UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 2010
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
to
Commission File Number 1-14387
Commission File Number 1-13663
United Rentals, Inc.
United Rentals (North America), Inc.
(Exact Names of Registrants as
Specified in Their Charters)
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|
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Delaware
Delaware
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|
06-1522496
06-1493538
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(States of Incorporation)
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(I.R.S. Employer Identification Nos.)
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Five Greenwich Office Park,
Greenwich, Connecticut
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06831
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrants Telephone Number, Including Area Code: (203) 622-3131
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
x
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 whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
|
|
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Large Accelerated Filer
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¨
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Accelerated Filer
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x
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Non-Accelerated Filer
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¨
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Smaller Reporting Company
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|
¨
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
¨
Yes
x
No
As of October 18, 2010, there were 60,533,375 shares of United Rentals, Inc. common stock, $.01 par value, outstanding. There is no
market for the common stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc.
This combined Form 10-Q is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a wholly owned subsidiary of United Rentals, Inc.). United Rentals
(North America), Inc. meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format permitted by such instruction.
UNITED RENTALS, INC.
UNITED RENTALS (NORTH AMERICA), INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010
INDEX
2
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q 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: (1) on-going decreases in North American construction and industrial activities, which have
significantly affected revenues and, because many of our costs are fixed, our profitability, and which may further reduce demand and prices for our products and services; (2) inability to benefit from government spending associated with
stimulus-related construction projects; (3) 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; (4) 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; (5) inability to access
the capital that our business may require; (6) increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual value of our equipment; (7) inability to sell our new or used fleet in the amounts, or at
the prices, we expect; (8) rates we can charge and time utilization we can achieve being less than anticipated; and (9) costs we incur being more than anticipated, and the inability to realize expected savings in the amounts or time frames
planned. For a fuller description of these and other possible uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2009. Our forward-looking statements contained herein speak only as of the date hereof,
and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.
3
PART I. FINANCIAL INFORMATION
Item 1.
|
Financial Statements
|
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except share data)
|
|
|
|
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|
|
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September 30,
2010
|
|
|
December 31,
2009
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
170
|
|
|
$
|
169
|
|
Accounts receivable, net of allowance for doubtful accounts of $26 and $25 at September 30, 2010 and December 31, 2009,
respectively
|
|
|
399
|
|
|
|
337
|
|
Inventory
|
|
|
48
|
|
|
|
44
|
|
Prepaid expenses and other assets
|
|
|
37
|
|
|
|
89
|
|
Deferred taxes
|
|
|
58
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
712
|
|
|
|
705
|
|
Rental equipment, net
|
|
|
2,335
|
|
|
|
2,414
|
|
Property and equipment, net
|
|
|
409
|
|
|
|
434
|
|
Goodwill and other intangible assets, net
|
|
|
227
|
|
|
|
231
|
|
Other long-term assets
|
|
|
61
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,744
|
|
|
$
|
3,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
123
|
|
|
$
|
125
|
|
Accounts payable
|
|
|
167
|
|
|
|
128
|
|
Accrued expenses and other liabilities
|
|
|
234
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
524
|
|
|
|
461
|
|
Long-term debt
|
|
|
2,692
|
|
|
|
2,826
|
|
Subordinated convertible debentures
|
|
|
124
|
|
|
|
124
|
|
Deferred taxes
|
|
|
384
|
|
|
|
424
|
|
Other long-term liabilities
|
|
|
35
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,759
|
|
|
|
3,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock$0.01 par value, 500,000,000 shares authorized, 60,533,375 and 60,163,233 shares issued and outstanding at
September 30, 2010 and December 31, 2009, respectively
|
|
|
1
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
490
|
|
|
|
487
|
|
Accumulated deficit
|
|
|
(579
|
)
|
|
|
(574
|
)
|
Accumulated other comprehensive income
|
|
|
73
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(15
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
3,744
|
|
|
$
|
3,859
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
4
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
507
|
|
|
$
|
478
|
|
|
$
|
1,337
|
|
|
$
|
1,380
|
|
Sales of rental equipment
|
|
|
32
|
|
|
|
41
|
|
|
|
104
|
|
|
|
192
|
|
New equipment sales
|
|
|
19
|
|
|
|
20
|
|
|
|
59
|
|
|
|
63
|
|
Contractor supplies sales
|
|
|
24
|
|
|
|
30
|
|
|
|
73
|
|
|
|
95
|
|
Service and other revenues
|
|
|
23
|
|
|
|
23
|
|
|
|
67
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
605
|
|
|
|
592
|
|
|
|
1,640
|
|
|
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment rentals, excluding depreciation
|
|
|
237
|
|
|
|
225
|
|
|
|
668
|
|
|
|
679
|
|
Depreciation of rental equipment
|
|
|
98
|
|
|
|
100
|
|
|
|
289
|
|
|
|
316
|
|
Cost of rental equipment sales
|
|
|
22
|
|
|
|
38
|
|
|
|
74
|
|
|
|
189
|
|
Cost of new equipment sales
|
|
|
15
|
|
|
|
16
|
|
|
|
49
|
|
|
|
53
|
|
Cost of contractor supplies sales
|
|
|
16
|
|
|
|
22
|
|
|
|
51
|
|
|
|
70
|
|
Cost of service and other revenues
|
|
|
8
|
|
|
|
11
|
|
|
|
26
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
396
|
|
|
|
412
|
|
|
|
1,157
|
|
|
|
1,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
209
|
|
|
|
180
|
|
|
|
483
|
|
|
|
465
|
|
Selling, general and administrative expenses
|
|
|
95
|
|
|
|
99
|
|
|
|
271
|
|
|
|
308
|
|
Restructuring charge
|
|
|
7
|
|
|
|
1
|
|
|
|
19
|
|
|
|
25
|
|
Non-rental depreciation and amortization
|
|
|
14
|
|
|
|
13
|
|
|
|
43
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
93
|
|
|
|
67
|
|
|
|
150
|
|
|
|
90
|
|
Interest expense, net
|
|
|
55
|
|
|
|
62
|
|
|
|
170
|
|
|
|
154
|
|
Interest expensesubordinated convertible debentures, net
|
|
|
2
|
|
|
|
2
|
|
|
|
6
|
|
|
|
(6
|
)
|
Other income, net
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for income taxes
|
|
|
38
|
|
|
|
4
|
|
|
|
(23
|
)
|
|
|
(58
|
)
|
Provision (benefit) for income taxes
|
|
|
15
|
|
|
|
4
|
|
|
|
(18
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
(5
|
)
|
|
$
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
0.37
|
|
|
$
|
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.60
|
)
|
Diluted earnings (loss) per share
|
|
$
|
0.33
|
|
|
$
|
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.60
|
)
|
See accompanying notes.
5
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) (UNAUDITED)
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
Number of
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Comprehensive
(Loss) Income
|
|
|
Comprehensive
Income
|
|
Balance at December 31, 2009
|
|
|
60
|
|
|
$
|
1
|
|
|
$
|
487
|
|
|
$
|
(574
|
)
|
|
|
|
|
|
$
|
67
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
$
|
(5
|
)
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense, net
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefits from share-based payment arrangements, net
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
1
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
September 30, 2010
|
|
|
61
|
|
|
$
|
1
|
|
|
$
|
490
|
|
|
$
|
(579
|
)
|
|
|
|
|
|
$
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
6
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5
|
)
|
|
$
|
(36
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
332
|
|
|
|
358
|
|
Amortization of deferred financing costs and original issue discounts
|
|
|
17
|
|
|
|
13
|
|
Gain on sales of rental equipment
|
|
|
(30
|
)
|
|
|
(3
|
)
|
(Gain) loss on sales of non-rental equipment
|
|
|
(1
|
)
|
|
|
1
|
|
Stock compensation expense, net
|
|
|
6
|
|
|
|
6
|
|
Restructuring charge
|
|
|
19
|
|
|
|
25
|
|
Loss (gain) on repurchase/redemption of debt securities
|
|
|
3
|
|
|
|
(16
|
)
|
Gain on retirement of subordinated convertible debentures
|
|
|
|
|
|
|
(13
|
)
|
Decrease in deferred taxes
|
|
|
(35
|
)
|
|
|
(4
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
|
(62
|
)
|
|
|
94
|
|
(Increase) decrease in inventory
|
|
|
(4
|
)
|
|
|
7
|
|
Decrease in prepaid expenses and other assets
|
|
|
62
|
|
|
|
13
|
|
Increase (decrease) in accounts payable
|
|
|
39
|
|
|
|
(17
|
)
|
Increase (decrease) in accrued expenses and other liabilities
|
|
|
2
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
343
|
|
|
|
353
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Purchases of rental equipment
|
|
|
(287
|
)
|
|
|
(198
|
)
|
Purchases of non-rental equipment
|
|
|
(20
|
)
|
|
|
(34
|
)
|
Proceeds from sales of rental equipment
|
|
|
104
|
|
|
|
192
|
|
Proceeds from sales of non-rental equipment
|
|
|
6
|
|
|
|
11
|
|
Purchases of other companies
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(197
|
)
|
|
|
(55
|
)
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from debt
|
|
|
1,481
|
|
|
|
2,003
|
|
Payments of debt
|
|
|
(1,625
|
)
|
|
|
(2,227
|
)
|
Payments of financing costs
|
|
|
|
|
|
|
(14
|
)
|
Shares repurchased and retired
|
|
|
(1
|
)
|
|
|
|
|
Excess tax benefits from share-based payment arrangements, net
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(147
|
)
|
|
|
(240
|
)
|
Effect of foreign exchange rates
|
|
|
2
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
1
|
|
|
|
72
|
|
Cash and cash equivalents at beginning of period
|
|
|
169
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
170
|
|
|
$
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash received for income taxes, net
|
|
$
|
49
|
|
|
$
|
2
|
|
See accompanying notes
7
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in millions, except per share data, unless otherwise indicated)
1. Organization, Description of Business and Basis of Presentation
United Rentals, Inc. (Holdings, United Rentals or the Company) is principally a
holding company and conducts its operations primarily through its wholly owned subsidiary, United Rentals (North America), Inc. (URNA), and subsidiaries of URNA. Holdings primary asset is its sole ownership of all issued and
outstanding shares of common stock of URNA. URNAs various credit agreements and debt instruments place restrictions on its ability to transfer funds to its shareholder.
