O N S H I P  B E T W E E N  H O L D I N G S
A N D  U R I

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

The Trust Preferred Securities are the obligation of a sub-
sidiary trust of Holdings and are not the obligation of URI.
Historically, the dividends payable on these securities were
reﬂected as an expense on the consolidated ﬁnancial state-
ments of Holdings, but were not reﬂected as an expense on
the consolidated ﬁnancial statements of URI. This is the
principal reason for the difference in the historical net
income (loss) reported on the consolidated ﬁnancial state-
ments of URI and the net income (loss) reported on the
consolidated ﬁnancial statements of Holdings.

F LU C T UAT I O N S  I N  O PE R AT I N G  R E S U LTS

We expect that our revenues and operating results may ﬂuc-
tuate from quarter to quarter or over the longer term due to
a number of factors, including: (i) seasonal rental patterns
of our customers, with rental activity tending to be lower in
the winter; (ii) changes in general economic conditions in
our markets, including changes in construction and indus-
trial activities; (iii) the timing of acquisitions, new location
openings and related expenditures; (iv) the effect of the
integration of acquired businesses and start-up locations;
(v) if we determine that a potential acquisition will not be
consummated, the need to charge against earnings any
expenditures relating to such acquisition (such as ﬁnancing
commitment fees, merger and acquisition advisory fees and
professional fees) previously capitalized; (vi) changes in the
size of our rental ﬂeet or in the rate at which we sell our
used equipment; (vii) changes in demand for our equip-
ment or the prices thereof due to changes in economic

ACCO U N T I N G  F O R  C E RTA I N  E X PE N S E S
R E L AT I N G  TO  P OT E N T I A L
ACQU I S I T I O N S

In accordance with accounting principles generally
accepted in the United States, we capitalize certain direct
out-of-pocket expenditures (such as legal and accounting
fees) relating to potential or pending acquisitions. Indirect
acquisition costs such as executive salaries, general corpo-
rate overhead, public affairs and other corporate services
are expensed as incurred. Our policy is to charge against
earnings any capitalized expenditures relating to any poten-
tial or pending acquisition that we determine will not be
consummated. There can be no assurance that in future
periods we will not be required to incur a charge against
earnings in accordance with such policy, which charge,
depending upon the magnitude thereof, could adversely
affect our results of operations.

S E A S O N A L I T Y

Our business is seasonal with demand for our rental equip-
ment tending to be lower in the winter months. The sea-
sonality of our business is heightened because we offer for
rent trafﬁc control equipment. Branches that rent a signiﬁ-
cant amount of this type of equipment tend to generate
most of their revenues and proﬁts in the second and third
quarters of the year, slow down during the fourth quarter
and operate at a loss during the ﬁrst quarter.

I N F L AT I O N

Although we cannot accurately anticipate the effect of
inﬂation on our operations, we believe that inﬂation has
not had, and is not likely in the foreseeable future to have, a
material impact on our results of operations. However, as
described above, cost increases have, from time to time,
impacted our results.

I M PAC T  O F  R E C E N T LY  I S S U E D
ACCO U N T I N G  S TA N D A R D S

In April 2002, the FASB issued SFAS No. 145, “Rescission
of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections.” This
standard rescinds SFAS No. 4, “Reporting Gains and
Losses from Extinguishment of Debt,” and an amendment
of that Statement, SFAS No. 64, “Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements.” This stan-
dard also rescinds SFAS No. 44, “Accounting for Intangi-
ble Assets of Motor Carriers.” This standard amends SFAS
No. 13, “Accounting for Leases,” to eliminate an inconsis-
tency related to the required accounting for sale-leaseback
transactions and certain lease modiﬁcations. This standard
also amends other existing authoritative pronouncements

35

this standard did not otherwise have a material effect on
our statements of ﬁnancial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, “Amend-
ment of Statement 133 on Derivative Instruments and
Hedging Activities.” This standard amends and clariﬁes
ﬁnancial accounting and reporting for derivative instru-
ments and for hedging activities under SFAS No. 133,
“Accounting for Derivative Instruments and Hedging
Activities.” This standard is effective for contracts entered
into or modiﬁed after June 30, 2003, except as stated
below, and for hedging relationships designated after June
30, 2003. The provisions of this standard that relate to
SFAS No. 133 Implementation Issues that have been effec-
tive for ﬁscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their
respective effective dates. The adoption of this standard
regarding the provisions effective after June 30, 2003 did
not have a material effect on our statements of ﬁnancial
position or operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting
for Certain Financial Instruments with Characteristics of
both Liabilities and Equity,” which establishes standards
for how an issuer classiﬁes and measures certain ﬁnancial
instruments with characteristics of both liabilities and
equity. This standard requires that ﬁnancial instruments
falling within the scope of this standard be classiﬁed as lia-
bilities. This standard is effective for ﬁnancial instruments
entered into or modiﬁed after May 31, 2003 and otherwise
is effective with the ﬁrst interim period beginning after
June 15, 2003. The adoption of this standard did not have a
material effect on our statements of ﬁnancial position or
results of operations.

QUA N T I TAT I V E  A N D  QUA L I TAT I V E
D I S C LO S U R E S  A B O U T  M A R K E T  R I S K

Our exposure to market risk primarily consists of: (i) inter-
est rate risk associated with our variable rate debt; and
(ii) foreign currency exchange rate risk primarily associated
with our Canadian operations.

I N T E R E S T  R AT E  R I S K
We periodically utilize interest rate swap agreements to
manage our interest costs and exposure to changes in
interest rates. At December 31, 2003, we had swap agree-
ments with an aggregate notional amount of $1,160 mil-
lion. The effect of these agreements was to convert
$1,160 million of our ﬁxed rate notes to ﬂoating rate instru-
ments. The ﬁxed rate notes being converted consisted of:
(i) $300 million of our 91⁄4% senior subordinated notes
through 2009; (ii) $210 million of our December 2002
issued 103⁄4% senior notes through 2008; (iii) $200 million

to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. We
adopted this standard on January 1, 2003, and reclassiﬁed a
pre-tax extraordinary loss of approximately $18.1 million
recognized during the second quarter of 2001 to operating
income. The adoption of the remaining provisions of SFAS
No. 145 did not have a material effect on our consolidated
ﬁnancial position or results of operations.

In December 2002, the FASB issued SFAS No. 148,
“Accounting for Stock-Based Compensation—Transition
and Disclosure.” This standard provides alternative meth-
ods of transition to the fair value method of accounting for
stock-based employee compensation under SFAS No. 123,
“Accounting for Stock-Based Compensation,” but does not
require us to use the fair value method. This standard also
amends certain disclosure requirements related to stock-
based employee compensation. We adopted the disclosure
portion of this standard as of December 31, 2002 and such
adoption is reﬂected in note 2 to our consolidated ﬁnancial
statements included elsewhere in this report.

In January 2003, the FASB issued Interpretation No. 46
(“FIN 46,” revised December 2003), “Consolidation of
Variable Interest Entities,” which addresses consolidation
of variable interest entities (“VIEs”). FIN 46 requires a VIE
to be consolidated by a parent company if that company is
subject to a majority of the risk of loss from the variable
interest entity’s activities or entitled to receive a majority of
the entity’s residual returns or both. A VIE is a corporation,
partnership, trust or any other legal structure used for busi-
ness purposes that either does not have equity investors
with voting rights or has equity investors that do not pro-
vide sufﬁcient ﬁnancial resources for the entity to support
its activities. The consolidation requirements of FIN 46
apply immediately to VIEs created after January 31, 2003.
For entities created prior to February 1, 2003, the effective
date of these requirements, which originally was July 1,
2003, had been deferred so as not to apply until the ﬁrst
period ending after December 15, 2003. Upon adoption of
this standard, as of December 31, 2003, we deconsolidated
a subsidiary trust that had issued Trust Preferred Securities
as described above. As a result of such deconsolidation:
(i) the Trust Preferred Securities issued by our subsidiary
trust, which had previously been reﬂected on our consoli-
dated balance sheets, were removed from our consolidated
balance sheets at December 31, 2003; and (ii) the subordi-
nated convertible debentures that we issued to the sub-
sidiary trust, which previously had been eliminated in our
consolidated balance sheets, were no longer eliminated in
our consolidated balance sheets at December 31, 2003. The
carrying amount of the Trust Preferred Securities removed
from the consolidated balance sheets was the same as the
carrying amount of the subordinated convertible deben-
tures added to the consolidated balance sheets. However,
the subordinated convertible debentures are reﬂected as a
component of liabilities on the consolidated balance sheets
at December 31, 2003, whereas the Trust Preferred Securi-
ties were reﬂected as a separate category prior to December
31, 2003. See note 11 to our consolidated ﬁnancial state-
ments included elsewhere in this report. The adoption of

36

of our April 2003 issued 103⁄4% senior notes through 2008;
(iv) $200 million of our 9% senior subordinated notes
through 2009; and (v) $250 million of our 73⁄4% senior
subordinated notes through 2013. At December 31, 2002,
we had swap agreements with an aggregate notional
amount of $500 million. The effect of some of these agree-
ments was to limit the interest rate exposure to 9.5% on
$200 million of our then outstanding term loan. The
effect of the remainder of these agreements was to convert
$300 million of our ﬁxed rate 91⁄4% notes to a ﬂoating rate
instrument through 2009.

Subsequent to December 31, 2003, we reﬁnanced a
signiﬁcant portion of our indebtedness as described under
“—Liquidity and Capital Resources—Recent Financing
Transactions.” In connection with this reﬁnancing, we ter-
minated certain of the swap agreements described above
and entered into certain new swap agreements. As of
March 1, 2004, we had swap agreements with an aggregate
notional amount of $1,145 million. The effect of these
agreements is to convert $1,145 million of our ﬁxed rate
notes to ﬂoating rate instruments. The ﬁxed rate notes con-
verted consist of: (i) $245 million of our 61⁄2% senior notes
through 2012; (ii) $525 million of our 73⁄4% senior subordi-
nated notes through 2013; and (iii) $375 million of our
7% senior subordinated notes through 2014.

As of March 1, 2004, after giving effect to our interest rate
swap agreements, we had an aggregate of $1,787.1 million of
indebtedness that bears interest at variable rates. This debt
includes, in addition to the $1,145.0 million of debt subject
to the swap agreements described above: (i) all borrowings
under our $650 million revolving credit facility ($92.1 mil-
lion outstanding as of March 1, 2004); (ii) our term loan
($550.0 million outstanding as of March 1, 2004); and
(iii) all borrowings under our $250 million accounts receiv-
able securitization facility (none outstanding as of March 1,
2004). The weighted average interest rates applicable to our
variable rate debt on March 1, 2004 were: (i) 4.6% for the
revolving credit facility (represents the Canadian rate since
the amount outstanding was Canadian borrowings);
(ii) 3.4% for the term loan; and (iii) 3.9% for the debt sub-
ject to our swap agreements. As of March 1, 2004, based
upon the amount of our variable rate debt outstanding,
after giving effect to our interest rate swap agreements, our
annual earnings would decrease by approximately $10.9
million for each one percentage point increase in the interest
rates applicable to our variable rate debt. The amount of our
variable rate indebtedness may ﬂuctuate signiﬁcantly as a
result of changes in the amount of indebtedness outstanding
under our revolving credit facility and receivables securitiza-
tion facility from time to time. For additional information
concerning the terms of our variable rate debt, see note 9
to our notes to consolidated ﬁnancial statements included
elsewhere in this report.

C U R R E N C Y  E XC H A N G E  R I S K
The functional currency for our Canadian operations is the
Canadian dollar. As a result, our future earnings could be
affected by ﬂuctuations in the exchange rate between the
U.S. and Canadian dollars. Based upon the level of our
Canadian operations during 2003 relative to the company
as a whole, a 10% change in this exchange rate would not
have a material impact on our earnings. In addition, we
periodically enter into foreign exchange contracts to hedge
our transaction exposures. We had no outstanding foreign
exchange contracts as of December 31, 2003 and 2002. We
do not engage in purchasing forward exchange contracts
for speculative purposes.

P R I C E  R A N G E  O F  CO M M O N  S TO C K

Our common stock trades on the New York Stock
Exchange under the symbol URI. The following table
sets forth, for the periods indicated, the high and low 
composite stock sale prices for our common stock, as
reported by the New York Stock Exchange.

2003:

First Quarter  . . . . . . . . . . . . . . . . . . . . . .
Second Quarter  . . . . . . . . . . . . . . . . . . . .
Third Quarter  . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter  . . . . . . . . . . . . . . . . . . . .

2002:

First Quarter  . . . . . . . . . . . . . . . . . . . . . .
Second Quarter  . . . . . . . . . . . . . . . . . . . .
Third Quarter  . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter  . . . . . . . . . . . . . . . . . . . .

High

Low

$12.60
14.75
18.59
19.85

$30.83
28.87
19.40
10.86

$ 8.00
9.08
13.00
15.62

$19.30
20.80
8.40
5.88

As of March 1, 2004, there were approximately 541 holders
of record of our common stock. We believe that the num-
ber of beneﬁcial owners is substantially greater than the
number of record holders, because a large portion of our
common stock is held of record in broker “street names.”

D I V I D E N D  P O L I C Y

We intend to retain all earnings for the foreseeable future
for use in the operation and expansion of our business and,
accordingly, we currently have no plans to pay dividends on
our common stock. The payment of any future dividends
will be determined by the Board of Directors in light of
conditions then existing, including our earnings, ﬁnancial
condition and capital requirements, restrictions in ﬁnanc-
ing agreements, business conditions and other factors.
Under the terms of certain agreements governing our
outstanding indebtedness, we are prohibited or restricted
from paying dividends on our common stock. In addition,
under Delaware law, we are prohibited from paying any div-
idends unless we have capital surplus or net proﬁts available
for this purpose.

37

R E P O RT O F I N D E P E N D E N T AU D I T O R S

Board of Directors
United Rentals, Inc.

We have audited the accompanying consolidated balance
sheets of United Rentals, Inc. as of December 31, 2003 and
2002 and the related consolidated statements of operations,
stockholders’ equity, and cash ﬂows for each of the three
years in the period ended December 31, 2003. These con-
solidated 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 stan-
dards generally accepted in the United States. Those stan-
dards 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 exam-
ining, on a test basis, evidence supporting the amounts
and disclosures in the ﬁnancial statements. An audit also
includes assessing the accounting principles used and signif-
icant 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, 2003 and 2002, and the consolidated results
of its operations and its cash ﬂows for each of the three
years in the period ended December 31, 2003 in confor-
mity with accounting principles generally accepted in the
United States.

As discussed in Notes 2 and 4 to the consolidated ﬁnancial
statements, the Company adopted Statement of Financial
Accounting Standards No. 142, “Goodwill and Other
Intangible Assets,” effective January 1, 2002.

