ANNUAL REPORT 2010
THE POWER TO TRANSFORM
LETTER TO STOCKHOLDERS
2010 was a pivotal year for United Rentals. We turned the
corner ahead of our end markets and the industry.
It was a year of internal transformation, matched by our
fierce determination to create opportunities in a declining
marketplace. Although we reported a loss on a GAAP basis,
2010 was a turning point for United Rentals, both financially
and operationally. We held our rental revenues steady at
$1.8 billion, dramatically outperforming the construction
environment, and used that momentum to forge ahead as the
equipment rental supplier of choice in North America.
Our strongest results came in the fourth quarter, when
nonresidential construction spending fell 8 percent below the
prior year. Against that backdrop we increased rental revenues
by more than 10 percent, realized our third consecutive
quarter of record time utilization, and drove rates positive
year over year – the only major equipment rental company
to do so.
Our full year adjusted EBITDA margin was 30.9 percent
for 2010, significantly higher than in 2009.
These are the results of a strategy that has proved its mettle
under incredible pressure. That is: to capitalize on our
competitive advantages of scale through Operation United;
drive sustainable efficiencies in our core business; and
maintain a strong capital structure that supports opportunistic
investment. Our share price performance in 2010 reflects
investor confidence in our execution and the growth
potential of our business.
We know that our greatest potential lies with National
Accounts and other volume-based relationships. This is
where our fleet, branch footprint, safety record and expert
employees are irrefutable competitive advantages. Our go-to-
market roadmap starts with customer segmentation, informs
the selling process, and constantly shifts the destination
towards greater share of wallet with these key customers.
Our strategy is also relevant to the broader marketplace,
where we continue to pursue customer service leadership.
The equipment rental industry experienced intense price
competition during the recession. We believe that service
differentiation is the strongest defense against
commoditization.
We are transforming the company for the purpose of
generating an appropriate return on capital.
The precision management of our fleet, rates, labor,
facilities and corporate support all gained traction in 2010.
We reduced our SG&A expense by $41 million, and our
ongoing cost savings initiatives mitigated the increase in cost
of equipment rentals associated with higher rental volume.
We will not allow these costs to flow back unchecked in the
recovery.
We continued to optimize our branch footprint by closing
49 branches without exiting any major markets and adding
11 locations, including five in our Trench Safety, Power and
HVAC business. In the fourth quarter, we began exploring
revenue opportunities with oil and gas customers on the Gulf
Coast through a joint venture with AMECO.
Our entire organization benefited from state-of-the-art
technologies in 2010. Chief among these is CORE, our price
optimization software, which ensures the proper balance of
value for our company and our customers. Our investment in
technology is proving to be a game-changer for United Rentals
– it strengthens our logistics, our metrics, our margins and
the levers that drive them.
This ongoing transformation of our business is both systemic
and single-minded: to earn back more than our cost of capital,
peak to trough, in any cycle.
Outlook
Looking forward, a modest recovery appears to be underway
in most U.S. construction sectors, with continued strength in
Canada. We anticipate a gradual increase in nonresidential
project starts, excluding commercial construction, which is
projected to remain weak for at least another year.
Our strategy has been to stay in front of key customers
throughout the downturn, preparing for exactly this point in
the cycle. We also believe that a new wave of renters was
created by the recession, and that many will not return to
purchasing equipment. Our end markets are growing again,
and should exceed pre-recession levels by 2014. We have
more than 7,000 highly engaged employees to thank for
putting United Rentals first in line for that business.
With the leverage we are building through cost savings and
investment in technology, and our projected increase in rental
rates of at least 5 percent year-over-year, we expect EBITDA
flow-through of 65 to 70 percent for each incremental dollar
of total revenue this year.
Some of what we achieve in 2011 will be determined by the
pace of the recovery. But it is more about our strategy, our
transformation, and our commitment to outperform. In the
depths of the recession, that had a lot to do with positioning.
Now it’s about profitable growth.
March 31, 2011
Michael J. Kneeland
Chief Executive Officer
Jenne K. Britell
Chairman of the Board
TOTA L R E T U R N TO S TO C K H O L D E R S
The following tables and graph compare the cumulative total return of United Rentals common stock with the cumulative total
returns of the Standard & Poor’s 500 Index (“S&P 500 Index”) and an industry peer group index comprised of publicly traded
companies participating in the construction and distribution industries (“Peer Group 2010 Index”). The industry peer group
comprised of publicly traded companies participating in the equipment rental industry used in 2009 (“Peer Group 2009 Index”) is
also included for comparative purposes. We changed the members of our peer group index for 2010 to parallel the group of publicly
traded companies currently used by our Compensation Committee for benchmarking the total compensation package of our chief
executive officer and our chief financial officer. We also believe that the new peer group represents a more relevant group of
comparably sized companies in the broader industry in which United Rentals participates. The tables and graph assume that $100
was invested on December 31, 2005, in shares of our common stock, stocks comprising the S&P 500 Index, stocks comprising the
Peer Group 2009 Index and stocks comprising the Peer Group 2010 Index, and the reinvestment of any dividends. The returns of
each company within each of the S&P 500 Index, the Peer Group 2009 Index and the Peer Group 2010 Index has been weighted
annually for its respective stock market capitalization.
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name / Index
United Rentals, Inc.
S&P 500 Index
Peer Group 2010 Index
Peer Group 2009 Index
Company Name / Index
United Rentals, Inc.
S&P 500 Index
Peer Group 2010 Index
Peer Group 2009 Index
Peer Group 2010 Index
Dec06
8.72
15.79
16.82
20.75
Dec06
108.72
115.79
116.82
120.75
Dec07
-27.80
5.49
32.13
-13.08
Dec07
78.50
122.16
154.34
104.96
Dec08
-50.33
-37.00
-34.18
-51.06
INDEXED RETURNS
Years Ending
Dec08
38.99
76.96
101.59
51.36
Dec09
7.57
26.46
13.77
85.16
Dec09
41.94
97.33
115.58
95.11
Dec10
131.91
15.06
27.67
80.72
Dec10
97.26
111.99
147.55
171.87
Base Period
Dec05
100
100
100
100
AECOM Technology Corporation
(included from 5/10/07, when it began trading)
Quanta Services, Inc.
RSC Holdings Inc.
Applied Industrial Technologies, Inc.
BlueLinx Holdings Inc.
EMCOR Group, Inc.
Fastenal Company
Foster Wheeler AG
Granite Construction Incorporated
Peer Group 2009 Index
Aggreko PLC
Ashtead Group PLC
H&E Equipment Services Inc.
(included from 5/23/07, when it began trading)
Rush Enterprises, Inc.
The Shaw Group Inc.
Tutor Perini Corporation
Wesco International, Inc.
W.W. Grainger, Inc.
McGrath RentCorp
Mobile Mini, Inc.
NES Rentals Holdings, Inc.
(included from 1/31/06, when it began trading)
(included through 7/24/06, when it ceased trading)
Hertz Global Holdings, Inc.
RSC Holdings Inc.
(included from 11/16/06, when it began trading)
(included from 5/23/07, when it began trading)
■ United Rentals, Inc.
● S&P 500 Index
▲ Peer Group 2010 Index
X Peer Group 2009 Index
$250
$200
$150
$100
$50
$0
12/31/05
12/31/06
12/31/07
12/31/08
12/31/09
12/31/10
The comparisons in the graph and table above are not intended to forecast or be indicative of future performance of our common stock, either of the indices or
any of the companies comprising them. Data source: Standard & Poor’s Compustat.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
Commission File Number 1-14387
United Rentals, Inc.
United Rentals (North America), Inc.
Commission File Number 1-13663
(Exact Names of Registrants as Specified in Their Charters)
Delaware
Delaware
(States of Incorporation)
Five Greenwich Office Park,
Greenwich, Connecticut
(Address of Principal Executive Offices)
06-1522496
06-1493538
(I.R.S. Employer Identification Nos.)
06831
(Zip Code)
Registrants’ Telephone Number, Including Area Code: (203) 622-3131
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.01 par value, of United Rentals, Inc.
Name of Each Exchange on
Which Registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. ‘ Yes Í No
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. ‘ Yes Í No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Í Yes ‘ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). ‘ Yes ‘ No (registrant is not yet required to provide financial disclosure in an Interactive Data File format)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ‘ Accelerated Filer Í Non-Accelerated Filer ‘ Smaller Reporting Company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ‘ Yes Í No
As of June 30, 2010 there were 60,527,292 shares of United Rentals, Inc. common stock outstanding. The aggregate
market value of common stock held by non-affiliates (defined as other than directors, executive officers and 10 percent
beneficial owners) at June 30, 2010 was approximately $501 million, calculated by using the closing price of the common
stock on such date on the New York Stock Exchange of $9.32.
As of January 28, 2011, there were 60,629,338 shares of United Rentals, Inc. common stock outstanding. There is no market
for the common stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc.
This Form 10-K is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a
wholly owned subsidiary of United Rentals, Inc.). United Rentals (North America), Inc. meets the conditions set forth in
General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format
permitted by such instruction.
Documents incorporated by reference: Portions of United Rentals, Inc.’s Proxy Statement related to the 2011 Meeting of
Stockholders, which is expected to be filed with the Securities and Exchange Commission on or before March 31, 2011, are
incorporated by reference into Part III of this annual report.
FORM 10-K REPORT INDEX
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Removed and Reserved)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10-K Part
and Item No.
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
PART II
Item 5
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6
Item 7
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Page No.
2
10
20
21
22
22
22
24
25
46
48
89
89
91
92
92
92
92
92
Item 15
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements within the meaning of the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by
the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,”
“plan,” “project,” “forecast,” “intend” or “anticipate,” or the negative thereof or comparable terminology, or by
discussions of strategy or outlook. You are cautioned that our business and operations are subject to a variety of
risks and uncertainties, many of which are beyond our control, and, consequently, our actual results may differ
materially from those projected.
Factors that could cause actual results to differ materially from those projected include, but are not limited
to, the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
a change in the pace of the recovery in our end markets which began late in the first quarter of 2010.
Our business is cyclical and highly sensitive to North American construction and industrial activities.
Although we have recently experienced an upturn in rental activity, there is no certainty this trend will
continue. If the pace of the recovery slows or construction activity declines, our revenues and, because
many of our costs are fixed, our profitability, may be adversely affected;
inability to benefit from government spending associated with stimulus-related construction projects;
our highly leveraged capital structure, which requires us to use a substantial portion of our cash flow for
debt service and can constrain our flexibility in responding to unanticipated or adverse business
conditions;
noncompliance with financial or other covenants in our debt agreements, which could result in our
lenders terminating our credit facilities and requiring us to repay outstanding borrowings;
inability to access the capital that our businesses or growth plans may require;
inability to manage credit risk adequately or to collect on contracts with a large number of customers;
the outcome or other potential consequences of regulatory matters and commercial litigation;
incurrence of additional expenses (including indemnification obligations) and other costs in connection
with litigation, regulatory and investigatory matters;
increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual
value of our equipment;
inability to sell our new or used fleet in the amounts, or at the prices, we expect;
the possibility that companies we’ve acquired or may acquire could have undiscovered liabilities, may
strain our management capabilities or may be difficult to integrate;
turnover in our management team and inability to attract and retain key personnel;
rates we can charge and time utilization we can achieve being less than anticipated;
costs we incur being more than anticipated, and the inability to realize expected savings in the amounts
or time frames planned;
dependence on key suppliers to obtain equipment and other supplies for our business on acceptable
terms;
competition from existing and new competitors;
disruptions in our information technology systems;
the costs of complying with environmental and safety regulations;
1
•
•
•
•
labor disputes, work stoppages or other labor difficulties, which may impact our productivity, and
potential enactment of new legislation or other changes in law affecting our labor relations or operations
generally;
shortfalls in our insurance coverage;
adverse developments in our existing claims or significant increases in new claims; and
other factors discussed under Item 1A–Risk Factors and elsewhere in this annual report.
We make no commitment to revise or update any forward-looking statements in order to reflect events or
circumstances after the date any such statement is made.
PART I
United Rentals, Inc., incorporated in Delaware in 1997, is principally a holding company. We primarily
conduct our operations through our wholly owned subsidiary, United Rentals (North America), Inc., and its
subsidiaries. As used in this report, the term “Holdings” refers to United Rentals, Inc., the term “URNA” refers to
United Rentals (North America), Inc., and the terms the “Company,” “United Rentals,” “we,” “us,” and “our”
refer to United Rentals, Inc. and its subsidiaries, in each case unless otherwise indicated.
Unless otherwise indicated, the information under Items 1, 1A and 2 is as of January 1, 2011.
Item 1.
Business
General
United Rentals is the largest equipment rental company in the world and our network consists of 531 rental
locations in the United States and Canada. We offer approximately 2,900 classes of equipment for rent to
customers
include construction and industrial companies, manufacturers, utilities, municipalities,
homeowners, and government entities. In 2010, we generated total revenues of $2.2 billion, including $1.8 billion
of equipment rental revenue.
that
As of December 31, 2010, our fleet of rental equipment included over 210,000 units. The total original
equipment cost of our fleet (“OEC”), based on initial consideration paid, was $3.8 billion at December 31, 2010
and 2009. The fleet includes:
• General construction and industrial equipment, such as backhoes, skid-steer
loaders,
forklifts,
earthmoving equipment and material handling equipment;
•
Aerial work platforms, such as boom lifts and scissor lifts;
• General tools and light equipment, such as pressure washers, water pumps, generators, heaters and
power tools;
•
•
Trench safety equipment, such as trench shields, aluminum hydraulic shoring systems, slide rails,
crossing plates, construction lasers and line testing equipment for underground work; and
Power and HVAC equipment, such as portable diesel generators, electrical distribution equipment, and
temperature control equipment including heating and cooling equipment.
In addition to renting equipment, we sell new and used equipment as well as related contractor supplies,
parts and service.
2
Strategy
For the past several years, our strategy has focused on generating significant free cash flow and positioning
our business for disciplined growth of revenues and earnings at higher margins. The implementation of this
strategy calls for a superior standard of customer service, an increasing proportion of revenues derived from
larger accounts and a targeted presence in industrial and specialty markets.
Four key elements of this strategy are: a consistent focus on our core business of equipment rental; the
optimization of our rental fleet and branch network, both in terms of composition and management; responsible
rate management; and greater efficiency in all areas of operation as evidenced by a significant reduction in costs.
Although the economic environment continued to present challenges for both our Company and the U.S.
equipment rental industry in 2010, we succeeded in realizing a number of achievements related to our strategy.
These achievements include:
• An increase in the proportion of our equipment rental revenues derived from National Account
customers, from 27 percent in 2009 to 31 percent in 2010. National Accounts are generally defined as
customers with potential annual spend of $500,000 or more on equipment rentals or customers doing
business in multiple locations;
•
Full year free cash flow generation of $227 million in 2010, after net rental capital expenditures (defined
as purchases of rental equipment less the proceeds from sales of rental equipment) of $202 million. In
2010, we selectively invested in fleet where warranted by demand, which resulted in a significant
increase in net rental capital expenditures from $31 million in 2009;
• Continued improvement in fleet management, including a record average of $1.45 billion OEC of fleet
transferred among branches per quarter in 2010, to deploy assets in areas of greater earnings potential;
• Continued improvement in customer service management, including an increase in the percentage of
equipment rental revenues from accounts that are managed by a single point of contact. Establishing a
single point of contact for our key accounts helps us provide more uniform customer service
management. Equipment rental revenues from National Accounts and other large customers managed by
a single point of contact increased to 51 percent of our total equipment rental revenues in 2010 from 47
percent in 2009. Additionally, we expanded our centralized Customer Care Center (“CCC”). The CCC,
which established a second base of operations in 2010, handled 37 percent more rental reservations than
in 2009;
• A further reduction in our employee headcount from approximately 8,000 at December 31, 2009 to
approximately 7,300 at December 31, 2010;
•
The continued optimization of our network of rental locations, including a further reduction in the
overall number of branches from 569 at December 31, 2009 to 531 at December 31, 2010, and the
opening of five new trench safety, power and HVAC rental locations to grow our specialty rental
business; and
• A 2010 year-over-year reduction in selling, general and administrative expenses of $41 million, or 10.0
percent. As a percentage of revenue, selling, general and administrative expenses improved by 0.9
percentage points in 2010.
In 2011, we will continue to focus on optimizing our core business through diligent management of the
rental process, the strengthening of our customer service capabilities, and sustained cost controls. Additionally,
we will focus on:
•
•
Leveraging technology and training to improve rental rate performance and make the delivery and
pick-up of our rental equipment to and from customers more efficient;
Further increasing the proportion of our revenues derived from National Accounts and other large
customers. To the extent that we are successful, we believe that over the long-term we can improve our
3
equipment rental gross margins and overall profitability, as large accounts tend to rent more equipment
for longer periods of time and can be serviced more cost effectively than short-term transactional
customers;
• Accelerating our pursuit of opportunities in the industrial marketplace, where we believe our depth of
resources and branch footprint give us a competitive advantage. Additionally, industrial equipment
demand is subject to different cyclical pressures than construction demand; and
•
Further capitalizing on the demand for the higher margin power and temperature control equipment
rented by our trench safety, power and HVAC business.
Industry Overview and Economic Outlook
We serve four principal end-markets for equipment rental in North America: commercial, infrastructure,
industrial and residential. In 2010, based on an analysis of our charge customers’ Standard Industrial
Classification (“SIC”) codes:
• Commercial (private non-residential) construction rentals related to the construction and remodeling of
office, retail, lodging and healthcare and other commercial facilities represented approximately 56
percent of our rental revenues;
•
•
Industrial rentals to manufacturers, chemical companies, paper mills, railroads, ship builders, utilities
and other industries represented approximately 20 percent of our rental revenues;
Infrastructure (private and public non-residential) construction rentals related to the building of public
structures such as bridges, highways, power plants and airports represented approximately 17 percent of
our rental revenues; and
• Residential rentals for the construction and renovation of homes represented approximately 7 percent of
our rental revenues.
As we entered 2010, our operating environment continued to be challenged by the economic events of the
prior 18 months: the financial crisis and consequent credit restrictions, the widespread recession and a severe
downturn in non-residential construction activity of unprecedented depth and duration.
Late in the first quarter of 2010, we began to see signs of a recovery in some of our end markets; this
recovery continued at a modest level through the remainder of the year. We believe that our performance in the
second half of 2010—which included a 12 percent year-over-year increase in the volume of our equipment on
rent—primarily reflects cyclical improvements in our operating environment. In addition, we believe that the
economic environment—which was characterized by tight credit markets and cautious customer behavior—
helped create a wave of first-time renters, and that some of these renters will not return to purchasing equipment
when the pace of construction activity accelerates.
In 2011, based on our analysis of leading industry forecasts and broader economic indicators, we expect the
recovery in our end markets to continue at a modest pace. In particular, we estimate that U.S. non-residential
construction activity, our primary end market, will increase in the mid-single digit percent range year-over-year
in 2011.
Competitive Advantages
We believe that we benefit from the following competitive advantages:
Large and Diverse Rental Fleet. Our large and diverse fleet allows us to serve large customers that require
substantial quantities and/or wide varieties of equipment. We believe our ability to serve such customers should
allow us to improve our performance and enhance our market leadership position.
4
We manage our rental fleet, which is the largest and most comprehensive in the industry, utilizing a life-
cycle approach that focuses on satisfying customer demand and optimizing utilization levels. As part of this life-
cycle approach, we closely monitor repairs and maintenance expense and can anticipate, based on our extensive
experience with this type of equipment, the optimum time to dispose of an asset. Our fleet age, which is
calculated on a unit-weighted basis, was 47.7 months at December 31, 2010 compared with 42.4 months at
December 31, 2009.
Significant Purchasing Power. We purchase large amounts of equipment, contractor supplies and other
items, which enables us to negotiate favorable pricing, warranty and other terms with our vendors.
National Account Program. Our National Account sales force is dedicated to establishing and expanding
relationships with large companies, particularly those with a national or multi-regional presence. We offer our
National Account customers the benefits of a consistent level of service across North America, a wide selection of
equipment and a single point of contact for all their equipment needs. Equipment rental revenues from National
Account customers were approximately $575 million and $500 million in 2010 and 2009, respectively, and
represented approximately 31 and 27 percent of our total equipment rental revenues in 2010 and 2009, respectively.
With our continued focus on large National Accounts, we expect this percentage to increase over time.
Operating Efficiencies. We benefit from the following operating efficiencies:
•
Equipment Sharing Among Branches. We generally group our branches into districts of six to 10
locations that are in the same geographic area. Our districts are generally grouped into regions of six to
10 districts. Each branch within a region can access equipment located elsewhere in the region. This
sharing increases equipment utilization because equipment that is idle at one branch can be marketed
and rented through other branches. Additionally, fleet sharing allows us to be more disciplined with our
capital spend.
• Customer Care Center. We have a Customer Care Center (“CCC”) based in Tampa, Florida and
Charlotte, North Carolina that handles all 1-800-UR-RENTS telephone calls. The CCC handles many of
the 1-800-UR-RENTS telephone calls without having to route them to individual branches, which frees
up branch employee time. In 2010, we established a second base of operations for the CCC, which
facilitated the CCC’s handling of 37 percent more rental reservations than in 2009. The CCC provides
us with the ability to provide a more uniform quality experience to customers, manage fleet sharing
more effectively and free up branch employee time.
• Consolidation of Common Functions. We reduce costs through the consolidation of functions that are
common to our branches, such as accounts payable, payroll, benefits and risk management, information
technology and credit and collection.
Information Technology Systems. We have a wide variety of information technology systems, some proprietary
and some licensed, that support our operations. This information technology infrastructure facilitates our ability to
make rapid and informed decisions, respond quickly to changing market conditions and share rental equipment among
branches. We have an in-house team of information technology specialists that supports our systems.
Strong Brand Recognition. As the largest equipment rental company in the United States, we have strong
brand recognition, which helps us to attract new customers and build customer loyalty.
Geographic and Customer Diversity. We have 531 rental locations in 48 states and 10 Canadian provinces
and serve customers that range from Fortune 500 companies to small businesses and homeowners. We believe
that our geographic and customer diversity provides us with many advantages including:
•
•
•
enabling us to better serve National Account customers with multiple locations;
helping us achieve favorable resale prices by allowing us to access used equipment resale markets
across North America; and
reducing our dependence on any particular customer.
5
Our operations in Canada are subject to the risks normally associated with international operations. These
include (i) the need to convert currencies, which could result in a gain or loss depending on fluctuations in
exchange rates and (ii) the need to comply with foreign laws and regulations, as well as U.S. laws and regulations
applicable to our operations in foreign jurisdictions. For additional financial
information regarding our
geographic diversity, see note 4 to our consolidated financial statements.
Strong and Motivated Branch Management. Each of our full-service branches has a branch manager who
is supervised by a district manager. We believe that our managers are among the most knowledgeable and
experienced in the industry and we empower them, within budgetary guidelines, to make day-to-day decisions
concerning branch matters. Each regional office has a management team that monitors branch, district and
regional performance with extensive systems and controls, including performance benchmarks and detailed
monthly operating reviews.
Employee Training Programs. We are dedicated to providing training and development opportunities to our
employees. In 2010, our employees enhanced their skills through over 260,000 hours of training, including safety
training, equipment-related training from our suppliers and online courses covering a variety of subjects.
Risk Management and Safety Programs. Our risk management department is staffed by experienced
professionals directing the procurement of insurance, managing claims made against
the Company, and
developing loss prevention programs to address workplace safety, driver safety and customer safety. The
department’s primary focus is on the protection of our employees and assets, as well as protecting the Company
from liability for accidental loss.
Segment Information
We have two reportable segments–general rentals and trench safety, power and HVAC. Segment financial
information is presented in note 4 to our consolidated financial statements. The general rentals segment includes
the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The
general rentals segment’s customers include construction and industrial companies, manufacturers, utilities,
rentals segment comprises seven geographic regions–the
municipalities and homeowners. The general
Southwest, Gulf, Northwest, Southeast, Midwest, East, and the Northeast Canada–as well as the Aerial West
region and operates throughout the United States and Canada. The trench safety, power and HVAC segment
includes the rental of specialty construction products and related services. The trench safety, power and HVAC
segment’s customers include construction companies involved in infrastructure projects, municipalities and
industrial companies. This segment operates throughout the United States and has two locations in Canada.
Products and Services
Our principal products and services are described below.
Equipment Rental. We offer for rent approximately 2,900 classes of rental equipment on an hourly, daily,
weekly or monthly basis. The types of equipment that we offer include general construction and industrial
equipment; aerial work platforms; trench safety equipment; and general tools and light equipment. The unit-
weighted age of our fleet was 47.7 months at December 31, 2010, compared to 42.4 months at December 31,
2009.
Sales of Rental Equipment. We routinely sell used rental equipment and invest in new equipment in order
to manage repairs and maintenance costs, as well as the composition and size of our fleet. We also sell used
equipment in response to customer demand for this equipment. In accordance with the life-cycle approach we use
to manage our fleet, the rate at which we replace used equipment with new equipment depends on a number of
factors, including changing general economic conditions, growth opportunities, the market for used equipment,
the age of the fleet and the need to adjust fleet composition to meet customer requirements as well as local
demand.
6
We utilize many channels to sell used equipment: through our national sales force, which can access many
resale markets across North America; at auction; through brokers; and directly to manufacturers. We also sell
used equipment through our website, which includes an online database of used equipment available for sale. In
addition, we hold United Rentals Certified Auctions on eBay to provide customers with another convenient
online tool for purchasing used equipment.
New Equipment Sales. We sell equipment for many leading equipment manufacturers. The manufacturers
that we represent and the brands that we carry include: Genie, JLG and Skyjack (aerial lifts); Multiquip, Wacker
and Honda USA (compaction equipment, generators and pumps); Sullair (compressors); Skytrak and JLG (rough
terrain reach forklifts); Takeuchi (skid-steer loaders); Terex (telehandlers); and DeWalt (generators). The type of
new equipment that we sell varies by location.
Contractor Supplies Sales. We sell a variety of contractor supplies including construction consumables,
tools, small equipment and safety supplies. Our target customers for contractor supplies are our existing rental
customers.
Service and Other Revenues. We also offer repair, maintenance and rental protection services and sell parts
for equipment that is owned by our customers. Our target customers for these types of ancillary services are our
current rental customers as well as those who purchase both new and used equipment from our branches.
RENTALMAN(R) and INFOMANAGER(R) Software. We have two subsidiaries that develop and market
software. One of the subsidiaries develops and markets RENTALMAN(R), which is an enterprise resource
planning application used by ourselves and most of the other largest equipment rental companies. The other
subsidiary develops and markets INFOMANAGER(R), which provides a complete solution for creating an
advanced business intelligence system. INFOMANAGER(R) helps with extracting raw data from transactional
applications, transforming it into meaningful information and saving it in a database that is specifically optimized
for analytical use.
Customers
Our customer base is highly diversified and ranges from Fortune 500 companies to small businesses and
homeowners. In 2010, our largest customer accounted for less than one percent of our revenues and our top 10
customers in the aggregate accounted for approximately four percent of our revenues. Historically, over 90
percent of our business each year, as measured by equipment rental revenues, has been generated from previous
customers.
Our customer base varies by branch and is determined by several factors, including the equipment mix and
marketing focus of the particular branch as well as the business composition of the local economy, including
construction opportunities with different customers. Our customers include:
•
•
construction companies that use equipment for constructing and renovating commercial buildings,
warehouses, industrial and manufacturing plants, office parks, airports, residential developments and
other facilities;
industrial companies—such as manufacturers, chemical companies, paper mills, railroads, ship builders
and utilities—that use equipment for plant maintenance, upgrades, expansion and construction;
• municipalities that require equipment for a variety of purposes; and
•
homeowners and other individuals that use equipment for projects that range from simple repairs to
major renovations.
Our business is seasonal, with demand for our rental equipment tending to be lower in the winter months.
7
Sales and Marketing
We market our products and services through multiple channels as described below.
Sales Force. We have approximately 1,700 sales people, including approximately 900 outside sales
representatives who frequently travel to customer jobsites and meet with customers, and approximately 800
inside sales representatives who work in our branches and at our customer care center. Our sales representatives
are responsible for calling on existing and potential customers as well as assisting our customers in planning for
their equipment needs. We have ongoing programs for training our employees in sales and service skills and on
strategies for maximizing the value of each transaction.
National Account Program. Our National Account sales force is dedicated to establishing and expanding
relationships with large customers, particularly those with a national or multi-regional presence. Our National
Account team, which consists of approximately 55 sales professionals and support staff, and includes those who
service government agencies, closely coordinates its efforts with the local sales force in each area.
E-Rentals. Our customers can rent or buy equipment online 24 hours a day, seven days a week, at our
E-Rentals portal, which can be found at http://www.ur.com. Our customers can also use our UR data® application
to access real-time reports on their business activity with us.
Advertising. We promote our business through local and national advertising in various media, including
trade publications, yellow pages, the Internet, radio and direct mail. We also regularly participate in industry
trade shows and conferences and sponsor a variety of local promotional events.
Suppliers
Our strategic approach with respect to our suppliers is to maintain the minimum number of suppliers per
category of equipment that can satisfy our anticipated volume and business requirements. This approach is
designed to ensure the terms we negotiate are competitive and that there is sufficient product available to meet
anticipated customer demand. We utilize a comprehensive selection process to determine our equipment vendors.
We consider product capabilities and industry position, the terms being offered, product liability history and
financial strength. We estimate that our largest supplier accounted for approximately 19 percent of our 2010
purchases of equipment, measured on a dollar basis, and that our 10 largest suppliers in the aggregate accounted
for approximately 52 percent of such purchases. We believe we have sufficient alternative sources of supply
available for each of our major equipment categories.
Information Technology Systems
In support of our rental business, we have information technology systems which facilitate rapid and informed
decision-making and enable us to respond quickly to changing market conditions. Each branch is equipped with one
or more workstations that are electronically linked to our other locations and to our IBM System i™ system located
at our data center. Rental transactions can be entered at these workstations and processed on a real-time basis.
Management, branch and call center personnel can access these systems 24 hours a day.
These systems:
•
•
•
enable branch personnel to (i) determine equipment availability, (ii) access all equipment within a
geographic region and arrange for equipment to be delivered from anywhere in the region directly to the
customer, (iii) monitor business activity on a real-time basis and (iv) obtain customized reports on a
wide range of operating and financial data,
including equipment utilization, rental rate trends,
maintenance histories and customer transaction histories;
permit customers to access their accounts online; and
allow management to obtain a wide range of operational and financial data.
8
Our information technology systems and website are supported by our in-house group of information
technology specialists working in conjunction with our strategic technology partners and service providers. This
group trains our branch personnel; upgrades and customizes our systems; provides hardware and technology
support; operates a support desk to assist branch and other personnel in the day-to-day use of the systems;
extends the systems to newly acquired locations; and manages our website.
Leveraging information technology to achieve greater efficiencies and improve customer service is a critical
element of our strategy. In 2010, we made the following investments in the area of technology:
•
•
•
Pricing Optimization: We completed a company-wide rollout of new price optimization software. This
new pricing system includes customer-centric pricing (differentiated pricing based on specific customer
attributes) which is available in the branch rental system and is provided in real-time to our sales
representatives in the field on their smartphones;
Field Automation Strategy and Technology: We completed an asset tagging process using wifi handheld
computers to barcode the rental assets in our branches. We continued to pilot the use of wireless
handheld computers with GPS capabilities and route optimization and dispatching software for the
delivery and pick-up of our equipment to improve service to our customers while operating more
efficiently in our branches. In 2011, we expect to expand this program and commence a company-wide
deployment of handheld GPS devices and route optimization and dispatching software;
Voice over Internet Protocol (“VoIP”): We continued to improve our VoIP voice communication
systems for our call center, credit offices and a group of pilot branches, to better answer, transfer and
route calls to provide improved customer service and internal collaboration. Our VoIP systems allow us
to route calls to other branches in the area or to our call center when all branch personnel are busy
serving customers;
• Customer Service Scorecard: All of our branches utilize a customer service scorecard to improve and
monitor their performance across five critical dimensions: service response time, on-time delivery,
off-rent pick-up time, equipment availability and billing dispute resolution. In 2010, we implemented
scorecards reflecting these service metrics for individual customers;
•
Enterprise Data Warehouse: We initially implemented an enterprise data warehouse focused on
supporting our customer service and sales force automation initiatives in 2009. In 2010, we
implemented additional reporting packages within the enterprise data warehouse focused on customer
relationship management, sales force effectiveness, financial management and operations management.
Additionally, automated campaigns and leads from internal and external data sources were routed to our
sales force automation system to improve customer retention and increase our share of wallet. In 2011,
we expect to implement additional reporting packages that will target sales, operations and financial
performance as well as customer and product profitability; and
•
Financial Systems: We upgraded our general ledger, accounts payable, asset management and financial
planning and forecasting systems to improve our financial close and planning/forecasting processes.