We rent equipment to a diverse customer base that includes construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities 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.
We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the accounting policies described in our annual report on Form 10-K for the year ended
December 31, 2009 (the 2009 Form 10-K) and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally
accepted accounting principles (GAAP) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the 2009 Form 10-K. Certain reclassifications have been made to prior
year financial information to conform to the current year presentation.
Generally, accounting for income taxes requires
companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year (the effective tax rate approach). However, in the present circumstance, because we are unable to reliably estimate the effective
tax rate for the full year, we have calculated taxes for the three and nine months ended September 30, 2010 based on actual year-to-date pre-tax income, rather than a full-year forecast.
In our opinion, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of financial
condition, operating results and cash flows for the interim periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year.
New Accounting Pronouncements
Fair Value Measurements.
In January 2010, the Financial Accounting Standards Board (FASB) issued guidance which expanded the required disclosures about fair value measurements. In
particular, this guidance requires (i) separate disclosure of the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements along with the reasons for such transfers, (ii) information about purchases,
sales, issuances and settlements to be presented separately in the reconciliation for Level 3 fair value measurements, (iii) fair value measurement disclosures for each class of assets and liabilities and (iv) disclosures about the
valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. The adoption of this guidance did not have a material effect on our financial condition or
results of operations.
Subsequent Events.
In February 2010, the FASB issued guidance related to events that occur
after the balance sheet date but before financial statements are issued or are available to be issued. This guidance amended existing standards to address potential conflicts with Securities and Exchange Commission (SEC) guidance and
refined the scope of the reissuance disclosure requirements to include revised financial statements only. Under this guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated. The adoption
of this standard did not have a material effect on our financial condition or results of operations.
2. Segment Information
Our reportable segments are general rentals and trench safety, power and HVAC. In the second quarter of 2010, our
reportable segment for specialty operations was renamed trench safety, power and HVAC to better reflect its fleet and service components. The segment was previously referred to as trench safety, pump and power.
The general rentals segment includes the rental of construction, infrastructure, industrial and homeowner equipment and related services
and activities. The general rentals segments customers include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. The general rentals segment comprises seven geographic
regionsthe Southwest, Gulf, Northwest, Southeast, Midwest, East, and the Northeast Canadaas 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 equipment for underground construction, temporary power, climate control and disaster recovery, and related services such as training. The trench safety, power and HVAC segments customers include construction companies involved in
infrastructure projects, municipalities and industrial companies. This segment operates in the United States and has one location in Canada. These segments align our external segment reporting with how management evaluates and allocates resources.
We evaluate segment performance based on segment operating results.
8
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
The following table sets forth financial information by segment. Information related to our condensed consolidated balance sheets is
presented as of September 30, 2010 and December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Total reportable segment revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General rentals
|
|
$
|
558
|
|
|
$
|
548
|
|
|
$
|
1,516
|
|
|
$
|
1,682
|
|
Trench safety, power and HVAC
|
|
|
47
|
|
|
|
44
|
|
|
|
124
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
605
|
|
|
$
|
592
|
|
|
$
|
1,640
|
|
|
$
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reportable segment depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General rentals
|
|
$
|
105
|
|
|
$
|
106
|
|
|
$
|
314
|
|
|
$
|
339
|
|
Trench safety, power and HVAC
|
|
|
7
|
|
|
|
7
|
|
|
|
18
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization expense
|
|
$
|
112
|
|
|
$
|
113
|
|
|
$
|
332
|
|
|
$
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reportable segment operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General rentals
|
|
$
|
87
|
|
|
$
|
59
|
|
|
$
|
144
|
|
|
$
|
97
|
|
Trench safety, power and HVAC
|
|
|
13
|
|
|
|
9
|
|
|
|
25
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reportable segment operating income
|
|
$
|
100
|
|
|
$
|
68
|
|
|
$
|
169
|
|
|
$
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reportable segment capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General rentals
|
|
|
|
|
|
|
|
|
|
$
|
288
|
|
|
$
|
218
|
|
Trench safety, power and HVAC
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
|
|
|
|
|
|
|
|
$
|
307
|
|
|
$
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
Total reportable segment assets
|
|
|
|
|
|
|
|
|
General rentals
|
|
$
|
3,507
|
|
|
$
|
3,633
|
|
Trench safety, power and HVAC
|
|
|
237
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,744
|
|
|
$
|
3,859
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of segment operating income to total Company operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Total reportable segment operating income
|
|
$
|
100
|
|
|
$
|
68
|
|
|
$
|
169
|
|
|
$
|
115
|
|
Unallocated restructuring charge
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
(19
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
93
|
|
|
$
|
67
|
|
|
$
|
150
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
3. Restructuring and Asset
Impairment Charges
Over the past several years we have been focused on reducing our operating costs. In connection with
this strategy, we reduced our employee headcount from approximately 10,900 at December 31, 2007 to approximately 8,000 at December 31, 2009. Additionally, we reduced our branch network from 697 at December 31, 2007 to 569 at
December 31, 2009. In the first nine months of 2010, we further reduced our headcount by approximately 600 employees, or 8 percent, and closed 27 of our less profitable branches. The restructuring charges for the three and nine months ended
September 30, 2010 and 2009 include severance costs associated with our headcount reductions, as well as branch closure charges, the latter of which principally relates to continuing lease obligations at vacant facilities.
The table below provides certain information concerning our restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Reserve Balance at
December 31, 2009
|
|
|
Charged to
Costs and
Expenses(1)
|
|
|
Payments
and Other
|
|
|
Reserve Balance at
September 30, 2010
|
|
Branch closure charges
|
|
$
|
20
|
|
|
$
|
15
|
|
|
$
|
(12
|
)
|
|
$
|
23
|
|
Severance costs
|
|
|
1
|
|
|
|
4
|
|
|
|
(3
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21
|
|
|
$
|
19
|
|
|
$
|
(15
|
)
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflected in our condensed consolidated statements of operations as Restructuring charge.
|
We have incurred total restructuring charges between January 1, 2008 and September 30, 2010 of $70, comprised of $53 of branch
closure charges and $17 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 three and nine months ended September 30, 2010, the company recorded asset impairment charges of $1 and $3, respectively. The
asset impairment charges for the three and nine months ended September 30, 2010 primarily relate to leasehold improvement write-offs which were recognized in connection with the consolidation of our branch network discussed above, and are
reflected in non-rental depreciation and amortization in the accompanying condensed consolidated statements of operations.
During the three and nine months ended September 30, 2009, the company recorded restructuring charges of $1 and $25, respectively,
and asset impairment charges of $0 and $9, respectively. The asset impairment charges for the nine months ended September 30, 2009 include (i) a charge of $7 related to certain rental equipment which is reflected in depreciation of rental
equipment in the accompanying condensed consolidated statements of operations and (ii) leasehold improvement write-offs of $2 recognized in connection with the consolidation of our branch network discussed above, which are reflected in
non-rental depreciation and amortization in the accompanying condensed consolidated statements of operations.
4. 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 September 30, 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 condensed 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. At September 30, 2010, the primary risks we managed using derivative instruments were diesel price risk and foreign
currency exchange rate risk. At September 30, 2010, we had (i) outstanding fixed price swap contracts on diesel purchases which were entered into to mitigate the price risk associated with forecasted purchases of diesel and (ii) an
outstanding forward contract to purchase Canadian dollars which was entered into to mitigate the foreign currency exchange rate risk associated with URNAs Canadian dollar denominated intercompany loan. The outstanding forward contracts on
diesel purchases were designated and qualify as cash flow hedges and the forward contract to purchase Canadian dollars represents a derivative instrument not designated as a hedging instrument.
Fixed Price Diesel Swaps
The fixed price swap contracts on diesel purchases that were outstanding at September 30, 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 condensed consolidated statements of
operations during the current period. As of September 30, 2010, we had outstanding fixed price swap contracts covering 2.1 million gallons of diesel, 0.9 million and 1.2 million of which will be purchased throughout 2010 and
2011, respectively.
Foreign Currency Forward Contracts
The forward contract to purchase Canadian dollars represents a derivative instrument not designated as a hedging instrument and gains or
losses due to changes in its fair value are recognized in our condensed consolidated statements of operations during the period in which the changes in fair value occur. At September 30, 2010, there was an outstanding forward contract to
purchase $11 Canadian dollars, representing the amount due at maturity for an intercompany loan entered into during the third quarter of 2010. This intercompany loan concentrated excess foreign cash into the US. The intercompany loan and the forward
contract both mature in the fourth quarter of 2010. Upon maturity, the proceeds from the forward contract will be used to pay down the Canadian dollar denominated intercompany loan.
10
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
Financial
Statement Presentation
There were no derivative instruments outstanding as of December 31, 2009, or during the
three and nine months ended September 30, 2009, and these periods are excluded from the tables below.