MetroPark, New Jersey
February 24, 2004

38

C O N S O L I D AT E D B A L A N C E S H E E T S

(In thousands, except share data)

A S S E TS
Cash and cash equivalents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts 

of $47,439 in 2003 and $48,542 in 2002  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

L I A B I L I T I E S   A N D   S TO C K H O L D E R S ’   E QU I T Y
Liabilities:
Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated convertible debentures  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
Company-obligated mandatorily redeemable convertible preferred 

December 31

2003

2002

$

79,449

$

19,231

499,433
105,987
118,145
2,071,492
406,601
1,437,809
3,225

466,196
91,798
131,293
1,845,675
425,352
1,705,191
5,821

$4,722,141

$4,690,557

$ 150,796
2,817,088
221,550
165,052
226,780

3,581,266

$ 207,038
2,512,798

225,587
187,079

3,132,502

securities of a subsidiary trust  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

226,550

Stockholders’ equity:
Preferred stock — $.01 par value, 5,000,000 shares authorized:

Series C perpetual convertible preferred stock — $300,000 liquidation

preference, 300,000 shares issued and outstanding  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Series D perpetual convertible preferred stock — $150,000 liquidation

preference, 150,000 shares issued and outstanding  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

2

Common stock — $.01 par value, 500,000,000 shares authorized, 

77,150,277 shares issued and outstanding in 2003 and 76,657,521 in 2002  . . . . . . . . . . . . .
Additional paid-in capital  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Accumulated deﬁcit) retained earnings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

771
1,329,946
(25,646)
(189,300)
25,099

1,140,875

3

2

765
1,341,290
(52,988)
69,281
(26,848)

1,331,505

$4,722,141

$4,690,557

See accompanying notes.

39

C O N S O L I D AT E D S TAT E M E N T S O F O P E R AT I O N S

(In thousands, except per share amounts)

2003

2002

2001

Year Ended December 31

R EV E N U E S :
Equipment rentals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of equipment and merchandise and other revenues  . . . . . . . . . . . . .
Total revenues  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CO S T   O F   R EV E N U E S :
Cost of equipment rentals, excluding depreciation  . . . . . . . . . . . . . . . . . .
Depreciation of rental equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of rental equipment sales  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of equipment and merchandise sales and other operating costs  . . . .
Total cost of revenues  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses  . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization  . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends of a subsidiary trust  . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before provision for income taxes and cumulative 

effect of change in accounting principle  . . . . . . . . . . . . . . . . . . . . . . . .
Provision (beneﬁt) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before cumulative effect of change in 

$2,177,462
181,282
508,492

2,867,236

1,192,638
332,610
121,998
372,022

2,019,268

847,968
451,347
296,873

69,300

30,448
209,328
14,590
133,051

$2,154,681
176,179
490,129

2,820,989

1,137,609
325,548
116,821
354,734

1,934,712

886,277
438,918
247,913
28,262
59,301

111,883
195,961
18,206
(900)

(326,521)
(67,940)

(101,384)
8,102

$2,212,900
147,101
526,604

2,886,605

1,053,635
320,963
88,742
383,795

1,847,135

1,039,470
441,751

28,922
106,763

462,034
221,563
19,500
24,497

196,474
85,218

accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(258,581)

(109,486)

111,256

Cumulative effect of change in accounting principle, net of

tax beneﬁt of $60,529  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings (loss) per share — basic:

Income (loss) available to common stockholders before cumulative 

effect of change in accounting principle  . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle, net  . . . . . . . . . . .
Income (loss) available to common stockholders . . . . . . . . . . . . . . . . . .

Earnings (loss) per share — diluted:

Income (loss) available to common stockholders before cumulative 

effect of change in accounting principle  . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle, net  . . . . . . . . . . .
Income (loss) available to common stockholders . . . . . . . . . . . . . . . . . .

See accompanying notes.

(288,339)

$ (258,581)

$ (397,825)

$ 111,256

$(3.35)

$(3.35)

$(3.35)

$(3.35)

$(0.98)
(3.80)

$(4.78)

$(0.98)
(3.80)

$(4.78)

$1.54

$1.54

$1.18

$1.18

40

C O N S O L I D AT E D S TAT E M E N T S O F S T O C K H O L D E R S ’ E Q U I T Y

Series C
Perpetual

Series D
Perpetual
Convertible Convertible
Preferred
Stock

Preferred
Stock

(In thousands)

Balance, December 31, 2000  . . . . . . . . . . .
Comprehensive income:
Net income  . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:
Foreign currency translation adjustments . .
Cumulative effect on equity of adopting 

SFAS 133, net of tax of $1,784 . . . . . . . .

Derivatives qualifying as hedges, 

net of tax of $3,212  . . . . . . . . . . . . . . . .
Comprehensive income  . . . . . . . . . . . . . . .
Issuance of common stock under deferred 
compensation plans . . . . . . . . . . . . . . . .
Amortization of deferred compensation  . . .
Issuance of Series C perpetual convertible 

preferred stock  . . . . . . . . . . . . . . . . . . .

$3

Common Stock

Number
of Shares

Amount

Additional
Paid-in
Capital

Deferred
Compensation

(Accumulated
Deﬁcit)
Retained
Earnings

Comprehensive
Income (Loss)

71,066

$711 $ 765,529

$ 355,850

Accumulated
Other
Comprehensive
Income (Loss)

$ (6,947)

111,256

$ 111,256

(16,137)

(16,137)

(2,516)

(2,516)

(4,527)
$ 88,076

(4,527)

2,928

29

61,941 $ (61,970)
6,176

Issuance of Series D perpetual convertible 

preferred stock  . . . . . . . . . . . . . . . . . . .
Issuance of common stock  . . . . . . . . . . . . .
Exercise of common stock options  . . . . . . .
Shares repurchased and retired . . . . . . . . . .
Balance, December 31, 2001  . . . . . . . . . . .
Comprehensive income (loss):
Net loss  . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:
Foreign currency translation adjustments . .
Derivatives qualifying as hedges, 

net of tax of $999  . . . . . . . . . . . . . . . . .
Comprehensive loss  . . . . . . . . . . . . . . . . . .
Issuance of common stock under deferred 
compensation plans . . . . . . . . . . . . . . . .
Amortization of deferred compensation  . . .
Exercise of common stock options  . . . . . . .
Common stock repurchased and retired  . .
Convertible debt converted to 

common stock . . . . . . . . . . . . . . . . . . . .
Liquidation preference in excess of amounts
paid for Company-obligated mandatorily 
redeemable convertible preferred 
securities of a subsidiary trust  . . . . . . . .
Balance, December 31, 2002  . . . . . . . . . . .
Comprehensive income (loss):
Net loss  . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:
Foreign currency translation adjustments . .
Derivatives qualifying as hedges, 

net of tax of $4,001  . . . . . . . . . . . . . . . .
Comprehensive loss  . . . . . . . . . . . . . . . . . .
Issuance of common stock under deferred 
compensation plans, net of forfeitures  . .
Amortization of deferred compensation  . . .
Exercise of common stock options 

and warrants  . . . . . . . . . . . . . . . . . . . . .
Common stock issuances  . . . . . . . . . . . . . .
Tax effect of liquidation preference in excess 
of amounts paid for Company-obligated 
mandatorily redeemable preferred securities
of a subsidiary previously repurchased . .
Liquidation preference in excess of amounts
paid for Company-obligated mandatorily 
redeemable convertible preferred 
securities of a subsidiary trust  . . . . . . . .
Balance, December 31, 2003  . . . . . . . . . . .

See accompanying notes.

$2

3

2

3
715
(1,351)
73,361

8
(14)
734

286,734

143,667
50
10,409
(24,744)
1,243,586

(55,794)

467,106

(30,127)

(397,825) $(397,825)

2,484

2,484

795
$(394,546)

795

469

3

8,634

(8,637)
11,443

3,736
(1,066)

37
(11)

77,768
(26,715)

157

2

2,678

3

2

76,657

765

35,339
1,341,290

(52,988)

69,281

(26,848)

(258,581) $(258,581)

45,699

45,699

6,248
$(206,634)

6,248

342

105
46

4

2

(931)

927
26,415

1,309
500

(13,118)

896

$3

$2

77,150

$771 $1,329,946 $(25,646) $(189,300)

$ 25,099

41

C O N S O L I D AT E D S TAT E M E N T S O F C A S H F L OW S

(In thousands)

C A S H   F LOW S   F RO M   O PE R AT I N G   AC T I V I T I E S
Net income (loss)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided 

by operating activities:

Depreciation and amortization  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred compensation  . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt reﬁnancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of a change in accounting principle, net of tax  . . . . . . .
Deferred taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities  . . . . . . . . . . . . . . . . . . . . . . . . .

C A S H   F LOW S   F RO M   I N V E S T I N G   AC T I V I T I E S
Purchases of rental equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of rental equipment  . . . . . . . . . . . . . . . . . . . . . . . . . .
Buy-outs of equipment leases  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of other companies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of contingent purchase price  . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits on rental equipment purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C A S H   F LOW S   F RO M   F I N A N C I N G   AC T I V I T I E S
Proceeds from debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale—leaseback  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of ﬁnancing costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the exercise of common stock options, net of tax  . . . . . . . .
Shares repurchased and retired  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company-obligated mandatorily redeemable convertible preferred 

securities of a subsidiary trust repurchased and retired  . . . . . . . . . . . . .
Net cash provided by (used in) ﬁnancing activities  . . . . . . . . . . . . . . . . . .
Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents  . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31

2003

2002

2001

$(258,581)

$(397,825)

$

111,256

401,910
(59,284)
26,415

296,873
20,950

(70,237)

(33,237)
10,817
21,159
(56,242)
41,763

342,306

(335,881)
(42,044)
181,282
(335,376)
(5,420)

384,850
(59,359)
11,443
2,497
247,913

288,339
5,871

(6,949)
21,189
8,353
2,252
9,335

517,909

(492,259)
(38,599)
176,179

(172,583)

(4,342)
(4,644)

427,726
(58,359)
6,176
10,893

18,076

100,683

24,888
87,084
8,148
(58,713)
18,852

696,710

(449,770)
(47,548)
147,101

(54,838)
(2,103)
(2,485)

(537,439)

(536,248)

(409,643)

888,016
(613,855)

(16,731)
1,102

(3,575)

254,957
394

60,218
19,231

508,316
(491,728)

(6,197)
63,755
(26,726)

(38,111)

9,309
935

(8,095)
27,326

2,053,467
(2,300,507)
12,435
(29,042)
10,417
(24,758)

(277,988)
(16,137)

(7,058)
34,384

$ 79,449

$ 19,231

$

27,326

42

C O N S O L I D AT E D S TAT E M E N T S O F C A S H F L OW S
( C O N T I N U E D )

(In thousands)

S U P P L E M E N TA L   D I S C LO S U R E   O F  

C A S H   F LOW   I N F O R M AT I O N

Cash paid for interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for taxes, net of refunds  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S U P P L E M E N TA L   S C H E D U L E   O F   N O N - C A S H  
I N V E S T I N G   A N D   F I N A N C I N G   AC T I V I T I E S

Conversion of operating leases to capital leases  . . . . . . . . . . . . . . . . . . . . .
Conversion of convertible debt to common stock  . . . . . . . . . . . . . . . . . . .
Issuances of common stock as non-cash compensation  . . . . . . . . . . . . . . .
The Company acquired the net assets and assumed certain 

liabilities of other companies as follows:

Assets, net of cash acquired  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities assumed  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
Amounts paid through issuance of debt  . . . . . . . . . . . . . . . . . . . . . . . . . .

Due to seller and other payments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash paid  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See accompanying notes.

Year Ended December 31

2003

2002

2001

$224,691
$ (2,974)

$212,199
$ (1,454)

$230,385
$ (30,799)

$ 31,451
2,680
$

$

500

$ 3,965
(50)

$172,222
(4,705)

3,915
1,505

$ 5,420

167,517
5,066

$172,583

$ 21,465
(4,612)

(600)

16,253
38,585

$ 54,838

43

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

1 .  O RG A N I Z AT I O N  A N D  B A S I S  
O F  P R E S E N TAT I O N

United Rentals, Inc. (“Holdings” or the “Company”) is
principally a holding company and conducts its operations
primarily through its wholly owned subsidiary United
Rentals (North America), Inc. (“URI”) and subsidiaries of
URI. Holdings’ primary asset is its sole ownership of all
issued and outstanding shares of common stock of URI.
URI’s various credit agreements and debt instruments place
restrictions on its ability to transfer funds to its shareholder.

The Company rents a broad array of equipment to a diverse
customer base that includes construction and industrial
companies, manufacturers, utilities, municipalities, home-
owners and others in the United States, Canada and Mex-
ico. In addition to renting equipment, the Company sells
used rental equipment, acts as a dealer for new equipment
and sells related merchandise and contractor supplies, parts
and service. The nature of the Company’s business is such
that short-term obligations are typically met by cash ﬂow
generated from long-term assets. Therefore, the accompa-
nying balance sheets are presented on an unclassiﬁed basis.

The accompanying consolidated ﬁnancial statements
include the accounts of the Company and its wholly owned
subsidiaries. All signiﬁcant intercompany accounts and
transactions have been eliminated.

2 .  S U M M A RY  O F  S I G N I F I C A N T  
ACCO U N T I N G  P O L I C I E S

C A S H  E QU I VA L E N TS
The Company considers all highly liquid instruments with
maturities of three months or less when purchased to be
cash equivalents.

A L LOWA N C E  F O R  D O U B T F U L  ACCO U N TS
The Company maintains an allowance for doubtful
accounts. This allowance reﬂects the Company’s estimate
of the amount of its receivables that it will be unable 
to collect.

I N V E N TO RY
Inventory consists of equipment, merchandise and con-
tractor supplies, 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 $5.5 mil-
lion and $6.5 million at December 31, 2003 and 2002,
respectively. Cost is determined, depending on the type
of inventory, on either a weighted average or ﬁrst-in,
ﬁrst-out method.

44

R E N TA L  E QU I P M E N T
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 0% to 10% of cost.
Ordinary repair and maintenance costs are charged to
operations as incurred.

P RO PE RT Y  A N D  E QU I P M E N T
Property and equipment are recorded at cost and depreci-
ated over their estimated useful lives using the straight-line
method. The range of estimated useful lives for property
and equipment is two to thirty-nine years. Ordinary repair
and maintenance costs are charged to operations as
incurred. Leasehold improvements are amortized using the
straight-line method over their estimated useful lives or the
remaining life of the lease, whichever is shorter.

G O O DW I L L
Goodwill consists of the excess of cost over the fair value of
identiﬁable net assets of businesses acquired and was amor-
tized on a straight-line basis over forty years prior to Janu-
ary 1, 2002. Goodwill is no longer amortized, but is tested
on at least an annual basis for impairment. See Note 4.

OT H E R  I N TA N G I B L E  A S S E TS
Other intangible assets consists of non-compete agree-
ments. The non-compete agreements are amortized
on a straight-line basis for periods ranging from three
to eight years.

LO N G - L I V E D  A S S E TS
Long-lived assets are recorded at the lower of amortized
cost or fair value. As part of an ongoing review of the valua-
tion 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 esti-
mated fair value. There have been no impairments recog-
nized in these ﬁnancial statements.

D E R I VAT I V E  F I N A N C I A L  I N S T RU M E N TS
Under SFAS No. 133, “Accounting for Derivative Instru-
ments and Hedging Activities,” all derivatives are required
to be recorded as assets or liabilities and measured at fair
value. Gains or losses resulting from changes in the values
of derivatives are recognized immediately or deferred,
depending on the use of the derivative and whether or not
it qualiﬁes as a hedge. Derivative ﬁnancial instruments are
periodically used by the Company in the management of
its interest rate and foreign currency exposures. Derivative
ﬁnancial instruments are not used for trading purposes.