Each of these investments is aligned with our strategic focus on customer service and operational
efficiencies.
We have a fully functional back-up facility designed to enable business continuity for our core rental and
financial business systems in the event that our main computer facility becomes inoperative. This back-up facility
also allows us to perform system upgrades and maintenance without interfering with the normal ongoing
operation of our information technology systems.
9
Competition
The U.S. equipment rental industry is highly fragmented and competitive. As the largest equipment rental
company in the industry, we estimate that we have an approximate nine percent market share and that the four
largest companies account for approximately 23 percent of industry revenue, based on 2009 revenues from
construction and industrial equipment as measured by the American Rental Association (“ARA”). Our
competitors primarily include small,
locations; regional
competitors that operate in one or more states; public companies or divisions of public companies that operate
nationally or internationally; and equipment vendors and dealers who both sell and rent equipment directly to
customers. We believe we are well positioned to take advantage of this environment because, as a larger
company, we have more resources and certain competitive advantages over our smaller competitors. These
advantages include greater purchasing power, the ability to provide customers with a broader range of equipment
and services, and greater flexibility to transfer equipment among locations in response to, and in anticipation of,
customer demand. The fragmented nature of the industry and our relatively small market share, however, may
adversely impact our ability to mitigate rate pressure.
independent businesses with one or two rental
Environmental and Safety Regulations
Our operations are subject to numerous laws governing environmental protection and occupational health
and safety matters. These laws regulate such issues as wastewater, stormwater, solid and hazardous wastes and
materials, and air quality. Our operations generally do not raise significant environmental risks, but we use and
store hazardous materials as part of maintaining our rental equipment fleet and the overall operations of our
business, dispose of solid and hazardous waste and wastewater from equipment washing, and store and dispense
petroleum products from above-ground storage tanks located at certain of our locations. Under environmental
and safety laws, we may be liable for, among other things, (i) the costs of investigating and remediating
contamination at our sites as well as sites to which we sent hazardous wastes for disposal or treatment regardless
of fault and (ii) fines and penalties for non-compliance. We incur ongoing expenses associated with the
performance of appropriate investigation and remediation activities at certain of our locations.
Employees
We have approximately 7,300 employees. Of these, approximately 2,500 are salaried personnel and
approximately 4,800 are hourly personnel. Collective bargaining agreements relating to 50 separate locations
cover approximately 600 of our employees. We monitor employee satisfaction through ongoing surveys and
consider our relationship with our employees to be good.
Available Information
We make available on our Internet website, free of charge, our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as well as our other SEC
filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our
website address is http://www.ur.com. The information contained on our website is not incorporated by reference
in this document.
Item 1A. Risk Factors
Our business, results of operations and financial condition are subject to numerous risks and uncertainties.
In connection with any investment decision with respect to our securities, you should carefully consider the
following risk factors, as well as the other information contained in this report and our other filings with the SEC.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also
impair our business operations. Should any of these risks materialize, our business, results of operations,
financial condition and future prospects could be negatively impacted, which in turn could affect the trading
value of our securities.
10
The recent economic downturn, and resulting decreases in North American construction and industrial
activities, adversely affected our revenues and operating results by decreasing the demand for our
equipment and the prices that we could charge. A slowdown in the economic recovery or a decrease in
general economic activity could have further adverse effects on our revenues and operating results.
Our rental equipment is used primarily in the non-residential construction industry, which is cyclical in
nature. Trench safety, power and HVAC equipment is principally used in connection with construction and
industrial activities. Over the past several years, our industry has experienced a decline in construction and
industrial activity, and we experienced weakness in our end markets. This weakness in our end markets has led to
a decrease in the demand for our equipment and the prices that we can charge and could lead to further decreases.
Such decreases adversely affect our operating results by causing our revenues to decline and, because certain of
our costs are fixed, our operating margins to be reduced. While many areas of the global economy are improving,
a slowdown in the economic recovery or worsening of economic conditions, in particular with respect to North
American construction and industrial activities, could cause further weakness in our end markets and adversely
affect our revenues and operating results.
The following factors, among others, may cause weakness in our end markets, either temporarily or long-
term:
•
•
•
•
•
•
a decrease in expected levels of infrastructure spending, including lower than expected government
funding for economic stimulus projects;
a lack of availability of credit;
an increase in the cost of construction materials;
an increase in interest rates;
adverse weather conditions, which may temporarily affect a particular region; or
terrorism or hostilities involving the United States or Canada.
If we are unable to collect on contracts with customers, our operating results would be adversely affected.
One of the reasons some of our customers find it more attractive to rent equipment than own that equipment
is the need to deploy their capital elsewhere. This has been particularly true in industries with high growth rates
such as the construction industry. However, some of our customers may have liquidity issues and ultimately may
not be able to fulfill the terms of their rental agreements with us. If we are unable to manage credit risk issues
adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses
could increase above historical
levels and our operating results would be adversely affected. Further,
delinquencies and credit losses generally can be expected to increase during economic slowdowns or recessions.
Our operating results may fluctuate, which could affect the trading value of our securities.
We expect that our revenues and operating results may fluctuate from quarter to quarter or over the longer
term due to a number of factors, which could adversely affect the trading value of our securities. These factors, in
addition to general economic conditions and the factors discussed above under “Cautionary Statement Regarding
Forward-Looking Statements”, include, but are not limited to:
•
•
•
•
seasonal rental patterns of our customers, with rental activity tending to be lower in the winter;
changes in the size of our rental fleet and/or in the rate at which we sell our used equipment;
changes in non-residential construction spending or government funding for infrastructure and other
construction projects;
changes in demand for, or utilization of, our equipment or in the prices we charge due to changes in
economic conditions, competition or other factors;
11
•
•
•
•
•
•
•
commodity price pressures and the resultant increase in the cost of fuel and steel to our equipment
suppliers, which can result in increased equipment costs for us;
other cost fluctuations, such as costs for employee-related compensation and healthcare benefits;
labor shortages, work stoppages or other labor difficulties;
potential enactment of new legislation affecting our operations or labor relations;
completion of acquisitions, divestitures or recapitalizations;
increases in interest rates and related increases in our interest expense and our debt service obligations;
the possible need, from time to time, to record goodwill impairment charges or other write-offs or
charges due to a variety of occurrences, such as the adoption of new accounting standards, the
impairment of assets, rental location divestitures, dislocation in the equity and/or credit markets,
consolidations or closings, restructurings, the refinancing of existing indebtedness or the buy-out of
equipment leases; and
•
currency risks and other risks of international operations.
Our common stock price has fluctuated significantly and may continue to do so in the future.
Our common stock price has fluctuated significantly and may continue to do so in the future for a number of
reasons, including:
•
announcements of developments related to our business;
• market perceptions of the likelihood of our involvement in merger and acquisition activity;
•
•
•
•
•
•
variations in our
expectations;
revenues, gross margins, earnings or other
financial
results from investors’
departure of key personnel;
purchases or sales of large blocks of our stock by institutional investors or transactions by insiders;
fluctuations in the results of our operations and general conditions in the economy, our market, and the
markets served by our customers;
investor perceptions of the equipment rental industry in general and our Company in particular; and
the operating and stock performance of comparable companies or related industries.
In addition, prices in the stock market have been volatile over the past few years. In many cases, the
fluctuations have been unrelated to the operating performance of the affected companies. As a result, the price of
our common stock could fluctuate in the future without regard to our or our competitors’ operating performance.
Our substantial debt exposes us to various risks.
At December 31, 2010, our total indebtedness was approximately $2.9 billion, including $124 million of
subordinated convertible debentures. Our substantial indebtedness has the potential to affect us adversely in a
number of ways. For example, it will or could:
•
•
•
increase our vulnerability to adverse economic, industry or competitive developments;
require us to devote a substantial portion of our cash flow to debt service, reducing the funds available
for other purposes or otherwise constraining our financial flexibility;
restrict our ability to move operating cash flows to Holdings. As of December 31, 2010, the “restricted
payment” basket capacity provided for in the indentures governing certain of URNA’s outstanding debt
securities was fully depleted by losses sustained in prior years;
12
•
•
affect our ability to obtain additional financing, particularly since substantially all of our assets are
subject to security interests relating to existing indebtedness; and
decrease our profitability or cash flow.
Further, if we are unable to service our indebtedness and fund our operations, we will be forced to adopt an
alternative strategy that may include:
•
•
•
•
•
reducing or delaying capital expenditures;
limiting our growth;
seeking additional capital;
selling assets; or
restructuring or refinancing our indebtedness.
Even if we adopt an alternative strategy, the strategy may not be successful and we may continue to be
unable to service our indebtedness and fund our operations.
A portion of our indebtedness bears interest at variable rates that are linked to changing market interest
rates. As a result, an increase in market interest rates would increase our interest expense and our debt service
obligations. At December 31, 2010, we had $904 million of indebtedness that bears interest at variable rates. This
amount represents 31 percent of our total indebtedness, including our subordinated convertible debentures. See
Item 7A—Quantitative and Qualitative Disclosures About Market Risk for additional information related to
interest rate risk.
Despite our current indebtedness levels, we may be able to incur substantially more debt and take other
actions that could diminish our ability to make payments on our indebtedness when due, which could
further exacerbate the risks associated with our substantial indebtedness.
Despite our current indebtedness levels, we may be able to incur substantially more indebtedness in the
future. We are not fully restricted under the terms of the indentures or agreements governing our indebtedness
from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of
other actions that are not prohibited by the terms of the indentures or agreements governing our indebtedness,
any of which actions could have the effect of diminishing our ability to make payments on our indebtedness
when due and further exacerbate the risks associated with our substantial indebtedness.
If we are unable to satisfy the financial and other covenants in certain of our debt agreements, our lenders
could elect to terminate the agreements and require us to repay the outstanding borrowings, or we could
face other substantial costs.
Under the agreement governing our senior secured asset-based revolving credit facility (“ABL facility”), we
are required, among other things, to satisfy certain financial tests relating to: (i) the fixed charge coverage ratio
and (ii) the ratio of senior secured debt to adjusted EBITDA. Both of these covenants were suspended on June 9,
2009 because the availability, as defined in the agreement governing the ABL facility, had exceeded 20 percent
of the maximum revolver amount under the ABL facility. Subject to certain limited exceptions specified in the
ABL facility, these covenants will only apply in the future if availability under the ABL facility falls below 10
percent of the maximum revolver amount under the ABL facility. Since the June 9, 2009 suspension date and
through December 31, 2010, availability under the ABL facility has exceeded 10 percent of the maximum
revolver amount under the ABL facility and, as a result, these maintenance covenants remained inapplicable.
Under our accounts receivable securitization facility, we are required, among other things, to maintain certain
financial tests relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales
outstanding. If we are unable to satisfy these or any other of the relevant covenants, the lenders could elect to
terminate the ABL facility, accounts receivable securitization facility and/or other agreements governing our debt
In such event, unless we are able to refinance
and require us
to repay outstanding borrowings.
13
the indebtedness coming due and replace the ABL facility, accounts receivable securitization facility and/or the
other agreements governing our debt, we would likely not have sufficient liquidity for our business needs and
would be forced to adopt an alternative strategy as described above. Even if we adopt an alternative strategy, the
strategy may not be successful and we may not have sufficient liquidity to service our debt and fund our
operations.
Restrictive covenants in certain of the agreements and instruments governing our indebtedness may
adversely affect our financial and operational flexibility.
In addition to the risks with respect to covenant non-compliance, compliance with covenants may restrict
our ability to conduct our operations. These covenants could adversely affect our operating results by
significantly limiting our operating and financial flexibility. In addition to financial covenants, various other
covenants in the ABL facility, accounts receivable securitization facility, and in the other agreements governing
our debt, among our things, restrict our ability to:
•
incur additional indebtedness;
• make prepayments of certain indebtedness;
•
•
pay dividends;
repurchase common stock;
• make investments;
•
create liens; and
• make acquisitions, sell assets and engage in mergers and acquisitions.
We rely on available borrowings under the ABL facility and accounts receivable securitization facility for
cash to operate our business, which subjects us to risk, some of which is beyond our control.
In addition to cash we generate from our business, our principal existing sources of cash are borrowings
available under the ABL facility and accounts receivable securitization facility. If our access to such financing
was unavailable or reduced, or if such financing were to become significantly more expensive for any reason, we
may not be able to fund daily operations, which may cause material harm to our business or could affect our
ability to operate our business as a going concern. In addition, if any of our lenders experience difficulties that
render them unable to fund future draws on the facilities, we may not be able to access all or a portion of these
funds, which could have similar adverse consequences.
If we are unable to obtain additional capital as required, we may be unable to fund the capital outlays
required for the success of our business.
If the cash that we generate from our business, together with cash that we may borrow under the ABL
facility and accounts receivable securitization facility, is not sufficient to fund our capital requirements, we will
require additional debt and/or equity financing. However, we may not succeed in obtaining the requisite
additional financing or such financing may include terms that are not satisfactory to us. We may not be able to
obtain additional debt financing as a result of prevailing interest rates or other factors, including the presence of
covenants or other restrictions under the ABL facility and/or other agreements governing our debt. In the event
we seek to obtain equity financing, our stockholders may experience dilution as a result of the issuance of
additional equity securities. This dilution may be significant depending upon the amount of equity securities that
we issue and the prices at which we issue such securities. If we are unable to obtain sufficient additional capital
in the future, we may be unable to fund the capital outlays required for the success of our business, including
those relating to purchasing equipment, growth plans and refinancing existing indebtedness.
14
If we determine that our goodwill has become impaired, we may incur impairment charges, which would
negatively impact our operating results.
At December 31, 2010, we had $198 million of goodwill on our consolidated balance sheet. Goodwill
represents the excess of cost over the fair value of net assets acquired in business combinations. We assess
potential impairment of our goodwill at least annually. Impairment may result from significant changes in the
manner of use of the acquired asset, negative industry or economic trends and/or significant underperformance
relative to historic or projected operating results.
We have a holding company structure and we will depend in part on distributions from our subsidiaries in
order to pay amounts due on our indebtedness. Certain provisions of law or contractual restrictions could
limit distributions from our subsidiaries.
We derive substantially all of our operating income from, and hold substantially all of our assets through,
our subsidiaries. The effect of this structure is that we will depend in part on the earnings of our subsidiaries, and
the payment or other distribution to us of these earnings, in order to meet our obligations under our outstanding
debt. Provisions of law, such as those requiring that dividends be paid only from surplus, could limit the ability
of our subsidiaries to make payments or other distributions to us. Furthermore, these subsidiaries could in certain
circumstances agree to contractual restrictions on their ability to make distributions.
We are subject to certain ongoing class action and derivative lawsuits, which could adversely affect our
liquidity and results of operations.
Multiple purported class action and derivative lawsuits have been filed against the Company, as described in
greater detail under Item 3—Legal Proceedings. These include three complaints that were filed following our
November 14, 2007 announcement that affiliates of Cerberus Capital Management, L.P. (“Cerberus”) had
notified us that they were not prepared to proceed with the purchase of the Company on the terms set forth in the
merger agreement entered into with such persons. These complaints have been consolidated. Plaintiffs’ second
consolidated amended complaint alleges, among other things, that certain of the Company’s filings with the SEC,
including proxy materials in connection with the special meeting of stockholders, and other public statements
contained false and misleading statements and/or material omissions relating to the contemplated merger with
affiliates of Cerberus. The second consolidated amended complaint asserts claims under Section 10(b) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and SEC Rule 10b-5 thereunder and, in the
case of the individual defendants, Section 20(a) of the Exchange Act. The second consolidated amended
complaint seeks unspecified compensatory damages, costs, expenses and fees. On August 24, 2009, the United
States District Court for the District of Connecticut granted defendants’ motion to dismiss the second
consolidated amended complaint with prejudice and entered a judgment in favor of defendants. On August 30,
2010, the United States Court of Appeals for the Second Circuit affirmed the judgment of dismissal entered by
the District Court. On September 13, 2010, plaintiffs filed a petition for rehearing en banc or panel rehearing. We
can give no assurances as to the outcome of these proceedings or any other stockholder lawsuit pending against
the Company and, if we do not prevail, we may be required to pay substantial damages or settlement amounts.
Further, regardless of the outcome, we may incur significant defense and indemnification costs, and the time and
attention of our management may be diverted from normal business operations. If we are ultimately required to
pay significant defense costs, damages or settlement amounts, such payments, to the extent not covered,
advanced or timely reimbursed by insurance, could materially and adversely affect our liquidity and results of
operations.
We are exposed to a variety of claims relating to our business, and our insurance may not fully cover them.
We are in the ordinary course exposed to a variety of claims relating to our business. These claims include
those relating to (i) personal injury or property damage involving equipment rented or sold by us, (ii) motor
vehicle accidents involving our vehicles and our employees and (iii) employment-related claims. Further, as
15
described elsewhere in this report, several stockholder derivative and class action lawsuits have been filed against
us. Currently, we carry a broad range of insurance for the protection of our assets and operations. However, such
insurance may not fully cover these claims for a number of reasons, including:
•
•
our insurance policies, reflecting a program structure that we believe reflects market conditions for
companies our size, are often subject to significant deductibles or self-insured retentions: $2 million per
occurrence for each general liability or automobile liability claim, and $1 million per occurrence for
each workers’ compensation claim;
our director and officer liability insurance policy has no deductible for individual non-indemnifiable
loss coverage, but is subject to a $2.5 million deductible for company reimbursement coverage and all
director and officer coverage is subject to certain exclusions;
• we do not maintain stand-alone coverage for environmental
liability (other than legally required
coverage), since we believe the cost for such coverage is high relative to the benefit it provides; and
•
certain types of claims, such as claims for punitive damages or for damages arising from intentional
misconduct, which are often alleged in third party lawsuits, might not be covered by our insurance.
We establish and regularly evaluate our loss reserves to address business operations claims, or portions
thereof, not covered by our insurance policies. To the extent that we are found liable for any significant claim or
claims that exceed our established levels of reserves, or that are not otherwise covered by insurance, we could
have to significantly increase our reserves, and our liquidity and operating results could be materially and
adversely affected. During the fourth quarter of 2010, we recognized a charge of $24 million related to our
provision for self-insurance reserves. The charge in particular reflects recent adverse experience in our portfolio
of automobile and general liability claims, as well as worker’s compensation claims. In addition, the purported
class action and derivative lawsuits against us, and our indemnification costs associated with such matters, may
not be fully reimbursable or covered by insurance. It is also possible that some or all of the insurance that is
currently available to us will not be available in the future on economically reasonable terms or at all.
We have made acquisitions in the past, which entail certain risks, as do any growth initiatives, including
additional acquisitions or consolidations, that we may make in the future.
We have historically achieved a portion of our growth through acquisitions. Although we have not made
many acquisitions in recent years, we will consider potential acquisitions on a selective basis. From time-to-time
we have also approached, or have been approached, to explore consolidation opportunities with other public
companies or large privately-held companies.
Whether historical or in the future, it is possible that we will not realize the expected benefits from our
acquisitions or that our existing operations will be adversely affected as a result of acquisitions. Acquisitions
entail certain risks, including:
•
•
•
•
•
unrecorded liabilities of acquired companies that we fail
investigations or that are not subject to indemnification or reimbursement by the seller;
to discover during our due diligence
difficulty in assimilating the operations and personnel of the acquired company within our existing
operations or in maintaining uniform standards;
loss of key employees of the acquired company;
the failure to achieve anticipated synergies; and
strains on management and other personnel time and resources to evaluate, negotiate and integrate
acquisitions.
16
We would expect to pay for any future acquisitions using cash, capital stock, notes and/or assumption of
indebtedness. To the extent that our existing sources of cash are not sufficient in any instance, we would expect
to need additional debt or equity financing, which involves its own risks, such as the dilutive effect on shares
held by our stockholders if we financed acquisitions by issuing convertible debt or equity securities.
We have also spent resources and efforts, apart from acquisitions, in attempting to enhance our rental
business over the past few years. These efforts place strains on our management and other personnel time and
resources, and require timely and continued investment in facilities, personnel and financial and management
systems and controls. We may not be successful in implementing all of the processes that are necessary to
support any of our growth initiatives, which could result in our expenses increasing disproportionately to our
incremental revenues, causing our operating margins and profitability to be adversely affected.
Our rights plan and charter provisions, as well as other factors, may affect the likelihood of a takeover or
change of control of the Company.
We have in place a stockholders’ rights plan and certain charter provisions, such as the inability for
stockholders to act by written consent, that may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of the Company that are not approved by our board, including
transactions in which our stockholders might otherwise receive a premium for their shares over then-current
market prices. As previously reported, on October 16, 2008, we amended our rights plan to reduce the beneficial
ownership threshold required to trigger rights under the plan from a 25 percent ownership interest to a 15 percent
ownership interest. We are also subject to Section 203 of the Delaware General Corporation Law which, under
certain circumstances, restricts the ability of a publicly held Delaware corporation to engage in a business
combination, such as a merger or sale of assets, with any stockholder that, together with affiliates, owns 15
percent or more of the corporation’s outstanding voting stock, which similarly could prohibit or delay the
accomplishment of a change of control transaction. In addition, under the ABL facility, a change of control (as
defined in the credit agreement) constitutes an event of default, entitling our lenders to terminate the ABL facility
and require us to repay outstanding borrowings. A change of control (as defined in the applicable agreement) is
also a termination event under our accounts receivable securitization facility and generally would require us to
offer to repurchase our outstanding senior and senior subordinated notes. As a result, the provisions of the
agreements governing our debt also may affect the likelihood of a takeover or other change of control.
Turnover of members of our management and our ability to attract and retain key personnel may affect
our ability to efficiently manage our business and execute our strategy.
Our success is dependent, in part, on the experience and skills of our management team, and competition in
our industry and the business world for top management talent is generally significant. Although we believe we
generally have competitive pay packages, we can provide no assurance that our efforts to attract and retain senior
management staff will be successful. Moreover, given the volatility in our stock price, it may be more difficult
and expensive to recruit and retain employees, particularly senior management, through grants of stock or stock
options. This in turn could place greater pressure on the Company to increase the cash component of its
compensation packages, which may adversely affect our operating results. If we are unable to fill and keep filled
all of our senior management positions, or if we lose the services of any key member of our senior management
team and are unable to find a suitable replacement in a timely fashion, we may be challenged to effectively
manage our business and execute our strategy.
Our operational and cost reduction strategies may not generate the improvements and efficiencies we
expect.
We have been pursuing a strategy of optimizing our field operations in order to improve sales force
effectiveness, and to focus our sales force’s efforts on increasing revenues from our National Account and other
large customers. We are also continuing to pursue our overall cost reduction program, which resulted in
substantial cost savings in 2009 and further savings in 2010. The extent to which these strategies will achieve our
17
desired efficiencies and goals in 2011 and beyond is uncertain, as their success depends on a number of factors,
some of which are beyond our control. Even if we carry out these strategies in the manner we currently expect,
we may not achieve the efficiencies or savings we anticipate, or on the timetable we anticipate, and there may be
unforeseen productivity, revenue or other consequences resulting from our strategies that may adversely affect
us. Therefore, there can be no guarantee that our strategies will prove effective in achieving desired profitability,
margins or returns to stockholders.
We are dependent on our relationships with key suppliers to obtain equipment and other supplies for our
business on acceptable terms.
We have achieved significant cost savings through our centralization of equipment and non-equipment
purchases. However, as a result, we depend on and are exposed to the credit risk of a group of key suppliers. While
we make every effort to evaluate our counterparties prior to entering into long-term and other significant
procurement contracts, we cannot predict the impact on our suppliers of the current economic environment and
other developments in their respective businesses. Insolvency, financial difficulties or other factors may result in our
suppliers not being able to fulfill the terms of their agreements with us. Further, such factors may render suppliers
unwilling to extend contracts that provide favorable terms to the Company or may force them to seek to renegotiate
existing contracts with us. Although we believe we have alternative sources of supply for the equipment and other
supplies used in our business, termination of our relationship with any of our key suppliers could have a material
adverse effect on our business, financial condition or results of operations in the unlikely event that we were unable
to obtain adequate equipment or supplies from other sources in a timely manner or at all.
As our rental fleet ages, our operating costs may increase, we may be unable to pass along such costs, and
our earnings may decrease. The costs of new equipment we use in our fleet may increase, requiring us to
spend more for replacement equipment or preventing us from procuring equipment on a timely basis.
If our rental equipment ages, the costs of maintaining such equipment, if not replaced within a certain period
of time, will likely increase. The costs of maintenance may materially increase in the future and could lead to
material adverse effects on our results of operations.
The cost of new equipment for use in our rental fleet could also increase due to increased material costs to our
suppliers or other factors beyond our control. Such increases could materially adversely impact our financial
condition and results of operations in future periods. Furthermore, changes in customer demand could cause certain
of our existing equipment to become obsolete and require us to purchase new equipment at increased costs.
Our industry is highly competitive, and competitive pressures could lead to a decrease in our market share
or in the prices that we can charge.
The equipment rental industry is highly fragmented and competitive. Our competitors include small,
independent businesses with one or two rental locations, regional competitors that operate in one or more states,
public companies or divisions of public companies, and equipment vendors and dealers who both sell and rent
equipment directly to customers. We may in the future encounter increased competition from our existing
competitors or from new companies. Competitive pressures could adversely affect our revenues and operating
results by, among other things, decreasing our rental volumes, depressing the prices that we can charge or
increasing our costs to retain employees.
Disruptions in our information technology systems could adversely affect our operating results by limiting
our capacity to effectively monitor and control our operations.
Our information technology systems facilitate our ability to monitor and control our operations and adjust to
changing market conditions. Any disruptions in these systems or the failure of these systems to operate as
expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting
18
our capacity to effectively monitor and control our operations and adjust to changing market conditions. In
addition, because our systems sometimes contain information about individuals and businesses, our failure to
appropriately maintain the security of the data we hold, whether as a result of our own error or the malfeasance
or errors of others, could harm our reputation or give rise to legal liabilities leading to lower revenues, increased
costs and other material adverse effects on our results of operations.
We are subject to numerous environmental and safety regulations. If we are required to incur compliance
or remediation costs that are not currently anticipated, our liquidity and operating results could be
materially and adversely affected.
Our operations are subject to numerous laws and regulations governing environmental protection and
occupational health and safety matters. These laws regulate such issues as wastewater, stormwater, solid and
hazardous waste and materials, and air quality. Under these laws, we may be liable for, among other things,
(i) the costs of investigating and remediating any contamination at our sites as well as sites to which we send
hazardous waste for disposal or treatment, regardless of fault and (ii) fines and penalties for non-compliance. Our
operations generally do not raise significant environmental risks, but we use hazardous materials to clean and
maintain equipment, dispose of solid and hazardous waste and wastewater from equipment washing, and store
and dispense petroleum products from above-ground storage tanks located at certain of our locations.
Based on conditions currently known to us, we do not believe that any pending or likely remediation and/or
compliance effort will have a material adverse effect on our business. We cannot be certain, however, as to the
impact on our business if new adverse environmental conditions are discovered or
potential financial
environmental and safety requirements become more stringent. If we are required to incur environmental
compliance or remediation costs that are not currently anticipated, our liquidity and operating results could be
materially and adversely affected, depending on the magnitude of such costs.
We have operations throughout the United States, which exposes us to multiple state and local regulations,
in addition to federal law and requirements as a government contractor. Changes in applicable law,
regulations or requirements, or our material failure to comply with any of them, can increase our costs
and have other negative impacts on our business.
Our 446 branch locations in the United States are located in 48 states, which exposes us to a host of different
state and local regulations, in addition to federal law and regulatory and contractual requirements we face as a
government contractor. These laws and requirements address multiple aspects of our operations, such as worker
safety, consumer rights, privacy, employee benefits and more, and can often have different requirements in
different jurisdictions. Changes in these requirements, or any material failure by our branches to comply with
them, can increase our costs, affect our reputation, limit our business, drain management time and attention and
generally otherwise impact our operations in adverse ways.
Labor disputes could disrupt our ability to serve our customers and/or lead to higher labor costs.
We currently have approximately 600 employees who are represented by unions and covered by collective
bargaining agreements and approximately 6,700 employees who are not represented by unions. Various unions
occasionally seek to organize certain of our nonunion employees. Union organizing efforts or collective
bargaining negotiations could potentially lead to work stoppages and/or slowdowns or strikes by certain of our
employees, which could adversely affect our ability to serve our customers. Further, settlement of actual or
threatened labor disputes or an increase in the number of our employees covered by collective bargaining
agreements can have unknown effects on our labor costs, productivity and flexibility.
Fluctuations in fuel costs or reduced supplies of fuel could harm our business.
We believe that one of our competitive advantages is the mobility of our fleet. Accordingly, we could be
adversely affected by limitations on fuel supplies or significant increases in fuel prices that result in higher costs
19
to us for transporting equipment from one branch to another branch. Although we have used, and may continue
to use, futures contracts to hedge against rising and/or declining fuel prices, a significant or protracted price
fluctuation or disruption of fuel supplies could have a material adverse effect on our financial condition and
results of operations.
Our rental fleet is subject to residual value risk upon disposition, and may not sell at the prices or in the
quantities we expect.
The market value of any given piece of rental equipment could be less than its depreciated value at the time
it is sold. The market value of used rental equipment depends on several factors, including:
•
the market price for new equipment of a like kind;
• wear and tear on the equipment relative to its age and the performance of preventive maintenance;
•
•
•
•
the time of year that it is sold;
the supply of used equipment on the market;
the existence and capacities of different sales outlets;
the age of the equipment at the time it is sold;
• worldwide and domestic demand for used equipment; and
•
general economic conditions.
We include in income from operations the difference between the sales price and the depreciated value of an
item of equipment sold. Changes in our assumptions regarding depreciation could change our depreciation
expense, as well as the gain or loss realized upon disposal of equipment. Sales of our used rental equipment at
prices that fall significantly below our projections and/or in lesser quantities than we anticipate will have a
negative impact on our results of operations and cash flows.
We have operations outside the United States. As a result, we may incur losses from currency conversions
and have higher costs than we otherwise would have due to the need to comply with foreign laws.
Our operations in Canada are subject to the risks normally associated with international operations. These
include (i) the need to convert currencies, which could result in a gain or loss depending on fluctuations in
exchange rates and (ii) the need to comply with foreign laws and regulations, as well as U.S. laws and regulations
applicable to our operations in foreign jurisdictions.
Item 1B. Unresolved Staff Comments
None.
20
Item 2.
Properties
As of January 1, 2011, we operated 531 rental locations. 446 of these locations are in the United States and
85 are in Canada. The number of locations in each state or province is shown in the table below, as well as the
number of locations that are in our general rentals (GR) and trench safety, power and HVAC (TPH) segments.
United States
• Alabama (GR 6)
• Alaska (GR 5)
•
Louisiana (GR 5, TPH 2)
• North Dakota (GR 3)
• Maine (GR 2)
• Ohio (GR 10, TPH 3)
• Arizona (GR 8, TPH 2)
• Maryland (GR 9, TPH 2)
• Oklahoma (GR 3, TPH 1)
• Arkansas (GR 2, TPH 1)
• Massachusetts (GR 6, TPH 2)
• Oregon (GR 10, TPH 1)
• California (GR 52, TPH 12)
• Michigan (GR 3)
•
Pennsylvania (GR 11)
• Colorado (GR 8, TPH 1)
• Minnesota (GR 6, TPH 1)
• Rhode Island (GR 1)
• Connecticut (GR 7, TPH 1)
• Mississippi (GR 2)
• Delaware (GR 2)
• Missouri (GR 5, TPH 3)
•
Florida (GR 19, TPH 8)
• Montana (GR 1)
• Georgia (GR 17, TPH 2)
• Nebraska (GR 3, TPH 1)
•
•
•
•
South Carolina (GR 7)
South Dakota (GR 2)
Tennessee (GR 9)
Texas (GR 40, TPH 10)
•
•
•
•
Idaho (GR 2)
• Nevada (GR 4, TPH 3)
• Utah (GR 3, TPH 1)
Illinois (GR 5, TPH 2)
• New Hampshire (GR 3)
• Virginia (GR 13, TPH 1)
Indiana (GR 8, TPH 1)
• New Jersey (GR 8, TPH 3)
• Washington (GR 17, TPH 5)
Iowa (GR 4, TPH 1)
• New Mexico (GR 4)
• West Virginia (GR 2)
• Kansas (GR 2)
• Kentucky (GR 3)
• New York (GR 13)
• Wisconsin (GR 5, TPH 1)
• North Carolina (GR 12, TPH 1)
• Wyoming (GR 2)
Canada
• Alberta (GR 8)
• British Columbia (GR 16, TPH 1)
• Manitoba (GR 3)
• New Brunswick (GR 7)
• Newfoundland (GR 6)
• Nova Scotia (GR 5)
• Ontario (GR 26, TPH 1)
•
Prince Edward Island (GR 1)
• Quebec (GR 9)
•
Saskatchewan (GR 2)
Our branch locations generally include facilities for displaying equipment and, depending on the location,
may include separate areas for equipment service, storage and displaying contractor supplies. We own 117 of our
branch locations and lease the other branch locations. We also lease or own other premises used for purposes
such as district and regional offices and service centers.