Our derivative
instruments were reflected in our condensed consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
Balance sheet location
|
|
September 30, 2010
|
|
Derivatives designated as hedging instruments:
|
|
|
|
Fixed price diesel swaps
|
|
Prepaid expenses and other assets
|
|
$
|
*
|
|
|
|
Accrued expenses and other liabilities
|
|
|
*
|
|
|
|
Accumulated other comprehensive income (1)
|
|
|
*
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
Prepaid expenses and other assets
|
|
|
*
|
|
*
|
Amounts are insignificant (less than $1).
|
(1)
|
Represents the effective portion of the fixed price diesel swap contracts, net of taxes.
|
The effect of our derivative instruments on our condensed consolidated statements of operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of income (expense)
recognized on derivative
|
|
|
|
|
Amount of income
(expense)
recognized on hedged item
|
|
|
|
Location of income (expense)
recognized on derivative
|
|
Three Months
Ended
September 30,
2010
|
|
|
Nine Months
Ended
September 30,
2010
|
|
|
Location of income
(expense) recognized
on hedged item
|
|
Three Months
Ended
September 30,
2010
|
|
|
Nine
Months
Ended
September 30,
2010
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price diesel swaps
|
|
Other income (expense), net (1)
|
|
$
|
*
|
|
|
$
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment rentals, excluding depreciation (2)
|
|
|
*
|
|
|
|
*
|
|
|
Cost of equipment rentals, excluding depreciation (3)
|
|
$
|
(3
|
)
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
|
5
|
|
|
|
12
|
|
|
Other income (expense), net
|
|
|
(5
|
)
|
|
|
(12
|
)
|
*
|
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 1.1 million and 2.7 million gallons of diesel covered by the fixed price swap contracts during the three and nine months ended
September 30, 2010, respectively.
|
5. Fair Value Measurements
We account for certain assets and liabilities at fair value. In accordance with GAAP, we 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.
11
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
Assets and
Liabilities Measured at Fair Value
The following table presents the fair values of our assets and liabilities that are
measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
Liabilities:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair
Value
|
|
Held for sale assets measured at fair value on a non-recurring basis (1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Derivatives measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel fixed price swaps contracts (2)
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts (3)
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets
|
|
$
|
|
|
|
$
|
*
|
|
|
$
|
|
|
|
$
|
*
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the first half of 2010. A gain of $1 was recognized in depreciation of rental equipment in the accompanying condensed consolidated statements of operations associated with held for sale assets during the nine months ended
September 30, 2010. Fair value is determined using a market approach based on the proceeds we expect to receive upon sale of the equipment.
|
(2)
|
As discussed in note 4 to the condensed 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 September 30, 2010, we have fixed price swap contracts covering 2.1 million gallons of diesel which we will buy at the average
contractual rate of $3.11 per gallon, while the average forward price for the hedged gallons was $3.16 per gallon as of September 30, 2010. Fixed price swap contracts covering 0.9 million and 1.2 million gallons of diesel mature
throughout 2010 and 2011, respectively.
|
(3)
|
As discussed in note 4 to the condensed consolidated financial statements, we entered into a forward contract to purchase Canadian dollars to mitigate the foreign
currency exchange rate risk associated with an outstanding Canadian dollar denominated intercompany loan. Fair value is determined based on observable market data. As of September 30, 2010, we have a forward contract covering $11 Canadian which
we will buy at an exchange rate of $0.96 cents per Canadian dollar at contract maturity, while the forward rate at contract maturity was $0.97 cents per Canadian dollar as of September 30, 2010. This forward contract matures in the fourth
quarter of 2010.
|
Fair Value of Financial Instruments
The carrying amounts reported in our condensed 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 September 30, 2010 and December 31, 2009. The estimated fair values of our other financial instruments as of September 30, 2010 and December 31, 2009 have been calculated based upon available market information
or an appropriate valuation technique, and are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
Subordinated convertible debentures
|
|
$
|
124
|
|
|
$
|
86
|
|
|
$
|
124
|
|
|
$
|
75
|
|
Senior and senior subordinated notes
|
|
|
1,822
|
|
|
|
1,985
|
|
|
|
2,275
|
|
|
|
2,302
|
|
Other debt, including capital leases (1)
|
|
|
21
|
|
|
|
15
|
|
|
|
31
|
|
|
|
24
|
|
(1)
|
Primarily comprised of capital leases, the fair value of which is determined using an expected present value technique.
|
12
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
6. Debt and Subordinated
Convertible Debentures
Debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
URNA and subsidiaries debt:
|
|
|
|
|
|
|
|
|
Accounts Receivable Securitization Facility (1)
|
|
$
|
240
|
|
|
$
|
193
|
|
$1.360 billion ABL Facility (1)
|
|
|
617
|
|
|
|
337
|
|
6
1
/
2
percent Senior Notes
|
|
|
|
|
|
|
435
|
|
7
3
/
4
percent Senior Subordinated Notes
|
|
|
468
|
|
|
|
484
|
|
7 percent Senior Subordinated Notes
|
|
|
253
|
|
|
|
261
|
|
10
7
/
8
percent Senior Notes
|
|
|
487
|
|
|
|
486
|
|
9
1
/
4
percent Senior Notes
|
|
|
492
|
|
|
|
492
|
|
1
7
/
8
percent Convertible Senior Subordinated Notes (2)
|
|
|
115
|
|
|
|
115
|
|
Other debt, including capital leases
|
|
|
21
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Total URNA and subsidiaries debt
|
|
|
2,693
|
|
|
|
2,834
|
|
Less current portion
|
|
|
(123
|
)
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
Long-term URNA and subsidiaries debt
|
|
|
2,570
|
|
|
|
2,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings:
|
|
|
|
|
|
|
|
|
4 percent Convertible Senior Notes
|
|
|
122
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt (3)
|
|
$
|
2,692
|
|
|
$
|
2,826
|
|
|
|
|
|
|
|
|
|
|
(1)
|
$683 and $7 were available under our senior secured asset-based revolving credit facility (the ABL facility) and accounts receivable securitization
facility, respectively, at September 30, 2010. The ABL facility availability is reflected net of $60 of letters of credit. At September 30, 2010, the interest rates applicable to our ABL facility and accounts receivable securitization
facility were 3.4 percent and 1.7 percent, respectively.
|
(2)
|
Subject to providing notification to the Company on October 15, 2010, the holders of our 1
7
/
8
percent Convertible Senior Subordinated Notes had the right to
require us to repurchase all of the 1
7
/
8
percent
Convertible Senior Subordinated Notes. On October 15, 2010, $93 of the 1
7
/
8
percent Convertible Senior Subordinated Notes outstanding at September 30, 2010 were put to the Company and are scheduled to be repurchased on October 20, 2010 at par.
|
(3)
|
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 September 30, 2010 and December 31, 2009 excludes $124 of these Debentures, which are separately classified in our condensed 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.
|
Retirement/Redemption of Debt.
During the nine
months ended September 30, 2010, we repurchased or redeemed and subsequently retired certain of our outstanding debt securities. In connection with these repurchases/retirements, we recognized gains (losses) based on the difference between the
net carrying amounts of the repurchased or redeemed securities and the repurchase prices. A summary of our debt repurchase/redemption activity for the nine months ended September 30, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
price
|
|
|
Principal
|
|
|
Gain
(loss) (1)
|
|
7
3
/
4
percent Senior Subordinated Notes
|
|
$
|
15
|
|
|
$
|
16
|
|
|
$
|
1
|
|
7 percent Senior Subordinated Notes
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
6
1
/
2
percent Senior Notes
|
|
|
435
|
|
|
|
435
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
458
|
|
|
$
|
459
|
|
|
$
|
(3
|
)
|
(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. In connection with the repurchases/redemptions, aggregate debt issuance costs and original issue discounts of $4 were
written off in the nine months ended September 30, 2010. The gains (losses) are reflected in interest expense, net in our consolidated statements of operations.
|
13
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
Loan Covenants
and Compliance.
As of September 30, 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 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 September 30, 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. 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.
7. Legal and Regulatory Matters
As discussed in note 13 to our consolidated financial statements for the year ended December 31, 2009 filed on Form 10-K on February 3, 2010 (Note 13), we are subject to certain
ongoing class action and derivative legal proceedings. The following information is limited to recent developments concerning certain legal proceedings in which we are involved, and supplements the discussions of these proceedings included in Note
13.
In the First New York Securities, L.L.C., et al. v. United Rentals, Inc., et al. matter, on August 30, 2010, the
United States Court of Appeals for the Second Circuit affirmed the judgment of the United States District Court for the District of Connecticut granting defendants motion to dismiss. On September 13, 2010, plaintiffs filed a petition for
rehearing en banc or panel rehearing.
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
condition, results of operations or cash flows.
8. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares. Diluted
earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the adjusted weighted-average number of common shares. Diluted earnings per share for the three months ended September 30, 2010 and 2009
excludes the impact of approximately 3.0 million and 8.3 million common stock equivalents, respectively, since the effect of including these securities would be anti-dilutive. Diluted loss per share for the nine months ended
September 30, 2010 and 2009 excludes the impact of approximately 9.2 million and 9.6 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 earnings (loss) per share (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
(5
|
)
|
|
$
|
(36
|
)
|
Convertible debt interest1
7
/
8
percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
(5
|
)
|
|
$
|
(36
|
)
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings (loss) per shareweighted-average common shares
|
|
|
60,531
|
|
|
|
60,132
|
|
|
|
60,417
|
|
|
|
60,081
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options and warrants
|
|
|
383
|
|
|
|
231
|
|
|
|
|
|
|
|
|
|
Convertible subordinated notes1
7
/
8
percent
|
|
|
5,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible subordinated notes4 percent
|
|
|
1,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
|
751
|
|
|
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings (loss) per shareadjusted weighted-average common shares
|
|
|
68,532
|
|
|
|
60,728
|
|
|
|
60,417
|
|
|
|
60,081
|
|
Basic earnings (loss) per share
|
|
$
|
0.37
|
|
|
$
|
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.60
|
)
|
Diluted earnings (loss) per share
|
|
$
|
0.33
|
|
|
$
|
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.60
|
)
|
14
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
9. 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 Companys accounts receivable securitization facility, all of URNAs U.S. subsidiaries (the guarantor subsidiaries). However, this indebtedness is not guaranteed by URNAs 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 to
a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws). Separate consolidated financial
statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors; however, condensed consolidating financial information is presented. The condensed consolidating
financial information of the Parent and its subsidiaries is as follows:
CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
163
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
170
|
|
Accounts receivable, net
|
|
|
|
|
|
|
5
|
|
|
|
7
|
|
|
|
68
|
|
|
|
319
|
|
|
|
|
|
|
|
399
|
|
Intercompany receivable (payable)
|
|
|
76
|
|
|
|
(894
|
)
|
|
|
959
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
|
|
|
|
25
|
|
|
|
15
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
Prepaid expenses and other assets
|
|
|
|
|
|
|
10
|
|
|
|
23
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
Deferred taxes
|
|
|
|
|
|
|
56
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
76
|
|
|
|
(791
|
)
|
|
|
1,005
|
|
|
|
103
|
|
|
|
319
|
|
|
|
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental equipment, net
|
|
|
|
|
|
|
1,281
|
|
|
|
767
|
|
|
|
287
|
|
|
|
|
|
|
|
|
|
|
|
2,335
|
|
Property and equipment, net
|
|
|
43
|
|
|
|
196
|
|
|
|
143
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
409
|
|
Investments in subsidiaries
|
|
|
196
|
|
|
|
1,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,192
|
)
|
|
|
|
|
Goodwill and other intangibles, net
|
|
|
|
|
|
|
100
|
|
|
|
83
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
227
|
|
Other long-term assets
|
|
|
8
|
|
|
|
48
|
|
|
|
4
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
323
|
|
|
$
|
2,830
|
|
|
$
|
2,002
|
|
|
$
|
461
|
|
|
$
|
320
|
|
|
$
|
(2,192
|
)
|
|
$
|
3,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
|
|
|
$
|
123
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
123
|
|
Accounts payable
|
|
|
|
|
|
|
61
|
|
|
|
77
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
167
|
|
Accrued expenses and other liabilities
|
|
|
43
|
|
|
|
77
|
|
|
|
96
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
43
|
|
|
|
261
|
|
|
|
173
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
524
|
|
Long-term debt
|
|
|
122
|
|
|
|
2,188
|
|
|
|
142
|
|
|
|
|
|
|
|
240
|
|
|
|
|
|
|
|
2,692
|
|
Subordinated convertible debentures
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
Deferred taxes
|
|
|
16
|
|
|
|
185
|
|
|
|
153
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
384
|
|
Other long-term liabilities
|
|
|
33
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
338
|
|
|
|
2,634
|
|
|
|
470
|
|
|
|
77
|
|
|
|
240
|
|
|
|
|
|
|
|
3,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders (deficit) equity
|
|
|
(15
|
)
|
|
|
196
|
|
|
|
1,532
|
|
|
|
384
|
|
|
|
80
|
|
|
|
(2,192
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders (deficit) equity
|
|
$
|
323
|
|
|
$
|
2,830
|
|
|
$
|
2,002
|
|
|
$
|
461
|
|
|
$
|
320
|
|
|
$
|
(2,192
|
)
|
|
$
|
3,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
161
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
169
|
|
Accounts receivable, net
|
|
|
|
|
|
|
9
|
|
|
|
8
|
|
|
|
60
|
|
|
|
260
|
|
|
|
|
|
|
|
337
|
|
Intercompany receivable (payable)
|
|
|
74
|
|
|
|
(773
|
)
|
|
|
847
|
|
|
|
(148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
|
|
|
|
21
|
|
|
|
17
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
Prepaid expenses and other assets
|
|
|
|
|
|
|
53
|
|
|
|
23
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
Deferred taxes
|
|
|
|
|
|
|
59
|
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
74
|
|
|
|
(626
|
)
|
|
|
904
|
|
|
|
93
|
|
|
|
260
|
|
|
|
|
|
|
|
705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental equipment, net
|
|
|
|
|
|
|
1,363
|
|
|
|
788
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
2,414
|
|
Property and equipment, net
|
|
|
47
|
|
|
|
210
|
|
|
|
148
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
434
|
|
Investments in subsidiaries
|
|
|
190
|
|
|
|
1,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,138
|
)
|
|
|
|
|
Goodwill and other intangibles, net
|
|
|
|
|
|
|
102
|
|
|
|
85
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
231
|
|
Other long-term assets
|
|
|
9
|
|
|
|
63
|
|
|
|
2
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
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
|
|
$
|
|
|
|
$
|
125
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
125
|
|
Accounts payable
|
|
|
|
|
|
|
61
|
|
|
|
50
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
Accrued expenses and other liabilities
|
|
|
43
|
|
|
|
71
|
|
|
|
74
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
43
|
|
|
|
257
|
|
|
|
124
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
461
|
|
Long-term debt
|
|
|
117
|
|
|
|
2,375
|
|
|
|
141
|
|
|
|
|
|
|
|
193
|
|
|
|
|
|
|
|
2,826
|
|
Subordinated convertible debentures
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
Deferred taxes
|
|
|
14
|
|
|
|
238
|
|
|
|
141
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
424
|
|
Other long-term liabilities
|
|
|
41
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
339
|
|
|
|
2,870
|
|
|
|
408
|
|
|
|
68
|
|
|
|
193
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
|
|
|
$
|
255
|
|
|
$
|
180
|
|
|
$
|
72
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
507
|
|
Sales of rental equipment
|
|
|
|
|
|
|
15
|
|
|
|
12
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
New equipment sales
|
|
|
|
|
|
|
11
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Contractor supplies sales
|
|
|
|
|
|
|
11
|
|
|
|
8
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Service and other revenues
|
|
|
|
|
|
|
12
|
|
|
|
5
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
304
|
|
|
|
209
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment rentals, excluding depreciation
|
|
|
|
|
|
|
119
|
|
|
|
87
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
Depreciation of rental equipment
|
|
|
|
|
|
|
54
|
|
|
|
32
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
98
|
|
Cost of rental equipment sales
|
|
|
|
|
|
|
9
|
|
|
|
9
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
Cost of new equipment sales
|
|
|
|
|
|
|
9
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Cost of contractor supplies sales
|
|
|
|
|
|
|
7
|
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Cost of service and other revenues
|
|
|
|
|
|
|
6
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
204
|
|
|
|
138
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
100
|
|
|
|
71
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
209
|
|
Selling, general and administrative expenses
|
|
|
12
|
|
|
|
44
|
|
|
|
20
|
|
|
|
14
|
|
|
|
5
|
|
|
|
|
|
|
|
95
|
|
Restructuring charge
|
|
|
|
|
|
|
2
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Non-rental depreciation and amortization
|
|
|
4
|
|
|
|
6
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(16
|
)
|
|
|
48
|
|
|
|
43
|
|
|
|
23
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
93
|
|
Interest expense, net
|
|
|
3
|
|
|
|
49
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
55
|
|
Interest expense-subordinated convertible debentures
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Other (income) expense, net
|
|
|
(17
|
)
|
|
|
12
|
|
|
|
7
|
|
|
|
4
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit) provision for income taxes
|
|
|
(4
|
)
|
|
|
(13
|
)
|
|
|
33
|
|
|
|
20
|
|
|
|
2
|
|
|
|
|
|
|
|
38
|
|
(Benefit) provision for income taxes
|
|
|
(2
|
)
|
|
|
(7
|
)
|
|
|
19
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before equity in net earnings (loss) of subsidiaries
|
|
|
(2
|
)
|
|
|
(6
|
)
|
|
|
14
|
|
|
|
16
|
|
|
|
1
|
|
|
|
|
|
|
|
23
|
|
Equity in net earnings (loss) of subsidiaries
|
|
|
25
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
23
|
|
|
$
|
25
|
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
1
|
|
|
$
|
(56
|
)
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
|
|
|
$
|
248
|
|
|
$
|
171
|
|
|
$
|
59
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
478
|
|
Sales of rental equipment
|
|
|
|
|
|
|
22
|
|
|
|
14
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
New equipment sales
|
|
|
|
|
|
|
10
|
|
|
|
6
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Contractor supplies sales
|
|
|
|
|
|
|
13
|
|
|
|
11
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
Service and other revenues
|
|
|
|
|
|
|
13
|
|
|
|
7
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
306
|
|
|
|
209
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment rentals, excluding depreciation
|
|
|
|
|
|
|
113
|
|
|
|
85
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
225
|
|
Depreciation of rental equipment
|
|
|
|
|
|
|
57
|
|
|
|
32
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Cost of rental equipment sales
|
|
|
|
|
|
|
21
|
|
|
|
12
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
Cost of new equipment sales
|
|
|
|
|
|
|
9
|
|
|
|
4
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Cost of contractor supplies sales
|
|
|
|
|
|
|
9
|
|
|
|
9
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
Cost of service and other revenues
|
|
|
|
|
|
|
6
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
215
|
|
|
|
146
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
91
|
|
|
|
63
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
180
|
|
Selling, general and administrative expenses
|
|
|
6
|
|
|
|
46
|
|
|
|
31
|
|
|
|
11
|
|
|
|
5
|
|
|
|
|
|
|
|
99
|
|
Restructuring charge
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Non-rental depreciation and amortization
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(10
|
)
|
|
|
41
|
|
|
|
27
|
|
|
|
14
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
67
|
|
Interest expense, net
|
|
|
8
|
|
|
|
48
|
|
|
|
4
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
62
|
|
Interest expense-subordinated convertible debentures
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Other (income) expense, net
|
|
|
(18
|
)
|
|
|
14
|
|
|
|
10
|
|
|
|
2
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit) provision for income taxes