T R A N S L AT I O N  O F  F O R E I G N  C U R R E N C Y
Assets and liabilities of the Company’s subsidiaries operat-
ing outside the United States which account in a functional
currency other than U.S. dollars are translated into U.S.
dollars using exchange rates at the end of the year. Rev-
enues and expenses are translated at average exchange
rates effective during the year. Foreign currency translation
gains and losses are included as a component of accu-
mulated other comprehensive income (loss) within
shareholders’ equity.

FA I R  VA LU E  O F  F I N A N C I A L  I N S T RU M E N TS
The carrying amounts reported in the balance sheets for
accounts receivable, accounts payable, and accrued

(In thousands)

expenses and other liabilities approximate fair value due to
the immediate to short-term maturity of these ﬁnancial
instruments. The fair values of the revolving credit facility,
term loan, and receivables securitization are determined
using current interest rates for similar instruments as of
December 31, 2003 and 2002 and approximate the carry-
ing 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 esti-
mated fair value of the Company’s other ﬁnancial instru-
ments at December 31, 2003 and 2002 are based upon
available market information and are as follows:

2003

2002

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

Redeemable convertible preferred securities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated convertible debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior and senior subordinated notes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 221,550
2,079,684
45,779

$ 183,887
2,228,138
42,739

$ 226,550

$ 126,324

1,605,947
61,984

1,454,113
57,041

P R E F E R R E D  S TO C K
The Company issued Series A Perpetual Convertible Pre-
ferred Stock (“Series A Preferred”) and Series B Perpetual
Convertible Preferred Stock (“Series B Preferred”) in 1999
and included such preferred stock in stockholders’ equity.
In July 2001, the SEC issued guidance to all public compa-
nies as to when redeemable preferred stock may be classi-
ﬁed as stockholders’ equity. This guidance indicates that
preferred stock that would be subject to redemption on the
occurrence of an event outside the control of the issuer may
not be classiﬁed as equity and that the probability of the
event occurring is not a factor to be considered. Under this
guidance, the Series A Preferred and Series B Preferred
would not be included in stockholders’ equity because
this stock would be subject to mandatory redemption on
a hostile change of control. On September 28, 2001, the
Company entered into an agreement effecting the exchange
of new Series C Perpetual Convertible Preferred Stock
(“Series C Preferred”) for the Series A Preferred and new
Series D Perpetual Convertible Preferred Stock (“Series D
Preferred”) for the Series B Preferred (see Note 12). The
Series C Preferred and Series D Preferred stock is not
subject to mandatory redemption on a hostile change of
control, and is classiﬁed as stockholders’ equity under the
SEC guidance.

The effect of the foregoing is that the Company’s perpetual
convertible preferred stock is classiﬁed as stockholders’
equity as of September 28, 2001 and thereafter, but is clas-
siﬁed outside of stockholders’ equity for earlier dates.
Accordingly, the Company has restated the 2000 balance
sheet to show its $430.8 million of perpetual convertible
preferred stock under “Series A and B Preferred Stock”
rather than under “Stockholders’ Equity.” The Company
has also made a corresponding change to the related Con-
solidated Statements of Stockholders’ Equity. In all other
respects, the ﬁnancial statements remain unchanged,
including total assets and liabilities, revenues, operating
income, net income and earnings per share.

R EV E N U E  R E CO G N I T I O N
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 equipment rental is recog-
nized over the contract term.

A DV E RT I S I N G  E X PE N S E
The Company advertises primarily through trade publica-
tions and Yellow Pages. Advertising expense is recognized
over the period of related beneﬁt. Advertising expense was
$8.4 million, $7.8 million and $11.9 million for the years
ended December 31, 2003, 2002 and 2001, respectively.

I N CO M E  TA X E S
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.

U S E  O F  E S T I M AT E S
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 ﬁnan-
cial statements and accompanying notes. Signiﬁcant esti-
mates include restructuring charges, allowance for doubtful
accounts, useful lives for depreciation, goodwill and other
asset impairments, deferred income taxes, claim reserves,
loss contingencies and fair values of ﬁnancial instruments.
Actual results could materially differ from those estimates.

45

CO N C E N T R AT I O N S  O F  C R E D I T  R I S K
Financial instruments that potentially subject the Com-
pany 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 is limited
because a large number of geographically diverse customers
make up the Company’s customer base. The Company’s
largest customer in 2003 represented less than 1% of total
revenues and no single customer represented greater than
1% of total accounts receivable. The Company controls
credit risk through credit approvals, credit limits and
monitoring procedures.

S TO C K - B A S E D  CO M PE N S AT I O N
The Company accounts for its stock-based compensation
arrangements using the intrinsic value method under the
provisions of Accounting Principles Board (“APB”) Opin-
ion No. 25, “Accounting for Stock Issued to Employees.”
At December 31, 2003, the Company had six stock-based
compensation plans (see Note 13). 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. Restricted stock
awards granted by the Company are recognized as deferred
compensation. The Company recognizes compensation
expense related to these restricted stock awards over their
vesting periods or earlier upon acceleration of vesting. Dur-
ing 2003, the Company recognized increased amortization
for the accelerated vesting of approximately 866,000 shares
of restricted stock. The following table provides additional
information related to the Company’s stock-based compen-
sation arrangements for the years ended December 31,
2003, 2002 and 2001:

(In thousands)

2003

2002

2001

December 31

Net income (loss), as reported . .
Plus: Stock-based compensation 
expense included in reported 
net income (loss), net of tax . .
Less: Stock-based compensation 
expense determined using 
the fair value method, 
net of tax  . . . . . . . . . . . . . . .

$(258,581) $(397,825)

$111,256

20,281

6,980

3,613

(22,869)

(11,402)

(11,798)

Pro forma net income (loss)  . . .

$(261,169) $(402,247)

$103,071

Basic earnings (loss) available 
to common stockholders 
per share:

As reported . . . . . . . . . . . .
Pro forma  . . . . . . . . . . . . .
Diluted earnings (loss) available 
to common stockholders 
per share:

$(3.35)
$(3.38)

$(4.78)
$(4.84)

$1.54
$1.43

As reported . . . . . . . . . . . .
Pro forma  . . . . . . . . . . . . .

$(3.35)
$(3.38)

$(4.78)
$(4.84)

$1.18
$1.09

The weighted average fair value of options granted was
$5.47, $5.57 and $7.34 during 2003, 2002 and 2001,
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

46

a single measure of fair value of options. The Company
used a risk-free interest rate average of 1.81%, 2.01% and
3.74% in 2003, 2002 and 2001, respectively, a volatility fac-
tor for the market price of the Company’s common stock of
63%, 66% and 49% in 2003, 2002 and 2001, respectively,
and a weighted-average expected life of options of approxi-
mately three years in 2003, 2002 and 2001. 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 compen-
sation expense in future years may be materially different.

I N S U R A N C E
The Company is insured for general liability, automobile
liability, workers’ compensation, and group medical claims
up to a speciﬁed claim and aggregate amounts (subject to
deductibles per occurrence of $2 million for general liabil-
ity, $2 million for workers’ compensation and $3 million
for automobile liability). 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.

I M PAC T  O F  R E C E N T LY  I S S U E D  

ACCO U N T I N G  S TA N D A R D S
In April 2002, the FASB issued SFAS No. 145, “Rescission
of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections.” This
standard rescinds SFAS No. 4, “Reporting Gains and
Losses from Extinguishment of Debt,” and an amendment
of that Statement, SFAS No. 64, “Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements.” This stan-
dard also rescinds SFAS No. 44, “Accounting for Intangi-
ble Assets of Motor Carriers.” This standard amends SFAS
No. 13, “Accounting for Leases,” to eliminate an inconsis-
tency related to the required accounting for sale-leaseback
transactions and certain lease modiﬁcations. This standard
also amends other existing authoritative pronouncements
to make various technical corrections, clarify meanings,
or describe their applicability under changed conditions.
The Company adopted this standard on January 1, 2003,
and reclassiﬁed a pre-tax extraordinary loss of approxi-
mately $18.1 million recognized during the second quarter
of 2001 to operating income. The adoption of the remain-
ing provisions of SFAS No. 145 did not have a material
effect on the Company’s consolidated ﬁnancial position
or results of operations.

In December 2002, the FASB issued SFAS No. 148,
“Accounting for Stock-Based Compensation—Transition
and Disclosure.” This standard provides alternative meth-
ods of transition to the fair value method of accounting for
stock-based employee compensation under SFAS No. 123,
“Accounting for Stock-Based Compensation,” but does
not require the Company to use the fair value method.
This standard also amends certain disclosure requirements
related to stock-based employee compensation. The
Company adopted the disclosure portion of this standard
as of December 31, 2002 and such adoption is reﬂected
within this Note.

In January 2003, the FASB issued Interpretation No. 46
(“FIN 46,” revised December 2003), “Consolidation of
Variable Interest Entities,” which addresses consolidation
of variable interest entities (“VIEs”). FIN 46 requires a VIE
to be consolidated by a parent company if that company is
subject to a majority of the risk of loss from the variable
interest entity’s activities or entitled to receive a majority of
the entity’s residual returns or both. A VIE is a corporation,
partnership, trust or any other legal structure used for busi-
ness purposes that either does not have equity investors
with voting rights or has equity investors that do not pro-
vide sufﬁcient ﬁnancial resources for the entity to support
its activities. The consolidation requirements of FIN 46
apply immediately to VIEs created after January 31, 2003.
For entities created prior to February 1, 2003, the effective
date of these requirements, which originally was July 1,
2003, had been deferred so as not to apply until the ﬁrst
period ending after December 15, 2003. Upon adoption of
this standard, as of December 31, 2003, the Company
deconsolidated a subsidiary trust that had issued convert-
ible preferred securities. As a result of such deconsolidation:
(i) the Company-obligated mandatorily redeemable con-
vertible preferred securities of a subsidiary trust, which had
previously been reﬂected on the Company’s consolidated
balance sheets, were removed from its consolidated balance
sheets at December 31, 2003; and (ii) the subordinated
convertible debentures that were issued to the subsidiary
trust, which previously had been eliminated in the Com-
pany’s consolidated balance sheets, were no longer elimi-
nated in its consolidated balance sheets at December 31,
2003. The carrying amount of the convertible preferred
securities removed from the consolidated balance sheets
was the same as the carrying amount of the subordinated
convertible debentures added to the consolidated balance
sheets. However, the subordinated convertible debentures
are reﬂected as a component of liabilities on the consoli-
dated balance sheets at December 31, 2003, whereas the
convertible preferred securities were reﬂected as a separate
category prior to December 31, 2003. See Note 11. The
adoption of this standard did not otherwise have a material
effect on the Company’s statements of ﬁnancial position
or results of operations.

In April 2003, the FASB issued SFAS No. 149, “Amend-
ment of Statement 133 on Derivative Instruments and
Hedging Activities.” This standard amends and clariﬁes
ﬁnancial accounting and reporting for derivative instru-
ments and for hedging activities under SFAS No. 133,
“Accounting for Derivative Instruments and Hedging
Activities.” This standard is effective for contracts entered
into or modiﬁed after June 30, 2003, except as stated
below, and for hedging relationships designated after June
30, 2003. The provisions of this standard that relate to
SFAS No. 133 Implementation Issues that have been effec-
tive for ﬁscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their
respective effective dates. The adoption of this standard
regarding the provisions effective after June 30, 2003 did
not have a material effect on the Company’s statements of
ﬁnancial position or operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting
for Certain Financial Instruments with Characteristics of
both Liabilities and Equity,” which establishes standards
for how an issuer classiﬁes and measures certain ﬁnancial
instruments with characteristics of both liabilities and
equity. This standard requires that ﬁnancial instruments
falling within the scope of this standard be classiﬁed as lia-
bilities. This standard is effective for ﬁnancial instruments
entered into or modiﬁed after May 31, 2003 and otherwise
is effective with the ﬁrst interim period beginning after
June 15, 2003. The adoption of this standard did not have a
material effect on the Company’s statements of ﬁnancial
position or results of operations.

3 .  ACQU I S I T I O N S

The acquisitions completed during the years ended
December 31, 2003, 2002 and 2001 include one, two,
and three acquisitions, respectively, that were accounted
for as purchases. The results of operations of the businesses
acquired in these acquisitions have been included in the
Company’s results of operations from their respective
acquisition dates. The acquisition made in 2003 was
insigniﬁcant to the Company’s operations.

On June 30, 2002, the Company acquired 35 rental loca-
tions from National Equipment Services, Inc. for initial
consideration of approximately $111.6 million in cash,
which was determined based primarily on the number of
locations acquired and their ﬁnancial performance. The
acquisition of these rental locations, which offer trench
safety equipment rental, was made to complement the
Company’s existing network of rental locations. The results
of operations of the acquisitions are included in the Com-
pany’s statement of operations as of the date of acquisition.
The initial consideration paid by the Company for the
other 2002 acquisition was approximately $45.9 million
in cash. The Company estimates that approximately
$93.1 million of goodwill related to the 2002 acquisitions
will be deductible for tax purposes.

The aggregate initial consideration paid by the Company
for 2001 acquisitions that were accounted for as purchases
was approximately $12.1 million and consisted of approxi-
mately $11.5 million in cash and $0.6 million in seller
notes. In addition, the Company repaid or assumed out-
standing indebtedness in the aggregate amount of approxi-
mately $4.9 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. Purchase price allocations
are subject to change when additional information con-
cerning asset and liability valuations are completed. The
preliminary purchase price allocations that are subject to
change primarily consist of rental and non-rental equip-
ment valuations. These allocations are ﬁnalized within 12
months of the acquisition date and are not expected to
result in signiﬁcant differences between the preliminary
and ﬁnal allocations.

47

The Company completed its initial impairment analysis in
the ﬁrst quarter of 2002 and recorded a non-cash charge of
approximately $348.9 million ($288.3 million, net of tax).
The charge associated with the initial impairment analysis
is reﬂected on the Company’s statement of operations as a
“Cumulative Effect of Change in Accounting Principle.”
The Company completed subsequent impairment analyses
in the fourth quarter of 2002 and fourth quarter of 2003
and recorded additional non-cash impairment charges. The
additional charge in the fourth quarter of 2002 was approx-
imately $247.9 million ($198.8 million, net of tax), and the
additional charge in the fourth quarter of 2003 was approx-
imately $296.9 million ($238.9 million, net of tax). These
charges are reﬂected on the Company’s statement of opera-
tions as “goodwill impairment.”

The impairment charges recognized in 2003 and 2002
related to certain branches that decreased in value. The fac-
tors that negatively affected the value of these branches
included the following: (i) continued weakness in private
non-residential construction spending which negatively
affected the earnings of the Company’s branches; and (ii)
to a lesser extent, operational weakness at some branches
and increased competition for some branches. Fair values
used in impairment testing were based upon valuation
techniques using multiples of earnings and revenues.