21
We have a fleet of approximately 4,700 vehicles. These vehicles are used for delivery, maintenance,
management and sales functions. Approximately 86 percent of this fleet is leased and the balance is owned.
Our corporate headquarters are located in Greenwich, Connecticut, where we occupy approximately 51,000
square feet under a lease that expires in 2013. Additionally, we maintain a facility in Shelton, Connecticut, where we
occupy approximately 32,000 square feet under a lease that expires in 2016. Further, we maintain shared-service
facilities in Tampa, Florida, where we occupy approximately 43,000 square feet under a lease that expires in 2011, and
Charlotte, North Carolina, where we occupy approximately 23,000 square feet under a lease that expires in 2012.
Item 3.
Legal Proceedings
A description of legal proceedings can be found in note 15 to our consolidated financial statements, included
in this report at Item 8—Financial Statements and Supplementary Data, and is incorporated by reference into this
Item 3.
Item 4.
(Removed and Reserved)
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Price Range of Common Stock
Holdings’ common stock trades on the New York Stock Exchange under the symbol “URI.” The following
table sets forth, for the periods indicated, the intra-day high and low sale prices for our common stock, as
reported by the New York Stock Exchange.
2010:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
Low
$10.13
14.79
15.41
23.69
$ 9.50
6.90
11.32
11.53
$ 6.87
9.26
8.20
14.46
$ 2.52
3.99
5.19
8.61
As of January 1, 2011, there were approximately 101 holders of record of our common stock. The number
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.”
Dividend Policy
Holdings has not paid dividends on its common stock since inception. The payment of any future dividends
or the authorization of stock repurchases or other recapitalizations will be determined by our board of directors in
light of conditions then existing, including earnings, financial condition and capital requirements, financing
agreements, business conditions, stock price and other factors. The terms of certain agreements governing our
outstanding indebtedness contain certain limitations on our ability to move operating cash flows to Holdings and/
or to pay dividends on, or effect repurchases of, our common stock. In addition, under Delaware law, dividends
may only be paid out of surplus or current or prior year’s net profits.
22
Purchases of Equity Securities by the Issuer
The following table provides information about acquisitions of Holdings’ common stock by Holdings during
the fourth quarter of 2010:
Period
Total Number of Shares Purchased
Average Price Paid per Share
October 1, 2010 to October 31, 2010 . . .
November 1, 2010 to November 30,
2010 . . . . . . . . . . . . . . . . . . . . . . . . . .
December 1, 2010 to December 31,
2010 . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (1) . . . . . . . . . . . . . . . . . . . . . . . .
—
625
2,030
2,655
$ —
$19.31
$21.22
(1) The shares were withheld by Holdings to satisfy tax withholding obligations upon the vesting of restricted
stock unit awards. These shares were not acquired pursuant to any repurchase plan or program.
Equity Compensation Plans
For information regarding equity compensation plans, see Item 12 of this annual report on Form 10-K.
23
Item 6. Selected Financial Data
The following selected financial data reflects the results of operations and balance sheet data as of and for
the years ended December 31, 2006 to 2010. The data below should be read in conjunction with, and is qualified
by reference to, our Management’s Discussion and Analysis and our consolidated financial statements and notes
thereto contained elsewhere in this report. In December 2006, we entered into a definitive agreement to sell our
traffic control business and, as a result, the operations of our traffic control business are reflected as a
discontinued operation for all periods presented. The financial information presented may not be indicative of our
future performance.
Year Ended December 31,
2010
2009
2008
2007
2006
(in millions, except per share data)
Income statement data:
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,237 $2,358 $ 3,267 $3,715 $3,627
1,579
2,335
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
658
1,292
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
367
617
Selling, general and administrative expenses . . . . . . . . . . . . .
—
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
—
Charge related to settlement of SEC inquiry . . . . . . . . . . . . . —
—
Goodwill impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . —
50
60
Non-rental depreciation and amortization . . . . . . . . . . . . . . .
625
197
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
208
255
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net
13
8
Interest expense-subordinated convertible debentures, net
. .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
(3)
(Loss) income from continuing operations before (benefit)
2,405
2,149
1,748
1,310
1,118
610
598
509
408
20 —
31
—
14 —
— 1,147 —
54
57
658
114
187
226
9
(4)
(116)
(1) —
58
(630)
174
9
provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
(Benefit) provision for income taxes . . . . . . . . . . . . . . . . . . .
(Loss) income from continuing operations . . . . . . . . . . . . . . .
Loss from discontinued operation, net of taxes . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock redemption charge . . . . . . . . . . . . . . . . . . . . . —
Net (loss) income available to common stockholders . . . . . .
Basic (loss) earnings per share:
(63)
(41)
(22)
(4)
(26)
(26)
(813)
(109)
(704)
(107)
(47)
(60)
(2) —
(62)
—
(62)
578
215
363
(1)
(704)
362
(239) —
369
(943)
405
156
249
(25)
224
—
234
(Loss) income from continuing operations (inclusive of
preferred stock redemption charge) . . . . . . . . . . . . . . $ (0.38) $ (0.98) $(12.62) $ 3.61 $ 2.58
(0.26)
Loss from discontinued operation . . . . . . . . . . . . . . . . . .
(0.04) — (0.01)
(0.06)
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.44) $ (1.02) $(12.62) $ 3.60 $ 2.32
Diluted (loss) earnings per share:
(Loss) income from continuing operations (inclusive of
preferred stock redemption charge) . . . . . . . . . . . . . . $ (0.38) $ (0.98) $(12.62) $ 3.26 $ 2.28
(0.22)
Loss from discontinued operation . . . . . . . . . . . . . . . . . .
(0.04) — (0.01)
(0.06)
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.44) $ (1.02) $(12.62) $ 3.25 $ 2.06
December 31,
2010
2009
2008
2007
2006
(in millions)
Balance sheet data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,693 $3,859 $4,191 $5,842 $5,366
2,556
Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
146
Subordinated convertible debentures . . . . . . . . . . . . . . . . . . . .
1,538
Stockholders’ (deficit) equity . . . . . . . . . . . . . . . . . . . . . . . . . .
3,199
2,570
146
146
(29) 2,018
2,951
124
(19)
2,805
124
(20)
24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in millions, except per share data and unless otherwise indicated)
Executive Overview
United Rentals is the largest equipment rental company in the world, with an integrated network of 531
rental locations in the United States and Canada. Although the equipment rental industry is highly fragmented
and diverse, we believe that we are well positioned to take advantage of this environment because, as a larger
company, we have more extensive resources and certain competitive advantages. These include a fleet of rental
equipment with a total original equipment cost (“OEC”) of $3.8 billion, and a national branch network that
operates in 48 states and every Canadian province, and serves 99 of the largest 100 metropolitan areas in the
United States. In addition, our size gives us greater purchasing power, the ability to provide customers with a
broader range of equipment and services, the ability to provide customers with equipment that is better
maintained and therefore more productive and reliable, and the ability to enhance the earning potential of our
assets by transferring equipment among branches to satisfy customer needs.
We offer approximately 2,900 classes of equipment for rent to a diverse customer base that includes
construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government
entities. Our revenues are derived from the following sources: equipment rentals, sales of used rental equipment,
sales of new equipment, contractor supplies sales and service and other. In 2010, equipment rental revenues
represented 82 percent of our total revenues.
As we entered 2010, our operating environment continued to be challenged by the economic events of the
prior 18 months: the financial crisis and consequent credit restrictions, the widespread recession and a severe
downturn in non-residential construction activity of unprecedented depth and duration.
Late in the first quarter of 2010, we began to see signs of a recovery in some of our end markets; this
recovery continued at a modest level through the remainder of the year. We believe that our performance in the
second half of 2010—which included a 12 percent year-over-year increase in the volume of our equipment on
rent—primarily reflects cyclical improvements in our operating environment. In addition, we believe that the
economic environment—which was characterized by tight credit markets and cautious customer behavior—
helped create a wave of first-time renters, and that some of these renters will not return to purchasing equipment
when the pace of construction activity accelerates.
In 2011, based on our analysis of leading industry forecasts and broader economic indicators, we expect the
recovery in our end markets to continue at a modest pace. In particular, we estimate that U.S. non-residential
construction activity, our primary end market, will increase in the mid-single digit percent range year-over-year
in 2011.
For the past several years, our strategy has focused on generating significant free cash flow and positioning
our business for disciplined growth of revenues and earnings at higher margins. The implementation of this
strategy calls for a superior standard of customer service, an increasing proportion of revenues derived from
larger accounts and a targeted presence in industrial and specialty markets.
Four key elements of this strategy are: a consistent focus on our core business of equipment rental; the
optimization of our rental fleet and branch network, both in terms of composition and management; responsible
rate management; and greater efficiency in all areas of operation as evidenced by a significant reduction in costs.
Although the economic environment continued to present challenges for both our Company and the U.S.
equipment rental industry in 2010, we succeeded in realizing a number of achievements related to our strategy.
These achievements include:
• An increase in the proportion of our equipment rental revenues derived from National Account
customers, from 27 percent in 2009 to 31 percent in 2010. National Accounts are generally defined as
25
customers with potential annual spend of $500,000 or more on equipment rentals or customers doing
business in multiple locations;
•
Full year free cash flow generation of $227 in 2010, after net rental capital expenditures (defined as
purchases of rental equipment less the proceeds from sales of rental equipment) of $202. In 2010, we
selectively invested in fleet where warranted by demand, which resulted in a significant increase in net
rental capital expenditures from $31 in 2009;
• Continued improvement in fleet management, including a record average of $1.45 billion OEC of fleet
transferred among branches per quarter in 2010, to deploy assets in areas of greater earnings potential;
• Continued improvement in customer service management, including an increase in the percentage of
equipment rental revenues from accounts that are managed by a single point of contact. Establishing a
single point of contact for our key accounts helps us provide more uniform customer service
management. Equipment rental revenues from National Accounts and other large customers managed by
a single point of contact increased to 51 percent of our total equipment rental revenues in 2010 from 47
percent in 2009. Additionally, we expanded our centralized Customer Care Center (“CCC”). The CCC,
which established a second base of operations in 2010, handled 37 percent more rental reservations than
in 2009;
• A further reduction in our employee headcount from approximately 8,000 at December 31, 2009 to
approximately 7,300 at December 31, 2010;
•
The continued optimization of our network of rental locations, including a further reduction in the
overall number of branches from 569 at December 31, 2009 to 531 at December 31, 2010, and the
opening of five new trench safety, power and HVAC rental locations to grow our specialty rental
business; and
• A 2010 year-over-year reduction in selling, general and administrative expenses of $41, or 10.0 percent.
As a percentage of revenue, selling, general and administrative expenses improved by 0.9 percentage
points in 2010.
In 2011, we will continue to focus on optimizing our core business through diligent management of the
rental process, the strengthening of our customer service capabilities, and sustained cost controls. Additionally,
we will focus on:
•
•
Leveraging technology and training to improve rental rate performance and make the delivery and
pick-up of our rental equipment to and from customers more efficient;
Further increasing the proportion of our revenues derived from National Accounts and other large
customers. To the extent that we are successful, we believe that over the long-term we can improve our
equipment rental gross margins and overall profitability, as large accounts tend to rent more equipment
for longer periods of time and can be serviced more cost effectively than short-term transactional
customers;
• Accelerating our pursuit of opportunities in the industrial marketplace, where we believe our depth of
resources and branch footprint give us a competitive advantage. Additionally, industrial equipment
demand is subject to different cyclical pressures than construction demand; and
•
Further capitalizing on the demand for the higher margin power and temperature control equipment
rented by our trench safety, power and HVAC business.
Although there are near-term challenges that may continue to constrain equipment rental demand, we
believe that our strategy, together with our competitive advantages of size and a strong balance sheet, puts us in a
unique position to capitalize on opportunities that may arise during the recovery.
26
Financial Overview
Despite the challenges posed by recent economic and credit market conditions, we succeeded in taking a
number of positive actions in 2009 and 2010 related to our capital structure, and have significantly improved our
financial flexibility and liquidity. These actions include:
•
•
•
•
In June 2009, United Rentals North America (“URNA”) issued $500 aggregate principal amount of
10 7⁄ 8 percent Senior Notes, which are due June 15, 2016, and received net proceeds of $471.
In November 2009, URNA issued $500 aggregate principal amount of 9 1⁄4 percent Senior Notes (the
“9 1⁄4 percent Notes”), which are due December 15, 2019, and received net proceeds of $480.
In November 2009, contemporaneous with the issuance of the 9 1⁄4 percent Notes, we issued $173
aggregate principal amount of 4 percent Convertible Senior Notes, which are due November 15, 2015,
and received net proceeds of $167.
In October 2010, URNA issued $750 aggregate principal amount of 8 3⁄ 8 percent Senior Subordinated
Notes, which are due September 15, 2020, and received net proceeds of $732.
As discussed elsewhere in this report, proceeds from these offerings, as well as cash on hand, were used to
repurchase or redeem and subsequently retire certain of our outstanding debt securities. These actions have
improved our debt maturity profile and positioned us to invest the necessary capital in our business to take
advantage of opportunities in the economic recovery.
Loss from continuing operations. Loss from continuing operations and diluted loss per share from
continuing operations for each of the three years in the period ended December 31, 2010 were as follows:
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted loss per share from continuing operations (inclusive of
Year Ended December 31,
2010
2009
2008
$ (22)
$ (60)
$ (704)
preferred stock redemption charge) . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(0.38)
$(0.98)
$(12.62)
27
Loss from continuing operations and diluted loss per share from continuing operations for each of the three
years in the period ended December 31, 2010 include the impacts of the following special items (amounts
presented on an after-tax basis):
Year Ended December 31,
2010
2009
2008
Contribution to
loss from
continuing
operations
Impact on
diluted loss per
share from
continuing
operations
Contribution to
loss from
continuing
operations
Impact on
diluted loss per
share from
continuing
operations
Contribution to
loss from
continuing
operations
Impact on
diluted loss per
share from
continuing
operations
$ (21)
$(0.34)
$ (19)
$(0.29)
$ (12)
$ (0.17)
Restructuring charge (1) . . . . . .
Goodwill impairment
charge (2) . . . . . . . . . . . . . . .
—
—
—
—
(911)
(12.19)
(Losses) gains on repurchase/
retirement of debt securities
and subordinated convertible
debentures . . . . . . . . . . . . . . .
. .
Asset impairment charge (3)
Charge related to settlement of
SEC inquiry . . . . . . . . . . . . .
Preferred stock redemption
charge (4) . . . . . . . . . . . . . . .
Foreign tax credit valuation
allowance and other (5) . . . .
(17)
(6)
—
—
—
(0.28)
(0.09)
—
—
—
12
(8)
—
—
—
0.19
(0.12)
—
—
—
24
(5)
(14)
—
(8)
0.32
(0.06)
(0.19)
(3.19)
(0.10)
(1) As discussed below (see “Restructuring charge”), this relates to branch closure charges and severance costs.
(2) As discussed below (see “Goodwill impairment charge”), we recognized a non-cash goodwill impairment charge in the
fourth quarter of 2008 related to certain reporting units within our general rentals segment. The charge reflected the
challenges of the construction cycle, as well as the broader economic and credit environment. Substantially all of the
impairment charge relates to goodwill arising out of acquisitions made between 1997 and 2000.
(3) As discussed in note 5 to our consolidated financial statements, this non-cash charge primarily relates to the impact of
impairing certain rental equipment and leasehold improvement write-offs.
(4) This charge, which relates to the June 2008 repurchase of our Series C and Series D Preferred Stock, reduces income
available to common stockholders for earnings per share purposes, but does not affect net income (loss).
(5) Primarily relates to the establishment of a valuation allowance related to certain foreign tax credits that, as a result of the
preferred stock redemption, were no longer expected to be realized.
In addition to the matters discussed above, our 2010 performance reflects increased gross profit from
equipment rentals and sales of rental equipment, and reductions in selling, general and administrative expenses.
As discussed below (see “Results of Operations- Income taxes”), our results for 2010 also include a tax benefit of
$41, which equates to an effective tax rate of 65.1 percent.
EBITDA GAAP Reconciliation. EBITDA represents the sum of net loss, loss from discontinued operation,
net of taxes, benefit for income taxes, interest expense, net, interest expense-subordinated convertible debentures,
net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents
EBITDA plus the sum of the restructuring charge, the charge related to the settlement of the SEC inquiry, the
goodwill impairment charge and stock compensation expense, net. These items are excluded from adjusted
EBITDA internally when evaluating our operating performance and allow investors to make a more meaningful
comparison between our core business operating results over different periods of time, as well as with those of
other similar companies. Management believes that EBITDA and adjusted EBITDA, when viewed with the
Company’s results under U.S. generally accepted accounting principles (“GAAP”) and the accompanying
reconciliation, provide useful information about operating performance and period-over-period growth, and
provide additional information that is useful for evaluating the operating performance of our core business
without regard to potential distortions. Additionally, management believes that EBITDA and adjusted EBITDA
permit investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from
28
which capital investments are made and debt is serviced. However, EBITDA and adjusted EBITDA are not
measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as
alternatives to net income (loss) or cash flow from operating activities as indicators of operating performance or
liquidity. The table below provides a reconciliation between net loss and EBITDA and adjusted EBITDA.
Year Ended December 31,
2010
2009
2008
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operation, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense—subordinated convertible debentures, net . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (26) $ (62) $ (704)
2
(47)
226
(4)
417
57
—
(109)
174
9
455
58
4
(41)
255
8
389
60
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
649
Restructuring charge (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
Charge related to settlement of SEC inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Goodwill impairment charge (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Stock compensation expense, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
589
31
—
—
8
(117)
20
14
1,147
6
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$691
$628
$1,070
(1) As discussed below (see “Restructuring charge”), this relates to branch closure charges and severance costs.
(2) As discussed below (see “Goodwill impairment charge”), we recognized a non-cash goodwill impairment
charge in the fourth quarter of 2008 related to certain reporting units within our general rentals segment. The
charge reflected the challenges of the construction cycle, as well as the broader economic and credit
environment. Substantially all of the impairment charge relates to goodwill arising out of acquisitions made
between 1997 and 2000.
(3) Represents non-cash, share-based payments associated with the granting of equity instruments.
For the year ended December 31, 2010, EBITDA increased $60, or 10.2 percent, and adjusted EBITDA
increased $63, or 10.0 percent, primarily reflecting increased margins from sales of rental equipment and selling,
general and administrative expense reductions.
For the year ended December 31, 2009, EBITDA increased $706 primarily reflecting the absence of the
$1,147 non-cash goodwill impairment charge recognized in the fourth quarter of 2008 related to certain reporting
units within our general rentals segment. Excluding the impact of the 2008 goodwill impairment charge, the 2009
EBITDA decline reflects lower equipment rental gross profit due to the softening construction environment,
lower new and used equipment sales and reduced sales of contractor supplies, consistent with our strategy to
focus on the higher margin core rental business. On an adjusted basis, our EBITDA declined $442, or 41.3
percent, and our EBITDA margin decreased by 6.2 percentage points to 26.6 percent, also reflecting lower
equipment rental gross profit and reduced revenues from our other lines of business.
Revenues. Revenues for each of the three years in the period ended December 31, 2010 were as follows:
Year Ended December 31,
Percent Change
2010
2009
2008
2010
2009
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,834
144
78
95
86
$1,830
229
86
121
92
$2,496
264
179
212
116
0.2
(37.1)
(9.3)
(21.5)
(6.5)
(26.7)
(13.3)
(52.0)
(42.9)
(20.7)
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,237
$2,358
$3,267
(5.1)
(27.8)
29
Equipment rentals include our revenues from renting equipment, as well as related revenues such as the fees
we charge for equipment delivery, fuel, repair or maintenance of rental equipment and damage waivers. Sales of
rental equipment represent our revenues from the sale of used rental equipment. Contractor supplies sales include
our sales of supplies utilized by contractors, which include construction consumables, tools, small equipment and
safety supplies. Services and other revenue includes our repair services (including parts sales) as well as the
operations of our subsidiaries that develop and market software for use by equipment rental companies in
managing and operating multiple branch locations.
2010 total revenues of $2.2 billion decreased 5.1 percent, compared with total revenues of $2.4 billion in 2009.
The decrease primarily reflects a 37.1 percent decline in sales of rental equipment and a 21.5 percent decline in
contractor supplies sales. Equipment rental revenue increased slightly as a 4.3 percent increase in the volume of
OEC on rent and the favorable impact of changes in the exchange rate between the U.S. and Canadian dollars were
largely offset by a 2.1 percent decrease in rental rates and other. In 2011, based on our analysis of leading industry
forecasts and the broader economic environment, we estimate that U.S. non-residential construction activity will
increase in the mid-single digit percent range as compared to 2010. We expect to outperform the market in 2011 as
improved rental rates and increased volume of OEC on rent will each contribute to rental revenue growth. The
decline in sales of rental equipment in 2010 primarily reflects a decline in the volume of equipment sold. The
decline in contractor supplies sales in 2010 reflects a reduction in the volume of supplies sold, partially offset by
improved pricing and product mix driven by our continued focus on higher margin products.
2009 total revenues of $2.4 billion decreased 27.8 percent, compared with total revenues of $3.3 billion in
2008. The decrease primarily reflects a 26.7 percent decrease in equipment rental revenue, a 52.0 percent decline
in sales of new equipment, a 42.9 percent decline in contractor supplies sales, and a 13.3 percent decline in sales
of rental equipment. The decrease in equipment rental revenue reflects an 11.8 percent decrease in rental rates
and a 12.4 percent decrease in the volume of OEC on rent. The decline in sales of new equipment reflects volume
declines. The decline in contractor supplies sales reflects a reduction in the volume of supplies sold, consistent
with a weak construction environment, partially offset by improved pricing and product mix driven by our
continued focus on higher margin products. The decline in sales of rental equipment primarily reflects lower
pricing due to general softness in the used equipment market and an increased proportion of used equipment sold
through the auction channel, partially offset by a higher number of units sold.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with GAAP. A summary of our significant
accounting policies is contained in note 2 to our consolidated financial statements. In applying many accounting
principles, we make assumptions, estimates and/or judgments. These assumptions, estimates and/or judgments
are often subjective and may change based on changing circumstances or changes in our analysis. Material
changes in these assumptions, estimates and/or judgments have the potential to materially alter our results of
operations. We have identified below our accounting policies that we believe could potentially produce
materially different results were we to change underlying assumptions, estimates and/or judgments. Although
actual results may differ from those estimates, we believe the estimates are reasonable and appropriate.
Revenue Recognition. We recognize equipment rental revenue on a straight-line basis. Our rental contract
periods are daily, weekly or monthly. By way of example, if a customer were to rent a piece of equipment and the
daily, weekly and monthly rental rates for that particular piece were (in actual dollars) $100, $300 and $900,
respectively, we would recognize revenue of $32.14 per day. The daily rate for recognition purposes is calculated by
dividing the monthly rate of $900 by the monthly term of 28 days. As part of this straight-line methodology, when
the equipment is returned, we recognize as incremental revenue the excess, if any, between the amount the customer
is contractually required to pay over the cumulative amount of revenue recognized to date. In any given accounting
period, we will have customers return equipment and be contractually required to pay us more than the cumulative
amount of revenue recognized to date. For instance, continuing the above example, if the above customer rented a
piece of equipment on December 29 and returned it at the close of business on January 1, we would recognize
30
incremental revenue on January 1 of $171.44 (in actual dollars, representing the difference between the amount the
customer is contractually required to pay and the cumulative amount recognized to date on a straight-line basis). We
record amounts billed to customers in excess of recognizable revenue as deferred revenue on our balance sheet. We
had deferred revenue of $12 and $9 as of December 31, 2010 and 2009, respectively. Revenues from the sale of
rental equipment and new equipment are recognized at the time of delivery to, or pick-up by, the customer and
when collectibility is reasonably assured. Sales of contractor supplies are also recognized at the time of delivery to,
or pick-up by, the customer. Service revenue is recognized as the services are performed.
Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts. These allowances reflect
our estimate of the amount of our receivables that we will be unable to collect based on historical 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. Trade receivables that have contractual maturities of one year or less are written-off
when they are determined to be uncollectible based on the criteria necessary to qualify as a deduction for federal
tax purposes. Write-offs of such receivables require management approval based on specified dollar thresholds.
Useful Lives of Rental Equipment and Property and Equipment. We depreciate rental equipment and
property and equipment over their estimated useful lives, after giving effect to an estimated salvage value which
ranges from zero percent to 10 percent of cost. Costs we incur in connection with refurbishment programs that
extend the life of our equipment are capitalized and amortized over the remaining useful life of the related
equipment. The costs incurred under these refurbishment programs were $12, $33 and $30 for the years ended
December 31, 2010, 2009 and 2008, respectively, and are included in purchases of rental equipment in our
consolidated statements of cash flows.
The useful life of an asset is determined based on our estimate of the period over which the asset will
generate revenues; such periods are periodically reviewed for reasonableness. In addition, the salvage value,
which is also reviewed periodically for reasonableness, 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.
To the extent that the useful lives of all of our rental equipment were to increase or decrease by one year, we
estimate that our annual depreciation expense would decrease or increase by approximately $34 or $43,
respectively. Similarly, to the extent the estimated salvage values of all of our rental equipment were to increase
or decrease by one percentage point, we estimate that our annual depreciation expense would change by
approximately $4. Any change in depreciation expense as a result of a hypothetical change in either useful lives
or salvage values would generally result in a proportional increase or decrease in the gross profit we would
recognize upon the ultimate sale of the asset. To the extent that the useful lives of all of our depreciable property
and equipment were to increase or decrease by one year, we estimate that our annual non-rental depreciation
expense would decrease or increase by approximately $6 or $8, respectively.
Impairment of Long-lived Assets (Excluding Goodwill). We review the recoverability of our long-lived
assets, including rental equipment and property and equipment, when events or changes in circumstances occur
that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment
is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows
(undiscounted and without interest charges). If these cash flows are less than the carrying value of such asset, an
impairment loss is recognized for the difference between the estimated fair value and carrying value. During the
years ended December 31, 2010, 2009 and 2008, we recognized asset impairment charges of $9, $12 and $8,
respectively, in our general rentals segment. The 2010 impairment charge is primarily reflected in non-rental
depreciation and amortization in the accompanying consolidated statements of operations and principally relates
to write-offs of leasehold improvements and other fixed assets in connection with the consolidation of our branch
network discussed below (see “Restructuring charge”). The 2009 impairment charge includes $9 reflected in
31
depreciation of rental equipment in the accompanying consolidated statements of operations, as well as $3
primarily related to leasehold improvement write-offs which are reflected in non-rental depreciation and
amortization in the accompanying consolidated statements of operations. The 2008 impairment charge of $8 is
reflected in depreciation of rental equipment in the accompanying consolidated statements of operations and
relates to certain rental equipment. Our estimates of the impairment charges for the rental fleet were calculated
by comparing the proceeds estimated to be realized from the expected disposition of these rental assets to their
carrying values. The 2009 impairments of the rental fleet, as well as the 2009 and 2010 write-offs of leasehold
improvements and other fixed assets, followed from our decision to close an aggregate of 113 branches in 2009
and 2010. As of December 31, 2010 and 2009, there were $0 and $2 of held for sale assets reflected in rental
equipment, net in our consolidated balance sheets, respectively.
In addition to the impairment reviews we conduct in connection with branch consolidations and other
changes in the business, each quarter we conduct a review of rental assets with utilization below a specified
threshold. We select these assets, which represented approximately three percent of our total rental assets at
December 31, 2010, as we believe they are at the greatest risk of potential impairment. As part of this impairment
review, we estimate future rental revenues based on current and expected utilization levels, the age of these
assets and their remaining useful lives. Additionally, we estimate when the asset is expected to be removed or
retired from our rental fleet as well as the expected proceeds to be realized upon disposition. Based on our most
recently completed December 31, 2010 quarterly review, there was no impairment associated with these assets.
Purchase Price Allocation. We have made a number of acquisitions in the past and may continue to make
acquisitions in the future. We allocate the cost of the acquired enterprise to the assets acquired and liabilities
assumed based on their respective fair values at the date of acquisition. With the exception of goodwill, long-
lived fixed assets generally represent the largest component of our acquisitions. The long-lived fixed assets that
we acquire are primarily rental equipment, transportation equipment and real estate.
In addition to long-lived fixed assets, we also acquire other assets and assume liabilities. These other assets
and liabilities typically include, but are not limited to, parts inventory, accounts receivable, accounts payable and
other working capital items. Because of their short-term nature, the fair values of these other assets and liabilities
generally approximate the book values reflected on the acquired entities’ balance sheets. However, when
appropriate, we adjust these book values for factors such as collectibility and existence. The intangible assets that
we have acquired are primarily goodwill, customer relationships and non-compete agreements. Goodwill is
calculated as the excess of the cost of the acquired entity over the net of the fair value of the assets acquired and
the liabilities assumed. Customer relationships and non-compete agreements are valued based on an excess
earnings or income approach with consideration to projected cash flows.
Evaluation of Goodwill Impairment. We have made acquisitions over the years, principally during the
period between 1997 and 2000, which included the recognition of a significant amount of goodwill. Goodwill is
tested for impairment annually or more frequently if an event or circumstance indicates that an impairment loss
may have been incurred. Application of the goodwill
including the
identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to
reporting units, and determination of the fair value of each reporting unit. Accounting rules permit a company to
carry forward a detailed determination of a reporting unit’s fair value from one year to the next if the following
criteria are met: (i) the assets and liabilities of each reporting unit have not changed significantly from the prior
year, (ii) the carrying amount of each reporting unit in the prior year significantly exceeded the fair value, and
(iii) the likelihood that the carrying value of each reporting unit this year would be less than the fair value is
remote. In 2010, because these criteria were met, we carried forward the results of our 2009 fair value estimates.
test requires judgment,
impairment
In 2008 and 2009, we estimated the fair value of our reporting units (or our regions) using a combination of
an income approach based on the present value of estimated future cash flows and a market approach based on
market price data of shares of our Company and other corporations engaged in similar businesses. We believe
this approach, which utilizes multiple valuation techniques, yields the most appropriate evidence of fair value.
32
We review goodwill for impairment utilizing a two-step process. The first step of the impairment test
requires a comparison of the fair value of each of our reporting units to the respective carrying value. If the
carrying value of a reporting unit is less than its fair value, no indication of impairment exists and a second step
is not performed. If the carrying amount of a reporting unit is higher than its fair value, there is an indication that
an impairment may exist and a second step must be performed. In the second step, the impairment is computed
by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of the goodwill. If
the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an
impairment loss must be recognized for the excess and charged to operations.
Inherent in our development of the present value of future cash flow projections are assumptions and
estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital
and tax rates. We also make certain assumptions about future economic conditions, interest rates and other
market data. Many of the factors used in assessing fair value are outside the control of management, and these
assumptions and estimates can change in future periods. Changes in assumptions or estimates could materially
affect the determination of the fair value of a reporting unit, and therefore could affect the amount of potential
impairment. The following assumptions are significant to our income approach:
•
•
Business Projections—We make assumptions about the level of equipment rental activity in the
marketplace and cost
levels. These assumptions drive our planning assumptions for pricing and
utilization and also serve as key inputs for developing our cash flow projections. These projections are
derived using our internal business plans over a ten-year planning period that are updated at least
annually and reviewed by our board of directors;
Long-term Growth Rates—Beyond the planning period, we also determine an assumed long-term
growth rate representing the expected rate at which a reporting unit’s earnings stream is projected to
grow. These rates are used to calculate the terminal value of our reporting units, and are added to the
cash flows projected during our ten-year planning period; and
• Discount Rates—Our combined future cash flows are then discounted at a rate that is consistent with a
weighted-average cost of capital that is likely to be used by market participants. The weighted-average
cost of capital is an estimate of the overall after-tax rate of return required by equity and debt holders of
a business enterprise.
The market approach is one of the other primary methods used for estimating the fair value of a reporting
unit. This assumption relies on the market value (market capitalization) of companies that are engaged in the
same or a similar line of business.
During the fourth quarter of 2008, and in connection with the preparation of our 2008 year-end financial
statements, we recognized an aggregate non-cash goodwill impairment charge of $1.1 billion related to certain
reporting units within our general rentals segment. The charge reflected the challenges of the construction cycle, as
well as the broader economic and credit environment, and included $1.0 billion, reflecting conditions at the time of
our annual October 1, 2008 testing date, as well as an additional $100 as of December 31, 2008, reflecting further
deterioration in the economic and credit environment during the fourth quarter of 2008. Substantially all of the
impairment charge related to goodwill arising from acquisitions made between 1997 and 2000.