|
|
|
(2
|
)
|
|
|
(21
|
)
|
|
|
13
|
|
|
|
11
|
|
|
|
3
|
|
|
|
|
|
|
|
4
|
|
(Benefit) provision for income taxes
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before equity in net earnings (loss) of subsidiaries
|
|
|
(1
|
)
|
|
|
(20
|
)
|
|
|
9
|
|
|
|
9
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Equity in net earnings (loss) of subsidiaries
|
|
|
1
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
3
|
|
|
$
|
(22
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
|
|
|
$
|
695
|
|
|
$
|
458
|
|
|
$
|
184
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,337
|
|
Sales of rental equipment
|
|
|
|
|
|
|
53
|
|
|
|
34
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
104
|
|
New equipment sales
|
|
|
|
|
|
|
33
|
|
|
|
13
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
Contractor supplies sales
|
|
|
|
|
|
|
32
|
|
|
|
24
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
73
|
|
Service and other revenues
|
|
|
|
|
|
|
36
|
|
|
|
17
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
849
|
|
|
|
546
|
|
|
|
245
|
|
|
|
|
|
|
|
|
|
|
|
1,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment rentals, excluding depreciation
|
|
|
|
|
|
|
335
|
|
|
|
242
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
668
|
|
Depreciation of rental equipment
|
|
|
|
|
|
|
160
|
|
|
|
96
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
289
|
|
Cost of rental equipment sales
|
|
|
|
|
|
|
37
|
|
|
|
25
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
Cost of new equipment sales
|
|
|
|
|
|
|
28
|
|
|
|
10
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
Cost of contractor supplies sales
|
|
|
|
|
|
|
23
|
|
|
|
17
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
Cost of service and other revenues
|
|
|
|
|
|
|
16
|
|
|
|
6
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
599
|
|
|
|
396
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
1,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
250
|
|
|
|
150
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
483
|
|
Selling, general and administrative expenses
|
|
|
21
|
|
|
|
126
|
|
|
|
70
|
|
|
|
40
|
|
|
|
14
|
|
|
|
|
|
|
|
271
|
|
Restructuring charge
|
|
|
|
|
|
|
11
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Non-rental depreciation and amortization
|
|
|
10
|
|
|
|
18
|
|
|
|
12
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(31
|
)
|
|
|
95
|
|
|
|
60
|
|
|
|
40
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
150
|
|
Interest expense, net
|
|
|
9
|
|
|
|
156
|
|
|
|
5
|
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
|
|
|
170
|
|
Interest expense-subordinated convertible debentures
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Other (income) expense, net
|
|
|
(46
|
)
|
|
|
34
|
|
|
|
24
|
|
|
|
9
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit) provision for income taxes
|
|
|
|
|
|
|
(95
|
)
|
|
|
31
|
|
|
|
34
|
|
|
|
7
|
|
|
|
|
|
|
|
(23
|
)
|
(Benefit) provision for income taxes
|
|
|
|
|
|
|
(54
|
)
|
|
|
18
|
|
|
|
14
|
|
|
|
4
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before equity in net (loss) earnings of subsidiaries
|
|
|
|
|
|
|
(41
|
)
|
|
|
13
|
|
|
|
20
|
|
|
|
3
|
|
|
|
|
|
|
|
(5
|
)
|
Equity in net (loss) earnings of subsidiaries
|
|
|
(5
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
|
$
|
13
|
|
|
$
|
20
|
|
|
$
|
3
|
|
|
$
|
(31
|
)
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
|
|
|
$
|
724
|
|
|
$
|
495
|
|
|
$
|
161
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,380
|
|
Sales of rental equipment
|
|
|
|
|
|
|
110
|
|
|
|
59
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
192
|
|
New equipment sales
|
|
|
|
|
|
|
31
|
|
|
|
20
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
Contractor supplies sales
|
|
|
|
|
|
|
39
|
|
|
|
38
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
Service and other revenues
|
|
|
|
|
|
|
40
|
|
|
|
22
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
944
|
|
|
|
634
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment rentals, excluding depreciation
|
|
|
|
|
|
|
346
|
|
|
|
254
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
679
|
|
Depreciation of rental equipment
|
|
|
|
|
|
|
177
|
|
|
|
106
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
316
|
|
Cost of rental equipment sales
|
|
|
|
|
|
|
111
|
|
|
|
57
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
Cost of new equipment sales
|
|
|
|
|
|
|
27
|
|
|
|
16
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
Cost of contractor supplies sales
|
|
|
|
|
|
|
28
|
|
|
|
29
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
70
|
|
Cost of service and other revenues
|
|
|
|
|
|
|
16
|
|
|
|
9
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
705
|
|
|
|
471
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
1,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
239
|
|
|
|
163
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
465
|
|
Selling, general and administrative expenses
|
|
|
13
|
|
|
|
134
|
|
|
|
108
|
|
|
|
38
|
|
|
|
15
|
|
|
|
|
|
|
|
308
|
|
Restructuring charge
|
|
|
|
|
|
|
10
|
|
|
|
14
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Non-rental depreciation and amortization
|
|
|
15
|
|
|
|
12
|
|
|
|
13
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(28
|
)
|
|
|
83
|
|
|
|
28
|
|
|
|
22
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
90
|
|
Interest expense, net
|
|
|
24
|
|
|
|
115
|
|
|
|
11
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
154
|
|
Interest expense-subordinated convertible debentures, net
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
Other (income) expense, net
|
|
|
(51
|
)
|
|
|
42
|
|
|
|
32
|
|
|
|
6
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for income taxes
|
|
|
5
|
|
|
|
(74
|
)
|
|
|
(15
|
)
|
|
|
16
|
|
|
|
10
|
|
|
|
|
|
|
|
(58
|
)
|
Provision (benefit) for income taxes
|
|
|
2
|
|
|
|
(22
|
)
|
|
|
(7
|
)
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in net (loss) earnings of subsidiaries
|
|
|
3
|
|
|
|
(52
|
)
|
|
|
(8
|
)
|
|
|
14
|
|
|
|
7
|
|
|
|
|
|
|
|
(36
|
)
|
Equity in net (loss) earnings of subsidiaries
|
|
|
(39
|
)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(36
|
)
|
|
$
|
(39
|
)
|
|
$
|
(8
|
)
|
|
$
|
14
|
|
|
$
|
7
|
|
|
$
|
26
|
|
|
$
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
UNITED RENTALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in millions, except per share data, unless otherwise indicated)
CONDENSED
CONSOLIDATING CASH FLOW INFORMATION
For the Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
12
|
|
|
$
|
271
|
|
|
$
|
70
|
|
|
$
|
45
|
|
|
$
|
(55
|
)
|
|
$
|
|
|
|
$
|
343
|
|
Net cash used in investing activities
|
|
|
(10
|
)
|
|
|
(69
|
)
|
|
|
(75
|
)
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
(197
|
)
|
Net cash (used in) provided by financing activities
|
|
|
(2
|
)
|
|
|
(200
|
)
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
55
|
|
|
|
|
|
|
|
(147
|
)
|
Effect of foreign exchange rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
5
|
|
|
|
3
|
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
163
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING CASH FLOW INFORMATION
For the Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
URNA
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
Foreign
|
|
|
SPV
|
|
|
|
Net cash provided by operating activities
|
|
$
|
18
|
|
|
$
|
172
|
|
|
$
|
6
|
|
|
$
|
49
|
|
|
$
|
108
|
|
|
$
|
|
|
|
$
|
353
|
|
Net cash (used in) provided by investing activities
|
|
|
(15
|
)
|
|
|
(38
|
)
|
|
|
(8
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
Net cash (used in) provided by financing activities
|
|
|
(3
|
)
|
|
|
(128
|
)
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
(108
|
)
|
|
|
|
|
|
|
(240
|
)
|
Effect of foreign exchange rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
139
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Item 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except per share data, unless otherwise indicated)
|
Executive Overview
We are the largest equipment rental company in the world with an integrated network of 549 rental locations in the United States and Canada. Although the equipment rental industry is highly fragmented and
diverse, 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 smaller competitors. These advantages include greater purchasing power, the
ability to provide customers with a broader range of equipment and services as well as with better maintained equipment, and greater flexibility to transfer equipment among branches.
We offer for rent approximately 2,900 classes of equipment to customers that include 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 2009, equipment rental revenues represented 78 percent of our total revenues.
The latter part of 2008 through 2009
was challenging for both our company and the U.S. equipment rental industry as a whole. As the financial crisis led into a recession, credit restrictions and the macro economy triggered 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 potential recovery in our end markets; this has continued through the second and third quarters, becoming more pronounced by June. We believe that our
performance in the third quarterwhich includes record quarterly time utilization of 71.3 percentreflects both seasonal and cyclical improvements in our operating environment. Although there is no certainty that these trends will
continue, we believe that our strategy will strengthen our leadership position in the recovery. Our strategy is to optimize our core rental business through customer segmentation, rate management and fleet management; achieve differentiation and a
competitive advantage through customer service excellence; and maintain a disciplined approach to cost control.
Financial Overview
Net income (loss).
Net income (loss) and diluted earnings (loss) per share for the three and nine months ended September 30, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine
Months
Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net income (loss)
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
(5
|
)
|
|
$
|
(36
|
)
|
Diluted earnings (loss) per share
|
|
$
|
0.33
|
|
|
$
|
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.60
|
)
|
Net income (loss) and
diluted earnings (loss) per share for the three and nine months ended September 30, 2010 and 2009 include the impacts of the following special items (amounts presented on an after-tax basis):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
Net
loss
|
|
|
Diluted loss
per share
|
|
|
Net
loss
|
|
|
Diluted loss
per share
|
|
|
Net
loss
|
|
|
Diluted loss
per
share
|
|
|
Net
(loss)
income
|
|
|
Diluted
(loss)
earnings
per share
|
|
Restructuring charge (1)
|
|
$
|
(4
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(11
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(15
|
)
|
|
|
(0.24
|
)
|
(Loss) gain on repurchases/redemptions of debt securities and retirement of subordinated convertible debentures
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(0.01
|
)
|
|
|
(2
|
)
|
|
|
(0.03
|
)
|
|
|
18
|
|
|
|
0.28
|
|
Asset impairment charge (2)
|
|
|
(1
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(0.04
|
)
|
|
|
(6
|
)
|
|
|
(0.09
|
)
|
(1)
|
As discussed below (see Restructuring charge), this relates to branch closure charges and severance costs.
|
(2)
|
As discussed in note 3 to the condensed consolidated financial statements, the 2010 charge primarily relates to the impact of leasehold improvement write-offs. The 2009
charge includes the impact of impairing certain rental equipment and leasehold improvement write-offs.
|
In
addition to the matters discussed above, our 2010 performance reflects increased gross profit from the sale of rental equipment and reductions in selling, general and administrative expenses. Our results for the three months ended September 30,
2010 also include increased gross profit from equipment rentals reflecting a 7.1 percentage point increase in time utilization to a quarterly record of 71.3 percent. Additionally, and as discussed below (see Income taxes), our results
for the nine months ended September 30, 2010 include a tax benefit of $18.