The Company is required to review its goodwill for further
impairment at least annually. The Company tests for good-
will impairment on a branch-by-branch basis rather than
on an aggregate basis. This means that a goodwill write-off
is required even if only one or a limited number of the
Company’s branches has impairment as of the annual test-
ing date or at any other date when an indicator of impair-
ment may exist and even if there is no impairment for all
the Company’s branches on an aggregate basis. In addition,
the Company assesses impairment solely on the basis of
recent historical performance and without reference to
expected future performance. This means that, if the his-
torical data for a branch indicates impairment, a goodwill
write-off is required even when the Company believes that
branch’s future performance will be signiﬁcantly better.
The fact that the Company tests for impairment on a
branch-by-branch basis and uses only historical ﬁnancial
data in assessing impairment increases the likelihood that
the Company will be required to take additional non-cash
goodwill write-offs in the future, although it cannot quan-
tify at this time the magnitude of any future write-offs.
Future goodwill write-offs, if required, may have a material
adverse effect on the Company’s results.

The following table summarizes, on an unaudited pro
forma basis, the combined results of operations of the
Company for the years ended December 31, 2002 and
2001 as though each acquisition described above was made
on January 1, 2001.

(In thousands, except per share data)

2002

2001

Revenues  . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before cumulative effect of 

$2,851,853

$3,000,196

change in accounting principle  . . . . . . . .

(108,871)

114,023

Basic earnings (loss) available to common 
stockholders before cumulative effect 
of change in accounting principle 
per share  . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings (loss) available to 

common stockholders before cumulative 
effect of change in accounting principle 
per share  . . . . . . . . . . . . . . . . . . . . . . . . .

$(0.97)

$1.58

$(0.97)

$1.21

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.

The acquisition made in 2003 had an insigniﬁcant impact
on the Company’s pro forma results of operations for the
year ended December 31, 2003. Therefore, pro forma
results of operations for such year are not shown.

4 .  G O O DW I L L  A N D  OT H E R  
I N TA N G I B L E  A S S E TS

Changes in the Company’s carrying amount of goodwill for
2003 are as follows:

(In thousands)

Balance at December 31, 2002  . . . . . . . . . . . . . . . . . . . .
Impairment charges  . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments  . . . .
Goodwill related to acquisitions  . . . . . . . . . . . . . . . . . . .

$1,705,191
(296,873)
26,985
2,506

Balance at December 31, 2003  . . . . . . . . . . . . . . . . . . . .

$1,437,809

The Company adopted SFAS No. 142, “Goodwill and
Other Intangible Assets” issued by the Financial Accoun-
tants Standards Board (“FASB”). Under this standard,
goodwill, which was previously amortized over 40 years, is
no longer amortized. The Company amortized approxi-
mately $58.4 million of goodwill in 2001. The Company’s
approximately $3.2 million of other intangible assets
will continue to be amortized over their estimated useful
lives. The Company is required to periodically review its
goodwill for impairment. In general, this means that the
Company must determine whether the fair value of the
goodwill, calculated in accordance with applicable
accounting standards, is at least equal to the recorded
value shown on its balance sheet. If the fair value of the
goodwill is less than the recorded value, the Company is
required to write off the excess goodwill as an expense.

48

The reconciliation of previously reported net income and
earnings per share to adjusted net income and earnings per
share excluding goodwill amortization is as follows for the
years ended December 31, 2003, 2002 and 2001:

(In thousands, except 
per share data)

Income (loss) before cumulative 

effect of change in 
accounting principle  . . . . . .
Goodwill amortization expense, 
net of tax  . . . . . . . . . . . . . . .

Adjusted income (loss) before 
cumulative effect of change 
in accounting principle  . . . .

Net income (loss)  . . . . . . . . . . .
Goodwill amortization expense, 
net of tax  . . . . . . . . . . . . . . .

2003

2002

2001

$(258,581) $(109,486)

$111,256

47,046

$(258,581) $(109,486)

$158,302

$(258,581) $(397,825)

$111,256

47,046

respectively. The weighted-average remaining period of
amortization as of December 31, 2003 is approximately
14 months.

As of December 31, 2003, estimated amortization expense
of other intangible assets for each of the next ﬁve years is
as follows:

(In thousands)

2004  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,653
867
490
95
83
37

$3,225

Adjusted net income (loss)  . . . .

$(258,581) $(397,825)

$158,302

5 .  R E S T RU C T U R I N G  C H A RG E S

Earnings (loss) per share—basic:
Income (loss) available to 

common stockholders before 
cumulative effect of change 
in accounting principle  . . . .
Goodwill amortization expense, 
net of tax  . . . . . . . . . . . . . . .

Adjusted income (loss) available 
to common stockholders 
before cumulative effect 
of change in accounting 
principle . . . . . . . . . . . . . . . .

Income (loss) available to 

common stockholders  . . . . .
Goodwill amortization expense, 
net of tax  . . . . . . . . . . . . . . .

Adjusted income (loss) available 
to common stockholders  . . .

Earnings (loss) per 
share—diluted:

Income (loss) available to 

common stockholders before 
cumulative effect of change 
in accounting principle  . . . .
Goodwill amortization expense, 
net of tax  . . . . . . . . . . . . . . .

Adjusted income (loss) available 
to common stockholders 
before cumulative effect 
of change in accounting 
principle . . . . . . . . . . . . . . . .

Income (loss) available to 

$(3.35)

$(0.98)

$1.54

0.65

$(3.35)

$(0.98)

$2.19

$(3.35)

$(4.78)

$1.54

0.65

$(3.35)

$(4.78)

$2.19

$(3.35)

$(0.98)

$1.18

0.49

$(3.35)

$(0.98)

$1.67

common stockholders  . . . . .

$(3.35)

$(4.78)

$1.18

Goodwill amortization 

expense, net of tax  . . . . . . . .

Adjusted income (loss) available 
to common stockholders  . . .

0.49

$(3.35)

$(4.78)

$1.67

Other intangible assets consist of non-compete agreements
and are amortized over periods ranging from three to eight
years. The cost of other intangible assets and the related
accumulated amortization as of December 31, 2003 were
$18.2 million and $15.0 million, respectively, and as of
December 31, 2002 were $17.0 million and $11.2 million,
respectively. Amortization expense of other intangible
assets was $4.2 million, $3.5 million and $3.2 million for
the years ended December 31, 2003, 2002 and 2001,

The Company adopted a restructuring plan in 2001 and a
second restructuring plan in 2002 as described below. In
connection with these plans, the Company recorded
restructuring charges of $28.9 million in 2001 (including a
non-cash component of approximately $10.9 million) and
$28.3 million in the fourth quarter of 2002 (including a
non-cash component of approximately $2.5 million).

The 2001 plan involved the following principal elements:
(i) 31 underperforming branches were closed or consoli-
dated with other locations; (ii) ﬁve administrative ofﬁces
were closed or consolidated with other locations; (iii) the
reduction of the Company’s workforce by 489 through the
termination of branch and administrative personnel; and
(iv) certain information technology hardware and software
was no longer used.

The 2002 plan involved the following principal elements:
(i) 40 underperforming branches and ﬁve administrative
ofﬁces were closed or consolidated with other locations;
(ii) the reduction of the Company’s workforce by 412
through the termination of branch and administrative
personnel; and (iii) a certain information technology
project was abandoned.

The costs to vacate facilities primarily represent the pay-
ment of obligations under leases offset by estimated sub-
lease opportunities, the write-off of capital improvements
made to such facilities and the write-off of related goodwill
(only in 2001). The workforce reduction costs primarily
represent severance. The information technology costs rep-
resent the payment of obligations under equipment leases
relating to the abandonment of certain information tech-
nology projects.

The aggregate balance of the 2001 and 2002 charges was
$17.3 million as of December 31, 2003. The Company esti-
mates that approximately $6.8 million of this amount will
be incurred by December 31, 2004 and approximately
$10.5 million in future periods.

49

Components of the restructuring charges are as follows:

9 .  D E B T

(In thousands)

Balance

Balance
December 31, Activity in December 31,
2003

2003

2002

Costs to vacate facilities  . . .
Workforce reduction 

$22,258

$7,298

$14,960

costs  . . . . . . . . . . . . . . . .

3,462

1,706

1,756

Information technology 

costs  . . . . . . . . . . . . . . . .

1,395

782

613

$27,115

$9,786

$17,329

6 .  R E N TA L  E QU I P M E N T

Rental equipment consists of the following:

(In thousands)

December 31

2003

2002

Rental equipment  . . . . . . . . . . . . . . . . . . . . $2,957,506
Less accumulated depreciation  . . . . . . . . . .
(886,014)

$2,682,258
(836,583)

Rental equipment, net . . . . . . . . . . . . . . . . . $2,071,492

$1,845,675

7 .  P RO PE RT Y  A N D  E QU I P M E N T

Property and equipment consist of the following:

(In thousands)

December 31

2003

2002

Land
 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation equipment . . . . . . . . . . . . . .
Machinery and equipment  . . . . . . . . . . . . .
Furniture and ﬁxtures  . . . . . . . . . . . . . . . . .
Leasehold improvements  . . . . . . . . . . . . . . .

$ 48,975
103,613
290,533
45,337
76,616
74,651

$ 46,623
94,842
278,853
45,086
73,722
70,545

Less accumulated depreciation 

and amortization . . . . . . . . . . . . . . . . . . .

(233,124)

(184,319)

Property and equipment, net . . . . . . . . . . . .

$ 406,601

$ 425,352

639,725

609,671

8 .  ACC RU E D  E X PE N S E S  A N D  
OT H E R  L I A B I L I T I E S

Accrued expenses and other liabilities consist of 
the following:

(In thousands)

December 31

2003

2002

Accrued incentive compensation . . . . . . . . .
Accrued insurance . . . . . . . . . . . . . . . . . . . .
Accrued interest  . . . . . . . . . . . . . . . . . . . . .
Restructuring accrual  . . . . . . . . . . . . . . . . .
Deferred revenue  . . . . . . . . . . . . . . . . . . . . .
Other
 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 26,808
46,188
48,866
17,329
18,656
68,933

$ 30,397
22,226
49,639
27,115
3,178
54,524

$226,780

$187,079

50

Debt consists of the following:

(In thousands)

Credit Facility, interest payable at a 
weighted average rate of 5.3% at 
December 31, 2003 and 2002 . . . . . . . . . $

Term Loan, interest payable at 4.2% 

and at 4.8% at December 31, 2003 and 
2002, respectively  . . . . . . . . . . . . . . . . . .

91⁄2% Senior Subordinated Notes, interest 

payable semi-annually  . . . . . . . . . . . . . . .

8.8% Senior Subordinated Notes, interest 

payable semi-annually  . . . . . . . . . . . . . . .

91⁄4% Senior Subordinated Notes, interest 

December 31

2003

2002

52,592

$

45,332

639,033

639,033

200,000

202,153

payable semi-annually  . . . . . . . . . . . . . . .

300,000

300,000

9% Senior Subordinated Notes, interest 

payable semi-annually  . . . . . . . . . . . . . . .

250,000

250,000

73⁄4% Senior Subordinated Notes, interest 

payable semi-annually  . . . . . . . . . . . . . . .

525,000

103⁄4% Senior Notes, interest payable 

semi-annually  . . . . . . . . . . . . . . . . . . . . .

860,934

653,795

17⁄8% Convertible Senior Subordinated 

Notes, interest payable semi-annually  . . .

143,750

Receivables securitization, interest payable 

at 2.2% at December 31, 2002  . . . . . . . .

Other debt, including capital leases, 

interest payable at various rates ranging 
from 5% to 10% at December 31, 2003 
and 2002, due through 2009  . . . . . . . . .

160,501

45,779

61,984

$2,817,088

$2,512,798

R E F I N A N C I N G  T R A N S AC T I O N S
Reﬁnancing Transaction in 2001. The Company reﬁnanced
outstanding secured indebtedness of approximately
$1,664.5 million and obligations under a synthetic lease of
$31.2 million with proceeds from a new senior secured
credit facility and the issuance of senior notes. As a result of
the reﬁnancing, the Company recorded a charge of approx-
imately $18.1 million ($11.3 million, net of tax), primarily
related to the write-off of ﬁnancing fees and a charge of
approximately $7.8 million related to reﬁnancing costs of
the synthetic lease. These charges were recorded in “other
(income) expense, net.”

Reﬁnancing Transaction in 2002. The Company used net
proceeds from the issuance of senior notes to: (i) repay
approximately $99.7 million of outstanding indebtedness
under the Company’s then existing term loan; and (ii)
repay approximately $99.7 million of outstanding borrow-
ings under the revolving credit facility. As a result of the
reﬁnancing, the Company recorded in “other (income)
expense” a charge of approximately $1.6 million ($0.9
million, net of tax) related to the write-off of ﬁnancing fees.

Reﬁnancing Transactions in 2003. During the fourth quarter
of 2003, the Company reﬁnanced $405 million of its debt
and bought-out equipment leases. As part of these transac-
tions, the Company:

• sold approximately $144 million of 17⁄8% Convertible

Senior Subordinated Notes Due 2023;

• sold $525 million of 73⁄4% Senior Subordinated Notes

Due 2013;

• redeemed $205 million principal amount of the

Company’s outstanding 8.8% Senior Subordinated
Notes Due 2008 (the “8.8% Notes”);

• redeemed $200 million principal amount of the

Company’s outstanding 91⁄2% Senior Subordinated
Notes Due 2008 (the “91⁄2% Notes”); and

• paid approximately $347 million for the buy-out of

equipment leases.

As a result of the transactions discussed above, the Com-
pany recorded in “other (income) expense” a charge of
$28.9 million ($17.1 million, net of tax) in connection with
the redemption of the notes and a charge of $95.1 million
($57.7 million, net of tax) in connection with the buy-out
of equipment leases. The charge relating to the redemption
of notes primarily reﬂects the redemption price premium
and the write-off of ﬁnancing fees relating to such notes.
The charge relating to the buy-out of equipment leases pri-
marily reﬂects the excess of the buy-out price over the fair
value of the equipment purchased, early termination fees
and the write-off of ﬁnancing fees related to such leases.

Reﬁnancing Transactions in First Quarter of 2004. During
the ﬁrst quarter of 2004, the Company reﬁnanced approxi-
mately $2.1 billion of its debt. As part of this reﬁnancing,
the Company:

• obtained a new senior secured credit facility to replace the
senior secured credit facility the Company previously had
in place;

• sold $1 billion of 61⁄2% Senior Notes Due 2012;

• sold $375 million of 7% Senior Subordinated Notes

Due 2014;

• repaid $639 million of term loans and $52 million of

borrowings that were outstanding under the old
credit facility;

• repurchased $845 million principal amount of the

Company’s 103⁄4% Senior Notes Due 2008 (the “103⁄4%
Notes”), pursuant to a tender offer;

• redeemed $300 million principal amount of the

Company’s outstanding 91⁄4% Senior Subordinated
Notes Due 2009 (the “91⁄4% Notes”); and

• called for redemption $250 million principal amount of
the Company’s outstanding 9% Senior Subordinated
Notes Due 2009 (with such redemption scheduled to be
completed on April 1, 2004).

In connection with the reﬁnancings in the ﬁrst quarter of
2004, the Company will incur aggregate pre-tax charges in
2004 of approximately $175 million to $185 million attrib-
utable to: (i) the redemption premium for notes redeemed
as part of the reﬁnancing; and (ii) the write-off of previ-
ously capitalized costs relating to the debt reﬁnanced.