33
As of October 1, 2010, we had $197 of goodwill on our balance sheet and, of this amount, substantially all
related to our trench safety, power and HVAC reportable segment and three of our reporting units within the general
rentals reportable segment: Southwest, Northwest and East. Our impairment testing indicated that the 2009 fair
value estimates of the reporting units that were carried forward exceeded the carrying values, thereby resulting in no
indication of impairment. The results of this impairment analysis are summarized in the table below:
Reporting unit
Goodwill
balance at
October 1,
2010
Carrying
value at
October 1,
2010
Trench safety, power and HVAC . . . . . . . . . . . . . . . . . .
Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Northwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East
$93
32
33
31
$237
324
351
716
2009
fair
value
estimate
$ 596
440
410
1,000
The underlying analyses supporting our 2009 fair value assessment related to our outlook of the business’
long-term performance, which included key assumptions as to the appropriate discount rate and long-term
growth rate. In connection with our impairment testing in the prior year, we utilized a discount rate of nine
percent and a long-term terminal growth rate of two percent beyond our planning period. We also performed
sensitivity analyses on our assumptions, and noted that increasing the discount rate by one percent still resulted in
fair values in excess of the carrying values. We also stress tested the long-term growth rate by reducing it to 1.5
percent, noting that the fair values for all reporting units were still in excess of the carrying values. We also stress
tested the analysis to increase the discount rate to 10 percent and reduce the long-term growth rate to 1.5 percent
(as well as in several other combinations for reasonably possible scenarios) noting that the carrying values were
exceeded by the fair values.
Income Taxes. We recognize deferred tax assets and liabilities for certain future deductible or taxable
temporary differences expected to be reported in our income tax returns. These deferred tax assets and liabilities
are computed using the tax rates that are expected to apply in the periods when the related future deductible or
taxable temporary difference is expected to be settled or realized. In the case of deferred tax assets, the future
realization of the deferred tax benefits and carryforwards are determined with consideration to historical
profitability, projected future taxable income,
the expected timing of the reversals of existing temporary
differences, and tax planning strategies. The most significant evidence that we consider in the recognition of
deferred tax assets is reversal of temporary differences resulting from book versus tax depreciation of our rental
equipment fleet. We also evaluate projected taxable income over a period generally ranging from one to five
years, depending on the relevant tax jurisdiction, to determine the recoverability of all deferred tax assets and, in
addition, examine the length of the carryforward to ensure the deferred tax assets are established in an amount
that is more likely than not to be realized. We have provided a partial valuation allowance against a deferred tax
asset for state operating loss carryforward amounts. This valuation allowance was required because it is more
likely than not that some of the state carryforward amounts will expire unused due to restrictive carryback/
carryover rules in various states that would limit realization of tax benefits, and our history of certain state
operating loss carryforwards expiring unused.
We have adopted an accounting principle which addresses accounting for uncertainty in income taxes and
requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken
in a tax return regarding uncertainties in income tax positions. The first step is recognition: we determine whether
it is more likely than not that a tax position will be sustained upon examination, including resolution of any
related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax
position has met the more-likely-than-not recognition threshold, we presume that the position will be examined
by the appropriate taxing authority with full knowledge of all relevant
information. The second step is
measurement: a tax position that meets the more-likely-than-not recognition threshold is measured to determine
the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount
of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
34
We are subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, accruals
for tax contingencies are established based on the probable outcomes of such matters. Our ongoing assessments
of the probable outcomes of the examinations and related tax accruals require judgment and could increase or
decrease our effective tax rate as well as impact our operating results.
Reserves for Claims. We are exposed to various claims relating to our business, including those for which
we retain portions of the losses through the application of deductibles and self-insured retentions, which we
sometimes refer to as “self-insurance.” These claims include (i) workers compensation claims and (ii) claims by
third parties for injury or property damage involving our equipment or personnel. These types of claims may take
a substantial amount of time to resolve and, accordingly, the ultimate liability associated with a particular claim
may not be known for an extended period of time. Our methodology for developing self-insurance reserves is
based on management estimates, which incorporate periodic actuarial valuations. Our estimation process
considers, among other matters, the cost of known claims over time, cost inflation and incurred but not reported
claims. These estimates may change based on, among other things, changes in our claims history or receipt of
additional information relevant to assessing the claims. Further, 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 reserve levels. As discussed below (see “Fourth Quarter 2010
Items”), during the fourth quarter of 2010, we recognized a charge of $24 related to our provision for self-
insurance reserves. The charge in particular reflects recent adverse experience in our portfolio of automobile and
general liability claims, as well as worker’s compensation claims.
Legal Contingencies. We are involved in a variety of claims, lawsuits, investigations and proceedings, as
described in note 15 to our consolidated financial statements and elsewhere in this report. We determine whether
an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can
be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using
available information. We develop our views on estimated losses in consultation with outside counsel handling
our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation
and settlement strategies. Should developments in any of these matters cause a change in our determination such
that we expect an unfavorable outcome and result in the need to recognize a material accrual, or should any of
these matters result in a final adverse judgment or be settled for a significant amount, they could have a material
adverse effect on our results of operations in the period or periods in which such change in determination,
judgment or settlement occurs.
Results of Operations
As discussed in note 4 to our consolidated financial statements, our reportable segments are general rentals
and trench safety, power and HVAC. The general rentals segment includes the rental of construction, aerial,
industrial and homeowner equipment and related services and activities. The general rentals segment’s customers
include construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The
general rentals segment operates throughout the United States and Canada. The trench safety, power and HVAC
segment includes the rental of specialty construction products and related services. The trench safety, power and
HVAC segment’s customers include construction companies involved in infrastructure projects, municipalities
and industrial companies. This segment operates throughout the United States and has two locations in Canada.
As discussed in note 4 to our consolidated financial statements, we aggregate our seven geographic
regions—the Southwest, Gulf, Northwest, Southeast, Midwest, East, and the Northeast Canada- as well as the
Aerial West region into our general rentals reporting segment. Historically, there have been variances in the
levels of equipment rentals gross margins achieved by these regions. For instance, for the five year period ended
December 31, 2010, our Midwest region’s equipment rentals gross margin varied by more than 10 percent from
the equipment rentals gross margin of the aggregated general rentals’ regions over the same period. Although the
margin for the Midwest region exceeded a 10 percent variance level for this five year period, prior to the
significant economic downturn in 2009 that negatively impacted all our regions, the Midwest region’s margin
35
was converging with those achieved at the other general rentals’ regions, and, given management’s focus on cost
cutting, improved processes and fleet sharing, we expect further convergence going forward. Although we
believe aggregating these regions into our general rentals reporting segment for segment reporting purposes is
appropriate, to the extent that the margin variances persist and the equipment rentals gross margins do not
converge, we may be required to disaggregate the regions into separate reporting segments. Any such
disaggregation would have no impact on our consolidated results of operations.
These segments align our external segment reporting with how management evaluates and allocates
resources. We evaluate segment performance based on segment operating results. Our revenues, operating
results, and financial condition fluctuate from quarter to quarter reflecting the seasonal rental patterns of our
customers, with rental activity tending to be lower in the winter.
Revenues by segment were as follows:
General
rentals
Trench safety,
power and HVAC
Total
2010
2009
2008
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,693
134
72
89
83
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,071
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,700
218
81
114
89
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,202
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,326
252
172
202
113
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,065
$141
10
6
6
3
$166
$130
11
5
7
3
$156
$170
12
7
10
3
$202
$1,834
144
78
95
86
$2,237
$1,830
229
86
121
92
$2,358
$2,496
264
179
212
116
$3,267
Equipment rentals. 2010 equipment rentals of $1.83 billion was flat with 2009 as a 4.3 percent increase in
the volume of OEC on rent and the favorable impact of changes in the exchange rate between the U.S. and
Canadian dollars (“currency”) were largely offset by a 2.1 percent decrease in rental rates and other. Equipment
rentals represented 82 percent of total revenues in 2010. On a segment basis, equipment rentals represented 82
percent and 85 percent of total revenues for general rentals and trench safety, power and HVAC, respectively.
General rentals equipment rentals decreased slightly as an increase in the volume of OEC on rent and the
favorable impact of currency were offset by a decrease in rental rates and other. Trench safety, power and HVAC
equipment rentals increased $11, or 8.5 percent, primarily reflecting a 10.2 percent increase in the volume of
OEC on rent partially offset by a 3.8 percent decrease in rental rates.
2009 equipment rentals of $1.83 billion decreased $666, or 26.7 percent, primarily reflecting an 11.8 percent
decrease in rental rates and a 12.4 percent decrease in the volume of OEC on rent, consistent with a weak
construction environment. Equipment rentals represented 78 percent of total revenues in 2009. On a segment
36
basis, equipment rentals represented 77 percent and 83 percent of total revenue for general rentals and trench
safety, power and HVAC, respectively. General rentals equipment rentals decreased $626, or 26.9 percent,
primarily reflecting decreases in the volume of OEC on rent and rental rates. Trench safety, power and HVAC
equipment rentals decreased $40, or 23.5 percent, primarily reflecting an 8.9 percent decrease in the volume of
OEC on rent and a 6.5 percent decrease in rental rates.
Sales of rental equipment. For each of the three years in the period ended December 31, 2010, sales of rental
equipment represented between 6 and 10 percent of our total revenues. Our general rentals segment accounted for
approximately 95 percent of these sales. 2010 sales of rental equipment of $144 declined $85, or 37.1 percent,
from 2009 primarily reflecting a decline in the volume of equipment sold. In 2010, the average age of our used
equipment sold was 75 months, as compared to 78 months in 2009. 2009 sales of rental equipment of $229
declined $35, or 13.3 percent, from 2008 reflecting lower pricing due to general softness in the used equipment
market and an increased proportion of used equipment sold through the auction channel, partially offset by a
higher number of units sold.
Sales of new equipment. For each of the three years in the period ended December 31, 2010, sales of new
equipment represented between 3 and 5 percent of our total revenues. Our general rentals segment accounted for
approximately 95 percent of these sales. 2010 sales of new equipment of $78 declined $8, or 9.3 percent, from
2009 reflecting volume declines. 2009 sales of new equipment of $86 declined $93, or 52.0 percent, from 2008
reflecting volume declines.
Sales of contractor supplies. For each of the three years in the period ended December 31, 2010, sales of
contractor supplies represented between 4 and 6 percent of our total revenues. Our general rentals segment
accounted for approximately 95 percent of these sales. 2010 sales of contractor supplies of $95 declined $26, or
21.5 percent, from 2009 reflecting a reduction in the volume of supplies sold, partially offset by improved pricing
and product mix. 2009 sales of contractor supplies of $121 declined $91, or 42.9 percent, from 2008 reflecting a
reduction in the volume of supplies sold, consistent with a weak construction environment, partially offset by
improved pricing and product mix driven by our continued focus on higher margin products.
Service and other revenues. For each of the three years in the period ended December 31, 2010, service and
other revenues represented approximately 4 percent of our total revenues. Our general rentals segment accounted
for approximately 97 percent of these sales. 2010 service and other revenues of $86 decreased $6, or 6.5 percent,
from 2009 primarily reflecting reduced revenues from service labor and parts sales, partially offset by increased
software license and related revenues. 2009 service and other revenues of $92 decreased $24, or 20.7 percent,
from 2008 primarily reflecting decreased revenues from service labor and parts sales.
Fourth Quarter 2010 Items. In the fourth quarter of 2010, we repurchased and retired an aggregate of $814
principal amount of our outstanding 7 3⁄4 percent Senior Subordinated Notes due 2013, 7 percent Senior
Subordinated Notes due 2014 and 1 7⁄ 8 percent Convertible Senior Subordinated Notes due 2023. Interest
expense, net for the fourth quarter of 2010 includes a charge of $25, representing the difference between the net
carrying amount of these securities and the total purchase price of $827. The $25 charge includes a $4 write-off
of a previously terminated derivative transaction. During the quarter, we also recognized a charge of $24 related
to our provision for self-insurance reserves, comprised of $18 recorded in cost of equipment rentals, excluding
depreciation, and $6 recorded in discontinued operation. The charge in particular reflects recent adverse
experience in our portfolio of automobile and general liability claims, as well as worker’s compensation claims.
The discontinued operation component of the charge is reflected net of taxes in our consolidated statements of
operations. Additionally, during the quarter, we recognized restructuring charges of $15 related to the closure of
22 branches and reductions in headcount of approximately 100. During the quarter, we also recognized asset
impairment charges of $6 which are primarily reflected in non-rental depreciation and amortization and
principally relate to write-offs of leasehold improvements and other fixed assets in connection with the
consolidation of our branch network discussed above. Additionally, the income tax provision (benefit) for the
quarter includes a benefit of $7 related to a correction of a deferred tax asset recognized in prior periods.
37
Fourth Quarter 2009 Items. In the fourth quarter of 2009, we repurchased and retired an aggregate of $429
principal amount of our outstanding 6 1⁄ 2 percent Senior Notes due 2012 and 14 percent Senior Notes due 2014.
Interest expense, net for the fourth quarter of 2009 includes a charge of $9, representing the difference between
the net carrying amount of these securities and the total purchase price of $430. Additionally, during the quarter,
we recognized restructuring charges of $6 related to the closure of 13 branches and reductions in headcount of
approximately 400. During the quarter, we also recognized asset
impairment charges of $3. These asset
impairment charges include $2 reflected in depreciation of rental equipment, and $1 primarily related to
leasehold improvement write-offs which are reflected in non-rental depreciation and amortization. During the
quarter, we also recognized a charge of $8 reflecting recent experience related to our provision for self-insurance
reserves, comprised of $4 recorded in cost of equipment rentals, excluding depreciation, and $4 recorded in
discontinued operation. The discontinued operation component of the charge is reflected net of taxes in our
consolidated statements of operations. Additionally, during the quarter, we recognized a benefit of $3 primarily
relating to vacation forfeitures, comprised of $2 recorded in cost of equipment rentals, excluding depreciation,
and $1 recorded in selling, general and administrative expenses.
Fourth Quarter 2008 Items. In addition to the non-cash goodwill impairment charge discussed above, in the
fourth quarter of 2008, we repurchased and retired an aggregate of $130 principal amount of our outstanding 6 1⁄ 2
percent Senior Notes due 2012, 7 3⁄4 percent Senior Subordinated Notes due 2013 and 7 percent Senior
Subordinated Notes due 2014. Interest expense, net for the fourth quarter of 2008 includes a gain of $45,
representing the difference between the net carrying amount of these securities and the total purchase price of
$82. Additionally, during the fourth quarter of 2008, we recognized restructuring charges of $14 related to the
closure of 44 branches and reductions in headcount of approximately 500. During the quarter, we also recognized
a non-cash impairment charge of $8 within depreciation of rental equipment related to certain rental assets.
During the fourth quarter of 2008, we also reduced our reserve for obsolescence and shrinkage by $3 following
our annual physical inventory inspections. This benefit was recorded in cost of equipment rentals, excluding
depreciation. Also, during the fourth quarter of 2008, we recognized a benefit of $5 reflecting recent experience
related to our provision for self-insurance reserves. This benefit was recorded in cost of equipment rentals,
excluding depreciation.
Segment Operating Income. Segment operating income and operating margin for each of the three years in
the period ended December 31, 2010 were as follows:
General
rentals
Trench safety,
power and HVAC
Total
2010
2009
2008
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 199
9.6%
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 123
5.6%
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 500
16.3%
$ 32
19.3%
$ 22
14.1%
$ 51
25.2%
$ 231
10.3%
$ 145
6.1%
$ 551
16.9%
The following is a reconciliation of segment operating income to total Company operating income (loss):
Total segment operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated items:
2010
2009
2008
$231
$145
$
551
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge related to settlement of SEC inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Goodwill impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
(34)
(31)
—
—
(20)
(14)
(1,147)
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$197
$114
$ (630)
38
General rentals. For each of the three years in the period ended December 31, 2010, general rentals
accounted for between 85 and 91 percent of our total operating income, excluding the unallocated items in the
reconciliation above. This contribution percentage is consistent with general rentals’ revenue contribution over
the same period. General rentals’ operating income in 2010 increased $76 and operating margin increased 4.0
percentage points, primarily reflecting increased gross margins from sales of rental equipment and selling,
general and administrative expense reductions. General rentals’ operating margin in 2009 decreased 10.7
percentage points from 2008, primarily reflecting an 8.9 percentage point reduction in gross margin from
equipment rentals, and a 22.9 percentage point reduction in gross margin from sales of rental equipment, partially
offset by the benefits of cost-savings initiatives.
Trench safety, power and HVAC. For the year ended December 31, 2010, operating income increased by
$10 and operating margin increased by 5.2 percentage points from 2009, reflecting increased gross margins from
equipment rentals and improved selling, general and administrative leverage. Operating income in 2009
decreased by $29 and operating margin decreased by 11.1 percentage points from 2008, reflecting reduced gross
margins from equipment rentals.
Gross Margin. Gross margins by revenue classification were as follows:
Total gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of new equipment
. . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2010
29.4%
28.4%
28.5%
16.7%
30.5%
62.8%
2009
25.9%
27.5%
3.1%
15.1%
26.4%
59.8%
2008
34.2%
36.2%
25.0%
15.6%
23.6%
60.3%
2010 gross margin of 29.4 percent increased 3.5 percentage points as compared to 2009, primarily reflecting
increased gross margins from equipment rentals and sales of rental equipment. Equipment rentals gross margin
increased 0.9 percentage points, primarily reflecting a 4.9 percentage point increase in time utilization, which is
calculated by dividing the amount of time equipment is on rent by the amount of time we have owned the
equipment, a $28 reduction in depreciation due to a 3.2 percent decrease in average fleet size, on an original
equipment cost basis, the impact of a $9 asset impairment charge related to certain rental equipment recognized
in 2009, and savings realized from ongoing cost saving initiatives, partially offset by a 2.1 percent rental rate
decline and increases in certain variable costs (including repairs and maintenance, fuel and delivery) associated
with higher rental volume. The 25.4 percentage point increase in gross margins from sales of rental equipment
primarily reflects a higher proportion of retail sales, which yield higher margins, in 2010. In 2010 and 2009, on
an original equipment cost-weighted basis, retail sales represented 62 and 33 percent of our sales of rental
equipment, respectively, while auction sales represented 22 and 40 percent of these sales, respectively. Gross
margins from sales of rental equipment may change in future periods if the mix of the channels that we use to sell
rental equipment changes. For instance, in 2011, we anticipate selling a greater proportion of used equipment to
manufacturers than we have in recent years. Equipment sales to manufacturers tend to have lower margins than
sales through our retail network.
2009 gross margin of 25.9 percent declined 8.3 percentage points from 2008, primarily reflecting reduced
gross margin from equipment rentals and sales of rental equipment. Equipment rentals gross margin decreased
8.7 percentage points, primarily reflecting an 11.8 percent decrease in rental rates and a 2.9 percentage point
decrease in time utilization on a smaller fleet, partially offset by savings realized from ongoing cost saving
initiatives. Equipment rentals gross margin for the years ended December 31, 2009 and 2008 includes
impairment charges of $9 and $8, respectively, related to the impairment of certain rental assets. Sales of rental
equipment gross margin decreased 21.9 percentage points, primarily reflecting deflationary pressures created by
the current construction environment and a higher proportion of auction-related sales which tend to yield lower
margins.
39
Selling, general and administrative (“SG&A”) expenses. SG&A expense information for each of the three
years in the period ended December 31, 2010 was as follows:
Year Ended December 31,
2010
2009
2008
Total SG&A expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SG&A as a percentage of revenue . . . . . . . . . . . . . . . . . . . . . . . . .
$ 367
16.4
$ 408
17.3
$ 509
15.6
SG&A expense primarily includes sales force compensation, information technology costs, third party
professional fees, advertising and marketing expenses, management salaries, bad debt expense and clerical and
administrative overhead.
2010 SG&A expense of $367 decreased $41 as compared to 2009 and improved by 0.9 percentage points as
a percentage of revenue. The decline in SG&A reflects the benefits we are realizing from our cost-saving
initiatives, including reduced compensation costs, professional fees and advertising expenses.
2009 SG&A expense of $408 declined $101, or 19.8 percent, compared to 2008 and increased by 1.7
percentage points as a percentage of revenue. The decline in the absolute level of our SG&A reflects the benefits
we realized from our cost-saving initiatives,
travel and entertainment,
professional and advertising expenses. The deterioration in our SG&A ratio reflected the combination of rental
rate pressure and lower utilization levels in a weak construction environment.
including reduced compensation,
Restructuring charge. For the years ended December 31, 2010, 2009 and 2008, restructuring charges of
$34, $31 and $20, respectively, relate to the closures of 49, 64 and 75 branches, respectively, and reductions in
headcount of approximately 700, 1,900 and 1,000, respectively. We expect that the restructuring activity will be
substantially complete by the end of 2011. See note 5 to our consolidated financial statements for additional
restructuring information.
Charge related to settlement of SEC inquiry. Our results for the year ended December 31, 2008 include a
$14 charge related to the SEC inquiry. As previously announced, in September 2008, we announced that we had
reached a final settlement with the SEC and we paid a civil penalty of $14.
Goodwill
impairment charge. As discussed above (see “Critical Accounting Policies—Evaluation of
Goodwill Impairment”) and in note 8 to our consolidated financial statements, during the fourth quarter of 2008,
we recorded an aggregate non-cash goodwill impairment charge of $1.1 billion related to certain reporting units
within our general rentals segment. The impairment charge reflected the challenges of the construction cycle as
well as the broader economic and credit environment.
Non-rental depreciation and amortization for each of the three years in the period ended December 31,
2010 was as follows:
Non-rental depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2010
$60
2009
$57
2008
$58
40
Non-rental depreciation and amortization primarily includes (i) depreciation expense associated with
equipment that is not offered for rent (such as computers and office equipment) and amortization expense
associated with leasehold improvements as well as (ii) the amortization of other intangible assets. Our other
intangible assets consist of non-compete agreements as well as customer-related intangible assets.
Interest expense, net for each of the three years in the period ended December 31, 2010 was as follows:
Year Ended December 31,
2010
2009
2008
Interest expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$255
$226
$174
Interest expense, net for the year ended December 31, 2010 increased by $29, or 13 percent. Interest
expense, net for the years ended December 31, 2010 and 2009 includes a loss of $28 and a gain of $7,
respectively, related to repurchases or redemptions of $1,273 and $919 principal amounts of our outstanding
debt, respectively. Excluding the impact of these gains/losses, interest expense, net decreased slightly as the
impact of lower average outstanding debt was partially offset by the impact of higher interest rates. Interest
expense, net for the year ended December 31, 2009 increased by $52, or 29.9 percent. Interest expense, net for
the years ended December 31, 2009 and 2008 includes gains of $7 and $41, respectively, related to repurchases
or redemptions of $919 and $255 principal amounts of our outstanding debt, respectively. Excluding the impact
of these gains, interest expense, net for the year ended December 31, 2009 increased primarily due to increased
debt following the preferred stock repurchase and the modified “Dutch auction” tender offer completed in the
second and third quarters of 2008.
Interest expense—subordinated convertible debentures, net for each of the three years in the period ended
December 31, 2010 was as follows:
Interest expense-subordinated convertible debentures, net . . . . . . . .
Year Ended December 31,
2010
$8
2009
$(4)
2008
$9
As discussed further in note 13 to our consolidated financial statements, the subordinated convertible
debentures included in our consolidated balance sheets reflect the obligation to our subsidiary trust that has
issued Quarterly Income Preferred Securities (“QUIPS”). This subsidiary is not consolidated in our financial
statements because we are not the primary beneficiary of the trust. As of December 31, 2010 and 2009, the
aggregate amount of subordinated convertible debentures outstanding was $124. Interest expense- subordinated
convertible debentures, net for 2009 included a $13 gain recognized in connection with the simultaneous
purchase of $22 of QUIPS and retirement of $22 principal amount of our subordinated convertible debentures.
Other income, net for each of the three years in the period ended December 31, 2010 was as follows:
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(3)
$(1)
$—
As discussed further in note 10 to our consolidated financial statements, other income, net for the year
ended December 31, 2010 includes (i) a gain of $13 associated with foreign currency forward contracts and (ii) a
loss of $13 associated with the revaluation of certain Canadian dollar denominated intercompany loans.
Year Ended December 31,
2010
2009
2008
41
Income Taxes. The following table summarizes our continuing operations benefit for income taxes and the
related effective tax rate for each respective period:
Year Ended December 31,
2010
2009
2008
Loss from continuing operations before benefit for income taxes . . . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (63) $(107) $(813)
(41)
(109)
(47)
65.1% 43.9% 13.4%
(1) A detailed reconciliation of this effective tax rate to the U.S. federal statutory income tax rate is included in
note 14 to our consolidated financial statements.
The differences between the effective tax rates of 65.1 percent, 43.9 percent, and 13.4 percent and the U.S.
federal statutory income tax rate of 35.0 percent for 2010, 2009, and 2008, respectively, relate primarily to state
taxes and certain nondeductible charges and other items. Additionally, the 2010 income tax benefit includes a
benefit of $7 related to a correction of a deferred tax asset recognized in prior periods. For 2010 and 2009, the
difference also relates to the geographical mix of income between U.S. and foreign and state operations.
Additionally, 2008 reflects the non-deductibility of a portion of the $1.1 billion goodwill impairment charge as
well as the non-deductibility of the $14 charge related to the settlement of the SEC inquiry. Our effective income
tax rate will change based on discrete events (such as audit settlements) as well as other factors, including the
geographical mix of income before taxes and the related tax rates in those jurisdictions.
The balance of prepaid expenses and other assets at December 31, 2010 decreased by $52, or 58.4 percent,
as compared to December 31, 2009, primarily due to a federal tax refund of $55 received in March 2010.
Liquidity and Capital Resources.
Liquidity and Capital Markets Activity. We manage our liquidity using internal cash management practices,
which are subject to (i) the policies and cooperation of the financial institutions we utilize to maintain and
provide cash management services, (ii) the terms and other requirements of the agreements to which we are a
party and (iii) the statutes, regulations and practices of each of the local jurisdictions in which we operate.
In October 2010, URNA issued $750 aggregate principal amount of 8 3⁄ 8 percent Senior Subordinated Notes,
which are due September 15, 2020. We received $732 in net proceeds from the issuance of the 8 3⁄ 8 percent
Senior Subordinated Notes, after underwriting discounts and commissions, fees and expenses. Proceeds from this
offering, as well as cash on hand, were used to repurchase or redeem and subsequently retire certain of our
outstanding debt securities.
The following table summarizes our 2010 debt repurchase activity:
Repurchase
price
Principal
Loss (1)
7 3⁄4 percent Senior Subordinated Notes . . . . . . . . . . . . . .
7 percent Senior Subordinated Notes . . . . . . . . . . . . . . . .
6 1⁄ 2 percent Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . .
1 7⁄ 8 percent Convertible Senior Subordinated Notes . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 490
267
435
93
$1,285
$ 484
261
435
93
$1,273
$(14)
(8)
(4)
(2)
$(28)
(1) The amount of the loss is calculated as the difference between the net carrying amount of the related
security and the repurchase price, and includes a $4 write-off of a previously terminated derivative
transaction. The net carrying amounts of the securities are less than the principal amounts due to capitalized
debt issuance costs and any original issue discount. Aggregate costs of $16 were written off in the year
ended December 31, 2010 in connection with the repurchases/redemptions, comprised of $12 of write-offs
of debt issuance costs and the $4 write-off of the previously terminated derivative transaction. The losses
are reflected in interest expense, net in our consolidated statements of operations.
42
Total debt at December 31, 2010 decreased by $146, or 4.9 percent, as compared to December 31, 2009,
primarily due to the use of free cash flow to pay down debt (see above for a summary of 2010 capital market
activity). Current maturities of long-term debt at December 31, 2010 primarily reflect $221 of borrowings
outstanding under our accounts receivable securitization facility.
Our principal existing sources of cash are cash generated from operations and from the sale of rental
equipment and borrowings available under the ABL facility and accounts receivable securitization facility. As of
December 31, 2010, we had (i) $617 of borrowing capacity, net of $60 of letters of credit, available under the
ABL facility, (ii) $11 of borrowing capacity available under our accounts receivable securitization facility and
(iii) cash and cash equivalents of $203. Cash equivalents at December 31, 2010 consist of direct obligations of
financial institutions rated A or better. We believe that our existing sources of cash will be sufficient to support
our existing operations over the next 12 months.
As of December 31, 2010, $683 and $221 were outstanding under the ABL facility and the accounts
receivable securitization facility, respectively. The interest rates applicable to the ABL facility and the accounts
receivable securitization facility at December 31, 2010 were 3.4 percent and 1.6 percent, respectively. During the
year ended December 31, 2010, the monthly average amounts outstanding under the ABL facility and the
accounts receivable securitization facility were $546 and $185, respectively, and the weighted-average interest
rates thereon were 3.4 percent and 1.7 percent, respectively. The maximum month-end amounts outstanding
under the ABL facility and the accounts receivable securitization facility during the year ended December 31,
2010 were $683 and $240, respectively. The amount outstanding at year-end under the ABL facility exceeded the
average amounts outstanding during the year primarily due to additional borrowings used to settle a Canadian
dollar denominated intercompany loan.
We expect that our principal needs for cash relating to our existing operations over the next 12 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 and (iv) debt service. We plan to fund such cash
requirements from our existing sources of cash. In addition, we may seek additional financing through the
securitization of some of our real estate, the use of additional operating leases or other financing sources as
market conditions permit. For information on the scheduled principal and interest payments coming due on our
outstanding debt and on the payments coming due under our existing operating leases, see “Certain Information
Concerning Contractual Obligations.”
To access the capital markets, we rely on credit rating agencies to assign ratings to our securities as an
indicator of credit quality. Lower credit ratings generally result in higher borrowing costs and reduced access to
debt capital markets. Credit ratings also affect the costs of derivative transactions, including interest rate and
foreign currency derivative transactions. As a result, negative changes in our credit ratings could adversely
impact our costs of funding. Our credit ratings as of January 28, 2010 were as follows:
Moody’s (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B2
B
B
Stable
Stable
Stable
Corporate Rating
Outlook
(1) Contemporaneous with the October 2010 issuance of URNA’s 8 3⁄ 8 percent Senior Subordinated Notes,
Moody’s upgraded the Company to a corporate rating of B2.
A security rating is not a recommendation to buy, sell or hold securities. There is no assurance that any
rating will remain in effect for a given period of time or that any rating will not be revised or withdrawn by a
rating agency in the future.
43
The amount of our future capital expenditures will depend on a number of factors, including general
economic conditions and growth prospects. We expect that we will fund such expenditures from cash generated
from operations, proceeds from the sale of rental and non-rental equipment and, if required, borrowings available
under the ABL facility and accounts receivable securitization facility. We expect our gross and net rental capital
expenditures to increase significantly in 2011 relative to 2010.
Loan Covenants and Compliance. As of December 31, 2010, we were in compliance with the covenants
and other provisions of the ABL facility, the accounts receivable securitization facility, the senior notes and the
QUIPS. Any failure to be in compliance with any material provision or covenant of these agreements could have
a material adverse effect on our liquidity and operations.
The only material financial covenants which currently exist relate to the fixed charge coverage ratio and the
senior secured leverage ratio under the ABL facility. Both of these covenants were suspended on June 9, 2009
because the availability, as defined in the agreement governing the ABL facility, had exceeded 20 percent of the
maximum revolver amount under the ABL facility. Subject to certain limited exceptions specified in the ABL
facility, these covenants will only apply in the future if availability under the ABL facility falls below 10 percent
of the maximum revolver amount under the ABL facility. Since the June 9, 2009 suspension date and through
December 31, 2010, availability under the ABL facility has exceeded 10 percent of the maximum revolver
amount under the ABL facility and, as a result, these maintenance covenants remained inapplicable. Under our
accounts receivable securitization facility, we are required, among other things, to maintain certain financial tests
relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales outstanding.
As of December 31, 2010, primarily due to losses sustained in prior years, URNA had no restricted payment
capacity under the most restrictive restricted payment covenants in the indentures governing its outstanding
indebtedness. Although this depletion limits our ability to move operating cash flows to Holdings, we do not
expect any material adverse impact on Holdings’ ability to meet its cash obligations due to certain intercompany
arrangements.
Sources and Uses of Cash. During 2010, we (i) generated cash from operations of $452 including $55
related to a federal tax refund and (ii) generated cash from the sale of rental and non-rental equipment of $151.
We used cash during this period principally to (i) purchase rental and non-rental equipment of $374 and (ii) fund
payments, net of proceeds, on debt of $183. During 2009, we (i) generated cash from operations of $438 and
(ii) generated cash from the sale of rental and non-rental equipment of $242. We used cash during this period
principally to (i) purchase rental and non-rental equipment of $311, (ii) fund payments, net of proceeds, on debt
of $206 and (iii) pay aggregate financing costs and costs associated with the convertible hedge transactions of
$59.