22
EBITDA GAAP
Reconciliation.
EBITDA represents the sum of net income (loss), provision (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 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 Companys results under 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
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 loss or cash flow from
operating activities as indicators of operating performance or liquidity. The table below provides a reconciliation between net income (loss) and EBITDA and adjusted EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
|
Nine Months
Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net income (loss)
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
(5
|
)
|
|
$
|
(36
|
)
|
Provision (benefit) for income taxes
|
|
|
15
|
|
|
|
4
|
|
|
|
(18
|
)
|
|
|
(22
|
)
|
Interest expense, net
|
|
|
55
|
|
|
|
62
|
|
|
|
170
|
|
|
|
154
|
|
Interest expense subordinated convertible debentures, net
|
|
|
2
|
|
|
|
2
|
|
|
|
6
|
|
|
|
(6
|
)
|
Depreciation of rental equipment
|
|
|
98
|
|
|
|
100
|
|
|
|
289
|
|
|
|
316
|
|
Non-rental depreciation and amortization
|
|
|
14
|
|
|
|
13
|
|
|
|
43
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
207
|
|
|
$
|
181
|
|
|
$
|
485
|
|
|
$
|
448
|
|
Restructuring charge (1)
|
|
|
7
|
|
|
|
1
|
|
|
|
19
|
|
|
|
25
|
|
Stock compensation expense, net (2)
|
|
|
2
|
|
|
|
2
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
216
|
|
|
$
|
184
|
|
|
$
|
510
|
|
|
$
|
479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As discussed below (see Restructuring charge), this relates to branch closure charges and severance costs.
|
(2)
|
Represents non-cash, share-based payments associated with the granting of equity instruments.
|
For the three months ended September 30, 2010, EBITDA increased $26, or 14.4 percent, and adjusted EBITDA increased $32, or 17.4
percent, primarily reflecting increased margins from equipment rentals and sales of rental equipment, and selling, general and administrative expense reductions. For the nine months ended September 30, 2010, EBITDA increased $37, or 8.3
percent, and adjusted EBITDA increased $31, or 6.5 percent, primarily reflecting increased margins from sales of rental equipment, and selling, general and administrative expense reductions, partially offset by reduced margins from equipment
rentals.
23
Results of Operations
As discussed in note 2 to our condensed consolidated financial statements, our reportable segments are general rentals and
trench safety, power and HVAC. In the second quarter of 2010, our reportable segment for specialty operations was renamed trench safety, power and HVAC to better reflect its fleet and service components. The segment was previously referred to as
trench safety, pump and power.
The general rentals segment includes the rental of construction, aerial, industrial and
homeowner equipment and related services and activities. The general rentals segments customers include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. The general rentals
segment operates throughout the United States and Canada. The trench safety, power and HVAC segment includes the rental of equipment for underground construction, temporary power, climate control and disaster recovery, and related services such as
training. The trench safety, power and HVAC segments customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates in the United States and has one location in
Canada.
As discussed in note 2 to our condensed consolidated financial statements, we aggregate our seven geographic
regionsthe Southwest, Gulf, Northwest, Southeast, Midwest, East, and the Northeast Canadaas 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 September 30, 2010, our Midwest regions 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 regions margin was converging with those achieved at the other general rentals regions, and, given managements 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
|
|
Three months ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
466
|
|
|
$
|
41
|
|
|
$
|
507
|
|
Sales of rental equipment
|
|
|
30
|
|
|
|
2
|
|
|
|
32
|
|
Sales of new equipment
|
|
|
17
|
|
|
|
2
|
|
|
|
19
|
|
Contractor supplies sales
|
|
|
22
|
|
|
|
2
|
|
|
|
24
|
|
Service and other revenues
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
558
|
|
|
$
|
47
|
|
|
$
|
605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
440
|
|
|
$
|
38
|
|
|
$
|
478
|
|
Sales of rental equipment
|
|
|
38
|
|
|
|
3
|
|
|
|
41
|
|
Sales of new equipment
|
|
|
19
|
|
|
|
1
|
|
|
|
20
|
|
Contractor supplies sales
|
|
|
29
|
|
|
|
1
|
|
|
|
30
|
|
Service and other revenues
|
|
|
22
|
|
|
|
1
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
548
|
|
|
$
|
44
|
|
|
$
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
1,233
|
|
|
$
|
104
|
|
|
$
|
1,337
|
|
Sales of rental equipment
|
|
|
96
|
|
|
|
8
|
|
|
|
104
|
|
Sales of new equipment
|
|
|
54
|
|
|
|
5
|
|
|
|
59
|
|
Contractor supplies sales
|
|
|
68
|
|
|
|
5
|
|
|
|
73
|
|
Service and other revenues
|
|
|
65
|
|
|
|
2
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
1,516
|
|
|
$
|
124
|
|
|
$
|
1,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment rentals
|
|
$
|
1,281
|
|
|
$
|
99
|
|
|
$
|
1,380
|
|
Sales of rental equipment
|
|
|
184
|
|
|
|
8
|
|
|
|
192
|
|
Sales of new equipment
|
|
|
59
|
|
|
|
4
|
|
|
|
63
|
|
Contractor supplies sales
|
|
|
90
|
|
|
|
5
|
|
|
|
95
|
|
Service and other revenues
|
|
|
68
|
|
|
|
3
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
1,682
|
|
|
$
|
119
|
|
|
$
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Three months ended
September 30, 2010 and 2009
. 2010 equipment rentals of $507 increased $29, or 6.1 percent, reflecting a 7.1 percentage point increase in time utilization, partially offset by a 1.4 percent decrease in rental rates. Dollar utilization, which
reflects the impact of both rental rates and time utilization, and is calculated based on annualized rental revenue divided by the average original equipment cost of our fleet, increased 2.9 percentage points to 51.6 percent. Same-store rental
revenues increased 9.7 percent. Equipment rentals represented 84 percent of total revenues for the three months ended September 30, 2010. On a segment basis, equipment rentals represented 84 percent and 87 percent of total revenues for general
rentals and trench safety, power and HVAC, respectively. General rentals equipment rentals increased $26, or 5.9 percent, reflecting a 9.6 percent increase in same-store rental revenues partially offset by the impact of closed locations. Trench
safety, power and HVAC equipment rentals increased $3, or 7.9 percent, reflecting an 11.2 percent increase in same-store rental revenues.
Nine months ended September 30, 2010 and 2009
. 2010 equipment rentals of $1,337 decreased $43, or 3.1 percent, reflecting a 4.4 percent decrease in average fleet size, on an original equipment
cost basis, and a 3.3 percent decline in rental rates, partially offset by a 4.0 percentage point increase in time utilization. Dollar utilization increased 0.5 percentage points to 45.8 percent. Same-store rental revenues increased 0.6 percent.
Equipment rentals represented 82 percent of total revenues for the nine months ended September 30, 2010. On a segment basis, equipment rentals represented 81 percent and 84 percent of total revenues for general rentals and trench safety, power
and HVAC, respectively. General rentals equipment rentals decreased $48, or 3.7 percent, primarily due to the impact of closed locations. Trench safety, power and HVAC equipment rentals increased $5, or 5.1 percent, reflecting a 5.3 percent increase
in same-store rental revenues.
Sales of rental equipment
. For the three and nine months ended September 30, 2010,
sales of rental equipment represented approximately 6 percent of our total revenues and our general rentals segment accounted for approximately 93 percent of these sales. Sales of rental equipment for trench safety, power and HVAC were
insignificant. For the three and nine months ended September 30, 2010, sales of rental equipment decreased 22.0 and 45.8 percent, respectively, primarily reflecting a decline in the volume of equipment sold and the mix of equipment sold.
New equipment sales.
For the three and nine months ended September 30, 2010, new equipment sales represented
approximately 4 percent of our total revenues and our general rentals segment accounted for approximately 91 percent of these sales. Sales of new equipment for trench safety, power and HVAC were insignificant. For the three and nine months ended
September 30, 2010, sales of new equipment decreased 5.0 and 6.3 percent, respectively, primarily reflecting changes in the volume of equipment sold.
Contractor supplies sales.
Contractor supplies sales represent our revenues associated with selling a variety of supplies including construction consumables, tools, small equipment and safety
supplies. Consistent with sales of rental and new equipment, general rentals accounts for substantially all of our contractor supplies sales. For the three and nine months ended September 30, 2010, contractor supplies sales decreased 20.0 and
23.2 percent, respectively, reflecting a reduction in the volume of supplies sold, partially offset by improved pricing and product mix.
Service and other revenues
. Service and other revenues primarily represent our revenues earned from providing repair and maintenance services (including parts sales). Consistent with sales of
rental and new equipment as well as sales of contractor supplies, general rentals accounts for substantially all of our service and other revenues. Service and other revenues were flat for the three months ended September 30, 2010. For the nine
months ended September 30, 2010, service and other revenues decreased 5.6 percent, primarily reflecting reduced revenues from service labor and parts sales, partially offset by increased software license and related revenues.