I N F O R M AT I O N  CO N C E R N I N G  D E B T  O U TS TA N D I N G

A S  O F  D E C E M B E R  3 1 ,  2 0 0 3
17⁄ 8% Convertible Senior Subordinated Notes. In October
and December 2003, URI issued approximately $144 mil-
lion aggregate principal amount of 17⁄ 8% Convertible Senior
Subordinated Notes (the “17⁄ 8% Convertible Notes”) which

are due October 15, 2023. The net proceeds from the
sale of the 17⁄ 8% Convertible Notes were approximately
$140 million (after deducting the initial purchasers’ dis-
count and offering expenses). The 17⁄ 8% Convertible Notes
are unsecured and are guaranteed by Holdings. Holders of
the 17⁄ 8% Convertible Notes may convert them into shares
of Holdings’ common stock prior to their maturity at a
conversion price of approximately $25.67 per share (subject
to adjustment in certain circumstances), unless the 17⁄ 8%
Convertible Notes have previously been redeemed or repur-
chased, if: (i) the price of Holdings’ common stock reaches
a speciﬁc threshold; (ii) the 17⁄ 8% Convertible Notes are
called for redemption; (iii) speciﬁed corporate transactions
occur or; (iv) the trading price of the 17⁄ 8% Convertible
Notes falls below certain thresholds. The 17⁄ 8% Convertible
Notes mature on October 15, 2023 and may be redeemed
by URI on or after October 20, 2010, at 100.0% of the
principal amount. Holders of the 17⁄ 8% Convertible Notes
may require URI to repurchase all or a portion of the
17⁄ 8% Convertible Notes in cash on each of October 15,
2010, October 15, 2013 and October 15, 2018 at 100.0%
of the principal amount of the 17⁄ 8% Convertible Notes
to be repurchased.

7 3⁄4% Senior Subordinated Notes. In November 2003, URI
issued $525 million aggregate principal amount of 73⁄4%
Senior Subordinated Notes (the “73⁄4% Notes”) which are
due November 15, 2013. The net proceeds from the sale of
the 73⁄4% Notes were approximately $523 million (after
deducting the initial purchasers’ discount and offering
expenses). The 73⁄4% Notes are unsecured and are guaran-
teed by Holdings and, subject to limited exceptions, URI’s
domestic subsidiaries. The 73⁄4% Notes mature on Novem-
ber 15, 2013 and may be redeemed by URI on or after
November 15, 2008, at speciﬁed redemption prices that
range from 103.875% in 2008 to 100.0% in 2011 and
thereafter. In addition, on or prior to November 15, 2006,
URI may, at its option, use the proceeds of a public equity
offering to redeem up to 35% of the outstanding 73⁄4%
Notes at a redemption price of 107.75%. The indenture
governing the 73⁄4% Notes contains certain restrictive
covenants, including limitations on: (i) additional indebt-
edness; (ii) restricted payments; (iii) liens; (iv) dividends
and other payments; (v) preferred stock of certain sub-
sidiaries; (vi) transactions with afﬁliates; (vii) the disposi-
tion of proceeds of asset sales; and (viii) the Company’s
ability to consolidate, merge or sell all or substantially all
of its assets.

10 3⁄4% Senior Notes. The Company issued an aggregate of
$860 million principal amount of 103⁄4% Notes which are
due April 15, 2008 in three separate transactions in 2001,
2002 and 2003. As part of the reﬁnancing transaction in
the ﬁrst quarter of 2004, the Company repurchased through
a tender offer substantially all of the 103⁄4% Notes and, as a
result, only approximately $15 million principal amount
of these notes were outstanding as of March 1, 2004.

Other Senior Subordinated Notes. The 91⁄4% Senior Subordi-
nated Notes and the 9% Senior Subordinated Notes
shown in the debt table above were redeemed or called for
redemption as part of the 2004 reﬁnancing described above
and, as a result, are no longer outstanding.

51

Old Revolving Credit Facility. As of December 31, 2003, the
Company had a revolving credit facility that enabled URI
to borrow up to $650 million on a revolving basis and
enabled one of its Canadian subsidiaries to borrow up to
$100 million (provided that the aggregate borrowings of
URI and the Canadian subsidiary did not exceed $650
million). Up to $250 million of the revolving credit facility
was available in the form of letters of credit ($187 million
outstanding as of December 31, 2003). This facility was
repaid and replaced by a new facility in connection with
the 2004 reﬁnancing described above.

Old Term Loan. As of December 31, 2003, the Company
had a $639 million term loan. This loan was repaid and
replaced with a new term loan in connection with the 2004
reﬁnancing described above.

Receivables Securitization. On June 17, 2003, the Company
obtained a new accounts receivable securitization facility
under which one of its subsidiaries can borrow up to
$250 million based upon a qualifying collateral pool of
accounts receivable. Upon obtaining this facility, the
Company terminated its existing accounts receivable
securitization facility.

The borrowings under the new facility and the receivables
in the collateral pool are included in the liabilities and
assets, respectively, reﬂected on the Company’s consoli-
dated balance sheet. However, such assets are only available
to satisfy the obligations of the borrower subsidiary. Key
terms of this facility include:

• borrowings may be made only to the extent that the face
amount of the receivables in the collateral pool exceeds
the outstanding loans by a speciﬁed amount;

• the facility is structured so that the receivables in the col-
lateral pool are the lenders’ only source of repayment;

• prior to expiration or early termination of the facility,

amounts collected on the receivables may, subject to cer-
tain conditions, be retained by the borrower, provided
that the remaining receivables in the collateral pool are
sufﬁcient to secure the then outstanding borrowings; and

• after expiration or early termination of the facility, no new
amounts will be advanced under the facility and collec-
tions on the receivables securing the facility will be used
to repay the outstanding borrowings.

Outstanding borrowings under the facility generally accrue
interest at the commercial paper rate plus 1%. However,
after expiration or early termination of the facility, out-
standing borrowings will accrue interest at 0.5% plus the
greater of: (i) the prime rate; and (ii) the Federal Funds
Rate plus 0.5%. The Company is also required to pay a
commitment fee of 0.45% per annum in respect of
undrawn commitments under the facility. As of December
31, 2003, there was no amount outstanding under the
facility. As of December 31, 2002, the outstanding borrow-
ings under the facility were approximately $160.5 million
and the aggregate face amount of the receivables in the
collateral pool was approximately $346.8 million.

The agreement governing this facility is scheduled to expire
on September 30, 2006. However, the lenders under this

52

facility, at their option, may terminate the facility earlier
upon the occurrence of certain events, including: (i) the
long-term senior secured debt rating of URI or, subject to
certain conditions, Holdings, is downgraded to be at or
below “B” by Standard & Poor’s Rating Services; (ii) the
long-term senior unsecured debt rating of URI or, subject
to certain conditions, Holdings, is downgraded to be at or
below “CCC+” by Standard & Poor’s Rating Services;
(iii) the long-term issuer rating of URI or, subject to certain
conditions, Holdings, is downgraded to be at or below
“Caa” by Moody’s Investors Service; (iv) the long-term
senior implied rating of URI or, subject to certain condi-
tions, Holdings, is downgraded to be at or below “B3” by
Moody’s Investors Service; or (v) either Standard & Poor’s
Rating Services or Moody’s Investors Service ceases to pro-
vide any such rating.

I N F O R M AT I O N  CO N C E R N I N G  D E B T  I N C U R R E D

S U B S E QU E N T  TO  D E C E M B E R  3 1 ,  2 0 0 3
7% Senior Subordinated Notes. In January 2004 as part
of the reﬁnancing in 2004 described above, URI issued
$375 million aggregate principal amount of 7% Senior
Subordinated Notes (the “7% Notes”) which are due Feb-
ruary 15, 2014. The net proceeds from the sale of the 7%
Notes were approximately $369 million (after deducting
the initial purchasers’ discount and offering expenses). The
7% Notes are unsecured and are guaranteed by Holdings
and, subject to limited exceptions, URI’s domestic sub-
sidiaries. The 7% Notes mature on February 15, 2014 and
may be redeemed by URI on or after February 15, 2009, at
speciﬁed redemption prices that range from 103.5% in
2009 to 100.0% in 2012 and thereafter. In addition, on or
prior to February 15, 2007, URI may, at its option, use the
proceeds of a public equity offering to redeem up to 35%
of the outstanding 7% Notes at a redemption price of
107.0%. The indenture governing the 7% Notes contains
certain restrictive covenants, including limitations on:
(i) additional indebtedness; (ii) restricted payments;
(iii) liens; (iv) dividends and other payments; (v) preferred
stock of certain subsidiaries; (vi) transactions with afﬁliates;
(vii) the disposition of proceeds of asset sales; and (viii)
the Company’s ability to consolidate, merge or sell all or
substantially all of its assets.

6 1⁄2% Senior Notes. In February 2004 as part of the reﬁ-
nancing in 2004 described above, URI issued $1 billion
aggregate principal amount of 61⁄2% Senior Notes (the
“61⁄2% Notes”) which are due February 15, 2012. The net
proceeds from the sale of the 61⁄2% Notes were approxi-
mately $984 million (after deducting the initial purchasers’
discount and offering expenses). The 61⁄2% Notes are unse-
cured and are guaranteed by Holdings. The 61⁄2% Notes
mature on February 15, 2012 and may be redeemed by URI
on or after February 15, 2008, at speciﬁed redemption
prices that range from 103.25% in 2008 to 100.0% in 2010
and thereafter. In addition, on or prior to February 15,
2007, URI may, at its option, use the proceeds of a public
equity offering to redeem up to 35% of the outstanding
61⁄2% Notes at a redemption price of 106.5%. The inden-
ture governing the 61⁄2% Notes contains certain restrictive
covenants, including limitations on: (i) additional indebt-
edness; (ii) restricted payments; (iii) liens; (iv) dividends

and other payments; (v) preferred stock of certain sub-
sidiaries; (vi) transactions with afﬁliates; (vii) the disposi-
tion of proceeds of asset sales; (viii) the Company’s ability
to consolidate, merge or sell all or substantially all of its
assets; and (ix) sale-leaseback transactions.

New Credit Facility. In the ﬁrst quarter of 2004, as part of
the reﬁnancing in 2004 described above, the Company
obtained a new senior secured credit facility. The new facil-
ity includes: (i) a $650 million revolving credit facility; (ii)
a $150 million institutional letter of credit facility; and (iii)
a $750 million term loan. The revolving credit facility,
institutional letter of credit facility and term loan are gov-
erned by the same credit agreement. Set forth below is cer-
tain additional information concerning the revolving credit
facility, institutional letter of credit facility and term loan.

Revolving Credit Facility. The revolving credit facility
enables URI to borrow up to $650 million on a revolving
basis and enables certain of the Company’s Canadian sub-
sidiaries to borrow up to $150 million (provided that the
aggregate borrowings of URI and the Canadian subsidiaries
may not exceed $650 million). A portion of the revolving
credit facility, up to $250 million, is available in the form of
letters of credit. The revolving credit facility is scheduled to
mature and terminate in February 2009.

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

Term Loan. The term loan will be obtained in two draws.
An initial draw of $550 million was obtained upon the
closing of the credit facility in February 2004, and an addi-
tional $200 million is expected to be obtained on April 1,
2004. Amounts repaid in respect of the term loan may not
be reborrowed.

The term loan must be repaid in installments as follows:
(i) during the period from and including June 30, 2004 to
and including March 31, 2010, URI must repay on each
March 31, June 30, September 30 and December 31 of
each year an amount equal to one-fourth of 1% of the origi-
nal aggregate principal amount of the term loan; and (ii)
URI must repay on each of June 30, 2010, September 30,
2010, December 31, 2010, and February 14, 2011 an
amount equal to 23.5% of the original aggregate principal
amount of the term loan.

Interest. As of February 2004, borrowings by URI under the
revolving credit facility accrue interest, at URI’s option, at
either (a) the ABR rate (which is equal to the greater of:
(i) the Federal Funds Rate plus 0.5%; and (ii) JPMorgan
Chase Bank’s prime rate) plus a margin of 1.25%, or (b) an
adjusted LIBOR rate plus a margin of 2.25%. The above
interest rate margins are adjusted quarterly based on the
Company’s Funded Debt to Cash Flow Ratio, up to the
maximum margins described in the preceding sentence
and down to minimum margins of 0.75% and 1.75% for

revolving loans based on the ABR rate and the adjusted
LIBOR rate, respectively.

As of February 2004, Canadian dollar borrowings under
the revolving credit facility accrue interest, at the borrower’s
option, at either (a) the Canadian prime rate (which is
equal to the greater of: (i) the CDOR rate plus 1%; and
(ii) JPMorgan Chase Bank, Toronto Branch’s prime rate)
plus a margin of 1.25%, or (b) the B/A rate (which is equal
to JPMorgan Chase Bank, Toronto Branch’s B/A rate) plus
a margin of 2.25%. These above interest rate margins are
adjusted quarterly based on the Company’s Funded Debt
to Cash Flow Ratio, up to the maximum margins described
in the preceding sentence and down to minimum margins
of 0.75% and 1.75% for revolving loans based on the
Canadian prime rate and the B/A rate, respectively.

URI is also required to pay the lenders a commitment fee
equal to 0.5% per annum in respect of undrawn commit-
ments under the revolving credit facility.

As of February 2004, borrowings under the term loan
accrue interest, at URI’s option, at either (a) the ABR rate
(which is equal to the greater of: (i) the Federal Funds Rate
plus 0.5%; and (ii) JPMorgan Chase Bank’s prime rate)
plus a margin of 1.25%; or (b) an adjusted LIBOR rate plus
a margin of 2.25% (which margins may be reduced to
1.00% and 2.00%, respectively, for certain periods based
on the Company’s Funded Debt to Cash Flow Ratio).

If at any time an event of default under the credit agree-
ment exists, the interest rate applicable to each revolving
loan and term loan will be based on the highest margins
described above plus 2%.

URI is required to pay a fee which accrues at the rate of
0.10% per annum on the amount of the ILCF. In addition,
URI is required to pay participation fees and fronting fees
in respect of letters of credit. For letters of credit obtained
under the ILCF, these fees accrue at the rate of 2.25% and
0.25% per annum, respectively.

Covenants. Under the agreement governing the Company’s
senior secured credit facility, the Company is required to,
among other things, satisfy certain ﬁnancial tests relating
to: (i) interest coverage ratio; (ii) the ratio of funded debt to
cash ﬂow; (iii) the ratio of senior secured debt to tangible
assets; and (iv) the ratio of senior secured debt to cash ﬂow.
If the Company is unable to satisfy any of these covenants,
the lenders could elect to terminate the credit facility and
require the Company to repay the outstanding borrowings
under the credit facility. The Company is also subject to
various other covenants under the agreements governing its
credit facility and other indebtedness. These covenants
limit or prohibit, among other things, the Company’s abil-
ity to incur indebtedness, make prepayments of certain
indebtedness, pay dividends, make investments, create
liens, make acquisitions, sell assets and engage in mergers
and acquisitions.

Interest Rate Swap Agreements. As of December 31, 2003,
the Company had outstanding interest rate swap agree-
ments that converted $1,160 million of its ﬁxed rate notes
to ﬂoating rate instruments. The ﬁxed rate notes being
converted consisted of: (i) $300 million of 91⁄4% senior

53

subordinated notes through 2009; (ii) $210 million of
December 2002 issued 103⁄4% senior notes through 2008;
(iii) $200 million of April 2003 issued 103⁄4% senior notes
through 2008; (iv) $200 million of 9% senior subordinated
notes through 2009; and (v) $250 million of 73⁄4% senior
subordinated notes through 2013.