44
Free Cash Flow GAAP Reconciliation
We define “free cash flow” as (i) net cash provided by operating activities less (ii) purchases of rental and
non-rental equipment plus (iii) proceeds from sales of rental and non-rental equipment and excess tax benefits
from share-based payment arrangements, net. Management believes free cash flow provides useful additional
information concerning cash flow available to meet future debt service obligations and working capital
requirements. However, free cash flow is not a measure of financial performance or liquidity under GAAP.
Accordingly, free cash flow should not be considered an alternative to net income (loss) or cash flow from
operating activities as indicators of operating performance or liquidity. The table below provides a reconciliation
between net cash provided by operating activities and free cash flow.
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment arrangements, net . . . . . . . .
Year Ended December 31,
2010
2009
2008
$ 452
(346)
(28)
144
7
(2)
$ 438
(260)
(51)
229
13
(2)
$ 764
(624)
(80)
264
11
—
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 227
$ 367
$ 335
Free cash flow for the year ended December 31, 2010 was $227, a decrease of $140 as compared to free
cash flow of $367 for the year ended December 31, 2009. As noted above, net cash provided by operating
activities for the year ended December 31, 2010 includes a $55 federal tax refund. Excluding the impact of this
refund, the year-over-year decrease in free cash flow primarily reflects increased purchases of rental equipment
and reduced proceeds from sales of rental equipment. In 2009, free cash flow increased $32 compared to 2008.
This increase reflects lower capital expenditures in 2009, consistent with reduced construction activity in a
challenging economic environment, partially offset by lower cash generated from operating activities and
decreased proceeds from sales of rental equipment.
Certain Information Concerning Contractual Obligations. As discussed above, during 2010, we issued
$750 aggregate principal amount of 8 3⁄ 8 percent Senior Subordinated Notes, and we repurchased or redeemed
and subsequently retired certain of our outstanding debt securities. As a result of this activity, the total scheduled
lease payments decreased from $3,033 at December 31, 2009 to $2,873 at
principal debt and capital
December 31, 2010. The total interest due on our debt increased from $1,187 at December 31, 2009 to $1,427 at
December 31, 2010, primarily due to additional years of interest obligations associated with the newly issued 8 3⁄ 8
percent Senior Subordinated Notes, which mature in 2020. The table below provides certain information
concerning the payments coming due under certain categories of our existing contractual obligations as of
December 31, 2010:
Debt and capital leases (1) . . . . . . . . . . . . . . . . . . . . . . .
Interest due on debt (2) . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases (1):
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Non-rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . .
Service agreements (3)
Purchase obligations (4)
. . . . . . . . . . . . . . . . . . . . . . . .
Subordinated convertible debentures (5) . . . . . . . . . . . .
Total (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011
2012
2013
2014
2015
Thereafter
Total
$229
199
$
5
195
$684
182
$
2
171
$174
170
$1,779
510
$2,873
1,427
58
68
18
10
1 —
—
76
34
12
50 —
8
$608
8
$295
8
$942
47
6
—
—
8
$234
36
4
—
—
8
$392
93
—
—
—
225
$2,607
378
72
13
50
265
$5,078
(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
45
due in such period under non-cancelable operating leases plus the maximum potential guarantee amounts
associated with some of our non-rental equipment operating leases for which we guarantee that the value of
the equipment at the end of the lease term will not be less than a specified projected residual value.
(2) Estimated interest payments have been calculated based on the principal amount of debt and the effective
interest rates as of December 31, 2010.
(3) These represent service agreements with third parties to provide wireless and network services, refurbish
our aerial equipment, operate the distribution centers associated with contractor supplies and provide
equipment appraisals.
(4) As of December 31, 2010, we had outstanding purchase orders, which were negotiated in the ordinary
course of business, with our equipment and inventory suppliers. These purchase commitments can be
cancelled by us, generally with 30 days notice and without cancellation penalties. The equipment and
inventory receipts from the suppliers for these purchases and related payments to the suppliers are expected
to be completed throughout 2011.
(5) Represents principal and interest payments on the $124 of 6 1⁄ 2 percent subordinated convertible debentures
reflected in our consolidated balance sheets as of December 31, 2010.
(6) This information excludes $4 of unrecognized tax benefits, which are discussed further in note 14 to our
is not possible to estimate the time period during which these
consolidated financial statements. It
unrecognized tax benefits may be paid to tax authorities.
Certain Information Concerning Off-Balance Sheet Arrangements. We lease real estate and non-rental
equipment under operating leases as a regular business activity. As part of some of our non-rental equipment
operating leases, we guarantee that the value of the equipment at the end of the term will not be less than a
specified projected residual value. If the actual residual value for all equipment subject to such guarantees were
to be zero, then our maximum potential liability under these guarantees would be approximately $8. Under
current circumstances we do not anticipate paying significant amounts under these guarantees; however, we
cannot be certain that changes in market conditions or other factors will not cause the actual residual values to be
lower than those currently anticipated. In accordance with GAAP, this potential liability was not reflected on our
balance sheet as of December 31, 2010 or any prior date as we believe that proceeds from the sale of the
equipment under these operating leases would approximate the payment obligation.
Relationship Between Holdings and URNA. Holdings is principally a holding company and primarily
conducts its operations through its wholly owned subsidiary, URNA, and subsidiaries of URNA. Holdings
licenses its tradename and other intangibles and provides certain services to URNA in connection with its
operations. These services principally include: (i) senior management services; (ii) finance and tax-related
services and support; (iii) information technology systems and support; (iv) acquisition-related services; (v) legal
services; and (vi) human resource support. In addition, Holdings leases certain equipment and real property that
are made available for use by URNA and its subsidiaries.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk primarily consists of (i) interest rate risk associated with our variable and fixed
rate debt, (ii) foreign currency exchange rate risk primarily associated with our Canadian operations and
(iii) equity price risk associated with our convertible debt.
Interest Rate Risk. As of December 31, 2010, we had an aggregate of $904 of indebtedness that bears
interest at variable rates, comprised of $683 of borrowings under the ABL facility and $221 of borrowings under
our accounts receivable securitization facility. The interest rates applicable to our variable rate debt on
December 31, 2010 were (i) 3.4 percent for the ABL facility and (ii) 1.6 percent for the accounts receivable
securitization facility. As of December 31, 2010, based upon the amount of our variable rate debt outstanding,
our annual after-tax earnings would decrease by approximately $5 for each one percentage point increase in the
interest rates applicable to our variable rate debt.
The amount of variable rate indebtedness outstanding under the ABL facility and accounts receivable
securitization facility may fluctuate significantly. For additional information concerning the terms of our variable
rate debt, see note 12 to our consolidated financial statements.
46
At December 31, 2010, we had an aggregate of $2.0 billion of indebtedness that bears interest at fixed rates,
including our subordinated convertible debentures. A one percentage point decrease in market interest rates as of
December 31, 2010 would increase the fair value of our fixed rate indebtedness by approximately six percent.
For additional information concerning the fair value and terms of our fixed rate debt, see notes 11 (see “Fair
Value of Financial Instruments”) and 12 to our consolidated financial statements.
Currency Exchange Risk. The functional currency for our Canadian operations is the Canadian dollar. As a
result, our future earnings could be affected by fluctuations in the exchange rate between the U.S. and Canadian
dollars. Based upon the level of our Canadian operations during 2010 relative to the Company as a whole, a 10
percent change in this exchange rate would cause our annual after-tax earnings to change by approximately $4.
As discussed in note 10 to our consolidated financial statements, during the year ended December 31, 2010, we
recognized foreign currency losses of $13 associated with the revaluation of certain Canadian dollar denominated
intercompany loans, however these losses were offset by gains of $13 recognized on forward contracts to
purchase Canadian dollars, and the aggregate foreign currency impact of the intercompany loans and forward
contracts did not have a material impact on our earnings. We do not engage in purchasing forward exchange
contracts for speculative purposes.
Equity Price Risk. In connection with the November 2009 issuance of $173 aggregate principal amount of
4 percent Convertible Senior Notes, Holdings entered into convertible note hedge transactions with option
counterparties. The convertible note hedge transactions cover, subject to anti-dilution adjustments, 15.5 million
shares of our common stock. The convertible note hedge transactions are intended to reduce, subject to a limit,
the potential dilution with respect to our common stock upon conversion of the 4 percent Convertible Notes.
Based on the price of our common stock during the fourth quarter of 2010, holders of the 4 percent Convertible
Notes may convert the notes during the first quarter of 2011 at the initial conversion price of approximately
$11.11 per share of common stock. As of January 28, 2011, none of the 4 percent Convertible Notes were
converted. The effect of the convertible note hedge transactions is to increase the effective conversion price to
approximately $15.56 per share, equal to an approximately 75 percent premium over the $8.89 closing price of
our common stock at issuance. However, in the event the market value of our common stock exceeds $15.56 per
share, the settlement amount received from such transactions will only partially offset the potential dilution. For
example, if, at the time of exercise of the conversion right, the price of our common stock was $25.00 or $30.00
per share, on a net basis, we would issue 5.9 million or 7.5 million shares, respectively.
47
Item 8.
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm on Financial Statements
The Board of Directors and Stockholders of United Rentals, Inc.
We have audited the accompanying consolidated balance sheets of United Rentals, Inc. as of December 31,
2010 and 2009, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash
flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial statements and the schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of United Rentals, Inc. at December 31, 2010 and 2009, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), United Rentals, Inc.’s internal control over financial reporting as of December 31, 2010, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 1, 2011 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
New York, New York
February 1, 2011
48
UNITED RENTALS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts of $29 and $25 at December 31,
2010 and 2009, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2010
2009
$ 203
$ 169
377
39
37
69
725
2,280
393
227
68
337
44
89
66
705
2,414
434
231
75
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,693
$3,859
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 229
132
208
$ 125
128
208
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated convertible debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock—$0.01 par value, 500,000,000 shares authorized, 60,621,338 and 60,163,233
shares issued and outstanding at December 31, 2010 and 2009, respectively . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Accumulated deficit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ deficit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
569
2,576
124
385
59
3,713
1
492
(600)
87
(20)
461
2,826
124
424
43
3,878
1
487
(574)
67
(19)
Total liabilities and stockholders’ deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,693
$3,859
See accompanying notes.
49
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Year Ended December 31,
2010
2009
2008
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of rental equipment
Sales of new equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,834
144
78
95
86
$1,830
229
86
121
92
$ 2,496
264
179
212
116
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,237
2,358
3,267
Cost of revenues:
Cost of equipment rentals, excluding depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of rental equipment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of new equipment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
924
389
103
65
66
32
910
417
222
73
89
37
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,579
1,748
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge related to settlement of SEC inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense—subordinated convertible debentures, net . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations before benefit for income taxes . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operation, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
658
367
34
—
—
60
197
255
8
(3)
(63)
(41)
(22)
(4)
610
408
31
—
—
57
114
226
(4)
(1)
(107)
(47)
(60)
(2)
1,137
455
198
151
162
46
2,149
1,118
509
20
14
1,147
58
(630)
174
9
—
(813)
(109)
(704)
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (26) $ (62) $ (704)
Preferred stock redemption charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic and diluted loss per share:
Loss from continuing operations (inclusive of preferred stock redemption
charge) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(239)
—
$ (26) $ (62) $ (943)
$ (0.38) $ (0.98) $(12.62)
(0.04)
(0.06)
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.44) $ (1.02) $(12.62)
See accompanying notes.
50
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S
UNITED RENTALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs and original issue discounts . . . . . . . . . . . . . . . . . . . .
Gain on sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on sales of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency transaction loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on repurchase/redemption of debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on retirement of subordinated convertible debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows From Investing Activities:
Purchases of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of non-rental equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of other companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows From Financing Activities:
Proceeds from debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock, including fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased and retired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payment arrangements, net . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid in connection with convertible note hedge transactions . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid in connection with preferred stock redemption, including fees . . . . . . . . . . . . . . . . . .
Net cash 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosure of cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (received) paid for taxes, net
Supplemental schedule of non-cash investing activities:
The Company acquired the net assets of other companies as follows:
Assets, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2010
2009
2008
(In millions)
$
(26) $
(62) $ (704)
449
23
(41)
—
—
—
8
34
28
—
(58)
(38)
5
61
4
3
452
(346)
(28)
144
7
—
(223)
474
17
(7)
1
—
—
8
31
(7)
(13)
4
128
16
(36)
(32)
(84)
438
(260)
(51)
229
13
(25)
(94)
3,423
(3,606)
(18)
1
—
3,452
(3,658)
(33)
—
—
(1)
(2)
—
—
(203)
8
34
169
203
229
(49)
(1)
(2)
(26)
—
(268)
16
92
77
169
234
3
$
$
$
$
513
16
(66)
(3)
1,147
1
6
20
(41)
—
(129)
51
31
30
(34)
(74)
764
(624)
(80)
264
11
(17)
(446)
2,004
(1,725)
(32)
3
(603)
(2)
—
—
(257)
(612)
(10)
(304)
381
77
218
46
$
$
$ — $
25
$
17
See accompanying notes.
54
UNITED RENTALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data and unless otherwise indicated)
1. Organization, Description of Business and Consolidation
United Rentals, Inc. is principally a holding company and conducts its operations primarily through its
wholly owned subsidiary, United Rentals (North America), Inc. (“URNA”), and subsidiaries of URNA.
Holdings’ primary asset is its sole ownership of all issued and outstanding shares of common stock of URNA.
URNA’s various credit agreements and debt instruments place restrictions on its ability to transfer funds to its
stockholder. As used in this report, the terms the “Company,” “United Rentals,” “we,” “us,” and “our” refer to
United Rentals, Inc. and its subsidiaries, in each case unless otherwise indicated.
We rent equipment
includes construction and industrial companies,
manufacturers, utilities, municipalities, homeowners and others in the United States and Canada. In addition to
renting equipment, we sell new and used rental equipment, as well as related contractor supplies, parts and
service.
to a diverse customer base that
The accompanying consolidated financial statements include our accounts and those of our controlled
intercompany accounts and transactions have been eliminated. We
the entity. Certain
subsidiary companies. All significant
consolidate variable interest entities if we are deemed the primary beneficiary of
reclassifications of prior years’ amounts have been made to conform to the current year’s presentation.
2. Summary of Significant Accounting Policies
Cash Equivalents
We consider all highly liquid instruments with maturities of three months or less when purchased to be cash
equivalents. Our cash equivalents at December 31, 2010 consist of direct obligations of financial institutions
rated A or better.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts. This allowance reflects our estimate of the amount of our
receivables that we will be unable to collect based on historical write-off experience. Trade receivables that have
contractual maturities of one year or less are written-off when they are determined to be uncollectible based on
the criteria necessary to qualify as a deduction for federal tax purposes. Write-offs of such receivables require
management approval based on specified dollar thresholds.
Inventory
Inventory consists of new equipment, contractor supplies, tools, parts, fuel and related supply items.
Inventory is stated at the lower of cost or market. Cost is determined, depending on the type of inventory, on
either a specific identification, weighted-average or first-in, first-out method.
Rental Equipment
Rental equipment, which includes service and delivery vehicles, is recorded at cost and depreciated over the
estimated useful life of the equipment using the straight-line method. The range of estimated useful lives for
rental equipment is two to 12 years. Rental equipment is depreciated to a salvage value of zero to 10 percent of
cost. Costs we incur in connection with refurbishment programs that extend the life of our equipment are
capitalized and amortized over the remaining useful life of the related equipment. The costs incurred under these
refurbishment programs were $12, $33 and $30 for the years ended December 31, 2010, 2009 and 2008,
respectively, and are included in purchases of rental equipment in our consolidated statements of cash flows.
55
Ordinary repair and maintenance costs are charged to operations as incurred. Repair and maintenance costs are
included in cost of revenues on our consolidated statements of operations. Repair and maintenance expense
(including both labor and parts) for our rental equipment was $262, $256 and $307 for the years ended
December 31, 2010, 2009 and 2008, respectively.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives using the
straight-line method. The range of estimated useful lives for property and equipment is two to 39 years. Ordinary
repair and maintenance costs are charged to expense 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.
Goodwill
Goodwill represents the excess of cost over the fair value of identifiable net assets of businesses acquired.
We test for goodwill impairment at a regional level. We are required to review our goodwill for impairment
annually as of a scheduled review date; however, if events or circumstances suggest that goodwill could be
impaired, we may be required to conduct an earlier review. The scheduled review date is October 1 of each year.
Other Intangible Assets
Other intangible assets consist of non-compete agreements and customer relationships. The non-compete
agreements are being amortized on a straight-line basis over periods ranging from two to five years. The
customer relationships are being amortized on a straight-line basis over periods ranging from eight to 12 years.
Long-Lived Assets
Long-lived assets are recorded at the lower of amortized cost or fair value. As part of an ongoing review of
the valuation of long-lived assets, we assess the carrying value of such assets if facts and circumstances suggest
they may be impaired. If this review indicates the carrying value of such an asset may not be recoverable, as
determined by an undiscounted cash flow analysis over the remaining useful life, the carrying value would be
reduced to its estimated fair value.
Translation of Foreign Currency
Assets and liabilities of our subsidiaries operating outside the United States that have a functional currency
other than U.S. dollars are translated into U.S. dollars using exchange rates at the balance sheet date. Revenues
and expenses are translated at average exchange rates effective during the year. Foreign currency translation
gains and losses are included as a component of accumulated other comprehensive income within stockholders’
equity.
Revenue Recognition
Our rental contract periods are daily, weekly or monthly and we recognize equipment rental revenue on a
straight-line basis. As part of this straight-line methodology, when the equipment is returned, we recognize as
incremental revenue the excess, if any, between the amount the customer is contractually required to pay over the
cumulative amount of revenue recognized to date. We record amounts billed to customers in excess of
recognizable revenue as deferred revenue on our balance sheet. We had deferred revenue of $12 and $9 as of
December 31, 2010 and 2009, respectively. Revenues from the sale of rental equipment and new equipment are
recognized at the time of delivery to, or pick-up by, the customer and when collectibility is reasonably assured.
Sales of contractor supplies are also recognized at the time of delivery to, or pick-up by, the customer. Service
revenue is recognized as the services are performed. Sales tax amounts collected from customers are recorded on
a net basis.
56
Delivery Expense
Equipment rentals include our revenues from fees we charge for equipment delivery. Delivery costs are
charged to operations as incurred, and are included in cost of revenues on our consolidated statements of
operations.
Advertising Expense
We promote our business through local and national advertising in various media,
including trade
publications, yellow pages, the Internet, radio and direct mail. Advertising costs are generally expensed as
incurred. Advertising expense, net of qualified advertising reimbursements, was $2, $6 and $19 for the years
ended December 31, 2010, 2009 and 2008, respectively.
Insurance
We are insured for general liability, workers’ compensation and automobile liability, subject to deductibles
or self-insured retentions per occurrence of $2 for general liability, $1 for workers’ compensation and $2 for
automobile liability as of December 31, 2010 and 2009. Losses within these deductible amounts are accrued
based upon the aggregate liability for reported claims incurred, as well as an estimated liability for claims
incurred but not yet reported. These liabilities are not discounted. The Company is also self-insured for group
medical claims but purchases “stop loss” insurance to protect itself from any one loss exceeding $500,000 (actual
dollars).
Income Taxes
We use 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 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 to be realized in future periods.
We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a
tax return regarding uncertainties in income tax positions. The first step is recognition: we determine whether it is
more likely than not that a tax position will be sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position
has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the
appropriate taxing authority with full knowledge of all relevant information. The second step is measurement: a
tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of
benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that
is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions
taken in a tax return and amounts recognized in the financial statements will generally result in one or more of
the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable,
a reduction in a deferred tax asset or an increase in a deferred tax liability.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Significant estimates impact
the calculation of goodwill
impairment charges, the allowance for doubtful accounts, depreciation and amortization, deferred income taxes,
reserves for claims, loss contingencies and fair values of financial instruments. Actual results could materially
differ from those estimates.
57
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk include cash and
cash equivalents and accounts receivable. We maintain 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 our customer base. Our largest customer accounted for less than one
percent of total revenues in each of 2010, 2009, and 2008. Our customer with the largest accounts receivable
balance represented approximately one percent of total accounts receivable at December 31, 2010 and 2009. We
manage credit risk through credit approvals, credit limits and other monitoring procedures.
Stock-Based Compensation
We measure stock-based compensation at the grant date based on the fair value of the award and recognize
stock-based compensation expense over the requisite service period. Determining the fair value of share-based
awards requires judgment, including estimating stock price volatility, forfeiture rates and expected option life.
We classify cash flows from tax benefits resulting from tax deductions in excess of the compensation cost
recognized for stock-based awards (“excess tax benefits”) as financing cash flows.
Restricted stock awards are valued based on the fair value of the stock on the grant date and the related
compensation expense is recognized over the service period. Similarly, for time-based restricted stock awards
subject to graded vesting, we recognize compensation cost on a straight-line basis over the requisite service period.
3. Discontinued Operation
In December 2006, we entered into a definitive agreement to sell our traffic control business to HTS
Acquisition, Inc. (“HTS”), an entity formed by affiliates of private equity investors Wynnchurch Capital Partners
and Oak Hill Special Opportunities Fund, L.P. The transaction closed in February 2007 and we received net
proceeds of $66. In accordance with GAAP, the results of operations of our traffic control business are reported
within discontinued operation in the consolidated statements of operations.
As part of the sale, we retained financial responsibility for deductibles and self-insured retentions associated
with casualty insurance programs (workers’ compensation, automobile liability and general liability) covering
the traffic control business with respect to claims arising from loss occurrences prior to closing. These liabilities
were not assumed by the purchaser. We are not liable for these types of liabilities associated with the traffic
control business to the extent they arise subsequent to closing. The aggregate amount of these retained insurance
liabilities as of December 31, 2010 and 2009 was $12 and $10, respectively, and is included in accrued expenses
and other liabilities and other long-term liabilities in the consolidated balance sheets. The 2010 and 2009
after-tax losses of $4 and $2, respectively, which are reflected in loss from discontinued operation, net of taxes in
the accompanying consolidated statements of operations, relate to changes in estimates for these retained
insurance liabilities.
4. Segment Information
Our reportable segments are general rentals and trench safety, power and HVAC. The general rentals
segment includes the rental of construction, infrastructure, industrial and homeowner equipment and related
services and activities. The general rentals segment comprises seven geographic regions—the Southwest, Gulf,
Northwest, Southeast, Midwest, East, and the Northeast Canada—as well as the Aerial West region and operates
throughout the United States and Canada. The trench safety, power and HVAC segment includes the rental of
specialty construction products and related services. The trench safety, power and HVAC segment’s customers
include construction companies involved in infrastructure projects, municipalities and industrial companies. This
segment operates throughout the United States and has two locations in Canada.
These segments align our external segment reporting with how management evaluates and allocates
resources. We evaluate segment performance based on segment operating results.
58
The accounting policies for our segments are the same as those described in the summary of significant
accounting policies in note 2. Certain corporate costs, including those related to selling, finance, legal, risk
management, human resources, corporate management and information technology systems, are deemed to be of
an operating nature and are allocated to our segments based on either the actual amount of costs incurred in the
prior year for selling, general and administrative expenses or equipment rental revenue generating activities.
The following table sets forth financial information by segment. Information related to our consolidated
balance sheets is presented as of December 31, 2010 and 2009.
Year Ended December 31,
2010
2009
2008
Total reportable segment revenue
General rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trench safety, power and HVAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,071
166
$2,202
156
$3,065
202
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,237
$2,358
$3,267
Total reportable segment depreciation and amortization expense
General rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trench safety, power and HVAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 426
23
$ 449
25
$ 485
28
Total depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 449
$ 474
$ 513
Total reportable segment operating income
General rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trench safety, power and HVAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 199
32
$ 123
22
$ 500
51
Total segment operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 231
$ 145
$ 551
Total reportable segment capital expenditures
General rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trench safety, power and HVAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 344
30
$ 295
16
$ 686
18
Total capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 374
$ 311
$ 704
Total reportable segment assets
General rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trench safety, power and HVAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,458
235
$3,633
226
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,693
$3,859
The following is a reconciliation of segment operating income to total Company operating income (loss):
Total segment operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated items:
Year Ended December 31,
2010
2009
2008
$231
$145
$
551
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge related to settlement of SEC inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Goodwill impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
(34)
(31)
—
—
(20)
(14)
(1,147)
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$197
$114
$ (630)
59
We operate in the United States and Canada. The following table presents geographic area information for
the years ended December 31, 2010, 2009 and 2008, except for balance sheet information, which is presented as
of December 31, 2010 and 2009. All the foreign assets as of December 31, 2010 are Canadian, and the foreign
information in the following table primarily relates to Canada.
Revenues from external customers
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues from external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental equipment, net
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets, net
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consolidated goodwill and other intangible assets, net . . . . . . . . . . . . . . . . . . . . .
Year ended December 31,
2010
2009
2008
$1,888
349
$2,237
$2,046
312
$2,358
$2,837
430
$3,267
$1,985
295
$2,280
$2,151
263
$2,414
$ 365
28
$ 393
$ 405
29
$ 434
$ 182
45
$ 227
$ 187
44
$ 231
5. Restructuring and Asset Impairment Charges
As discussed elsewhere in this report, over the past several years we have been focused on reducing our
operating costs. In connection with this strategy, and in recognition of the challenging economic environment, we
reduced our employee headcount from approximately 10,900 at December 31, 2007 to approximately 7,300 at
December 31, 2010. Additionally, we reduced our branch network from 697 at December 31, 2007 to 531 at
December 31, 2010. The restructuring charges for the years ended December 31, 2010, 2009 and 2008 include
severance costs associated with our headcount reductions, as well as branch closure charges which principally
relate to continuing lease obligations at vacant facilities.
The table below provides certain information concerning our restructuring charges:
Description
Year ended December 31, 2008:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2009:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2010:
Branch closure charges . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning
Reserve Balance
Charged to
Costs and
Expenses (1)
Payments
and Other
Ending
Reserve Balance
$—
—
$—
$ 11
2
$ 13
$ 20
1
$ 21
$14
6
$20
$24
7
$31
$28
6
$34
$ (3)
(4)
$ (7)
$(15)
(8)
$(23)
$(22)
(5)
$(27)
$11
2
$13
$20
1
$21
$26
2
$28
(1) Reflected in our consolidated statements of operations as “Restructuring charge.”
60
We have incurred total restructuring charges between January 1, 2008 and December 31, 2010 of $85,
comprised of $66 of branch closure charges and $19 of severance costs. We expect that the restructuring activity
will be substantially complete by the end of 2011.
In addition to the restructuring charges discussed above, during the years ended December 31, 2010, 2009
and 2008, we recorded asset impairment charges of $9, $12 and $8, respectively, in our general rentals segment.
The 2010 impairment charge is primarily reflected in non-rental depreciation and amortization in the
accompanying consolidated statements of operations and principally relates to write-offs of
leasehold
improvements and other fixed assets in connection with the consolidation of our branch network discussed
above. The 2009 impairment charge includes $9 reflected in depreciation of rental equipment
in the
accompanying consolidated statements of operations related to certain rental equipment, as well as $3 primarily
related to leasehold improvement write-offs which is reflected in non-rental depreciation and amortization in the
accompanying consolidated statements of operations. The 2008 impairment charge of $8 is reflected in
depreciation of rental equipment in the accompanying consolidated statements of operations and relates to certain
rental equipment.
6. Rental Equipment
Rental equipment consists of the following:
Rental equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,787
(1,507)
$ 3,736
(1,322)
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,280
$ 2,414
December 31,
2010
2009
7. Property and Equipment
Property and equipment consist of the following:
December 31,
2010
2009
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-rental vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 112
227
20
39
109
166
$ 120
229
22
42
98
162
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
673
(280)
673
(239)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 393
$ 434
8. Goodwill and Other Intangible Assets
We have made acquisitions over the years, principally during the period from 1997 to 2000, that included
the recognition of a significant amount of goodwill. Goodwill is tested for impairment annually or more
frequently if an event or circumstance indicates that an impairment loss may have been incurred. Application of
the goodwill impairment test requires judgment, including the identification of reporting units, assignment of
assets and liabilities to reporting units, assignment of goodwill to reporting units and determination of the fair
value of each reporting unit. Accounting rules permit a company to carry forward a detailed determination of a
reporting unit’s fair value from one year to the next if the following criteria are met: (i) the assets and liabilities
61
of each reporting unit have not changed significantly from the prior year, (ii) the carrying amount of each
reporting unit in the prior year significantly exceeded the fair value, and (iii) the likelihood that the carrying
value of each reporting unit this year would be less than the fair value is remote. In 2010, because these criteria
were met, we carried forward the results of our 2009 fair value estimates. In 2008 and 2009, we estimated the fair
value of our reporting units (or our regions) using a combination of an income approach based on the present
value of estimated future cash flows and a market approach based on market price data of stocks of corporations
engaged in similar businesses. We review goodwill for impairment utilizing a two-step process. The first step of
the impairment test requires a comparison of the fair value of each of our reporting units to the respective
carrying value. If the carrying value of a reporting unit is less than its fair value, no indication of impairment
exists and a second step is not performed. If the carrying amount of a reporting unit is higher than its fair value,
there is an indication that an impairment may exist and a second step must be performed. In the second step, the
impairment is computed by comparing the implied fair value of the reporting unit’s goodwill with the carrying
amount of the goodwill. If the carrying amount of the reporting unit’s goodwill is greater than the implied fair
value of its goodwill, an impairment loss must be recognized for the excess and charged to operations.
During the fourth quarter of 2008, and in connection with the preparation of our year-end financial
statements, we recognized an aggregate non-cash goodwill impairment charge of $1.1 billion related to certain
reporting units within our general rentals segment. The charge reflected the challenges of the construction cycle,
as well as the broader economic and credit environment, and includes $1.0 billion, reflecting conditions at the
time of our annual October 1, 2008 testing date, as well as an additional $100 as of December 31, 2008 reflecting
further deterioration in the economic and credit environment during the fourth quarter. Substantially all of the
impairment charge relates to goodwill arising out of acquisitions made between 1997 and 2000.
The following table presents the changes in the carrying amount of goodwill for each of the three years in
the period ended December 31, 2010:
General rentals
Trench safety,
power and HVAC
Balance at January 1, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill related to acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments . . . . . . . . . . . . . .
$ 1,265
(1,147)
2
(23)
Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill related to acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments . . . . . . . . . . . . . .
Balance at December 31, 2009 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other adjustments . . . . . . . . . . . . . .
Balance at December 31, 2010 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
97
1
5
103
2
105
$ 93
—
—
—
93
—
—
93
—
$ 93
$
Total
$ 1,358
(1,147)
2
(23)
190
1
5
196
2
198
(1) The total carrying amount of goodwill at December 31, 2010 and 2009 is reflected net of $1,557 of
accumulated impairment charges.
Other intangible assets primarily consist of customer relationships and non-compete agreements. Intangible
assets were comprised of the following at December 31, 2010 and 2009:
Weighted-Average Remaining
Amortization Period
2010
2009
As of December 31, 2010
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
Non-compete agreements . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . .
27 months
5 years
30 months
6 years
$25
$64
$24
$36
$ 1
$28
62
As of December 31, 2009
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amount
Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25
$62
$23
$29
$ 2
$33
Amortization expense for other intangible assets was $7, $8 and $8 for the years ended December 31, 2010,
2009 and 2008, respectively.
As of December 31, 2010, estimated amortization expense for other intangible assets for each of the next
five years and thereafter is as follows:
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6
6
6
4
4
3
$29
9. Accrued Expenses and Other Liabilities and Other Long-Term Liabilities
Accrued expenses and other liabilities consist of the following:
December 31,
2010
2009
Self-insurance accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring reserves (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 36
32
23
28
21
14
54
$ 43
19
17
21
36
11
61
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$208
$208
(1) Relates to branch closure charges and severance costs. See note 5 (“Restructuring and Asset Impairment
Charges”) for additional detail.
(2) Primarily relates to amounts billed to customers in excess of recognizable equipment rental revenue. See
note 2 (“Revenue Recognition”) for additional detail.
(3) Other includes multiple items, none of which are individually significant.
Other long-term liabilities consist of the following:
Self-insurance accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2010
2009
$57
2
$59
$40
3
$43
63
10. Derivatives
We recognize all derivative instruments as either assets or liabilities at fair value, and recognize the changes in
fair value of the derivative instruments based on the designation of the derivative. For derivative instruments that
are designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure
being hedged, as either a fair value hedge or a cash flow hedge. As of December 31, 2010, we do not have any
outstanding derivative instruments designated as fair value hedges. The effective portion of the changes in fair value
of derivatives that are designated as cash flow hedges is recorded as a component of accumulated other
comprehensive income. Amounts included in accumulated other comprehensive income for cash flow hedges are
reclassified into earnings in the same period that the hedged item is recognized in earnings. The ineffective portion
of changes in the fair value of derivatives designated as cash flow hedges is recorded currently in earnings. For
derivative instruments that do not qualify for hedge accounting, we recognize gains or losses due to changes in fair
value in our consolidated statements of operations during the period in which the changes in fair value occur.