Segment Operating Income
Segment operating income and operating margin were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
rentals
|
|
|
Trench safety,
power and
HVAC
|
|
|
Total
|
|
Three months ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
87
|
|
|
$
|
13
|
|
|
$
|
100
|
|
Operating Margin
|
|
|
15.6
|
%
|
|
|
27.7
|
%
|
|
|
16.5
|
%
|
Three months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
59
|
|
|
$
|
9
|
|
|
$
|
68
|
|
Operating Margin
|
|
|
10.8
|
%
|
|
|
20.5
|
%
|
|
|
11.5
|
%
|
Nine months ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
144
|
|
|
$
|
25
|
|
|
$
|
169
|
|
Operating Margin
|
|
|
9.5
|
%
|
|
|
20.2
|
%
|
|
|
10.3
|
%
|
Nine months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
97
|
|
|
$
|
18
|
|
|
$
|
115
|
|
Operating Margin
|
|
|
5.8
|
%
|
|
|
15.1
|
%
|
|
|
6.4
|
%
|
The following is a
reconciliation of segment operating income to total Company operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Total reportable segment operating income
|
|
$
|
100
|
|
|
$
|
68
|
|
|
$
|
169
|
|
|
$
|
115
|
|
Unallocated restructuring charge
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
(19
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
93
|
|
|
$
|
67
|
|
|
$
|
150
|
|
|
$
|
90
|
|
General
rentals
. For the three months ended September 30, 2010, operating income increased $28 and operating margin increased 4.8 percentage points, primarily reflecting increased gross margins from equipment rentals and sales of rental
equipment, and selling, general and administrative expense reductions.
For the nine months ended September 30, 2010,
operating income increased $47 and operating margin increased 3.7 percentage points, primarily reflecting increased gross margins from sales of rental equipment and selling, general and administrative expense reductions, partially offset by reduced
gross margins from equipment rentals. Additionally, operating income for the nine months ended September 30, 2010 included asset impairment charges of $3, as compared to $9 for the nine months ended September 30, 2009.
25
Trench safety,
power and HVAC
. For the three and nine months ended September 30, 2010, operating income increased by $4 and $7, respectively, and operating margin increased by 7.2 and 5.1 percentage points, respectively, reflecting increased gross
margins from equipment rentals and improved selling, general and administrative leverage.
Gross margin
. Gross
margins by revenue classification were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Total gross margin
|
|
|
34.5
|
%
|
|
|
30.4
|
%
|
|
|
29.5
|
%
|
|
|
25.8
|
%
|
Equipment rentals
|
|
|
33.9
|
%
|
|
|
32.0
|
%
|
|
|
28.4
|
%
|
|
|
27.9
|
%
|
Sales of rental equipment
|
|
|
31.3
|
%
|
|
|
7.3
|
%
|
|
|
28.8
|
%
|
|
|
1.6
|
%
|
New equipment sales
|
|
|
21.1
|
%
|
|
|
20.0
|
%
|
|
|
16.9
|
%
|
|
|
15.9
|
%
|
Contractor supplies sales
|
|
|
33.3
|
%
|
|
|
26.7
|
%
|
|
|
30.1
|
%
|
|
|
26.3
|
%
|
Service and other revenues
|
|
|
65.2
|
%
|
|
|
52.2
|
%
|
|
|
61.2
|
%
|
|
|
59.2
|
%
|
For the three months ended
September 30, 2010, total gross margin increased 4.1 percentage points as compared to the same period in 2009, primarily reflecting increased gross margins from equipment rentals, sales of rental equipment and service and other revenues.
Equipment rentals gross margin increased 1.9 percentage points, primarily reflecting a 7.1 percentage point increase in time utilization to a record 71.3 percent, reduced depreciation on a smaller fleet and savings realized from ongoing cost saving
initiatives, partially offset by a 1.4 percent rental rate decline. The 24.0 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. For
the three months ended September 30, 2010 and 2009, on an original equipment cost-weighted basis, retail sales represented 57 and 43 percent of our sales of rental equipment, respectively, while auction sales represented 20 and 23 percent,
respectively. The 13.0 percentage point increase in gross margins from service and other revenues primarily reflects a higher proportion of software license and related revenues, which yield higher margins, in 2010.
For the nine months ended September 30, 2010, total gross margin increased 3.7 percentage points as compared to the same period in
2009, primarily reflecting increased gross margins from equipment rentals and sales of rental equipment. Equipment rentals gross margin increased 0.5 percentage points, primarily reflecting a 4.0 percentage point increase in time utilization, a $27
reduction in depreciation due to a 4.4 percent decrease in average fleet size, on an original equipment cost basis, and the impact of a $7 asset impairment charge related to certain rental equipment recognized during the nine months ended
September 30, 2009, and savings realized from ongoing cost saving initiatives, partially offset by a 3.3 percent rental rate decline. The 27.2 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. For the nine months ended September 30, 2010 and 2009, on an original equipment cost-weighted basis, retail sales represented 63 and 32 percent of our sales of rental equipment,
respectively, while auction sales represented 20 and 42 percent, 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.
Selling, general and administrative expenses (SG&A)
. SG&A expense information for the three and nine
months ended September 30, 2010 and 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Total SG&A expenses
|
|
$
|
95
|
|
|
$
|
99
|
|
|
$
|
271
|
|
|
$
|
308
|
|
SG&A as a percentage of revenue
|
|
|
15.7
|
%
|
|
|
16.7
|
%
|
|
|
16.5
|
%
|
|
|
17.1
|
%
|
SG&A expense includes
sales force compensation, bad debt expense, information technology costs, advertising and marketing expenses, third-party professional fees, management salaries and clerical and administrative overhead. For the three months ended September 30,
2010, SG&A expense of $95 decreased $4 as compared to 2009 and improved by 1.0 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 and professional fees, partially offset by a $6 increase in bad debt expense. The increase in bad debt expense reflects an increase in accounts receivable and a slight deterioration in the aging of our portfolio.
For the nine months ended September 30, 2010, SG&A expense of $271 decreased $37 as compared to 2009 and improved by 0.6
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, travel and entertainment expenses and professional fees.
Restructuring charge.
For the three months ended
September 30, 2010 and 2009, restructuring charges of $7 and $1 relate to the closure of 10 and three branches, respectively. Additionally, the restructuring charges for the three months ended September 30, 2009 include severance costs
associated with reductions in headcount of approximately 200. For the nine months ended September 30, 2010 and 2009, restructuring charges of $19 and $25 relate to the closure of 27 and 51 branches, respectively, and severance costs associated
with reductions in headcount of approximately 600 and 1,500, respectively. We expect that the restructuring activity will be substantially complete by the end of 2011.
Interest expense, net
for the three and nine months ended September 30, 2010 and 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Interest expense, net
|
|
$
|
55
|
|
|
$
|
62
|
|
|
$
|
170
|
|
|
$
|
154
|
|
Interest expense, net
for the three months ended September 30, 2010 decreased by $7, or 11 percent, primarily reflecting lower average outstanding debt.
Interest expense, net for the nine months ended September 30, 2010 increased by $16, or 10 percent. Interest expense, net for the nine months ended September 30, 2010 and 2009 includes a loss of
$3 and a gain of $16, respectively, related to repurchases or redemptions of $459 and $490 principal amounts of our outstanding debt, respectively. Excluding the impact of the gains/losses on the debt repurchases/redemptions, interest expense, net
decreased slightly as the impact of higher interest rates partially offset the impact of lower average outstanding debt.
26
Interest
expense- subordinated convertible debentures, net
for the three and nine months ended September 30, 2010 and 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Interest expense- subordinated convertible debentures, net
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
(6
|
)
|
As discussed in note 6 to
our condensed 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 September 30, 2010 and December 31, 2009, the aggregate amount of subordinated convertible
debentures outstanding was $124. Interest expense-subordinated convertible debentures, net for nine months ended September 30, 2010 increased by $12 due to a $13 gain we recognized during the second quarter of 2009 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 the three and nine months ended September 30, 2010 and 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Other income, net
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
$
|
(3
|
)
|
|
$
|
|
|
As discussed in note
4 to our condensed consolidated financial statements, other income, net for the three months ended September 30, 2010 includes (i) a gain of $5 associated with foreign currency forward contracts and (ii) a loss of $5 associated with
the revaluation of certain Canadian dollar denominated intercompany loans. Other income, net for the nine months ended September 30, 2010 includes (i) a gain of $12 associated with foreign currency forward contracts and (ii) a loss of
$12 associated with the revaluation of certain Canadian dollar denominated intercompany loans.
Income taxes
.
The following table summarizes our provision (benefit) for income taxes and the related effective tax rates for the three and nine months ended September 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Income (loss) before provision (benefit) for income taxes
|
|
$
|
38
|
|
|
$
|
4
|
|
|
$
|
(23
|
)
|
|
$
|
(58
|
)
|
Provision (benefit) for income taxes
|
|
|
15
|
|
|
|
4
|
|
|
|
(18
|
)
|
|
|
(22
|
)
|
Effective tax rate
|
|
|
39.5
|
%
|
|
|
100.0
|
%
|
|
|
78.3
|
%
|
|
|
37.9
|
%
|
The differences between
the 2010 and 2009 effective tax rates and the U.S. federal statutory income tax rate of 35 percent primarily relate to the geographical mix of income between foreign and domestic operations, as well as the impact of state and local taxes.
As discussed in note 1 to our condensed consolidated financial statements, accounting for income taxes generally requires
companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year (the effective tax rate approach). However, in the present circumstance, because we are unable to reliably estimate the effective
tax rate for the full year, we have calculated taxes for the three and nine months ended September 30, 2010 based on actual year-to-date pre-tax income, rather than a full-year forecast.