Subsequent to December 31, 2003, as part of the reﬁnanc-
ing in 2004 described above, the Company terminated cer-
tain of the swap agreements described above and entered
into certain new swap agreements. As of March 1, 2004,
the Company had swap agreements with an aggregate
notional amount of $1,145 million. The effect of these
agreements is to convert $1,145 million of the Company’s
ﬁxed rate notes to ﬂoating rate instruments. The ﬁxed rate
notes converted consist of: (i) $245 million of our 61⁄2%
senior notes through 2012; (ii) $525 million of our 73⁄4%
senior subordinated notes through 2013; and (iii) $375
million of our 7% senior subordinated notes through 2014.
The Company’s swap agreements that convert its ﬁxed rate
notes to ﬂoating rate instruments are designated as fair
value hedges. Changes in the fair values of the Company’s
fair value hedges, as well as the offsetting fair value changes
in the hedged items, are recorded on the statement of
operations. There is no ineffectiveness related to the
Company’s hedges.

Maturities. Maturities of the Company’s debt for each of
the next ﬁve years and thereafter at December 31, 2003, as
adjusted to give effect to the reﬁnancing transactions in the
ﬁrst quarter of 2004 described above, are as follows:

(In thousands)

2004  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2005  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,501
17,470
13,233
10,840
23,644
2,909,290

54

1 0 .  I N CO M E  TA X E S

The provision for federal, state and provincial income taxes
is as follows:

(In thousands)

Domestic federal:

Current  . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . .

Domestic state:

Current  . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . .

Total domestic  . . . . . . . . . . . . .

Foreign federal:

Current  . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . .

Foreign provincial:

Current
Deferred . . . . . . . . . . . . . . . .

Total foreign . . . . . . . . . . . . . . .

Year Ended December 31

2003

2002

2001

$(58,423)

$ 3,963

$75,180

(58,423)

3,963

75,180

419
(15,551)

(15,132)

(73,555)

1,878
2,277

4,155

1,460

1,460

5,615

1,057
(1,825)

(768)

3,195

1,529
2,109

3,638

1,269

1,269

4,907

1,978
4,138

6,116

81,296

1,626
1,603

3,229

693

693

3,922

$(67,940)

$ 8,102

$85,218

A reconciliation of the provision for income taxes and the
amount computed by applying the statutory federal
income tax rate of 35% to income before provision for
income taxes and extraordinary item is as follows:

Year Ended December 31

(In thousands)

2003

2002

2001

Computed tax at statutory 

tax rate  . . . . . . . . . . . . . . . . .

$(114,283)

$(35,483)

$68,737

State income taxes, net of 

federal tax beneﬁt  . . . . . . . . .
Non-deductible goodwill  . . . . .
Other
 . . . . . . . . . . . . . . . . . . .

(9,835)
51,424
4,754

(499)
42,679
1,405

3,824
11,723
934

$ (67,940)

$ 8,102

$85,218

The components of deferred income tax assets (liabilities)
are as follows:

(In thousands)

Property and equipment  . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and allowances  . . . . . . . . . . . . . . .
Net operating loss and credit 

carryforwards  . . . . . . . . . . . . . . . . . . . . .
 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

December 31

2003

2002

$(572,437)
62,291
53,768

$(539,431)
32,799
57,057

280,585
10,741

221,905
2,083

$(165,052)

$(225,587)

The deferred tax assets and liabilities at December 31, 2003
include the effects of certain reclassiﬁcations related to dif-
ferences between the income tax provisions and tax returns
for prior years. These reclassiﬁcations had no effect on net
income. In addition to the deferred tax liabilities described
above, the Company has reserves for certain tax-related
matters resulting from its acquisitions.

For ﬁnancial reporting purposes, income before income
taxes and cumulative effect of change in accounting princi-
ple for the Company’s foreign subsidiaries was $5.1 million,
$9.2 million and $8.6 million for the years ended Decem-
ber 31, 2003, 2002 and 2001, respectively. At December
31, 2003 and 2002, unremitted earnings (deﬁcit) of foreign
subsidiaries were approximately $(2.2) million and
$(1.7) 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
(“NOLs”) of $635 million for federal income tax purposes
that expire through 2023. The Company has not recorded
a valuation allowance against its deferred tax assets because
it is deemed likely that such beneﬁt will be realized in
the future.

1 1 .  S U B O R D I N AT E D  CO N V E RT I B L E
D E B E N T U R E S

In August 1998, a subsidiary trust (the “Trust”) of Hold-
ings issued and sold in a private offering (the “Preferred
Securities Offering”) $300 million of 30 year, 61⁄2% Con-
vertible Quarterly Income Preferred Securities (the “Pre-
ferred Securities”). The Trust used the proceeds from the
Preferred Securities Offering to purchase 61⁄2% convertible
subordinated debentures due 2028 (the “Debentures”)
from Holdings which resulted in Holdings receiving all of
the net proceeds of the Preferred Securities Offering. Hold-
ings 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 (equiva-
lent 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 preferen-
tial cumulative cash distributions from the Trust at an
annual rate of 61⁄2% 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 payment 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 pay-
ments on the Preferred Securities. Under this circum-
stance, 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.

In accordance with FIN 46, the Company is considered to
hold a variable interest in the Trust. Since no one party
holds a majority of the Preferred Securities, the Company is
not deemed to be the primary beneﬁciary. Additionally, the
Trust’s common stock equity held by the Company would

not be considered at risk and therefore, the common stock
equity would not absorb any expected losses of the Trust.
Accordingly, the Company does not have a signiﬁcant vari-
able interest in the Trust. Therefore, as of December 31,
2003, the Company deconsolidated the Trust upon adop-
tion of FIN 46 thereby removing the amount previously
recorded as Company-obligated mandatorily redeemable
securities of a subsidiary trust and no longer eliminating
the Debentures, the result of which is recognition of subor-
dinated convertible debentures as a component of the
Company’s liabilities. As of December 31, 2003, upon the
deconsolidation of the Trust, the Company had recorded
on its balance sheets, in prepaid expenses and other assets,
an investment in the Trust of approximately $8.2 million.

Holdings has executed a guarantee with regard to payment
of the Preferred Securities to the extent that the Trust has
insufﬁcient funds to make the required payments.

1 2 .  S E R I E S  A ,  B ,  C  A N D  D  
P R E F E R R E D  S TO C K

S E R I E S  A  P R E F E R R E D  A N D  S E R I E S  B  P R E F E R R E D
The Company sold 300,000 shares of its Series A Preferred
on January 7, 1999 and sold 150,000 shares of its Series B
Preferred on September 30, 1999. On September 28, 2001,
the Company entered into an agreement effecting: (i) the
exchange of the outstanding Series A Preferred for an
equal number of shares of Series C Preferred; and (ii) the
exchange of the outstanding Series B Preferred for an equal
number of shares of Series D Preferred.

S E R I E S  C  P R E F E R R E D  A N D  S E R I E S  D  P R E F E R R E D
There are 300,000 shares of the Company’s Series C Pre-
ferred outstanding and 150,000 shares of the Company’s
Series D Preferred outstanding. The Series D Preferred
includes 105,252 shares designated as Class D-l and
44,748 shares designated as Class D-2. The rights of the
two classes of Series D Preferred are substantially the same,
except that only the Class D-l has the voting rights
described below.

Principal terms of the Series C Preferred and Series D Pre-
ferred include the following (subject to the special provi-
sions described below that will apply in the event of certain
Non-Approved Change of Control transactions): (i) each
share is entitled to a liquidation preference of $1,000 per
share; (ii) at holder’s option, each share of Series C Pre-
ferred is convertible into 40 shares of common stock sub-
ject to adjustment (representing a conversion price of $25
per share based on the liquidation preference) and each
share of Series D Preferred is convertible into 331⁄3 shares of
common stock subject to adjustment (representing a con-
version price of $30 per share based on the liquidation pref-
erence); (iii) the holders of the Series C Preferred and Series
D Preferred (on an as-converted basis) and the holders of
the common stock vote together as a single class on all mat-
ters (except that the Series C Preferred may vote as a sepa-
rate class as described in the next clause); (iv) the holders of
the Series C Preferred, voting separately as a single class,
may elect two directors (subject to reduction to one, if the
shares of Series C Preferred owned by speciﬁed holders
cease to represent, on an as-converted basis, at least eight

55

1 3 .  C A PI TA L  S TO C K

WA R R A N TS
As of December 31, 2003 there were outstanding warrants
to purchase an aggregate of 7,037,154 shares of common
stock. The weighted average exercise price of the warrants
is $11.78 per share. The warrants may be exercised through
2011 and there were 7,033,754 warrants exercisable as of
December 31, 2003.

CO M M O N  S TO C K  R E P U RC H A S E  P RO G R A M
The Board has authorized a repurchase program under
which the Company may, from time to time, repurchase
shares of its common stock or securities convertible into its
common stock. Under this program, the Company was
given authority to make up to $200 million of purchases,
during the period from May 2000 to May 2003, and up to
$200 million of additional purchases, during the period
from May 2003 to March 2005. Pursuant to this program,
the Company: (i) during 2001, repurchased and retired
1,350,600 shares of common stock at an aggregate cost of
approximately $24.8 million; (ii) during 2002, repurchased
and retired 1,066,641 shares of common stock and repur-
chased 1,469,000 shares of its Preferred Securities at an
aggregate cost of approximately $64.8 million for all the
2002 repurchases; and (iii) during 2003, repurchased
100,000 shares of its Preferred Securities at an aggregate
cost of approximately $3.6 million.

2 0 0 1  S E N I O R  S TO C K  P L A N
In June 2001, the Company’s shareholders approved the
adoption of the 2001 Senior Stock Plan. This plan provides
for the awarding of common stock and other equity-linked
awards to our ofﬁcers, directors and a limited number of
key employees. The maximum number of shares of com-
mon stock that can be issued under the plan is 4,000,000.
The Company records each share that is awarded under
this plan at an amount not less than 100% of the fair mar-
ket value per share at the date of the award. No shares may
be awarded under this plan after June 5, 2011. As of
December 31, 2003, 2,026,592 shares had been awarded
under this plan at a weighted-average price of $23.79 per
share with vesting periods up to ten years. Determinations
concerning the persons to receive awards, the form, amount
and timing of such awards and terms and provisions of
such awards are made by the Board (or a committee
appointed by the Board).

2 0 0 1  S TO C K  P L A N
In March 2001, the Company adopted the 2001 Stock
Plan. This plan provides for the awarding of common stock
and other equity-linked awards to certain employees (other
than ofﬁcers and directors) and others who render services
to the Company. The maximum number of shares of com-
mon stock that can be issued under the plan is 2,000,000.
The Company records each share that is awarded under
this plan at an amount not less than 100% of the fair mar-
ket value per share at the date of the award. No shares may

million shares of common stock, and reduction to zero, if
such shares of Series C Preferred cease to represent at least
four million shares of common stock); (v) there are no
stated dividends on the Series C Preferred or Series D Pre-
ferred, but the Series C Preferred and Series D Preferred,
on an as converted basis, will participate in any dividends
declared on the common stock; (vi) upon the occurrence of
speciﬁed change of control transactions, other than a Non-
Approved Change of Control (as deﬁned below), the Com-
pany must offer to redeem the Series C Preferred and Series
D Preferred at a price per share equal to the liquidation
preference plus an amount equal to 6.25% of the liquida-
tion preference compounded annually from the date of the
issuance of the Series A Preferred, in the case of the Series
C Preferred, and the date of the issuance of the Series B
Preferred, in the case of the Series D Preferred, to the
redemption date; (vii) if the Company issues for cash com-
mon stock (or a series of preferred stock convertible into
common stock) and the price for the common stock is
below the conversion price of the Series C Preferred, then
the Company must offer to repurchase a speciﬁed portion
of the outstanding Series C Preferred at the price per share
set forth in the preceding clause; and (viii) if the Company
issues for cash common stock (or a series of preferred stock
convertible into common stock) for a price for the common
stock below the conversion price of the Series D Preferred,
then the Company must offer to repurchase a speciﬁed por-
tion of the outstanding Series D Preferred at the price per
share speciﬁed in the second preceding clause.

S PE C I A L  R I G H TS  O F  S E R I E S  C  P R E F E R R E D  A N D

S E R I E S  D  P R E F E R R E D  U P O N  N O N - A P P ROV E D

C H A N G E  O F  CO N T RO L
In general, a Non-Approved Change of Control transaction
is a change of control transaction that the Board of Direc-
tors (the “Board”) has disapproved and which the Board
has not facilitated by such actions as weakening or elimi-
nating the Company’s Stockholder Rights Plan. If a Non-
Approved Change of Control occurs, and the Board does
not offer the holders of the Series C Preferred and Series D
Preferred essentially the same redemption rights that apply
to an Approved Change of Control transaction: (i) the
holders of the Series C Preferred would elect a majority of
the Board for a speciﬁed period; (ii) the holders of the
Series C Preferred and Series D Preferred would be entitled
to an additional 6.25% return on the liquidation prefer-
ence, compounded annually from January 1999 for the
Series C Preferred and from September 1999 for the Series
D Preferred; (iii) after the holders of the common stock
receive an amount equivalent to the liquidation preference,
the holders of the Series C Preferred and Series D Preferred
would share with the holders of the common stock, on an
as converted basis, in any remaining amounts available for
distribution; and (iv) the Series C Preferred and Series D
Preferred would accrue dividends at a maximum annual
rate, compounded annually, equal to 18% of the liquida-
tion preference.

56

be awarded under this plan after March 23, 2011. As of
December 31, 2003, 1,712,677 shares had been awarded
under this plan at a weighted-average price of $15.26 per
share with vesting periods up to three and one-half years.
Determinations concerning the persons to receive awards,
the form, amount and timing of such awards and terms
and provisions of such awards are made by the Board (or a
committee appointed by the Board).

The Company records the issuance of common shares
under the 2001 Senior Stock Plan and the 2001 Stock
Plan at the quoted market price on the date of the grants.
Amortization of deferred compensation is then recognized
on a straight-line basis over the related vesting period.
Amortization expense recognized for the years ended
December 31, 2003 and 2002 for the awards of the above
stock plans was approximately $26.4 million and
$11.4 million, respectively.

1 9 9 7  S TO C K  O P T I O N  P L A N
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 mean-
ing 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 partici-
pate 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, 2003 and
2002, options to purchase an aggregate of 3,932,130 shares
and 4,033,030 shares of common stock, respectively, were
outstanding under this plan. The exercise price of each
option, the period during which each option may be exer-
cised and other terms and conditions of each option are
determined by the Board (or by a committee appointed by
the Board).

1 9 9 8  S TO C K  O P T I O N  P L A N
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 Inter-
nal Revenue Code. All ofﬁcers, directors and a limited
number of key employees of the Company and its sub-
sidiaries are eligible to participate in the 1998 Stock Option
Plan. Each option granted pursuant to the 1998 Stock
Option Plan must provide for an exercise price per share
that is at least equal to the fair market value per share of
common stock on the date of grant. No options may be
granted under the 1998 Stock Option Plan after August 20,
2008. As of December 31, 2003 and 2002, options to pur-
chase an aggregate of 2,250,000 shares 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 condi-
tions of each option are determined by the Board (or by a
committee appointed by the Board).