We are exposed to certain risks relating to our ongoing business operations. During 2010, the primary risks
we managed using derivative instruments were diesel price risk and foreign currency exchange rate risk. At
December 31, 2010, we had outstanding fixed price swap contracts on diesel purchases which were entered into
to mitigate the price risk associated with forecasted purchases of diesel. During 2010, we entered into forward
contracts to purchase Canadian dollars to mitigate the foreign currency exchange rate risk associated with certain
Canadian dollar denominated intercompany loans. At December 31, 2010, there were no outstanding forward
contracts to purchase Canadian dollars. The outstanding forward contracts on diesel purchases were designated
and qualify as cash flow hedges and the forward contracts to purchase Canadian dollars, which were all settled as
of December 31, 2010, represented derivative instruments not designated as hedging instruments.
Fixed Price Diesel Swaps
The fixed price swap contracts on diesel purchases that were outstanding at December 31, 2010 were
designated and qualify as cash flow hedges and the effective portion of the gain or loss on these contracts is
reported as a component of accumulated other comprehensive income and reclassified into earnings in the period
during which the hedged transaction affects earnings (i.e., when the hedged gallons of diesel are used). The
remaining gain or loss on the fixed price swap contracts in excess of the cumulative change in the present value
of future cash flows of the hedged item, if any (i.e., the ineffectiveness portion), is recognized in our consolidated
statements of operations during the current period. As of December 31, 2010, we had outstanding fixed price
swap contracts covering 1.2 million gallons of diesel which will be purchased throughout 2011.
Foreign Currency Forward Contracts
The forward contracts to purchase Canadian dollars, which were all settled as of December 31, 2010,
represented derivative instruments not designated as hedging instruments and gains or losses due to changes in
the fair value of the forward contracts were recognized in our consolidated statements of operations during the
period in which the changes in fair value occurred. During 2010, forward contracts were used to purchase $481
Canadian dollars, representing the total amount due at maturity for certain Canadian dollar denominated
intercompany loans that were settled in 2010. Upon maturity, the proceeds from the forward contracts were used
to pay down the Canadian dollar denominated intercompany loans.
Financial Statement Presentation
There were no derivative instruments outstanding as of December 31, 2009, or during the years ended
December 31, 2009 and 2008, and derivative instruments had no impact on our financial statements in 2009 and
2008.
As of December 31, 2010, insignificant amounts (less than $1) were reflected in prepaid expenses and other
assets and accumulated other comprehensive income in our consolidated balance sheet associated with the
outstanding fixed price swap contracts that were designated and qualify as cash flow hedges. Operating cash
64
flows in our consolidated statement of cash flows for the year ended December 31, 2010 include $11 associated
with the fixed price diesel swaps, comprised of the $11 cost of the 3.6 million hedged gallons of diesel purchased
in 2010, net of insignificant amounts (less than $1) received from the counterparty to the fixed price swaps.
Insignificant amounts (less than $1) were reflected in our consolidated statement of cash flows for the year ended
December 31, 2010 associated with the forward contracts to purchase Canadian dollars, as the cash impact of the
$13 gain recognized on the derivative was offset by the $13 loss recognized on the hedged item.
The effect of our derivative instruments on our consolidated statement of operations for the year ended
December 31, 2010 was as follows:
Location of income
(expense)
recognized on
derivative/hedged item
Amount of income (expense)
recognized on derivative
Amount of income (expense)
recognized on hedged item
Derivatives designated as
hedging instruments:
Fixed price diesel
swaps . . . . . . . . . . .
Other income
(expense), net
Cost of equipment
rentals, excluding
depreciation
(1)
$
(2)
Derivatives not designated
as hedging instruments:
Foreign currency
forward contracts . .
Other income
(expense), net
*
*
13
(3)
$
(11)
(13)
Amounts are insignificant (less than $1).
*
(1) Represents the ineffective portion of the fixed price diesel swaps.
(2) Represents the effective portion of the fixed price diesel swaps.
(3) Reflects purchases of 3.6 million gallons of diesel covered by the fixed price swaps.
11. Fair Value Measurements
We account for certain assets and liabilities at fair value, and categorize each of our fair value measurements
in one of the following three levels based on the lowest level input that is significant to the fair value
measurement in its entirety:
Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical
assets or liabilities.
Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities
include:
a) quoted prices for similar assets or liabilities in active markets;
b) quoted prices for identical or similar assets or liabilities in inactive markets;
c) inputs other than quoted prices that are observable for the asset or liability;
d) inputs that are derived principally from or corroborated by observable market data by correlation or other
means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for
substantially the full term of the asset or liability.
Level 3—Inputs to the valuation methodology are unobservable (i.e., supported by little or no market
activity) and significant to the fair value measure.
65
Assets Measured at Fair Value
The following table presents the fair values of our assets that are measured at fair value:
Held for sale assets measured at fair value on
a non-recurring basis (1) . . . . . . . . . . . . . . .
Derivatives measured at fair value on a
recurring basis:
December 31, 2010
December 31, 2009
Level 1 Level 2 Level 3
Fair
Value
Level 1 Level 2 Level 3
Fair
Value
$— $— $— $— $— $— $
2
$
2
Fuel fixed price swaps contracts (2) . . . . . . . . —
* —
* —
—
—
—
Amounts are insignificant (less than $1).
*
(1) Primarily relates to certain rental equipment classified as held for sale. All assets that were classified as held
for sale as of December 31, 2009 were sold or transferred during 2010. A gain of $1 was recognized in
depreciation of rental equipment in the accompanying consolidated statements of operations associated with
held for sale assets during the year ended December 31, 2010. Fair value was determined using a market
approach based on the proceeds we expected to receive upon sale of the equipment.
(2) As discussed in note 10 to the consolidated financial statements, we entered into fixed price swap contracts
on diesel purchases to mitigate the price risk associated with forecasted purchases of diesel. Fair value is
determined based on observable market data. As of December 31, 2010, we have fixed price swap contracts
that mature throughout 2011 covering 1.2 million gallons of diesel which we will buy at the average
contractual rate of $3.17 per gallon, while the average forward price for the hedged gallons was $3.39 per
gallon as of December 31, 2010.
Fair Value of Financial Instruments
The carrying amounts reported in our consolidated balance sheets for accounts receivable, accounts payable
and accrued expenses and other liabilities approximate fair value due to the immediate to short-term maturity of
these financial instruments. The fair values of our ABL facility, accounts receivable securitization facility and
1 7⁄ 8 percent Convertible Senior Subordinated Notes approximate their book values as of December 31, 2010 and
2009. The estimated fair values of our other financial instruments at December 31, 2010 and 2009 have been
calculated based upon available market information or an appropriate valuation technique, and are as follows:
Subordinated convertible debentures . . . . . . . . . . . . . . . . . .
Senior and senior subordinated notes . . . . . . . . . . . . . . . . .
Other debt, including capital leases (1) . . . . . . . . . . . . . . . .
December 31, 2010
December 31, 2009
Carrying
Amount
$ 124
1,854
25
Fair
Value
$
92
2,020
20
Carrying
Amount
$ 124
2,275
31
Fair
Value
$
75
2,302
24
(1) Primarily comprised of capital leases, the fair value of which is determined using an expected present value
technique.
66
12. Debt
Debt consists of the following:
URNA and subsidiaries debt:
Accounts Receivable Securitization Facility (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.360 billion ABL Facility (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 1⁄ 2 percent Senior Notes (2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 3⁄4 percent Senior Subordinated Notes (2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 percent Senior Subordinated Notes (2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 7⁄ 8 percent Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 1⁄4 percent Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 3⁄ 8 percent Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 7⁄ 8 percent Convertible Senior Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt, including capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2010
2009
$ 221
683
—
—
—
488
492
750
22
25
$ 193
337
435
484
261
486
492
—
115
31
Total URNA and subsidiaries debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less short-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,681
(229)
2,834
(125)
Long-term URNA and subsidiaries debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,452
2,709
Holdings:
4 percent Convertible Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124
117
Total long-term debt (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,576
$2,826
(1) $617 and $11 were available under our ABL facility and accounts receivable securitization facility,
respectively, at December 31, 2010. The ABL facility availability is reflected net of $60 of letters of credit.
At December 31, 2010,
the interest rates applicable to our ABL facility and accounts receivable
securitization facility were 3.4 percent and 1.6 percent, respectively.
(3)
(2) During 2010, we repurchased and retired the entire outstanding principal amounts of the 6 1⁄ 2 percent Senior
Notes, the 7 3⁄4 percent Senior Subordinated Notes and the 7 percent Senior Subordinated Notes. See below
(“Retirement of Debt”) for a summary of our debt repurchase activity for the years ended December 31,
2010 and 2009.
In August 1998, a subsidiary trust of Holdings (the “Trust”) issued and sold $300 of 6 1⁄ 2 percent
Convertible Quarterly Income Preferred Securities (“QUIPS”) in a private offering. The Trust used the
proceeds from the offering to purchase 6 1⁄ 2 percent subordinated convertible debentures due 2028 (the
“Debentures”), which resulted in Holdings receiving all of the net proceeds of the offering. The QUIPS are
non-voting securities, carry a liquidation value of $50 (fifty dollars) per security and are convertible into
Holdings’ common stock. Total long-term debt at December 31, 2010 and 2009 excludes $124 of these
Debentures, which are separately classified in our consolidated balance sheets and referred to as
“subordinated convertible debentures.” The subordinated convertible debentures reflect the obligation to our
subsidiary that has issued the QUIPS. This subsidiary is not consolidated in our financial statements because
we are not the primary beneficiary of the Trust. See note 13 (“Subordinated Convertible Debentures”) for
additional detail.
Short-term debt
As of December 31, 2010, our short-term debt was comprised of $221 of borrowings under our accounts
receivable securitization facility and $8 of capital leases. During the year ended December 31, 2010, the monthly
average amount outstanding under the accounts receivable securitization facility was $185, and the weighted-
average interest rate thereon was 1.7 percent. The maximum month-end amount outstanding under the accounts
receivable securitization facility during the year ended December 31, 2010 was $240.
67
Accounts Receivable Securitization Facility. In December 2008, we amended our then existing accounts
receivable securitization facility, effective January 1, 2009. The amended facility, which expires on October 20,
2011, provides, among other things, for an increase in the facility size from $300 to $325 and includes a 364-day,
two-year term-out provision. The amended facility also provides for adjustments to the receivables subject to
purchase. In connection with entering into the amended facility, the Company agreed to a modified pricing
structure, which is based on commercial paper rates plus a specified spread based on the Company’s total
leverage ratio, as defined in the ABL facility. There is also a commitment fee based on the utilization of the
facility. Borrowings under the amended facility will continue to be reflected as debt on our consolidated balance
sheets. Key provisions of the amended facility include the following:
•
•
•
•
borrowings are permitted only to the extent that the face amount of the receivables in the collateral pool
exceeds the outstanding loans by a specified amount;
the receivables in the collateral pool are the lenders’ only source of repayment;
after expiration or early termination of the facility, no new amounts will be advanced under the facility
and collections on the receivables securing the facility will be used to repay the outstanding borrowings;
standard termination events including, without limitation, a termination event if there is a change of
control of Holdings or URNA, or if the long-term senior secured rating of URNA falls below either B+
from Standard & Poor’s Rating Services (“S&P”) or B2 from Moody’s Investors Service (“Moody’s”).
As of January 28, 2010, the Company’s long-term senior secured debt was rated BB- by S&P and Ba1
by Moody’s; and
•
standard default, delinquency, dilution and days sales outstanding provisions.
Long-term debt
ABL Facility. In June 2008, Holdings, URNA, and certain of our subsidiaries entered into a credit agreement
providing for a five-year $1.250 billion ABL facility, a portion of which is available for borrowing in Canadian
dollars. In October 2008 and November 2009, the ABL facility was upsized to $1.285 billion and $1.360 billion,
respectively, further increasing our liquidity. The ABL facility is subject to, among other things, the terms of a
borrowing base derived from the value of eligible rental equipment and eligible inventory. The borrowing base is
subject to certain reserves and caps customary for financings of this type. All amounts borrowed under the credit
agreement must be repaid on or before June 2013. Loans under the credit agreement bear interest, at URNA’s
option: (i) in the case of loans in U.S. Dollars, at a rate equal to the London interbank offered rate or an alternate
base rate, in each case plus a spread, or (ii) in the case of loans in Canadian dollars, at a rate equal to the
Canadian prime rate or an alternate rate (Bankers Acceptance Rate), in each case plus a spread. The interest rates
under the credit agreement are subject to change based on a total consolidated leverage ratio (a measurement of
URNA’s total debt to adjusted EBITDA). A commitment fee accrues on any unused portion of the commitments
under the credit agreement at a rate per annum based on usage. Ongoing extensions of credit under the credit
agreement are subject to customary conditions, including sufficient availability under the borrowing base. The
credit agreement also contains covenants that, unless certain financial and other conditions are satisfied, require
URNA to satisfy various financial tests and to maintain certain financial ratios. As discussed below (see “Loan
Covenants and Compliance”), the only material financial covenants which currently exist relate to the fixed
charge coverage ratio and the senior secured leverage ratio, and these covenants were suspended on June 9, 2009
because the availability, as defined in the agreement governing the ABL facility, had exceeded 20 percent of the
maximum revolver amount under the ABL facility. Since the June 9, 2009 suspension date and through
December 31, 2010, availability under the ABL facility has exceeded 10 percent of the maximum revolver
amount under the ABL facility and, as a result, these maintenance covenants remained inapplicable. In addition,
the credit agreement contains customary negative covenants applicable to Holdings, URNA and our subsidiaries,
including negative covenants that restrict the ability of such entities to, among other things, (i) incur additional
indebtedness or engage in certain other types of financing transactions, (ii) allow certain liens to attach to assets,
(iii) repurchase, or pay dividends or make certain other restricted payments on capital stock and certain other
securities, (iv) prepay certain indebtedness and (v) make acquisitions and investments. The U.S. Dollar
68
borrowings under the credit agreement are secured by substantially all of our assets and substantially all of the
assets of certain of our U.S. subsidiaries (other than real property and certain accounts receivable). The
U.S. Dollar borrowings under the credit agreement are guaranteed by Holdings and by URNA and, subject to
certain exceptions, our domestic subsidiaries. Borrowings under the credit agreement by URNA’s Canadian
subsidiaries are also secured by substantially all the assets of URNA’s Canadian subsidiaries and supported by
guarantees from the Canadian subsidiaries and from Holdings and URNA, and, subject to certain exceptions, our
domestic subsidiaries. Under the ABL facility, a change of control (as defined in the credit agreement)
constitutes an event of default, entitling our lenders, among other things, to terminate our ABL facility and to
require us to repay outstanding borrowings.
As of December 31, 2010, the ABL facility was our only long-term variable rate debt instrument. During the
year ended December 31, 2010, the monthly average amount outstanding under the ABL facility was $546, and
the weighted-average interest rate thereon was 3.4 percent. The maximum month-end amount outstanding under
the ABL facility during the year ended December 31, 2010 was $683.
10 7⁄ 8 percent Senior Notes. In June 2009, URNA issued $500 aggregate principal amount of 10 7⁄ 8 percent
Senior Notes (the “10 7⁄ 8 percent Notes”), which are due June 15, 2016. The net proceeds from the sale of the
10 7⁄ 8 percent Notes were $471 (after deducting the initial purchasers’ discount and offering expenses). The 10 7⁄ 8
percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA’s
domestic subsidiaries. The 10 7⁄ 8 percent Notes may be redeemed on or after June 15, 2013 at specified
redemption prices that range from 105.438 percent in 2013 to 100.0 percent in 2015 and thereafter. The indenture
governing the 10 7⁄ 8 percent Notes contains certain restrictive covenants, including, among others, limitations on
(i) indebtedness; (ii) restricted payments; (iii) liens; (iv) asset sales; (v) issuance of preferred stock of restricted
subsidiaries; (vi) transactions with affiliates; (vii) dividend and other payment restrictions affecting restricted
subsidiaries; (viii) designations of unrestricted subsidiaries; (ix) additional subsidiary guarantees and (x) mergers,
consolidations or sales of substantially all of its assets. The indenture also requires that, in the event of a change
of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 10 7⁄ 8
percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof plus
accrued and unpaid interest, if any, thereon. The difference between the December 31, 2010 carrying value of the
10 7⁄ 8 percent Notes and the $500 principal amount relates to the $12 unamortized portion of the original issue
discount recognized in conjunction with the issuance of these notes, which is being amortized through the above
maturity date. The effective interest rate on the 10 7⁄ 8 percent Notes is 11.50 percent.
9 1⁄4 percent Senior Notes. In November 2009, URNA issued $500 aggregate principal amount of
9 1⁄4 percent Senior Notes (the “9 1⁄4 percent Notes”), which are due December 15, 2019. The net proceeds from
the sale of the 9 1⁄4 percent Notes were $480 (after deducting the initial purchasers’ discount and offering
expenses). The 9 1⁄4 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited
exceptions, URNA’s domestic subsidiaries. The 9 1⁄4 percent Notes may be redeemed on or after December 15,
2014 at specified redemption prices that range from 104.625 percent in 2014 to 100.0 percent in 2017 and
thereafter. The indenture governing the 9 1⁄4 percent Notes contains certain restrictive covenants, including,
among others, limitations on (i) indebtedness; (ii) restricted payments; (iii) liens; (iv) asset sales; (v) issuance of
preferred stock of restricted subsidiaries; (vi) transactions with affiliates; (vii) dividend and other payment
restrictions affecting restricted subsidiaries; (viii) designations of unrestricted subsidiaries; (ix) additional
subsidiary guarantees and (x) mergers, consolidations or sales of substantially all of its assets. The indenture also
requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to
purchase all of the then outstanding 9 1⁄4 percent Notes tendered at a purchase price in cash equal to 101 percent
of the principal amount thereof plus accrued and unpaid interest, if any, thereon. The difference between the
December 31, 2010 carrying value of the 9 1⁄4 percent Notes and the $500 principal amount relates to the $8
unamortized portion of the original issue discount recognized in conjunction with the issuance of these notes,
which is being amortized through the above maturity date. The effective interest rate on the 9 1⁄4 percent Notes is
9.50 percent.
69
8 3⁄ 8 percent Senior Subordinated Notes. In October 2010, URNA issued $750 aggregate principal amount of
8 3⁄ 8 percent Senior Subordinated Notes (the “8 3⁄ 8 percent Notes”), which are due September 15, 2020. The net
proceeds from the sale of the 8 3⁄ 8 percent Notes were $732 (after deducting the initial purchasers’ discount and
offering expenses). The 8 3⁄ 8 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited
exceptions, URNA’s domestic subsidiaries. The 8 3⁄ 8 percent Notes may be redeemed by URNA on or after
September 15, 2015, at specified redemption prices that range from 104.188 percent in 2015 to 100.0 percent in
2018 and thereafter. The indenture governing the 8 3⁄ 8 percent Notes contains certain restrictive covenants,
including, among others, limitations on (i) additional indebtedness, (ii) restricted payments, (iii) liens, (iv) asset
sales, (v) preferred stock of certain subsidiaries, (vi) transactions with affiliates, (vii) dividends and other
payments, (viii) designations of unrestricted subsidiaries; (ix) additional subsidiary guarantees; and (x) mergers,
consolidations or sales of substantially all of our assets. The indenture also requires that, in the event of a change
of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding
8 3⁄ 8 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof plus
accrued and unpaid interest, if any, thereon.
1 7⁄ 8 percent Convertible Senior Subordinated Notes. In October and December 2003, URNA issued
approximately $144 aggregate principal amount of 1 7⁄ 8 percent Convertible Senior Subordinated Notes (the
“1 7⁄ 8 percent Convertible Notes”), which are due October 15, 2023. The net proceeds from the sale of the
1 7⁄ 8 percent Convertible Notes were approximately $140, after deducting the initial purchasers’ discount and
offering expenses. The 1 7⁄ 8 percent Convertible Notes are unsecured and are guaranteed by Holdings. Holders of
the 1 7⁄ 8 percent Convertible Notes may convert them into shares of common stock of Holdings prior to their
maturity at a current conversion price of approximately $22.25 per share (subject to further adjustment in certain
circumstances), if (i) the price of Holdings’ common stock reaches a specific threshold, (ii) the 1 7⁄ 8 percent
Convertible Notes are called for redemption, (iii) specified corporate transactions occur or (iv) the trading price
of the 1 7⁄ 8 percent Convertible Notes falls below certain thresholds. The 1 7⁄ 8 percent Convertible Notes mature
on October 15, 2023. In October 2010, we redeemed $93 principal amount of the 1 7⁄ 8 percent Convertible Notes
following the exercise of a mandatory repurchase option by holders of the notes. Holders of the 1 7⁄ 8 percent
Convertible Notes may require URNA to repurchase all or a portion of the 1 7⁄ 8 percent Convertible Notes in cash
on each of October 15, 2013 and October 15, 2018 at 100 percent of the principal amount of the 1 7⁄ 8 percent
Convertible Notes to be repurchased.
4 percent Convertible Senior Notes. In November 2009, Holdings issued $173 aggregate principal amount
of unsecured 4 percent Convertible Senior Notes (the “4 percent Convertible Notes”), which are due
November 15, 2015. The net proceeds from the sale of the 4 percent Convertible Notes were approximately
$167, after commissions, fees and expenses, but before the $26 cost of the convertible note hedge transactions
described below. Holders of the 4 percent Convertible Notes may convert them into shares of Holdings’ common
stock prior to the close of business on the business day immediately preceding May 15, 2015 (subject to earlier
conversion in certain circumstances) at an initial conversion price of approximately $11.11 per share of common
stock (subject to further adjustment in certain circumstances), if (i) the price of Holdings’ common stock reaches
a specific threshold, (ii) the trading price of the 4 percent Convertible Notes falls below certain thresholds or
(iii) specified corporate transactions occur. Based on the price of our common stock during the fourth quarter of
2010, holders of the 4 percent Convertible Notes may convert the notes during the first quarter of 2011 at the
initial conversion price of approximately $11.11 per share of common stock. As of January 28, 2011, none of the
4 percent Convertible Notes were converted. If Holdings undergoes a fundamental change (as defined in the
indenture governing the 4 percent Convertible Notes), holders of the 4 percent Convertible Notes may require
Holdings to repurchase all or any portion of their 4 percent Convertible Notes for cash at a price equal to 100
percent of the principal amount of the 4 percent Convertible Notes to be purchased plus any accrued and unpaid
interest, including any additional interest, up to but excluding the fundamental change purchase date. The
difference between the December 31, 2010 carrying value of the 4 percent Convertible Notes and the $173
principal amount relates to the $49 unamortized portion of the original issue discount recognized in conjunction
with the issuance of these notes, which is being amortized through the above maturity date. The original issue
discount increased additional paid-in capital by $33, net of taxes, in our accompanying consolidated statements
70
of stockholders’ equity (deficit), and represents the difference between the $173 of gross proceeds from the 4
percent Convertible Notes issuance and the fair value of the debt component of the 4 percent Convertible Notes
at issuance. The effective interest rate on the debt component of the 4 percent Convertible Notes is 11.60 percent.
The 4 percent Convertible Notes provide Holdings with a choice of net cash settlement or settlement in shares.
In connection with the 4 percent Convertible Notes offering, Holdings entered into convertible note hedge
transactions with option counterparties. The convertible note hedge transactions cover, subject to anti-dilution
adjustments, 15.5 million shares of our common stock. The convertible note hedge transactions are intended to
reduce, subject to a limit, the potential dilution with respect to our common stock upon conversion of the 4
percent Convertible Notes. The effect of the convertible note hedge transactions is to increase the effective
conversion price to approximately $15.56 per share, equal to an approximately 75 percent premium over the
$8.89 closing price of our common stock at issuance. However, in the event the market value of our common
stock exceeds $15.56 per share, the settlement amount received from such transactions will only partially offset
the potential dilution.
Retirement of Debt. During the years ended December 31, 2010 and 2009, we repurchased or redeemed and
subsequently retired certain of our outstanding debt securities. In connection with these repurchases/redemptions,
we recognized gains (losses) based on the difference between the net carrying amounts of the repurchased
securities and the repurchase prices. A summary of our debt repurchase activity for the years ended
December 31, 2010 and 2009 is as follows:
Year ended December 31, 2010
Year ended December 31, 2009
Repurchase
price
Principal Loss (1)
Repurchase
price
Principal
Gain/
(loss) (1)
7 3⁄4 percent Senior Subordinated Notes . . . . . . .
7 percent Senior Subordinated Notes . . . . . . . . .
6 1⁄ 2 percent Senior Notes . . . . . . . . . . . . . . . . . .
1 7⁄ 8 percent Convertible Senior Subordinated
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14 percent Senior Notes (2) . . . . . . . . . . . . . . . . .
$ 490
267
435
$ 484
261
435
93
—
93
—
$ (14)
(8)
(4)
(2)
—
$ 31
6
533
26
299
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,285
$1,273
$ (28)
$895
$ 37
8
545
29
300
$919
$ 5
1
6
2
(7)
$ 7
(1) The amount of the gain (loss) is calculated as the difference between the net carrying amount of the related
security and the repurchase price. The net carrying amounts of the securities are less than the principal
amounts due to capitalized debt issuance costs and any original issue discount. Aggregate costs of $16 and
$17 were written off in the years ended December 31, 2010 and 2009, respectively, in connection with the
repurchases/redemptions. The $16 of aggregate costs written off in the year ended December 31, 2010 was
comprised of $12 of write-offs of debt issuance costs and a $4 write-off of a previously terminated
derivative transaction. The gains (losses) are reflected in interest expense, net in our consolidated statements
of operations.
(2) Prior to December 31, 2009, we repurchased and retired the entire principal amount of the 14 percent Senior
Notes, which are not reflected in our consolidated balance sheets as of December 31, 2010 and 2009.
Loan Covenants and Compliance
As of December 31, 2010, we were in compliance with the covenants and other provisions of the ABL
facility, the accounts receivable securitization facility, the senior notes and the QUIPS. Any failure to be in
compliance with any material provision or covenant of these agreements could have a material adverse effect on
our liquidity and operations.
The only material financial covenants which currently exist relate to the fixed charge coverage ratio and the
senior secured leverage ratio under the ABL facility. Both of these covenants were suspended on June 9, 2009
because the availability, as defined in the agreement governing the ABL facility, had exceeded 20 percent of the
71
maximum revolver amount under the ABL facility. Subject to certain limited exceptions specified in the ABL
facility, these covenants will only apply in the future if availability under the ABL facility falls below 10 percent
of the maximum revolver amount under the ABL facility. Since the June 9, 2009 suspension date and through
December 31, 2010, availability under the ABL facility has exceeded 10 percent of the maximum revolver
amount under the ABL facility and, as a result, these maintenance covenants remained inapplicable. Under our
accounts receivable securitization facility, we are required, among other things, to maintain certain financial tests
relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales outstanding.
Maturities
Maturities of the Company’s debt for each of the next five years and thereafter at December 31, 2010 are as
follows:
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 229
5
684
2
174
1,779
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,873
13. Subordinated Convertible Debentures
The subordinated convertible debentures included in our consolidated balance sheets reflect the obligation
to a subsidiary trust of Holdings (the “Trust”) that has issued QUIPS. This subsidiary is not consolidated in our
financial statements because we are not the primary beneficiary of the Trust.
In August 1998, the Trust issued and sold $300 of QUIPS in a private offering. The Trust used the proceeds
from the offering to purchase 6 1⁄ 2 percent subordinated convertible debentures due 2028 (the “Debentures”), which
resulted in Holdings receiving all of the net proceeds of the offering. The QUIPS are non-voting securities, carry a
liquidation value of $50 (fifty dollars) per security and are convertible into Holdings’ common stock. The initial
convertible rate was 1.146 shares of common stock per preferred security (equivalent to an initial conversion price
of $43.63 per share). In July 2008, following the completion of the modified “Dutch auction” tender offer (see note
17 “Common Stock”), the conversion price of the QUIPS was adjusted to $41.02 and, accordingly, each $50 (fifty
dollars) in liquidation preference is now convertible into 1.219 shares of common stock. During the year ended
December 31, 2009, we purchased an aggregate of $22 of QUIPS for $9. In connection with this transaction, we
retired $22 principal amount of our subordinated convertible debentures and recognized a gain of $13. This gain is
reflected in interest expense-subordinated convertible debentures, net, in our consolidated statements of operations.
As of December 31, 2010 and 2009, the aggregate amount of Debentures outstanding was $124.
Holders of the QUIPS are entitled to preferential cumulative cash distributions from the Trust at an annual
rate of 6 1⁄ 2 percent 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 quarterly interest payments on the Debentures for up to twenty consecutive
quarters, but not beyond the maturity date of the Debentures. If Holdings’ quarterly interest payments on the
Debentures are deferred, so are the corresponding cash distribution payments on the QUIPS. During any period
in which Holdings is deferring its quarterly interest payments, Holdings will be prohibited from paying dividends
on any of its capital stock or making principal, interest or other payments on debt securities that rank pari passu
with or junior to the Debentures.
Holdings has executed a guarantee with regard to payment of the QUIPS to the extent that the Trust has
insufficient funds to make the required payments.
72
14.
Income Taxes
The components of the (benefit) provision for income taxes from continuing operations for each of the three
years in the period ended December 31, 2010 are as follows:
Year ended
December 31,
2010
2009
2008
Current
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $(55) $ (3)
16
5
7
(1)
16
1
Deferred
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(48)
(1)
(9)
13
2
(11)
(99)
(2)
(28)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(129)
4
(58)
$(41) $(47) $(109)
17
(51)
20
A reconciliation of the benefit for income taxes and the amount computed by applying the statutory federal
income tax rate of 35 percent to the loss from continuing operations before benefit for income taxes for each of
the three years in the period ended December 31, 2010 is as follows:
Year ended
December 31,
2010
2009
2008
Computed tax at statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible goodwill impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
State income tax valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Non-deductible expenses and other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (22) $ (38) $(285)
(14)
(7)
179
1
9
1
(6)
(5)
(1)
(1)
—
—
(8)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (41) $ (47) $(109)
(1) 2010 non-deductible expenses and other includes a benefit of $7 related to a correction of a deferred tax
asset recognized in prior periods. 2008 non-deductible expenses and other includes a $5 non-deductible SEC
settlement charge and a $5 write-off of foreign tax credit benefits.
The components of deferred income tax assets (liabilities) are as follows:
December 31, 2010
December 31, 2009
Current
Reserves and allowances . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 69
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Net operating loss and credit carryforwards . . . . . . . . . . . —
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Debt cancellation and other . . . . . . . . . . . . . . . . . . . . . . . . —
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Total deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . —
Non
Current
$
9
81
167
257
(618)
(22)
(2)
(642)
Total
Current
$ 78
$ 66
81 —
167 —
326
66
(618) —
(22) —
(2) —
(642) —
Non
Current
$ 19
110
134
263
(662)
(24)
(1)
(687)
Total
$ 85
110
134
329
(662)
(24)
(1)
(687)
Total deferred income tax asset (liability) . . . . . . . . . . . . .
$ 69
$(385) $(316)
$ 66
$(424) $(358)
73
As of December 31, 2010 and 2009, we had $4 and $6, respectively, of unrecognized tax benefits all of
which would impact our effective tax rate if recognized. A reconciliation of the beginning and ending amounts of
unrecognized tax benefits is as follows:
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6
—
(2)
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
4
$ 7
2
(3)
$ 6
2010
2009
We include interest accrued on the underpayment of income taxes in interest expense, and penalties, if any,
related to unrecognized tax benefits in selling, general and administrative expense. Interest expense of less than
$1 related to income tax was reflected in our consolidated statement of operations for each of the years ended
December 31, 2010 and 2009.
We file income tax returns in the United States and in several foreign jurisdictions. With few exceptions, we
have completed our domestic and international income tax examinations, or the statute of limitations has expired
in the respective jurisdictions, for years prior to 2004. The Internal Revenue Service (“IRS”) has completed
audits for periods prior to 2006. Canadian authorities have concluded income tax audits for periods through 2006.
The Company paid cash settlements of $3 in the fourth quarter of 2009 and $1 in the first quarter of 2010 relating
to the 2003 through 2005 Canadian transfer pricing audit, which is now closed. Included in the balance of
unrecognized tax benefits at December 31, 2010 are certain tax positions for which it is reasonably possible that
the total amounts of the unrecognized tax benefits for those tax positions could significantly change during the
next 12 months. However, based on the status of the ongoing audit examinations and alternative settlement
options available to the Company for certain of these tax positions, which could include legal proceedings, it is
not possible to estimate the amount of the change, if any, to the previously recorded uncertain tax positions.
For financial reporting purposes, income from continuing operations before income taxes for our foreign
subsidiaries was $54, $25 and $37 for the years ended December 31, 2010, 2009 and 2008, respectively. At
December 31, 2010, unremitted earnings of foreign subsidiaries were approximately $170. Since it is our
intention to indefinitely reinvest
taxes have been provided for these amounts.