For the nine months ended September 30, 2010, our net loss and diluted loss per share as reported and calculated using the U.S.
federal statutory income tax rate of 35 percent were as follows:
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
At federal
statutory
income tax
rate of 35
percent
|
|
Net loss
|
|
$
|
(5
|
)
|
|
$
|
(15
|
)
|
Diluted loss per share
|
|
$
|
(0.09
|
)
|
|
$
|
(0.25
|
)
|
The balance of prepaid
expenses and other assets at September 30, 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.
27
Liquidity and Capital Resources
Liquidity.
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.
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 September 30, 2010, we had (i) $683 of borrowing capacity available
under the ABL facility, (ii) $7 of borrowing capacity available under our accounts receivable securitization facility and (iii) cash and cash equivalents of $170. Cash equivalents at September 30, 2010 consist of direct obligations of
A rated financial institutions. We believe that our existing sources of cash will be sufficient to support our existing operations over the next 12 months.
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.
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 equipment and, if required, borrowings available under the ABL facility and accounts receivable securitization facility.
Retirement of Senior Notes.
As discussed above, in the nine months ended September 30, 2010, we repurchased or
redeemed and subsequently retired $459 principal amounts of our outstanding indebtedness.
Subject to
providing notification to the Company on October 15, 2010, the holders of our 1
7
/
8
percent Convertible Senior Subordinated Notes had the right to require us to repurchase all of the
1
7
/
8
percent Convertible Senior Subordinated Notes.
On October 15, 2010, $93 of the 1
7
/
8
percent
Convertible Senior Subordinated Notes outstanding at September 30, 2010 were put to the Company and are scheduled to be repurchased on October 20, 2010 at par.
Loan Covenants and Compliance.
As of September 30, 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. Since the June 9, 2009 suspension date and through September 30, 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. 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.
As of September 30, 2010, primarily due to our 2008 goodwill impairment charge, we no
longer had any restricted payment capacity under the most restrictive restricted payment covenants in the indentures governing our outstanding senior subordinated notes. This depletion limits our ability to move operating cash flows to Holdings,
although certain intercompany arrangements are exempted.
Sources and Uses of Cash.
During the nine months ended
September 30, 2010, we (i) generated cash from operating activities of $343, including $55 related to a federal tax refund and (ii) generated cash from the sale of rental and non-rental equipment of $110. We used cash during this
period principally to (i) purchase rental and non-rental equipment of $307 and (ii) fund payments on debt, net of proceeds, of $144. During the nine months ended September 30, 2009, we (i) generated cash from operating activities
of $353 and (ii) generated cash from the sale of rental and non-rental equipment of $203. We used cash during this period principally to (i) purchase rental and non-rental equipment of $232 and (iii) fund payments, net of proceeds, on
debt of $224.
The balance of accounts payable at September 30, 2010 increased by $39, or 30.5 percent, as compared to
December 31, 2009, primarily due to increased capital expenditures in 2010 and a seasonal increase in business activity.
28
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 that 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 loss or cash flow from operating activities as an indicator of operating performance or
liquidity. The table below provides a reconciliation between net cash provided by operating activities and free cash flow.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
Net cash provided by operating activities
|
|
$
|
343
|
|
|
$
|
353
|
|
Purchases of rental equipment
|
|
|
(287
|
)
|
|
|
(198
|
)
|
Purchases of non-rental equipment
|
|
|
(20
|
)
|
|
|
(34
|
)
|
Proceeds from sales of rental equipment
|
|
|
104
|
|
|
|
192
|
|
Proceeds from sales of non-rental equipment
|
|
|
6
|
|
|
|
11
|
|
Excess tax benefits from share-based payment arrangements, net
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
144
|
|
|
$
|
322
|
|
|
|
|
|
|
|
|
|
|
Free cash flow for the nine months ended September 30, 2010 was $144, a decrease of $178 as compared to
free cash flow of $322 for the nine months ended September 30, 2009. As noted above, net cash provided by operating activities for the nine months ended September 30, 2010 includes a $55 federal tax refund. Excluding the impact of this
refund, the year-over-year decrease in free cash flow primarily reflects reduced proceeds from sales of rental equipment and increased purchases of rental equipment.
Credit Ratings.
Both our ability to obtain financing and the related cost of borrowing are affected by our credit ratings, which are periodically reviewed by the rating agencies. Our current
credit ratings are below investment grade and we expect our access to the public debt markets to be limited to the non-investment grade segment as long as our ratings reflect a below investment grade rating. In addition, our accounts receivable
securitization facility includes a termination event if the long-term senior secured debt rating of URNA falls below either B+ from Standard & Poors (S&Ps) or B2 from Moodys. As of October 18, 2010,
URNAs long-term senior secured debt was rated BB- by S&Ps and Ba2 by Moodys.
Our credit ratings as of
October 18, 2010 were as follows:
|
|
|
|
|
|
|
|
|
Corporate Rating
|
|
Outlook
|
|
Moodys (1)
|
|
B3
|
|
|
Stable
|
|
S&Ps (1)
|
|
B
|
|
|
Stable
|
|
Fitch (1)
|
|
B
|
|
|
Stable
|
|
(1)
|
Prior to the June 2009 issuance of URNAs 10
7
/
8
percent Senior Notes, and in recognition of the deteriorating economic environment, S&Ps and Fitch downgraded the Company to a
corporate rating of B and Fitch placed the Company on negative outlook. In November 2009, prior to the issuance of URNAs 9
1
/
4
percent Senior Notes and URIs 4 percent Convertible Senior Notes, and in recognition of the deteriorating economic environment,
Moodys downgraded the Company to a corporate rating of B3 and placed the Company on stable outlook. In the second quarter of 2010, Fitch and S&Ps raised the Companys outlook from negative to stable.
|
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.
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 $14. 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 September 30, 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.
29
Item 3.
|
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 September 30, 2010, we had an aggregate of $857 of indebtedness that bears interest at variable rates, comprised of $617 of borrowings under the ABL facility and $240 of borrowings under our accounts receivable securitization facility.
The amount of variable rate indebtedness outstanding under the ABL facility and accounts receivable securitization facility may fluctuate significantly. The interest rates applicable to our variable rate debt on September 30, 2010 were
(i) 3.4 percent for the ABL facility and (ii) 1.7 percent for the accounts receivable securitization facility. As of September 30, 2010, based upon the amount of our variable rate debt outstanding, our annual after-tax earnings would
decrease by approximately $4 for each one percentage point increase in the interest rates applicable to our variable rate debt.
At September 30, 2010, we had an aggregate of $2.1 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 September 30, 2010 would increase the fair value of our fixed rate indebtedness by approximately four percent. For additional information
concerning the fair value of our fixed rate debt, see note 5 (see Fair Value of Financial Instruments) to our condensed 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 2009 relative to the Company as a whole, a 10 percent change in this exchange rate would not have a material impact on our earnings. As discussed in note 4
to our condensed consolidated financial statements, during the three and nine months ended September 30, 2010, we recognized foreign currency losses of $5 and $12, respectively, associated with the revaluation of certain Canadian dollar
denominated intercompany loans, however these losses were offset by gains of $5 and $12, respectively, 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 Senior 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 on November 10, 2009. 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 $17.00 or $20.00 per share, on a net basis, we would issue 1.3 million or
3.4 million shares, respectively.
Item 4.
|
Controls and Procedures
|
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys reports under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to management, including the Companys Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.
The Companys management carried out an
evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a15(e) and 15d15(e) of the
Exchange Act, as of September 30, 2010. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures were effective as of September 30,
2010.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2010 that materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1.
|
Legal Proceedings
|
The
information set forth under note 7 to our unaudited condensed consolidated financial statements of this quarterly report on Form 10-Q is incorporated by reference in answer to this item. Such information is limited to certain recent developments and
should be read in conjunction with note 13 to our consolidated financial statements for the year ended December 31, 2009 filed on
Form 10-K on February 3, 2010.
Our results
of operations and financial condition are subject to numerous risks and uncertainties described in our 2009
Form 10-K, which risk factors are incorporated herein by reference. You should carefully consider these risk factors in conjunction with
the other information contained in this report. Should any of these risks materialize, our business, financial condition and future prospects could be negatively impacted.
30
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(c)
The following table provides information about purchases of Holdings common stock by Holdings during the third quarter of 2010:
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number of
Shares
Purchased
|
|
|
Average Price
Paid Per
Share
|
|
July 1, 2010 to July 31, 2010
|
|
|
|
|
|
$
|
|
|
August 1, 2010 to August 31, 2010
|
|
|
|
|
|
$
|
|
|
September 1, 2010 to September 30, 2010
|
|
|
1,385
|
|
|
$
|
13.86
|
|
|
|
|
|
|
|
|
|
|
Total (1)
|
|
|
1,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
31
|
|
|
3(a)
|
|
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)
|
|
|
3(b)
|
|
By-laws of United Rentals, Inc., amended as of January 16, 2009 (incorporated by reference to Exhibit 3.1 of the United Rentals, Inc. Report on Form 8-K filed on
January 20, 2009)
|
|
|
10(a)*
|
|
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
|
|
|
12.1*
|
|
Computation of Ratio of Earnings to Fixed Charges
|
|
|
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
|
**
|
Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.
|
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
UNITED RENTALS, INC.
|
|
|
|
Dated: October 18, 2010
|
|
By:
|
|
/
S
/ J
OHN
J.
F
AHEY
|
|
|
|
|
John J. Fahey
|
|
|
|
|
Vice President, Controller
and Principal Accounting Officer
|
|
|
|
|
UNITED RENTALS (NORTH AMERICA), INC.
|
|
|
|
Dated: October 18, 2010
|
|
By:
|
|
/
S
/ J
OHN
J.
F
AHEY
|
|
|
|
|
John J. Fahey
|
|
|
|
|
Vice President, Controller
and Principal Accounting Officer
|
33
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