1 9 9 8  S U P P L E M E N TA L  S TO C K  O P T I O N  P L A N
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 indepen-
dent contractors who perform services for the Company
or its subsidiaries. As of December 31, 2003 and 2002,
options to purchase an aggregate of 4,519,421 shares and
4,752,565 shares of common stock, respectively, were out-
standing pursuant to this plan. The exercise price of each
option, the period during which each option may be exer-
cised and other terms and conditions of each option are
determined by the Board (or by a committee appointed by
the Board).

1 9 9 7  PE R F O R M A N C E  AWA R D  P L A N
Effective February 20, 1997, US Rentals adopted the 1997
Performance Award Plan under which stock options and
other awards could be granted to key employees and direc-
tors at prices and terms established by US Rentals at the
date of grant. The options expire in 2007. As a result of the
Company’s merger with US Rentals, all outstanding
options to purchase shares of US Rentals common stock
became fully vested and were converted into options to
purchase the Company’s common stock. As of December
31, 2003 and 2002, options to purchase an aggregate of
1,561,123 shares were outstanding pursuant to this plan.

A summary of the transactions within the Company’s stock
option plans follows here and on the next page:

Outstanding at December 31, 2000  . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised  . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled  . . . . . . . . . . . . . . . . . . . . . . . . . . .

Outstanding at December 31, 2001  . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised  . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled  . . . . . . . . . . . . . . . . . . . . . . . . . . .

Outstanding at December 31, 2002  . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised  . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled  . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Exercise
Price

$20.23
19.78
14.24
23.94

20.22
11.94
17.32
25.03

20.20
12.31
12.46
23.16

Shares

17,096,095
633,400
(715,143)
(592,338)

16,422,014
722,550
(3,735,666)
(812,180)

12,596,718
85,200
(94,446)
(324,798)

Outstanding at December 31, 2003  . . . . . . 12,262,674

$20.05

Exercisable at December 31, 2003 . . . . . . . . 11,416,784

$20.49

57

Options Outstanding

Options Exercisable

Weighted
Average
Remaining
Contractual
Life

7.5 years
5.3 years
6.4 years
5.9 years
5.2 years
4.7 years

5.7 years

Weighted
Average
Exercise
Price

$ 9.69
12.72
16.38
21.74
27.33
35.20

20.05

Weighted
Average
Exercise
Price

$ 9.84
12.68
16.47
21.72
27.29
35.20

20.49

Amount
Exercisable

243,406
2,485,034
1,587,234
4,994,180
1,107,681
999,249

11,416,784

Amount
Outstanding

567,854
2,667,479
1,820,434
5,058,478
1,149,180
999,249

12,262,674

1 4 .  ACC U M U L AT E D  OT H E R
CO M P R E H E N S I V E  I N CO M E

The following table sets forth the components of the Com-
pany’s accumulated other comprehensive income (loss):

Foreign

Accumulated
Currency Derivatives Other Com-
prehensive
Income/(Loss)

Translation Qualifying
as Hedges

Adjustments

(In thousands)

Balance at 

December 31, 2000  . . . . . . $ (6,947)
(16,137)

2001 activity  . . . . . . . . . . . . . .

$(7,043)

$ (6,947)
(23,180)

Balance at 

December 31, 2001 . . . . . . .
2002 activity  . . . . . . . . . . . . . .

(23,084)
2,484

Balance at 

December 31, 2002  . . . . . .
2003 activity  . . . . . . . . . . . . . .

(20,600)
45,699

(7,043)
795

(6,248)
6,248

(30,127)
3,279

(26,848)
51,947

Balance at 

December 31, 2003  . . . . . . $ 25,099

—

$ 25,099

Range of Exercise Prices 

$ 5.00 - $10.00  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.01 - 15.00  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.01 - 20.00  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.01 - 25.00  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25.01 - 30.00  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30.01 - 50.00  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At December 31, 2003 there were: (i) 7,037,154 shares of
common stock reserved for the exercise of warrants; (ii)
12,262,674 shares of common stock reserved for issuance
pursuant to options granted under the Company’s stock
option plans; (iii) 5,077,926 shares of common stock
reserved for the issuance of outstanding preferred securities
of a subsidiary trust; (iv) 17,000,000 shares of common
stock reserved for the issuance of Series C and Series D pre-
ferred stock; and (v) 5,802,845 shares of common stock
reserved for the conversion of convertible debt.

Stockholders’ Rights Plan. The Company adopted a Stock-
holders’ Rights Plan on September 28, 2001. This plan and
other provisions of the Company’s charter and bylaws may
have the effect of deferring hostile takeovers or delaying or
preventing changes in control or management of the Com-
pany, including transactions in which the shareholders of
the Company might otherwise receive a premium for their
shares over then current market prices. The rights expire on
September 27, 2011.

58

1 5 .  E A R N I N G S  PE R  S H A R E

The following table sets forth the computation of basic and
diluted earnings per share:

(In thousands, except
share and per share data)

Numerator:
Income (loss) before 

cumulative effect of change 
in accounting principle  . . .

Plus: Liquidation preference 
in excess of amounts paid 
for convertible preferred 
securities  . . . . . . . . . . . . . .

Income (loss) available to 

Year Ended December 31

2003

2002

2001

$(258,581)

$(109,486)

$111,256

896

35,339

common stockholders  . . . .

$(257,685)

$ (74,147)

$111,256

Denominator:
Denominator for basic 
earnings per share—
weighted-average shares . . . 76,959,151

Effect of dilutive securities:
Employee stock options . . . . .
431,481
Warrants  . . . . . . . . . . . . . . . .
1,754,884
Series C Preferred  . . . . . . . . . 12,000,000
Series D Preferred  . . . . . . . . .
5,000,000

Denominator for dilutive 
earnings per share—
adjusted weighted-
average shares  . . . . . . . . . . 96,145,516

75,787,693 72,141,128

1,507,820
1,162,530
3,738,239
2,780,047
12,000,000 12,000,000
5,000,000

5,000,000

96,730,270 94,387,187

Earnings (loss) per 
share—basic:

Income (loss) available to 
common stockholders 
before cumulative effect 
of change in accounting 
principle  . . . . . . . . . . . . . .

Cumulative effect of 

change in accounting 
principle, net . . . . . . . . . . .

Income (loss) available to 

$(3.35)

$(0.98)

$1.54

(3.80)

common stockholders  . . . .

$(3.35)

$(4.78)

$1.54

Earnings (loss) per 
share—diluted:

Income (loss) available to 
common stockholders 
before cumulative effect 
of change in accounting 
principle  . . . . . . . . . . . . . .

Cumulative effect of 

change in accounting 
principle, net . . . . . . . . . . .

Income (loss) available to 

$(3.35)

$(0.98)

$1.18

(3.80)

common stockholders  . . . .

$(3.35)

$(4.78)

$1.18

The diluted share base for years where the numerator repre-
sents a loss excludes incremental weighted shares for the
above-captioned “—Effect of dilutive securities” due to
their antidilutive effect.

For the year ended December 31, 2003, the approximate
5.6 million shares that are potentially issuable upon conver-
sion of all of the Company’s 17⁄ 8% Convertible Notes that
were issued in 2003 are not included in the Company’s cal-
culation of earnings per share because such notes are only
convertible if speciﬁed conditions are satisﬁed and none of
such conditions have to date been met. See Note 9 for fur-
ther information. For the years ended December 31, 2003,
2002 and 2001, the shares that are potentially issuable
upon conversion of the Preferred Securities are not
included in the Company’s calculation of earnings per
share because of their antidilutive effect. See Note 11 for
further information.

1 6 .  CO M M I T M E N TS  A N D
CO N T I N G E N C I E S

O PE R AT I N G  L E A S E S
The Company leases rental equipment, real estate and cer-
tain 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 non-cancelable operating leases
with initial or remaining terms of one year or more are as
follows at December 31, 2003:

(In thousands)

Real

Other
Rental
Estate Equipment Equipment
Leases
Leases
Leases

2004 . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . .
Thereafter  . . . . . . . . . . . . . . . .

$ 66,139
59,816
54,750
50,237
40,449
102,966

$ 64,099
38,628
41,558
18,304
8,737
4,523

$23,384
12,486
9,181
5,080
3,272
382

$374,357

$175,849

$53,785

As part of certain of its equipment operating leases, the
Company guarantees that the value of the equipment at
the end of the lease term will not be less than a speciﬁed
projected residual value. The use of these guarantees helps
to lower the Company’s monthly operating lease payments.
The Company does not know at this time the extent to
which the actual residual values may be less than the guar-
anteed residual values and, accordingly, cannot quantify
the amount that it will be required to pay, if any, under
these guarantees. If the actual residual value for all equip-
ment subject to such guarantees were to be zero, then the
Company’s maximum potential liability under these guar-
antees would be approximately $36.5 million. This poten-
tial liability was not reﬂected on the Company’s balance
sheet as of December 31, 2003, or any prior date.

59

The Company was the seller-lessee in sale-leaseback trans-
actions with unrelated third parties in which it sold rental
equipment for aggregate proceeds of $3.4 million in 2002
and rental equipment and real estate for aggregate proceeds
of $51.0 million in 2001. For the 2002 transactions, the
Company leased back the rental equipment for a minor
period of one to eight months. For the 2001 transactions,
the Company leased back the real estate over a 10-year
period and the rental equipment for a minor period of one
to eight months. The total gains related to these transac-
tions in 2002 and 2001 were, respectively, approximately
$1.5 million of which none was deferred and $21.6 million
of which $1.4 million was deferred. The deferred gains are
amortized over the respective lease periods on a straight-
line basis.

Rent expense under all non-cancelable real estate, rental
equipment and other equipment operating leases totaled
$176.2 million, $185.0 million, and $170.9 million for the
years ended December 31, 2003, 2002, and 2001, respec-
tively. The Company’s real estate leases provide for varying
terms, including leases subject to customary escalation
clauses, and include 42 leases that are on a month-to-
month basis and 30 leases that provide for a remaining term
of less than one year and do not provide a renewal option.

R E S T R I C T E D  S TO C K  AWA R D S
The Company has granted to employees other than execu-
tive ofﬁcers and directors approximately 1,200,000 shares
of restricted stock that contain the following provisions.
The shares vest in 2004, 2005 or 2006 or earlier upon a
change in control of the Company, death, disability, retire-
ment or certain terminations of employment, and are
subject to forfeiture prior to vesting on certain other
terminations of employment, the violation of non-compete
provisions and certain other events. If a holder of restricted
stock sells his stock and receives sales proceeds that are less
than a speciﬁed guaranteed amount set forth in the grant
instrument, the Company has agreed to pay the holder the
shortfall between the amount received and such speciﬁed
amount. However, the foregoing only applies to sales that
are made within ﬁve trading days of the vesting date. The
speciﬁed guaranteed amount is: (i) $15.17 per share with
respect to approximately 500,000 shares scheduled to vest
in 2004; (ii) $27.26 per share with respect to approximately
300,000 shares scheduled to vest in 2005; and (iii) $9.18
per share with respect to approximately 400,000 shares
scheduled to vest in 2006.

E M P LOY E E  B E N E F I T  P L A N S
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 $5.0 million, $5.2 million, and $6.0 million
for the years ended December 31, 2003, 2002 and
2001, respectively.

L E G A L  A N D  I N S U R A N C E  M AT T E R S
The Company is party to legal proceedings and potential
claims arising in the ordinary course of its business. In the
opinion of management, the Company has adequate legal
defenses, reserves, or insurance coverage with respect to
these matters so that the ultimate resolution will not have a
material adverse effect on the Company’s ﬁnancial position,
results of operations or cash ﬂows. The Company had
accrued $46.2 million and $22.2 million at December 31,
2003 and 2002, respectively, to cover the uninsured por-
tion of estimated costs arising from these pending claims
and other potential unasserted claims. The Company
records claims related to recoveries from third parties when
such recoveries are deemed realizable.

E N V I RO N M E N TA L  M AT T E R S
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.

1 7 .  R E L AT E D  PA RT Y

The Company has from time to time purchased equipment
from Terex Corporation (“Terex”) and expects to do so in
the future. The chief executive ofﬁcer and a director of
Terex is also a director of the Company. The Company pur-
chased equipment from Terex of approximately $85.2 mil-
lion, $52.3 million and $16.6 million during 2003, 2002
and 2001, respectively. The increase from 2002 to 2003
was attributable to Terex’s acquisition of one of the Com-
pany’s existing suppliers towards the end of 2002.

60

1 8 .  S E G M E N T  I N F O R M AT I O N

Each of the Company’s branch locations is an operating
segment which consists of the rental and sale of equipment
and related merchandise and parts. Certain of the Com-
pany’s branches also provide specialty trafﬁc control ser-
vices as a product line. Of the total revenues for these
branches, the amount of revenue attributable to such trafﬁc
control services was $277.0 million, $291.6 million, and
$272.2 million during the years ended December 31,
2003, 2002 and 2001, respectively. All of the Company’s
branches have been aggregated into one reportable segment
because they offer similar products and services in similar
markets and the factors determining strategic decisions
are comparable.

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, 2003, 2002 and 2001 is
as follows:

(In thousands)

2003

2002

2001

Year Ended December 31

Revenues from external 

customers

Domestic . . . . . . . . . . . . . . . . . $2,669,321
Foreign  . . . . . . . . . . . . . . . . . .
197,915

$2,658,969 $2,740,694
145,911

162,020

Total revenues from 

external customers  . . . . . . . $2,867,236

$2,820,989 $2,886,605

Rental equipment, net
Domestic . . . . . . . . . . . . . . . . . $1,915,149
Foreign  . . . . . . . . . . . . . . . . . .
156,343

$1,713,406 $1,630,411
116,771

132,269

Total consolidated rental 

equipment, net  . . . . . . . . . . $2,071,492

$1,845,675 $1,747,182

Property and equipment, net
Domestic . . . . . . . . . . . . . . . . . $ 388,901
Foreign  . . . . . . . . . . . . . . . . . .
17,700

$ 409,785 $ 393,541
16,512

15,567

Total consolidated property 

and equipment, net . . . . . . . $ 406,601

$ 425,352 $ 410,053

Goodwill and other intangible 

assets, net

Domestic . . . . . . . . . . . . . . . . . $1,361,409
Foreign  . . . . . . . . . . . . . . . . . .
79,625

$1,588,066 $2,086,481
121,220

122,946

Total consolidated goodwill 
and other intangible 
assets, net  . . . . . . . . . . . . . . $1,441,034

$1,711,012 $2,207,701

1 9 .  QUA RT E R LY  F I N A N C I A L
I N F O R M AT I O N  ( U N AU D I T E D )

S E L E C T E D  F I N A N C I A L  D ATA
The following table of quarterly ﬁnancial information has
been prepared from unaudited ﬁnancial statements of the
Company, and reﬂects adjustments which are, in the opin-
ion of management, necessary for a fair presentation of the
interim periods presented.

(In thousands, except
per share data)

For the year ended 

December 31, 2003

First

Fourth
Quarter Quarter Quarter Quarter

Second

Third

Total revenues  . . . . . . . $591,851 $728,056 $805,134 $742,196
Gross proﬁt  . . . . . . . . .
212,355
Goodwill impairment  .
296,873
Net income (loss)  . . . . .
31,884 (305,135)
Income (loss) 

258,559

223,066

153,989

(8,723)

23,391

available to common 
stockholders per 
share—basic  . . . . . . .