Determination of the amount of unrecognized deferred tax liability on these unremitted taxes is not practicable.
these earnings, no U.S.
We have net operating loss carryforwards (“NOLs”) of $1,059 for state income tax purposes that expire
from 2011 through 2030. We have recorded a valuation allowance against this deferred asset of $2 and $1 as of
December 31, 2010 and 2009, respectively. We have NOLs of $299 for federal income tax purposes that expire
beginning in 2029. We have not recorded a valuation allowance against this deferred tax asset because it is
deemed more likely than not that such benefit will be realized in the future.
15. Commitments and Contingencies
Derivative Litigation and Stockholder Class Action Lawsuits
As previously reported, following our August 2004 announcement
the SEC had commenced a
non-public, fact-finding inquiry concerning the Company, an alleged stockholder filed an action in Connecticut
State Superior Court, Judicial District of Norwalk/Stamford at Stamford, purportedly suing derivatively on the
Company’s behalf. The action, entitled Gregory Riegel v. John N. Milne, et al., named as defendants certain of
our current and/or former directors and/or officers, and named the Company as a nominal defendant. The
complaint asserted, among other things, that the defendants breached their fiduciary duties to the Company by
causing or allowing the Company to disseminate misleading and inaccurate information to stockholders and the
market and by failing to establish and maintain adequate accounting controls, thus exposing the Company to
that
74
damages. The complaint seeks unspecified compensatory damages, costs and expenses against the defendants.
The parties to the Riegel action agreed that the proceedings in this action would be stayed pending the resolution
of the motions to dismiss in certain previously-filed purported stockholder class actions. As previously reported,
those purported stockholder class actions were commenced in 2004 and were dismissed with prejudice, pursuant
to a stipulation of settlement in May 2009. We previously announced on September 8, 2008 that we had also
reached a final settlement with the SEC of its inquiry.
Subsequent to our November 14, 2007 announcement that affiliates of Cerberus Capital Management, L.P.
(“Cerberus”) had notified us that they were not prepared to proceed with the purchase of the Company on the
terms set forth in the merger agreement, three putative class action lawsuits were filed against the Company in
the United States District Court for the District of Connecticut. The Court subsequently entered an order
consolidating the three actions and appointed First New York Securities, L.L.C. and Omni Partners LLP as lead
plaintiffs for the purported class. The actions were consolidated under the caption First New York Securities,
L.L.C., et al. v. United Rentals, Inc., et al. Lead plaintiffs filed their second consolidated amended complaint on
April 16, 2009. The second consolidated amended complaint seeks to sue on behalf of a purported class of
persons who purchased or otherwise acquired our securities between August 30, 2007 and November 14, 2007.
The second consolidated amended complaint names as defendants the Company, our chief executive officer and
our former general counsel and alleges, among other things, that the named plaintiffs and members of the
purported class suffered damages when they purchased or otherwise acquired securities issued by the Company,
as a result of false and misleading statements and/or material omissions relating to the contemplated merger with
affiliates of Cerberus, contained in certain of the Company’s filings with the SEC and other public statements.
On the basis of those allegations, plaintiffs asserted claims under Section 10(b) of the Exchange Act and Rule
10b-5 thereunder; and against the individual defendants under Section 20(a) of the Exchange Act. On August 24,
2009, the Court granted defendants’ motion to dismiss the second consolidated amended complaint with
prejudice and subsequently entered judgment in favor of defendants. On August 30, 2010, the United States
Court of Appeals for the Second Circuit affirmed the judgment of dismissal entered by the District Court. On
September 13, 2010, plaintiffs filed a petition for rehearing en banc or panel rehearing. We intend to continue to
defend against the consolidated actions vigorously.
We are also subject to a number of claims and proceedings that generally arise in the ordinary conduct of
our business. These matters include, but are not limited to, general liability claims (including personal injury,
product liability, and property and auto claims), indemnification and guarantee obligations, employee injuries
and employment-related claims, self-insurance obligations and contract and real estate matters. Based on advice
of counsel and available information, including current status or stage of proceeding, and taking into account
accruals for matters where we have established them, we currently believe that any liabilities ultimately resulting
from these ordinary course claims and proceedings will not, individually or in the aggregate, have a material
adverse effect on our consolidated financial position, results of operations or cash flows.
Indemnification
The Company indemnifies its officers and directors pursuant to indemnification agreements and may in
addition indemnify these individuals as permitted by Delaware law. Accordingly, in connection with the
previously reported purported class action lawsuits, the purported stockholder derivative litigation, the SEC
inquiry, the U.S. Attorney’s Office inquiry and related review of the Special Committee, the Company has
advanced counsel fees and other reasonable fees and expenses, actually and necessarily incurred by the present
and former directors and officers who are involved, in an aggregate amount of approximately $18, most of which
was advanced between 2005 and 2009. Each of the aforementioned individuals is required to execute an
undertaking to repay such expenses if he or she is finally found not to be entitled to indemnification. The
Company does not currently expect to incur material indemnification expense in connection with these matters
during 2011.
75
Operating Leases
We lease rental equipment, real estate and certain office equipment under operating leases. Certain real
estate leases require us to pay maintenance, insurance, taxes and certain other expenses in addition to the stated
including the maximum potential guarantee amounts
rental payments. Future minimum lease payments,
associated with some of our non-rental equipment operating leases for which we guarantee that the value of the
equipment at the end of the lease term will not be less than a specified projected residual value, 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, 2010:
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real
Estate
Leases
$ 76
68
58
47
36
93
$378
Non-Rental
Equipment
Leases
$ 34
18
10
6
4
—
$ 72
Rent expense under all non-cancelable real estate, rental equipment and other equipment operating leases
totaled $129, $136 and $142 for the years ended December 31, 2010, 2009 and 2008, respectively. Our real estate
leases provide for varying terms, including customary escalation clauses.
Employee Benefit Plans
We currently sponsor two defined contribution 401(k) retirement plans, which are subject to the provisions
of the Employee Retirement Income Security Act of 1974. We also sponsor a deferred profit sharing plan for the
benefit of the full-time employees of our Canadian subsidiaries. Under these plans, we match a percentage of the
participants’ contributions up to a specified amount. Company contributions to the plans were $2, $2 and $8 in
the years ended December 31, 2010, 2009 and 2008, respectively. The decline in company contributions in 2009
from 2008 was primarily due to a reduction in the maximum amount of participants’ contributions that we match,
which reflected a decision made in response to deterioration in the economic environment.
Environmental Matters
The Company and its operations are subject
to various laws and related regulations governing
environmental matters. Under such laws, an owner or lessee of real estate may be liable for the costs of removal
or remediation of certain hazardous or toxic substances located on or in, or emanating from, such property, as
well as investigation of property damage. We incur ongoing expenses associated with the removal of
underground storage tanks and the performance of appropriate remediation at certain of our locations.
16. Preferred Stock
In June 2008, we repurchased all of our outstanding Series C and Series D preferred stock for approximately
$679. In connection with the repurchase of the preferred stock, we recorded a preferred stock redemption charge
of $239 as a reduction of net income available to common stockholders. This charge, which is also reflected as a
reduction of retained earnings in our accompanying consolidated statements of stockholders’ equity (deficit),
primarily represents the difference between the fair value of the cash and note consideration issued to the
preferred holders and the $431 carrying value of the preferred stock. As a result of the preferred stock
repurchase, our stockholders’ equity (deficit) balance was reduced by $670 in 2008.
76
17. Common Stock
We have 500 million authorized shares of common stock, $0.01 par value. In July 2008 and in connection
with a modified “Dutch auction” tender offer, we accepted for payment an aggregate of 27.16 million shares of
our common stock at a price of $22.00 per share, for a total cost of $603 (including fees and expenses). The
number of shares of common stock purchased in the tender offer represented approximately 31.4 percent of the
total common stock outstanding on the last full trading day prior to the commencement of the offer. At
December 31, 2010 and 2009, there were (i) 3.4 million and 2.8 million shares of common stock reserved for
issuance pursuant to options granted under our stock option plans, respectively, (ii) 3.0 million shares of common
stock reserved for the conversion of outstanding QUIPS of the Trust, (iii) 1.0 million and 5.3 million shares of
common stock reserved for the conversion of 1 7⁄ 8 percent Convertible Notes, respectively, and (iv) 19.4 million
shares of common stock reserved for the conversion of 4 percent Convertible Notes. As discussed above (see
note 12 “Debt”), based on the price of our common stock during the fourth quarter of 2010, holders of the 4
percent Convertible Notes may convert them during the first quarter of 2011 at the initial conversion price of
approximately $11.11 per share of common stock. As of January 28, 2011, none of the 4 percent Convertible
Notes were converted.
As of December 31, 2010, 2.6 million shares were available for grant of stock and options under our 2010
Long Term Incentive Plan.
A summary of the transactions within the Company’s stock option plans follows (shares in thousands):
Outstanding at January 1, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
4,598
70
(608)
(1,719)
2,341
910
—
(469)
2,782
851
(196)
(84)
Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,353
Exercisable at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,298
1,869
1,932
Weighted-Average
Exercise Price
$19.69
17.38
12.59
19.03
21.94
3.74
—
25.45
15.40
8.43
5.63
11.71
$14.30
$22.14
$21.03
$19.98
77
As of December 31, 2010 (options in thousands):
Range of Exercise Prices
$ 0.01- 5.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.01-10.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.01-15.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.01-20.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.01-25.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25.01-30.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30.01-35.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Outstanding
Options Exercisable
Amount
Outstanding
Weighted
Average
Remaining
Contractual Life
Weighted
Average
Exercise
Price
Amount
Exercisable
677
871
89
189
1,494
30
3
3,353
8.2
9.1
4.6
3.4
2.3
4.2
5.3
$ 3.41
8.39
13.44
18.22
21.94
26.56
34.86
$14.30
144
13
59
189
1,494
30
3
1,932
Weighted
Average
Exercise
Price
$ 3.40
9.14
14.48
18.22
21.94
26.56
34.86
$19.98
Stockholders’ Rights Plan. We adopted a stockholders’ rights plan on September 28, 2001. This plan, as
well as other provisions of our charter and bylaws, may have the effect of deferring hostile takeovers or delaying
or preventing changes in control or management of the Company,
including transactions in which our
stockholders might otherwise receive a premium for their shares over the then current market prices. As
previously reported, on October 16, 2008, we amended our rights plan to reduce the beneficial ownership
threshold required to trigger rights under the plan from a 25 percent ownership interest to a 15 percent ownership
interest. The rights expire on September 27, 2011.
18. Quarterly Financial Information (Unaudited)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full
Year
For the year ended December 31, 2010 (1)(3):
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 478 $ 557 $ 605 $ 597 $2,237
658
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
197
Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22)
(Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . .
(0.38)
(Loss) earnings per share from continuing operations—basic . . . . .
(0.38)
(Loss) earnings per share from continuing operations—diluted . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(26)
For the year ended December 31, 2009 (2)(3):
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 594 $ 615 $ 592 $ 557 $2,358
610
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(60)
(Loss) income from continuing operations . . . . . . . . . . . . . . . . . . . . . . .
(0.98)
(Loss) earnings per share from continuing operations—basic . . . . .
(0.98)
(Loss) earnings per share from continuing operations—diluted . . .
(62)
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
145
24
(24)
(0.28) — (0.39)
(0.28) — (0.39)
(26)
103
(2)
(40)
(0.67)
(0.67)
(40)
144
18
(19)
(0.32)
(0.32)
(19)
175
47
(17)
(0.29)
(0.29)
(21)
180
67
(17) —
171
59
12
0.20
0.18
12
209
93
23
0.37
0.33
23
(17) —
141
5
(1) During the fourth quarter of 2010, we repurchased or redeemed and subsequently retired an aggregate of
$814 principal amount of our outstanding 7 3⁄4 percent Senior Subordinated Notes due 2013, 7 percent
Senior Subordinated Notes due 2014 and 1 7⁄ 8 percent Convertible Senior Subordinated Notes due 2023.
Interest expense, net for the fourth quarter of 2010 includes a charge of $25, representing the difference
between the net carrying amount of these securities and the total purchase price of $827. The $25 charge
includes a $4 write-off of a previously terminated derivative transaction. During the quarter, we also
recognized restructuring charges of $15 related to the closure of 22 branches and reductions in headcount of
approximately 100, and recognized asset impairment charges of $6. These asset impairment charges are
78
primarily reflected in non-rental depreciation and amortization and principally relate to write-offs of
leasehold improvement and other fixed assets in connection with the consolidation of our branch network.
Additionally, the income tax provision (benefit) for the quarter includes a benefit of $7 related to a
correction of a deferred tax asset recognized in prior periods.
(2) During the fourth quarter of 2009, we repurchased or redeemed and subsequently retired an aggregate of
$429 principal amount of our outstanding 6 1⁄ 2 percent Senior Notes due 2012 and 14 percent Senior Notes
due 2014. Interest expense, net for the fourth quarter of 2009 includes a charge of $9, representing the
difference between the net carrying amount of these securities and the total purchase price of $430.
Additionally, during the quarter, we recognized restructuring charges of $6 related to the closure of 13
branches and reductions in headcount of approximately 400. During the quarter, we also recognized asset
impairment charges of $3. These asset impairment charges include $2 reflected in depreciation of rental
equipment, and $1 primarily related to leasehold improvement write-offs which are reflected in non-rental
depreciation and amortization.
(3) Diluted earnings (loss) per share from continuing operations includes the after-tax impacts of the following:
For the year ended December 31, 2010:
Restructuring charge (4) . . . . . . . . . . . . . . . . . . .
(Losses) gains on repurchase of debt
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charge (5) . . . . . . . . . . . . . . . .
For the year ended December 31, 2009:
Restructuring charge (4) . . . . . . . . . . . . . . . . . . .
Gains (losses) on repurchase/retirement of debt
securities and subordinated convertible
debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charge (5) . . . . . . . . . . . . . . . .
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full
Year
$(0.06)
$(0.06)
$(0.06)
$(0.15)
$(0.34)
(0.04)
—
0.01
(0.02)
—
(0.01)
(0.24)
(0.06)
(0.28)
(0.09)
$(0.04)
$(0.22)
$ —
$(0.07)
$(0.29)
0.04
—
0.27
(0.09)
(0.01)
—
(0.08)
(0.03)
0.19
(0.12)
(4) As discussed above (see note 5 “Restructuring and Asset Impairment Charges”), this relates to branch
closure charges and severance costs.
(5) As discussed above (see note 5 “Restructuring and Asset Impairment Charges”), this non-cash charge
primarily relates to the impact of impairing certain rental equipment and leasehold improvement write-offs.
79
19. Loss Per Share
Basic loss per share is computed by dividing net loss available to common stockholders by the weighted-
average number of common shares outstanding and, if dilutive, the Series C and Series D preferred shares as if
converted to common shares since such shares are participating securities. (As previously reported and as
discussed in note 16 to our consolidated financial statements and elsewhere in this report, in June 2008, we
repurchased all of our outstanding Series C and Series D preferred stock and recorded a preferred stock
redemption charge of $239.) Diluted loss per share is computed by dividing net loss available to common
stockholders by the weighted-average number of common shares plus the effect of dilutive potential common
shares outstanding during the period. There were no adjustments to the weighted-average number of common
shares reflected in the diluted losses per share in the table below due to the losses for each of the three years in
the period ended December 31, 2010. The diluted losses per share for the years ended December 31, 2010, 2009
and 2008 exclude the impact of approximately 10.9 million, 11.8 million and 10.7 million common stock
equivalents, respectively, since the effect of including these securities would be anti-dilutive. The following table
sets forth the computation of basic and diluted loss per share (shares in thousands):
Year Ended December 31,
2010
2009
2008
Numerator:
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock redemption charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(22) $
—
(60) $ (704)
(239)
—
Loss from continuing operations available to common stockholders . . . . . . . . . . .
Loss from discontinued operation, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22)
(4)
(60)
(2)
(943)
—
Net loss available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(26) $
(62) $ (943)
Denominator:
Denominator for basic and diluted loss per share—weighted-average common
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,455
60,100
74,734
Basic and diluted loss per share:
Loss from continuing operations (inclusive of preferred stock redemption
charge) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.38) $ (0.98) $ (12.62)
(0.06)
(0.04)
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.44) $ (1.02) $ (12.62)
80
20. Condensed Consolidating Financial Information of Guarantor Subsidiaries
URNA is 100 percent owned by Holdings (“Parent”) and has outstanding (i) certain indebtedness that is
guaranteed by Parent and (ii) certain indebtedness that is guaranteed by both Parent and, with the exception of its
U.S. special purpose entity (the “SPV”) which holds receivable assets relating to the Company’s accounts
receivable securitization, all of URNA’s U.S. subsidiaries (the “guarantor subsidiaries”). However,
this
indebtedness is not guaranteed by URNA’s foreign subsidiaries and the SPV (together, the “non-guarantor
subsidiaries”). The guarantor subsidiaries are all 100 percent-owned and the guarantees are made on a joint and
several basis and are full and unconditional (subject to subordination provisions and subject to a standard limitation
which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that
can be guaranteed without making the guarantee void under fraudulent conveyance laws). Separate consolidated
financial statements of the guarantor subsidiaries have not been presented because management believes that such
information would not be material to investors. However, condensed consolidating financial information as of
December 31, 2010 and 2009, and for each of the three years in the period ended December 31, 2010, is presented.
The condensed consolidating financial information of Parent and its subsidiaries is as follows:
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2010
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign SPV
Eliminations Total
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $— $
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . —
Intercompany receivable (payable)
115
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Prepaid expenses and other assets . . . . . . . . . . . . . . . —
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
115
Total current assets . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
4
5
(837)
19
31
65
(713)
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . — 1,243
186
43
Property and equipment, net . . . . . . . . . . . . . . . . . . . .
2,018
173
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . .
99
Goodwill and other intangibles, net . . . . . . . . . . . . . . —
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . .
60
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $339 $2,893
LIABILITIES AND STOCKHOLDERS’
8
(DEFICIT) EQUITY
. . . . . . . . . . . . . $— $
8
Current maturities of long-term debt
83
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
146
37
Accrued expenses and other liabilities . . . . . . . . . . . .
237
Total current liabilities . . . . . . . . . . . . . . . . . . .
37
124
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,306
124 —
Subordinated convertible debentures . . . . . . . . . . . . .
175
17
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
57
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,720
359
Total stockholders’ (deficit) equity . . . . . . . . . . . . .
Total liabilities and stockholders’ (deficit)
(20)
173
73
$ — $ 199 $— $ — $ 203
377
293
—
(155) —
39
7 —
37
2 —
69
1 —
725
293
—
142
—
—
—
142
6
735
13
4
3
761
127
742
136
414
83
—
$2,136
295 —
28 —
— —
45 —
— —
$ 495 $293
—
—
2,280
393
(2,605) —
227
68
$(2,463) $3,693
—
—
$ — $ — $221
23 —
25 —
221
48
— —
— —
33 —
— —
81
221
26
—
26
146
—
160
—
332
$ — $ 229
132
208
569
2,576
124
385
59
3,713
—
—
—
—
—
—
—
—
1,804
414
72
(2,463)
(20)
equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $339 $2,893
$2,136
$ 495 $293
$(2,463) $3,693
81
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2009
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign SPV
Eliminations Total
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $— $
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . —
Intercompany receivable (payable)
74
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Prepaid expenses and other assets . . . . . . . . . . . . . . . —
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
. . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . .
74
$
5
9
(773)
21
53
59
(626)
Rental equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . — 1,363
47
210
Property and equipment, net . . . . . . . . . . . . . . . . . . . .
1,948
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . .
190
102
Goodwill and other intangibles, net . . . . . . . . . . . . . . —
63
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . .
9
3
8
847
17
23
6
904
788
148
—
85
2
60
$ 161 $— $ — $ 169
337
—
44
89
66
260
(148) —
6 —
13 —
1 —
—
—
—
—
—
93
260
—
705
263 —
29 —
— —
44 —
—
1
—
—
2,414
434
(2,138) —
231
75
—
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $320 $3,060
$1,927
$ 429 $261
$(2,138) $3,859
LIABILITIES AND STOCKHOLDERS’
(DEFICIT) EQUITY
Current maturities of long-term debt
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
43
Accrued expenses and other liabilities . . . . . . . . . . . .
. . . . . . . . . . . . . $— $ 125
61
71
Total current liabilities . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated convertible debentures . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . .
257
43
117
2,375
124 —
14
238
41 —
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
339
2,870
$ — $ — $— $ — $ 125
128
208
17 —
20 —
50
74
—
—
124
141
—
141
2
408
37 —
— 193
— —
31 —
— —
68
193
—
—
—
—
—
—
461
2,826
124
424
43
3,878
Total stockholders’ (deficit) equity . . . . . . . . . . . . .
(19)
190
1,519
361
68
(2,138)
(19)
Total liabilities and stockholders’ (deficit)
equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $320 $3,060
$1,927
$ 429 $261
$(2,138) $3,859
82
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2010
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign SPV
Eliminations Total
130 —
45 —
16 —
16 —
16 —
3 —
226 —
122 —
56
20
— —
4 —
62
(3)
(20) —
4
(1)
— —
12
—
(35) —
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
1
—
1
(54)
$1,834
144
78
95
86
2,237
924
389
103
65
66
32
1,579
658
367
34
60
197
255
8
(3)
(63)
(41)
(22)
(4)
(26)
—
$ (53)
$ (26)
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— $ 940
73
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . —
41
Sales of new equipment
. . . . . . . . . . . . . . . . . . . . . . . —
41
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . —
46
Service and other revenues . . . . . . . . . . . . . . . . . . . . . —
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,141
$629
48
18
30
23
748
$265 $—
23 —
19 —
24 —
17 —
348 —
Cost of revenues:
Cost of equipment rentals, excluding depreciation . . —
Depreciation of rental equipment . . . . . . . . . . . . . . . . —
Cost of rental equipment sales . . . . . . . . . . . . . . . . . . —
Cost of new equipment sales . . . . . . . . . . . . . . . . . . . —
Cost of contractor supplies sales . . . . . . . . . . . . . . . . —
Cost of service and other revenues . . . . . . . . . . . . . . . —
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Selling, general and administrative expenses . . . . . . .
21
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . —
13
Non-rental depreciation and amortization . . . . . . . . .
Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense-subordinated convertible
(34)
12
463
214
51
34
30
20
812
329
149
21
26
133
237
debentures, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . .
8 —
54
(62)
Income (loss) from continuing operations before
provision (benefit) for income taxes . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . .
Loss from discontinued operation, net of taxes . . . . . —
Income (loss) before equity in net (loss) earnings of
8
3
5
331
130
36
15
20
9
541
207
121
13
17
56
6
—
28
22
7
(158)
(78)
(80)
15
(4) —
53
22
11
5
31
— —
6
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net (loss) earnings of subsidiaries . . . . . . . .
5
(31)
(84)
53
15
32
31
— —
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (26) $ (31)
$ 47
$ 31 $
6
6
83
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2009
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign SPV
Eliminations Total
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— $ 957
131
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . —
44
Sales of new equipment
. . . . . . . . . . . . . . . . . . . . . . . —
49
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . —
51
Service and other revenues . . . . . . . . . . . . . . . . . . . . . —
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,232
Cost of revenues:
Cost of equipment rentals, excluding depreciation . . —
Depreciation of rental equipment . . . . . . . . . . . . . . . . —
Cost of rental equipment sales . . . . . . . . . . . . . . . . . . —
Cost of new equipment sales . . . . . . . . . . . . . . . . . . . —
Cost of contractor supplies sales . . . . . . . . . . . . . . . . —
Cost of service and other revenues . . . . . . . . . . . . . . . —
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . —
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Selling, general and administrative expenses . . . . . . .
19
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . —
12
Non-rental depreciation and amortization . . . . . . . . .
Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense-subordinated convertible
(31)
40
469
231
132
38
36
21
927
305
175
12
18
100
176
debentures, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . .
(4) —
50
(66)
$645
69
26
47
28
815
329
139
65
22
36
10
601
214
144
17
23
30
6
—
45
(Loss) income from continuing operations before
(benefit) provision for income taxes . . . . . . . . . . . .
(1)
(Benefit) provision for income taxes . . . . . . . . . . . . . —
(126)
(51)
(21)
(9)
$228 $—
29 —
16 —
25 —
13 —
311 —
112 —
47 —
25 —
13 —
17 —
6 —
220 —
91 —
19
51
2 —
4 —
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
34
—
(19) —
—
4
— —
—
(38) —
8
26
7
15
6
(Loss) income from continuing operations . . . . . . . . .
Loss from discontinued operation, net of taxes . . . . . —
(1)
(12)
(75)
(2) —
19
— —
9
(Loss) income before equity in net earnings of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net (loss) earnings of subsidiaries . . . . . . . .
(1)
(61)
(77)
16
(12)
—
19
— —
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (62) $ (61)
$ (12)
$ 19 $
9
9
84
$1,830
229
86
121
92
2,358
910
417
222
73
89
37
1,748
610
408
31
57
114
226
(4)
(1)
(107)
(47)
(60)
(2)
(62)
—
—
—
—
—
—
45
$ 45
$ (62)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2008
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign SPV
Eliminations Total
Revenues:
Equipment rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $1,211
138
Sales of rental equipment . . . . . . . . . . . . . . . . . . . . . . —
81
Sales of new equipment
. . . . . . . . . . . . . . . . . . . . . . . —
78
Contractor supplies sales . . . . . . . . . . . . . . . . . . . . . . —
61
Service and other revenues . . . . . . . . . . . . . . . . . . . . . —
$ 974
99
59
97
40
$311 $— $ — $2,496
264
179
212
116
27 —
39 —
37 —
15 —
—
—
—
—
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,569
1,269
429 —
Cost of revenues:
Cost of equipment rentals, excluding depreciation . . —
Depreciation of rental equipment . . . . . . . . . . . . . . . . —
Cost of rental equipment sales . . . . . . . . . . . . . . . . . . —
Cost of new equipment sales . . . . . . . . . . . . . . . . . . . —
Cost of contractor supplies sales . . . . . . . . . . . . . . . . —
Cost of service and other revenues . . . . . . . . . . . . . . . —
544
239
104
69
59
23
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . — 1,038
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Selling, general and administrative expenses . . . . . . .
23
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . —
Charge related to settlement of SEC inquiry . . . . . . .
Goodwill impairment charge . . . . . . . . . . . . . . . . . . . —
Non-rental depreciation and amortization . . . . . . . . .
531
226
7
14 —
108
19
18
Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense-subordinated convertible
(55)
32
171
130
debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense, net . . . . . . . . . . . . . . . . . . . .
9 —
(86)
68
(Loss) income from continuing operations before
provision (benefit) for income taxes . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . .
(10)
1
(27)
(67)
(Loss) income before equity in net (loss) earnings of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net (loss) earnings of subsidiaries . . . . . . . .
(11)
(693)
40
(733)
457
165
77
50
75
16
840
429
168
11
—
950
17
(717)
7
—
60
(784)
(70)
(714)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
136 —
51 —
17 —
32 —
28 —
7 —
271 —
158 —
21
71
2 —
— —
89 —
4 —
(8)
1
(21)
4
— —
14
(56)
(23)
16
31
11
(39)
20
— —
—
1,426
3,267
1,137
455
198
151
162
46
2,149
1,118
509
20
14
1,147
58
(630)
174
9
—
(813)
(109)
(704)
—
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(704)$ (693) $ (714)
$ (39) $ 20
$1,426
$ (704)
85
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2010
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . .
Net cash (used in) provided by financing
$ 14
(13)
$ 304
(78)
$ 77
(82)
$ 82
$ (25)
(50) —
$—
—
activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
Effect of foreign exchange rates . . . . . . . . . . —
(227)
—
2
—
(2)
25
8 —
Net (decrease) increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . —
(1)
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $
5
4
(3)
3
38 —
161 —
$—
$199
$—
$—
$ 203
$ 452
(223)
(203)
8
34
169
—
—
—
—
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2009
Net cash provided by operating activities . .
Net cash (used in) provided by investing
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
$ 26
$ 180
$ 22
$ 70
$ 140
$—
$ 438
activities . . . . . . . . . . . . . . . . . . . . . . . . . .
(23)
(50)
(26)
5
—
Net cash (used in) provided by financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
Effect of foreign exchange rate . . . . . . . . . . —
(125)
—
3
—
(3)
16
(140)
—
—
—
—
—
—
(94)
(268)
16
92
77
88
73
—
—
$161
$ —
$—
$ 169
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . —
5
(1)
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
—
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $
5
$
4
3
86
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Year Ended December 31, 2008
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . .
Net cash provided by (used in) financing
Parent URNA
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Foreign
SPV
Eliminations
Total
$ 12
(19)
$ 447
(212)
$ 142
(146)
$ 98
$ 65
(69) —
$—
—
$ 764
(446)
activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Effect of foreign exchange rate . . . . . . . . . . . —
(560)
—
Net (decrease) increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . —
(325)
Cash and cash equivalents at beginning of
—
8
4
(65)
(2)
(10) —
17 —
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
325
—
56 —
—
—
—
—
(612)
(10)
(304)
381
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$— $ —
$
4
$ 73
$—
$—
$ 77
87
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
UNITED RENTALS, INC.
(Dollars in millions, except per share data and unless otherwise indicated)
Description
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Deductions
Balance
at End
of Period
Year ended December 31, 2010:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for obsolescence and shrinkage . . . . . . . . . . . . . . . . . . . . .
Self-insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2009:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for obsolescence and shrinkage . . . . . . . . . . . . . . . . . . . . .
Self-insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31, 2008:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for obsolescence and shrinkage . . . . . . . . . . . . . . . . . . . . .
Self-insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25
1
83
$23
1
86
$26
5
97
$21
6
94
$16
7
99
$14
6
90
$ 17 (a)
6 (b)
84 (c)
$ 14 (a)
7 (b)
102 (c)
$ 17 (a)
10 (b)
101 (c)
$29
1
93
$25
1
83
$23
1
86
The above information reflects the continuing operations of the Company for the periods presented.
Additionally, because the Company has retained certain self-insurance liabilities associated with the
discontinued traffic control business, those amounts have been included as well.
(a) Represents write-offs of accounts, net of recoveries.
(b) Represents write-offs.
(c) Represents payments.
88
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is
accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
The Company’s management carried out an evaluation, under the supervision and with participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a–15(e) and 15d–15(e) of the Exchange Act, as of December 31, 2010. Based
on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s
disclosure controls and procedures were effective as of December 31, 2010.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act. The Company’s
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management assessed
the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making
this assessment, management used the criteria set forth in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, our
management has concluded that the Company’s internal control over financial reporting was effective as of
December 31, 2010.
The Company’s financial statements included in this annual report on Form 10-K have been audited by
Ernst & Young LLP, independent registered public accounting firm, as indicated in the following report. Ernst &
Young LLP has also provided an attestation report on the Company’s internal control over financial reporting.
89
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
The Board of Directors and Stockholders of United Rentals, Inc.
We have audited United Rentals, Inc.’s internal control over financial reporting as of December 31, 2010,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). United Rentals, Inc.’s management
is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Annual
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, United Rentals, Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of United Rentals, Inc. as of December 31, 2010 and 2009, and
the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the
three years in the period ended December 31, 2010 of United Rentals, Inc. and our report dated February 1, 2011
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New York, New York
February 1, 2011
90
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended
December 31, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
Not applicable.
91
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information required by this Item is incorporated by reference to the applicable information in our
Proxy Statement related to the 2011 Annual Meeting of Stockholders (the “2011 Proxy Statement”), which will
be filed with the SEC on or before March 31, 2011.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the applicable information in the 2011
Proxy Statement, which will be filed with the SEC on or before March 31, 2011.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item is incorporated by reference to the applicable information in the 2011
Proxy Statement, which will be filed with the SEC on or before March 31, 2011.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the applicable information in the 2011
Proxy Statement, which will be filed with the SEC on or before March 31, 2011.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to the applicable information in the 2011
Proxy Statement, which will be filed with the SEC on or before March 31, 2011.
92
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as a part of this report
(1) Consolidated financial statements:
Report of Independent Registered Public Accounting Firm on Financial Statements
United Rentals, Inc. Consolidated Balance Sheets—December 31, 2010 and 2009
United Rentals, Inc. Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and
2008
United Rentals, Inc. Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31,
2010, 2009 and 2008
United Rentals, Inc. Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and
2008
Notes to consolidated financial statements
(2) Schedules to the financial statements:
Schedule II Valuation and Qualifying Accounts
Schedules other than those listed are omitted as they are not applicable or the required or equivalent information
has been included in the financial statements or notes thereto.
(3) Exhibits: The exhibits to this report are listed in the exhibit index below.