Income (loss) 

available to common 
stockholders per 
share—diluted  . . . . .

For the year ended 

December 31, 2002

$(0.11)

$0.30

$0.43

$(3.96)

$(0.11)

$0.25

$0.34

$(3.96)

Total revenues  . . . . . . . $598,965 $744,759 $783,103 $694,162
Gross proﬁt  . . . . . . . . .
208,060
Goodwill impairment  .
247,913
Restructuring charge  . .
28,262
Income (loss) before 

179,208

245,747

253,262

cumulative effect of 
change in accounting 
principle . . . . . . . . . .

Cumulative effect of 

change in accounting 
principle . . . . . . . . . .
Net income (loss)  . . . . .
Income (loss) available to 
common stockholders 
before cumulative 
effect of change in 
accounting principle 
per share—basic  . . . .
Income (loss) available to 
common stockholders 
before cumulative 
effect of change in 
accounting principle 
per share—diluted  . .

7,584

51,114

40,767

(208,951)

(288,339)
(280,755)

51,114

40,767

(208,951)

$0.17

$0.67

$0.53

$(2.33)

$0.13

$0.51

$0.43

$(2.33)

2 0 .  S U B S E QU E N T  EV E N TS

During the ﬁrst quarter of 2004, the Company acquired
843504 Alberta Ltd. (formerly known as Skyreach Equip-
ment, Ltd.) which has annual revenues of approximately
$40 million.

During the ﬁrst quarter of 2004, the Company reﬁnanced
approximately $2.1 billion of its debt. See Note 9 for
further information.

61

U N I T E D R E N TA L S
L O C AT I O N S

Lancaster
Lodi
Long Beach (4)
Los Alamitos
Los Angeles
Madera
Marysville
Merced
Modesto (4)
Montclair
Monterey
Mountain View
Napa (2)
Oakland
Oxnard
Pico Rivera
Redding
Ridgecrest
Riverside
Rocklin
Sacramento (3)
Salinas
San Diego
San Francisco
San Jose (5)
San Juan Capistrano
San Leandro
San Luis Obispo
Santa Ana
Santa Cruz
Santa Fe Springs
Santa Maria
Santa Rosa (2)
Sunnyvale
Susanville
South Lake Tahoe
Stockton (3)
Tracy
Turlock
Vacaville
Van Nuys
Ventura (2)
Visalia

COLORADO

Brighton
Colorado Springs (3)
Commerce City
Denver (5)
Fort Collins
Grand Junction
Loveland
Pueblo
Westminster

CONNECTICUT

Bloomﬁeld
Danbury
Darien
Fairﬁeld
Groton
Manchester
Milford
North Stonington
Old Saybrook
Plainville
Shelton
Stamford
West Haven

DELAWARE

Bear
Delmar
Frederica
Middletown
Newark

FLORIDA

Bradenton
Clearwater (2)
Davie
Deerﬁeld Beach
Fort Lauderdale
Fort Myers (2)
Fort Pierce
Fort Walton Beach
Gainesville
Holly Hill
Jacksonville (3)
Jupiter
Lakeland
Longwood
Melbourne
Miami (2)
Naples
Orlando (5)
Panama City Beach
Pompano Beach (2)
Port Saint Lucie
Tampa (3)
West Palm Beach

GEORGIA

Acworth
Augusta
Bogart
Carrollton
Columbus
Conyers
Douglasville
Fairburn
Forest Park (2)
Garden City
Jesup
Kingsland
Leesburg
Macon
McDonough
Norcross
Remerton
Ringgold
Sugar Hill
Villa Rica

IDAHO

Boise
Lewiston

ILLINOIS

Addison
Bloomingdale
Bloomington (2)
Carbon Cliff
Carbondale
Champaign
Chicago
Fairview Heights
Mokena
Moline
Rockford (2)
Springﬁeld
Villa Park

UNITED STATES

ALABAMA

Bessemer (2)
Birmingham
Decatur
Dothan
Florence (2)
Hope Hull
Madison (2)
Mobile
Montgomery (2)
Oxford

ALASKA

Anchorage (2)
Fairbanks
Palmer
Soldotna
Wasilla

ARIZONA

Bullhead City (2)
Cottonwood
Flagstaff (2)
Glendale
Kingman
Lake Havasu City
Phoenix (6)
Prescott (2)
Show Low
Tucson (2)
Yuma

ARKANSAS

Fayetteville
Little Rock
Rogers

CALIFORNIA

Antioch
Arroyo Grande
Bakersﬁeld (3)
Baldwin Park
Buena Park
Burbank
Burlingame
Canoga Park
Carmichael
Castro Valley
Cathedral City
Chico
Chula Vista
Corona
Downey
Dublin
Elk Grove
Escondido (2)
Eureka
Folsom
Fontana
Fremont (2)
Fresno (3)
Fullerton
Gardena
Gilroy
Hayward (2)
Hesperia
Huntington Beach (2)
Indio
Lakeside

62

INDIANA

Bloomington
Edinburgh
Evansville (2)
Fort Wayne (2)
Greenﬁeld
Indianapolis (3)
Lafayette (2)
Richmond
South Bend
Valparaiso
West Terre Haute

IOWA

Cedar Rapids
Council Bluffs
Des Moines (3)
Dubuque
Grimes (2)
Iowa City
Mason City
Sioux City (2)
Waterloo

KANSAS

Overland Park (2)
Salina
Topeka
Wichita (3)

KENTUCKY

Georgetown
Lexington
Louisville (5)
Paducah

LOUISIANA

Baton Rouge
Gonzales (2)
Harvey
Monroe
Saint Rose (2)
Shreveport

MAINE

Bangor
Scarborough

MARYLAND

Annapolis
Baltimore (2)
Beltsville
Bladensburg
Delmar
Frederick (4)
Gaithersburg
Glen Burnie
Joppa
Lexington Park
Pasadena
Prince Frederick
Silver Springs
Upper Marlboro

MASSACHUSETTS

Agawam
Boston
Canton
Everett
Four Rivers
Kingston (2)
Ludlow
Millbury
Mystic
Watertown
West Yarmouth
Worcester

MICHIGAN

Covert
Grand Rapids
Hudsonville
Portage
Romulus
Taylor
Traverse City
Wixom

MINNESOTA

Brainerd
Hastings
Hermantown (2)
Mankato
Minneapolis (2)
Rochester
Rogers (2)
Roseville
Saint Michael
Saint Paul
Savage

MISSISSIPPI

Canton
Olive Branch
Pearl

MISSOURI

Belton
Bridgeton
Kansas City (2)
Saint Joseph
Saint Louis (2)
Springﬁeld
Strafford

MONTANA

Billings
Missoula

NEBRASKA

Lincoln (2)
Norfolk
Omaha
Papillion

NEVADA

Carson City
Elko
Gardnerville
Las Vegas (2)
North Las Vegas
Reno (4)
Sparks

NEW HAMPSHIRE

Hudson
Manchester

NEW JERSEY

Bellmawr
Burlington
Carlstadt
Egg Harbor (2)
Elmwood Park
Piscataway
Richland
Ridgeﬁeld Park (2)
Vineland

NEW MEXICO

Albuquerque (2)
Farmington
Las Cruces

NEW YORK

Batavia
Brooklyn
Clifton Park
Depew
East Syracuse
Falconer
Flushing (2)
Highland
Holtsville (2)
New York
New Windsor
Rochester (5)
Williamsville

NORTH CAROLINA

Arden
Charlotte (2)
Durham
Fayetteville
Garner
Goldsboro
Greensboro (3)
Jacksonville
Pilot Mountain
Raleigh (2)
Salisbury
Wilmington
Winston-Salem

NORTH DAKOTA

Bismarck (2)
Fargo (4)
Grand Forks
Minot

OHIO

Brooklyn Heights
Cleveland
Cincinnati (2)
Columbiana
Columbus (2)
East Liverpool
Independence
Irontown (2)
Marietta
North Olmstead (2)
Perrysburg
Toledo

OKLAHOMA

Oklahoma City
Tulsa

OREGON

Albany
Bend
Clackamas
Corvallis
Eugene (2)
Grants Pass
Gresham
Hermiston
Hillsboro
Lebanon
Medford (2)
Portland (7)
Redmond
Roseburg
Salem (2)
Seaside
Tigard
Tualatin

PENNSYLVANIA

Hatﬁeld
Lebanon
Mechanicsburg (2)
Middletown
Murrysville
Oakdale
Palmyra
Philadelphia
Quakertown
State College
Watsontown
Wilkes-Barre
York

RHODE ISLAND

Cranston
Smithﬁeld (2)

SOUTH CAROLINA

Anderson
Charleston (2)
Columbia
Conway
Greenville
Rock Hill
Spartanburg

SOUTH DAKOTA

Rapid City (3)
Sioux Falls (3)

TENNESSEE

Franklin
Kingsport
Knoxville (3)
Memphis
Nashville (2)
Spring Hill

TEXAS

Arlington
Austin (3)
Beaumont (2)
Carrollton
Cedar Park
Conroe
Corpus Christi (2)
Corsicana
Dallas (3)
El Paso (3)
Fort Worth (4)
Garland
Georgetown
Greenville
Houston (7)
Irving (2)
Katy
Keller (2)
La Porte
Laredo
League City
Lubbock
Lufkin
Manor
Odessa
Palestine
Plano
Rosenberg
San Antonio (3)
Sherman
Temple
The Woodlands
Tyler (2)
Wichita Falls

UTAH

Kaysville
Orem
Saint George
Salt Lake City (4)
Sandy
Tooele

VIRGINIA

Chantilly
Charlottesville
Chesapeake (2)
Fairfax
Glen Allen
Hampton
Hopewell
Richmond
Roanoke
Sterling
Winchester

WASHINGTON

Airway Heights
Arlington
Auburn
Bellingham
Bonney Lake
Bothell
Bremerton (2)
Burien
Burlington
Chehalis
Covington
Ellensburg
Federal Way
Gig Harbor
Kirkland
Longview

Marysville
Monroe
Moses Lake
Pasco
Port Angeles
Puyallup
Renton (2)
Seattle
Spokane (2)
Sumner
Tacoma
Tukwila
Tumwater
Union Gap
Vancouver
Woodinville

WISCONSIN

De Pere
Madison
Marshﬁeld
Milwaukee (3)

WYOMING

Casper
Cheyenne

CANADA

ALBERTA

Calgary (3)
Edmonton (2)
Fort McMurray
Lethbridge
Medicine Hat
Red Deer

BRITISH COLUMBIA

Abbotsford
Burnaby (2)
Campbell River
Chilliwack
Genelle
Kamloops
Langley (2)
Maple Ridge
Nanaimo
North Vancouver
Port Coquitlam
Prince George
Richmond
Surrey
Vancouver
Victoria
Whistler
White Rock

MANITOBA

Thompson
Winnipeg

NEWFOUNDLAND

Arnold’s Cove
Clarenville
Corner Brook
Goose Bay
Grand Falls Windsor
Marystown
Mount Pearl
Saint John’s
Wabush

ONTARIO

Barrie
Belleville
Bracebridge
Brampton
Brantford
Cambridge
Collingwood
Dryden
Guelph
Kenora
Kingston
Kitchener (2)
London (3)
Meaford
Mississauga
North Bay
Oshawa
Ottawa
Saint Catherines
Sarnia
Scarborough
Stoney Creek (2)
Stratford
Sudbury
Toronto
Walkerton
Waterloo
Weston

QUEBEC

Chicoutimi
Longueuil
Mont-Tremblant
Saint Laurent
Saint Leonard
Sept-Iles
Shawinigan
Trois-Rivieres
Ville Vanier

SASKATCHEWAN

Regina
Saskatoon

MEXICO

NUEVO LAREDO

Escobedo

63

CORPORATE INFORMATION

OFFICERS

WAYLAND R. HICKS
Vice Chairman and 
Chief Executive Ofﬁcer

JOHN N. MILNE
President and 
Chief Financial Ofﬁcer

MICHAEL J. KNEELAND
Executive Vice President –
Operations

BOARD OF 
DIRECTORS

BRADLEY S. JACOBS
Chairman

WAYLAND R. HICKS
Vice Chairman and 
Chief Executive Ofﬁcer

JOHN N. MILNE
President and 
Chief Financial Ofﬁcer

LEON D. BLACK
Founding Principal
Apollo Management, L.P.

HOWARD L. CLARK, JR.
Vice Chairman
Lehman Brothers Inc.

RONALD M. DEFEO
Chairman and 
Chief Executive Ofﬁcer
Terex Corporation

MICHAEL S. GROSS
Founding Principal
Apollo Management, L.P.

BRIAN D. MCAULEY
Partner
NH II, LLC

JOHN S. MCKINNEY
Director

GERALD TSAI, JR. 
Director

CHRISTIAN M. WEYER
President
Enerﬁn S.A.

64

UNITED RENTALS STOCK LISTING
United Rentals common stock is listed on the New York
Stock Exchange under the symbol URI. The common
stock is included in the Standard & Poor’s MidCap 400
Index and the Russell 2000 Index®.

UNITED RENTALS COMMON STOCK PRICES
New York Stock Exchange Composite Prices

2003

1st Qtr. 2nd Qtr.

3rd Qtr. 4th Qtr.

High . . . . .
Low  . . . . .
Close  . . . .

$12.60
8.00
9.62

$14.75
9.08
13.89

$18.59 $19.85
15.62
19.26

13.00
16.09

2002

High . . . . .
Low  . . . . .
Close  . . . .

$30.83
19.30
27.48

$28.87
20.80
21.80

$19.40
8.40
8.44

$10.86
5.88
10.76

CORPORATE HEADQUARTERS
United Rentals, Inc.
Five Greenwich Ofﬁce Park
Greenwich, CT 06830
Phone: (203) 622-3131
Fax: (203) 622-6080
www.unitedrentals.com

INDEPENDENT AUDITORS
Ernst & Young LLP
99 Wood Avenue South
Iselin, NJ 08830
(732) 516-4200

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D

 
 
 
 
 
 
 
 
2004 ANNUAL MEETING

Thursday, May 20, 2004
at 3:00 pm.

Delamar Greenwich 
Harbor Hotel
500 Steamboat Road
Greenwich, CT 06830

INVESTOR 
INFORMATION

For United Rentals
investor information,
including our quarterly
earnings releases, 
webcasts and Securities
Exchange Act reports:

www.unitedrentals.com

Investment professionals
may contact:

Charles K. Wessendorf
Vice President, 
Investor Relations and 
Corporate Communications
cwessendorf@ur.com  
(203) 618-7318

SHAREHOLDER 
SHAREHOLDER INFORMATION
INFORMATION

Write: 
American Stock Transfer 
& Trust Company
40 Wall Street
New York, NY 10005

By overnight mail only:
American Stock Transfer 
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(718) 921-8210

www.amstock.com

For shareholder services
24 hours a day:
Call toll-free 
(800) 937-5449
in the U.S. and Canada,
or (718) 921-8200.
E-mail: 
investors@unitedrentals.com
To speak to a shareholder
services representative,
please call between 
9:00 am and 5:00 pm
Eastern Time, Monday
through Friday.

• Account information
• Transfer requirements
• Lost certiﬁcates 
• Change of address
• Tax forms 

®

®