(b) Description of exhibits
Exhibit
Number
3(a)
3(b)
3(c)
3(d)
4(a)
4(b)
4(c)
4(d)
Description of Exhibit
Restated Certificate of Incorporation of United Rentals, Inc., dated March 16, 2009 (incorporated by
reference to Exhibit 3.1 of the United Rentals, Inc. Report on Form 8-K filed on March 17, 2009)
By-laws of United Rentals, Inc., amended as of December 20, 2010 (incorporated by reference to
Exhibit 3.1 of the United Rentals, Inc. Report on Form 8-K filed on December 23, 2010)
Amended and Restated Certificate of Incorporation of United Rentals (North America), Inc.
(incorporated by reference to Exhibit 3.3 of the United Rentals (North America), Inc. Report on
Form 10-Q for the quarter ended June 30, 1998)
By-laws of United Rentals (North America), Inc. (incorporated by reference to Exhibit 3.4 of the
United Rentals (North America), Inc. Report on Form 10-Q for the quarter ended June 30, 1998)
Form of Certificate representing United Rentals, Inc. Common Stock (incorporated by reference to
Exhibit 4 of Amendment No. 2 to the United Rentals, Inc. Registration Statement on Form S-l,
Registration No. 333-39117, filed on December 3, 1997)
Rights Agreement, dated September 28, 2001, between United Rentals, Inc. and American Stock
Transfer & Trust Co., as Rights Agent (incorporated by reference to Exhibit 4 of the United Rentals,
Inc. Report on Form 8-K filed on October 5, 2001)
First Amendment, dated as of July 22, 2007, to the Rights Agreement, dated September 28, 2001,
between United Rentals, Inc. and American Stock Transfer & Trust Company (incorporated by
reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on July 24, 2007)
Second Amendment, dated as of October 16, 2008 to the Rights Agreement, dated September 28,
2001, between United Rentals, Inc. and American Stock Transfer & Trust Company (incorporated by
reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on October 17, 2008)
93
Exhibit
Number
4(e)
4(f)
4(g)
4(h)
4(i)
4(j)
4(k)
4(l)
4(m)
4(n)
4(o)
4(p)
4(q)
Description of Exhibit
Form of Certificate of Designation for Series E Junior Participating Preferred Stock (incorporated by
reference to Exhibit A of Exhibit 4 of the United Rentals, Inc. Report on Form 8-K filed on
October 5, 2001)
Certificate of Trust of United Rentals Trust I (incorporated by reference to Exhibit 4(a) of the United
Rentals,
filed on
Inc. Registration Statement on Form S-l, Registration No. 333-64463,
September 28, 1998)
Amended and Restated Trust Agreement, dated August 5, 1998, relating to United Rentals Trust I,
among United Rentals, Inc., The Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and the Administrative Trustees named therein (incorporated by
reference to Exhibit 10(ii) of the United Rentals, Inc. Registration Statement on Form S-4,
Registration No. 333-63171, filed on September 10, 1998)
Form of Certificate representing 6 1⁄ 2 percent Convertible Quarterly Income Preferred Securities
(“QUIPs”) (incorporated by reference to Exhibit 4(e) of the United Rentals, Inc. Registration
Statement on Form S-l, Registration No. 333-64463, filed on September 28, 1998)
Indenture, dated August 5, 1998, relating to 6 1⁄ 2 percent Convertible Subordinated Debentures,
between United Rentals, Inc. and The Bank of New York, as Trustee (incorporated by reference to
Exhibit 10(hh) of the United Rentals, Inc. Registration Statement on Form S-4, Registration
No. 333-63171, filed on September 10, 1998)
Form of Certificate representing 6 1⁄ 2 percent Convertible Subordinated Debentures (incorporated by
reference to Exhibit 4(f) of the United Rentals, Inc. Registration Statement on Form S-l, Registration
No. 333-64463, filed on September 28, 1998)
Guarantee Agreement, dated August 5, 1998, between United Rentals, Inc. and The Bank of New
York (incorporated by reference to Exhibit 10(jj) of the United Rentals, Inc. Registration Statement
on Form S-4, Registration No. 333-63171, filed on September 10, 1998)
Supplement, dated as of September 19, 2005, relating to the QUIPs (incorporated by reference to
Exhibit 4.5 of the United Rentals, Inc. Report on Form 8-K filed on September 23, 2005)
Indenture, dated as of October 31, 2003, relating to 1 7⁄ 8 percent Convertible Senior Subordinated
Notes due 2023, among United Rentals (North America), Inc., United Rentals, Inc., as Guarantor,
and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4(a) of the United
Rentals, Inc. Report on Form 10-Q for the quarter ended September 30, 2003)
Supplemental Indenture, dated as of September 19, 2005, relating to 1 7⁄ 8 percent Convertible Senior
Subordinated Notes due 2023 (incorporated by reference to Exhibit 4.4 of the United Rentals, Inc.
Report on Form 8-K filed on September 23, 2005)
Form of 1 7⁄ 8 percent Convertible Senior Subordinated Notes due 2023 (incorporated by reference to
Section 2.02 of Exhibit 4(a) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
September 30, 2003)
Indenture, dated as of November 12, 2003, relating to 7 3⁄4 percent Senior Subordinated Notes due
2013, among United Rentals (North America), Inc., the Guarantors named therein and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4(b) of the United Rentals, Inc. Report
on Form 10-Q for the quarter ended September 30, 2003)
Supplemental Indenture, dated as of September 19, 2005, relating to 7 3⁄4 percent Senior Subordinated
Notes due 2013 (incorporated by reference to Exhibit 4.2 of the United Rentals, Inc. Report on
Form 8-K filed on September 23, 2005)
94
Exhibit
Number
4(r)
4(s)
4(t)
4(u)
4(v)
4(w)
4(x)
4(y)
4(z)
4(aa)
4(bb)
4(cc)
4(dd)
4(ee)
Description of Exhibit
Form of 7 3⁄4 percent Senior Subordinated Notes due 2013 (incorporated by reference to Exhibits A-1
and A-2 of Exhibit 4(b) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
September 30, 2003)
Indenture, dated as of January 28, 2004, relating to 7 percent Senior Subordinated Notes due 2014,
among United Rentals (North America), Inc., the Guarantors named therein and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.1 of the United Rentals, Inc. Report on
Form 8-K filed on February 23, 2004)
Supplemental Indenture, dated as of September 19, 2005, relating to 7 percent Senior Subordinated
Notes due 2014 (incorporated by reference to Exhibit 4.3 of the United Rentals, Inc. Report on
Form 8-K filed on September 23, 2005)
Form of 7 percent Senior Subordinated Notes due 2014 (incorporated by reference to Exhibits A-1
and A-2 of Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on February 23, 2004)
Indenture, dated as of February 17, 2004, relating to 6 1⁄ 2 percent Senior Notes due 2012, among
United Rentals (North America), Inc., the Guarantors named therein and The Bank of New York, as
Trustee (incorporated by reference to Exhibit 4.2 of the United Rentals, Inc. Report on Form 8-K
filed on February 23, 2004)
Supplemental Indenture, dated as of September 19, 2005, relating to 6 1⁄ 2 percent Senior Notes due
2012 (incorporated by reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed
on September 23, 2005)
Form of 6 1⁄ 2 percent Senior Notes due 2012 (incorporated by reference to Exhibits A-1 and A-2 of
Exhibit 4.2 of the United Rentals, Inc. Report on Form 8-K filed on February 23, 2004)
Indenture, dated as of June 9, 2009, relating to 10 7⁄ 8 percent Senior Notes due 2016, among United
Rentals (North America), Inc., United Rentals, Inc., the Subsidiaries named in Schedule A and The
Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.1 of the United
Rentals, Inc. Report on Form 8-K filed on June 12, 2009)
Form of 10 7⁄ 8 percent Senior Notes due 2016 (incorporated by reference to Exhibits A-1 and A-2 of
Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on June 12, 2009)
Indenture, dated as of November 17, 2009, relating to 4 percent Convertible Senior Notes due 2015,
between United Rentals, Inc. and The Bank of New York Mellon, as Trustee (incorporated by
reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on November 17, 2009)
Form of 4 percent Convertible Senior Notes due 2015 (incorporated by reference to Exhibit A of
Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on November 17, 2009)
Indenture, dated as of November 17, 2009, relating to 9 1⁄4 percent Senior Notes due 2019, among
United Rentals (North America), Inc., United Rentals, Inc., United Rentals (North America), Inc.’s
subsidiaries named therein and The Bank of New York Mellon, as Trustee (incorporated by reference
to Exhibit 4.2 of the United Rentals, Inc. Report on Form 8-K filed on November 17, 2009)
Form of 9 1⁄4 percent Senior Notes due 2019 (incorporated by reference to Exhibit A of Exhibit 4.2 of
the United Rentals, Inc. Report on Form 8-K filed on November 17, 2009)
Indenture, dated as of October 26, 2010, relating to 8 3⁄ 8 percent Senior Subordinated Notes due 2020,
among United Rentals (North America),
Inc., United Rentals (North
America), Inc.’s subsidiaries named therein and The Bank of New York Mellon, as Trustee
(incorporated by reference to Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on
October 26, 2010)
Inc., United Rentals,
95
Exhibit
Number
Description of Exhibit
4(ff)* Supplemental Indenture, dated as of December 1, 2010, relating to 8 3⁄ 8 percent Senior Subordinated
4(gg)
10(a)
10(b)
10(c)
10(d)
10(e)
Notes due 2020
Form of 8 3⁄ 8 percent Senior Subordinated Notes due 2020 (incorporated by reference to Exhibit A of
Exhibit 4.1 of the United Rentals, Inc. Report on Form 8-K filed on October 26, 2010)
1997 Stock Option Plan of United Rentals, Inc. (incorporated by reference to Exhibit 10(b) of the
United Rentals, Inc. Registration Statement on Form S-l, Registration No. 333-39117, filed on
October 30, 1997)‡
1998 Supplemental Stock Option Plan of United Rentals, Inc., as amended and restated (incorporated
by reference to Exhibit 10(h) of the United Rentals, Inc. Report on Form 10-K for the year ended
December 31, 2005)‡
2001 Stock Plan of United Rentals, Inc. (incorporated by reference to Exhibit 4.6 of the United
Rentals, Inc. Registration Statement on Form S-8, No. 333-60458 filed on May 8, 2001)‡
2001 Comprehensive Stock Plan of United Rentals, Inc. (formerly the 2001 Senior Stock Plan)
(incorporated by reference to Exhibit 10(f) of the United Rentals, Inc. Report on Form 10-Q for the
quarter ended June 30, 2006)‡
United Rentals, Inc. Deferred Compensation Plan, as amended and restated, effective December 16,
2008 (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Report on Form 8-K filed
on December 19, 2008)‡
10(f)* Amendment Number One to the United Rentals, Inc. Deferred Compensation Plan, as amended and
restated, effective December 16, 2008‡
10(g)
United Rentals, Inc. Deferred Compensation Plan for Directors, as amended and restated, effective
December 16, 2008 (incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on
Form 8-K filed on December 19, 2008)‡
10(h)* Amendment Number One to the United Rentals, Inc. Deferred Compensation Plan for Directors, as
amended and restated, effective December 16, 2008‡
10(i)
10(j)*
10(k)
10(l)
10(m)
10(n)
United Rentals, Inc. Annual Incentive Compensation Plan, as amended and restated, effective
December 16, 2008 (incorporated by reference to Exhibit 10.4 of the United Rentals, Inc. Report on
Form 8-K filed on December 19, 2008)‡
Amendment Number One to the United Rentals, Inc. Annual Incentive Compensation Plan, as
amended and restated, effective December 16, 2008‡
United Rentals, Inc. 2009 Annual Incentive Compensation Plan, effective for bonuses granted for the
2009 fiscal year (incorporated by reference to Annex A of the United Rentals, Inc. Proxy Statement
on Schedule 14A filed on April 30, 2009)‡
United Rentals, Inc. Long-Term Incentive Plan, as amended and restated, effective December 16,
2008 (incorporated by reference to Exhibit 10.5 of the United Rentals, Inc. Report on Form 8-K filed
on December 19, 2008)‡
United Rentals, Inc. 2010 Long-Term Incentive Plan (incorporated by reference to Appendix A of
the United Rentals, Inc. Proxy Statement on Schedule 14A filed on March 31, 2010)‡
Form of United Rentals, Inc. 2010 Long-Term Incentive Plan Director Restricted Stock Unit
Agreement (incorporated by reference to Exhibit 10(b) of the United Rentals, Inc. Report on
Form 10-Q for the quarter ended June 30, 2010)‡
96
Exhibit
Number
10(o)
Description of Exhibit
United Rentals, Inc. Restricted Stock Unit Deferral Plan, as amended and restated, effective
December 16, 2008 (incorporated by reference to Exhibit 10.3 of the United Rentals, Inc. Report on
Form 8-K filed on December 19, 2008)‡
10(p)* Amendment Number One to the United Rentals, Inc. Restricted Stock Unit Deferral Plan, as
amended and restated, effective December 16, 2008‡
10(q)
10(r)
10(s)
10(t)
10(u)
10(v)
10(w)
10(x)
10(y)
10(z)
10(aa)
10(bb)
10(cc)
Form of United Rentals, Inc. Restricted Stock Unit Agreement for Senior Management (incorporated
by reference to Exhibit 10(b) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
June 30, 2006)‡
Form of United Rentals, Inc. Restricted Stock Unit Agreement for Senior Management, effective for
grants of awards beginning in 2009 (incorporated by reference to Exhibit 10.3 of the United Rentals,
Inc. Report on Form 10-Q for the quarter ended June 30, 2009)‡
Form of United Rentals, Inc., Restricted Stock Unit Agreement for Senior Management, effective for
grants of awards beginning in 2010 (incorporated by reference to Exhibit 10(e) of the United Rentals,
Inc. Report on Form 10-Q for the quarter ended March 31, 2010)‡
Form of United Rentals, Inc. Restricted Stock Unit Agreement for Non-Employee Directors
(incorporated by reference to Exhibit 10(c) of the United Rentals, Inc. Report on Form 10-Q for the
quarter ended June 30, 2006)‡
Form of United Rentals, Inc. Stock Option Agreement for Senior Management (incorporated by
reference to Exhibit 10.4 of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
June 30, 2009)‡
Form of United Rentals, Inc. Stock Option Agreement for Senior Management, effective for grants of
awards beginning in 2010 (incorporated by reference to Exhibit 10(d) of the United Rentals, Inc.
Report on Form 10-Q for the quarter ended March 31, 2010)‡
Form of Directors Option Agreement of United Rentals, Inc. (incorporated by reference to
Exhibit 99.1 of the United Rentals, Inc. Report on Form 8-K filed on March 8, 2005)‡
Compensation Program for Non-Employee Directors of United Rentals, Inc. (incorporated by
reference to Exhibit 10(d) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
June 30, 2006)‡
Revisions to Compensation Program for Non-Employee Directors of United Rentals,
Inc.
(incorporated by reference to Exhibit 10(d) of the United Rentals, Inc. Report on Form 10-Q for the
quarter ended June 30, 2008)‡
Compensation Arrangement for Non-Executive Chairman of United Rentals, Inc. (incorporated by
reference to Exhibit 10(c) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended
September 30, 2008)‡
Employment Agreement, dated as of August 22, 2008, between United Rentals, Inc. and Michael J.
Kneeland (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc. Report on Form 8-K
filed on August 25, 2008)‡
First (renumbered Second) Amendment, dated January 15, 2009, to the Employment Agreement
between United Rentals, Inc. and Michael J. Kneeland (incorporated by reference to Exhibit 10.1 of
the United Rentals, Inc. Report on Form 8-K filed on January 15, 2009)‡***
Third Amendment, dated March 13, 2009, to the Employment Agreement between United Rentals,
Inc. and Michael J. Kneeland (incorporated by reference to Exhibit 10.1 of the United Rentals, Inc.
Report on Form 8-K filed on March 17, 2009)‡
97
Exhibit
Number
Description of Exhibit
10(dd)* Fourth Amendment, effective as of August 22, 2008, to the Employment Agreement between United
Rentals, Inc. and Michael J. Kneeland‡
10(ee)
10(ff)
Form of 2001 Comprehensive Stock Plan Restricted Stock Unit Agreement with Michael J. Kneeland
(incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on Form 8-K filed on
August 25, 2008)‡
Employment Agreement, dated as of December 1, 2008, between United Rentals, Inc. and William
B. Plummer (including Restricted Stock Unit Agreement) (incorporated by reference to Exhibit 10.1
of the United Rentals, Inc. Report on Form 8-K filed on November 25, 2008)‡
10(gg)* Second Amendment, effective as of December 1, 2008, to the Employment Agreement between
United Rentals, Inc. and William B. Plummer‡
10(hh)
Employment Agreement, dated August 30, 2006, between United Rentals, Inc. and John Fahey
(incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on Form 8-K filed on
September 1, 2006)‡
10(ii)*
First Amendment, effective as of August 30, 2006, to the Employment Agreement between United
Rentals, Inc. and John Fahey‡
10(jj)
Employment Agreement, last dated September 3, 2008, between United Rentals, Inc. and Ken
DeWitt (incorporated by reference to Exhibit 10(f) of the United Rentals, Inc. Report on Form 10-Q
for the quarter ended March 31, 2009)‡
10(kk)* First Amendment, effective as of September 3, 2008, to the Employment Agreement between United
Rentals, Inc. and Ken DeWitt‡
10(ll)
Employment Agreement, dated as of February 2, 2009, between United Rentals, Inc. and Jonathan
Gottsegen (incorporated by reference to Exhibit 10(gg) of the United Rentals, Inc. Report on
Form 10-K for the year ended December 31, 2008)‡
10(mm) First Amendment, dated as of March 31, 2010, to the Employment Agreement between United
Rentals, Inc. and Jonathan Gottsegen (incorporated by reference to Exhibit 10(c) of the United
Rentals, Inc. Report on Form 10-Q for the quarter ended March 31, 2010)‡
10(nn)* Second Amendment, effective as of February 2, 2009, to the Employment Agreement between
United Rentals, Inc. and Jonathan Gottsegen‡
10(oo)
Employment Agreement, dated as of May 11, 2008, between United Rentals, Inc. and Joseph Dixon
(incorporated by reference to Exhibit 10(a) of the United Rentals, Inc. Report on Form 10-Q for the
quarter ended March 31, 2010)‡
10(pp)* First Amendment, effective as of May 11, 2008, to the Employment Agreement between United
Rentals, Inc. and Joseph Dixon‡
10(qq)
Inc. and
Employment Agreement, dated as of March 12, 2010, between United Rentals,
Matthew Flannery (incorporated by reference to Exhibit 10(b) of the United Rentals, Inc. Report on
Form 10-Q for the quarter ended March 31, 2010)‡
10(rr)* First Amendment, effective as of March 12, 2010, to the Employment Agreement between United
Rentals, Inc. and Matthew Flannery‡
10(ss)
10(tt)
Form of Amendment to Executive Officer Employment Agreement (incorporated by reference to
Exhibit 10.6 of the United Rentals, Inc. Report on Form 8-K filed on December 19, 2008)‡
Form of Indemnification Agreement for executive officers and directors (incorporated by reference to
Exhibit 10(gg) of the United Rentals, Inc. Report on Form 10-K for the year ended December 31, 2009)‡
98
Exhibit
Number
Description of Exhibit
10(uu) Credit Agreement, dated June 9, 2008, among United Rentals, Inc., United Rentals (North America),
Inc., certain of their subsidiaries, Bank of America, N.A., UBS Securities LLC, UBS AG Canada
Branch, Wachovia Bank, National Association, Wachovia Capital Finance Corporation (Canada),
Wells Fargo Foothill, LLC and the other lenders party thereto (incorporated by reference to
Exhibit 10(ss) of the United Rentals, Inc. Report on Form 10-Q for the quarter ended September 30,
2009)†
10(vv)
10(ww)
Incremental Assumption Agreement, dated as of October 16, 2008, among United Rentals, Inc.,
United Rentals (North America), Inc., certain of their subsidiaries, and Bank of America, N.A., as
agent (incorporated by reference to Exhibit 10(tt) of the United Rentals, Inc. Report on Form 10-K
for the year ended December 31, 2008)
Incremental Assumption Agreement, dated as of December 2, 2009, among United Rentals, Inc.,
United Rentals (North America), Inc., certain of their subsidiaries, and Bank of America, N.A., as
agent (incorporated by reference to Exhibit 10(kk) of the United Rentals, Inc. Report on Form 10-K
for the year ended December 31, 2009)
10(xx) Amended and Restated Receivables Purchase Agreement, dated as of December 22, 2008, among
Calyon New York Branch, The Bank of Nova Scotia, Atlantic Asset Securitization LLC, Liberty
Street Funding LLC, United Rentals Receivables LLC II and United Rentals, Inc. (without Annexes)
(incorporated by reference to Exhibit 10.2 of the United Rentals, Inc. Report on Form 8-K filed on
January 7, 2009)
10(yy)
10(zz)
First Amendment dated as of October 20, 2009, to the Amended and Restated Receivables Purchase
Agreement, dated as of December 22, 2008, by and among United Rentals Receivables LLC II,
United Rentals, Inc., Atlantic Asset Securitization LLC, Liberty Street Funding LLC, Calyon New
York Branch, and The Bank Of Nova Scotia (incorporated by reference to Exhibit 10(uu) of the
United Rentals, Inc. Report on Form 10-Q for the quarter ended September 30, 2009)
Second Amendment dated as of November 5, 2009, to the Amended and Restated Receivables
Purchase Agreement, dated as of December 22, 2008, by and among United Rentals Receivables
LLC II, United Rentals, Inc., Atlantic Asset Securitization LLC, Liberty Street Funding LLC, Calyon
New York Branch, and The Bank Of Nova Scotia (incorporated by reference to Exhibit 10(nn) of the
United Rentals, Inc. Report on Form 10-K for the year ended December 31, 2009)
10(aaa) Third Amendment, dated as of August 31, 2010, to the Amended and Restated Receivables Purchase
Agreement, dated as of December 22, 2008, by and among United Rentals Receivables LLC II,
United Rentals, Inc., Atlantic Asset Securitization LLC, Liberty Street Funding LLC, Calyon New
York Branch, and The Bank Of Nova Scotia (incorporated by reference to Exhibit 10(a) of the
United Rentals, Inc. Report on Form 10-Q for the quarter ended September 30, 2010)
10(bbb) Amended and Restated Purchase and Contribution Agreement, dated as of December 22, 2008,
among United Rentals Receivables LLC II, United Rentals, Inc., United Rentals (North America),
Inc. and United Rentals Northwest, Inc. (without Annexes) (incorporated by reference to Exhibit 10.1
of the United Rentals, Inc. Report on Form 8-K filed on January 7, 2009)
10(ccc) Performance Undertaking, dated as of May 31, 2005, executed by United Rentals, Inc. in favor of
United Rentals Receivables LLC II (incorporated by reference to Exhibit 99.3 of the United Rentals,
Inc. Report on Form 8-K filed on June 6, 2005)
10(ddd) Confirmation of Performance Undertaking, dated as of December 22, 2008, executed by United
Rentals, Inc.
in favor of United Rentals Receivables LLC II (incorporated by reference to
Exhibit 10(xx) of the United Rentals, Inc. Report on Form 10-K for the year ended December 31,
2008)
99
Exhibit
Number
Description of Exhibit
10(eee) Master Exchange Agreement, dated as of January 1, 2009, among United Rentals Exchange, LLC,
IPX1031 LLC, United Rentals (North America),
Inc.
(incorporated by reference to Exhibit 10.3 of the United Rentals, Inc. Report on Form 8-K filed on
January 7, 2009)
Form of Capped Call Confirmation, dated as of November 10, 2009, between United Rentals, Inc.
and each of Bank of America, N.A., Citibank, N.A., Wachovia Bank, National Association and
Morgan Stanley & Co. International plc (incorporated by reference to Exhibit 10.1 of the United
Rentals, Inc. Report on Form 8-K filed on November 17, 2009)‡‡
Inc. and United Rentals Northwest,
10(fff)
12*
21*
23*
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of United Rentals, Inc.
Consent of Ernst & Young LLP
31(a)* Rule 13a-14(a) Certification by Chief Executive Officer
31(b)* Rule 13a-14(a) Certification by Chief Financial Officer
32(a)** Section 1350 Certification by Chief Executive Officer
32(b)** Section 1350 Certification by Chief Financial Officer
Filed herewith.
*
** Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange
Act.
*** The First Amendment to Mr. Kneeland’s Employment Agreement corresponds to Exhibit 10(ss).
‡
This document is a management contract or compensatory plan or arrangement required to be filed as an
exhibit to this form pursuant to Item 15(a) of this report.
Certain information in this exhibit has been omitted and filed separately with the SEC pursuant to a
confidential treatment request under Rule 24b-2 of the Exchange Act. Omitted portions are indicated in this
exhibit with ****.
†
‡‡ The Company also entered into a Form of Additional Capped Call Option, dated November 13, 2009 with
each of Bank of America, N.A., Citibank, N.A., Wachovia Bank, National Association and Morgan
Stanley & Co. International plc which is substantially identical to Exhibit 10(fff) and is incorporated herein
by reference.
100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 1, 2011
UNITED RENTALS, INC.
By: /s/ MICHAEL J. KNEELAND
Chief Executive Officer
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Signatures
Title
Date
/S/
/S/
JENNE K. BRITELL
Jenne K. Britell
JOSÉ B. ALVAREZ
José B. Alvarez
/S/ HOWARD L. CLARK
Howard L. Clark
/S/ BOBBY J. GRIFFIN
Bobby J. Griffin
/S/ SINGLETON B. MCALLISTER
Singleton B. McAllister
/S/ BRIAN D. MCAULEY
Brian D. McAuley
/S/
JOHN S. MCKINNEY
John S. McKinney
/S/
JASON D. PAPASTAVROU
Jason D. Papastavrou
/S/ FILIPPO PASSERINI
Filippo Passerini
/S/ L. “KEITH” WIMBUSH
L. “Keith” Wimbush
Chairman
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
Director
February 1, 2011
/S/ MICHAEL J. KNEELAND
Michael J. Kneeland
Director and Chief Executive Officer
(Principal Executive Officer)
February 1, 2011
/S/ WILLIAM B. PLUMMER
Chief Financial Officer (Principal
February 1, 2011
William B. Plummer
/S/
JOHN J. FAHEY
John J. Fahey
Financial Officer)
Vice President, Controller (Principal
February 1, 2011
Accounting Officer)
101
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CORPORATE INFORMATION
INVESTOR INFORMATION
STOCKHOLDER INFORMATION
For investor information,
including our 2010 Form 10-K,
our quarterly earnings releases
and our other Securities
Exchange Act reports, please
visit our website:
unitedrentals.com
Investment professionals
may contact:
Fred Bratman
(203) 618-7318
fbratman@ur.com
2011 ANNUAL MEETING
Wednesday, May 11, 2011
at 10:00 am Eastern Time.
Hyatt Regency Greenwich
1800 East Putnam Avenue
Old Greenwich, CT 06870
For stockholder services
24 hours a day:
Call toll-free
(800) 937-5449
in the United States
and Canada, or
(718) 921-8200.
E-mail:
investors@unitedrentals.com
To speak to a stockholder
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
Write:
American Stock Transfer &
Trust Company
59 Maiden Lane
New York, NY 10038
By overnight mail only:
American Stock Transfer &
Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(718) 921-8210
www.amstock.com
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®.
The following table sets forth, for the periods indicated, the intra-day
high and low sale prices and close prices for our common stock, as
reported by the New York Stock Exchange.
UNITED RENTALS COMMON STOCK PRICES
2010
High
Low
Close
2009
High
Low
Close
2008
High
Low
Close
1st Qtr.
2nd Qtr.
3rd Qtr.
4th Qtr.
$10.13
6.87
9.38
$9.50
2.52
4.21
$20.50
14.83
18.84
$14.79
9.26
9.32
$6.90
3.99
6.49
$22.74
17.53
19.61
$15.41
8.20
14.84
$11.32
5.19
10.30
$22.59
13.79
15.24
$23.69
14.46
22.75
$11.53
8.61
9.81
$15.52
4.32
9.12
As of January 1, 2011, there were approximately 101 holders
of record of our common stock. We believe that the number 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.”
We have not paid dividends on our common stock since inception.
However, the payment of any future dividends will be determined by
our Board of Directors in light of conditions then existing. The terms
of certain of our indebtedness contain certain limitations on our
ability to pay dividends.
CORPORATE HEADQUARTERS
United Rentals, Inc.
Five Greenwich Office Park
Greenwich, CT 06831
Phone: (203) 622-3131
Fax: (203) 622-6080
unitedrentals.com
INDEPENDENT AUDITORS
Ernst & Young LLP
5 Times Square
New York, NY 10036
(212) 773-3000
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Brian D. McAuley Filippo Passerini Howard L. Clark, Jr. Jenne K. Britell L. Keith Wimbush Singleton B. McAllister
Bobby J. Griffin John S. McKinney Michael J. Kneeland Jason D. Papastavrou José B. Alvarez
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
SENIOR VICE PRESIDENTS
Jenne K . Britell, Ph.D., Chairman
Senior Managing Director
Brock Capital Group LLC
Michael J. Kneeland
President and
Chief Executive Officer
Matthew J. Flannery
Senior Vice President –
Operations
José B. Alvarez (2, 4, 5)
Senior Lecturer
Harvard Business School
William B. Plummer
Executive Vice President and
Chief Financial Officer
Jonathan M. Gottsegen
Senior Vice President, General
Counsel and Corporate Secretary
REGIONAL VICE PRESIDENTS
Chris Burlog
Vice President –
Midwest Region
Robert W. Hepler
Vice President –
Aerial West Region
David A. Hobbs
Vice President –
Gulf Region
Thomas P. Jones
Vice President –
Southeast Region
Robert P. Krause
Vice President –
Southwest Region
Kevin C. Parr
Vice President –
East Region
Tony Plescia
Vice President –
Northeast Canada Region
Timothy S. Rule
Vice President –
Northwest Region
Paul I. McDonnell
Senior Vice President –
Operations, Trench Safety,
Power and HVAC
CORPORATE VICE PRESIDENTS
Raymond J. Alletto
Vice President –
Risk Management
Dale A. Asplund
Vice President –
Business Services
Fred Bratman
Vice President –
Investor Relations and
Corporate Communications
Christopher M. Brown
Vice President –
Assistant Controller
John L. Bureau
Vice President –
Wynne Systems
Kenneth E. DeWitt
Vice President –
Chief Information Officer
Joseph A. Dixon
Vice President –
Sales
John J. Fahey
Vice President –
Controller and Principal
Accounting Officer
Loretta E. Foley
Vice President –
Business Process
Ned Graham
Vice President –
Business Development
Joli L. Gross
Vice President –
Deputy General Counsel
and Assistant Secretary
Daniel T. Higgins
Vice President –
Technology and Operations
Bruce W. Lafky
Vice President –
Service and Maintenance
Tony S. Leopold
Vice President –
Business Innovation
and Efficiency
Eric D. Mertz
Vice President –
Internal Audit
Kenneth B. Mettel
Vice President –
Strategy and Planning
Irene Moshouris
Vice President and Treasurer
Craig A. Pintoff
Vice President –
Human Resources
The United Rentals name and logo are registered trademarks
of United Rentals, Inc. and its affiliates. All rights reserved. All
other trademarks, service marks and brand names that appear
in this document are the property of their respective owners.
The covers and text of this annual report
are printed on papers containing at least
10% post-consumer recycled fiber.
Howard L. Clark, Jr.(3, 4)
Vice Chairman
Investment Banking
Barclays Capital
Bobby J. Griffin(2, 5)
Director
Michael J. Kneeland(5)
President and
Chief Executive Officer
United Rentals, Inc.
Singleton B. McAllister(2, 4)
Partner
Blank Rome LLP
Brian D. McAuley(1, 3)
Chairman
Pacific DataVision, Inc.
John S. McKinney(1, 5)
Director
Jason D. Papastavrou, Ph.D.(1, 3)
Founder and
Chief Executive Officer
ARIS Capital Management
Filippo Passerini(1, 5)
President
Global Business Services, and
Chief Information Officer
The Procter & Gamble Company
L. Keith Wimbush(1, 2)
Managing Director
Executive Search Services
International, LLC
COMMITTEES OF THE BOARD
(1) Audit Committee
Brian D. McAuley, Chair
(2) Compensation Committee
Singleton B. McAllister, Chair
(3) Finance Committee
Jason D. Papastavrou, Chair
(4) Nominating and
Corporate Governance Committee
Howard L. Clark, Jr., Chair
(5) Strategy Committee
John S. McKinney, Chair
The equipment rental leader
Total revenues: $2.2 billion
Market share: 9.5 %
Market coverage: 531 rental branches
Customers: Primarily construction and industrial
companies and utilities
Employees: Approximately 7,300
Rental fleet original cost: $3.8 billion
Rental range: Approximately 2,900 equipment classes
Data as of December 31, 2010. Market defined as North American
construction and industrial equipment rentals.
UNITED RENTALS, INC.
Five Greenwich Office Park
Greenwich, CT 06831
unitedrentals.com