10-K 1 d10k.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-14387 United Rentals, Inc. Commission File Number 1-13663 United Rentals (North America), Inc. (Exact Names of Registrants as Specified in Their Charters) Delaware 06-1522496 Delaware 06-1493538 State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization Identification Nos.) Five Greenwich Office Park, Greenwich, Connecticut 06830 (Address of Principal Executive Offices) (Zip code) Registrants' telephone number, including area code: (203) 622-3131 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $.01 par value, of United Rentals, Inc. New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 12, 2001, there were 69,799,819 shares of United Rentals, Inc. common stock outstanding. The aggregate market value of such common stock held by non-affiliates of the registrant at March 12, 2001 was approximately $800.0 million. Such aggregate market value was calculated by using the closing price of such common stock as of such date on the New York Stock Exchange of $18.67. There is no market for the common stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc. Documents incorporated by reference: Certain sections of the Proxy Statement of United Rentals, Inc. to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 within 120 days of the registrant's fiscal year are incorporated by reference into Part III of this Form 10-K. This combined Form 10-K is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a wholly owned subsidiary of United Rentals, Inc.). United Rentals (North America), Inc. meets the conditions set forth in general instruction (I)(1) (a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format permitted by such instruction. FORM 10-K REPORT INDEX

10-K Part and Item No. Page No. ------------ -------- PART I Item 1 Business.................................................................. 1 Item 2 Properties................................................................ 7 Item 3 Legal Proceedings......................................................... 8 Item 4 Submission of Matters to a Vote of Security Holders....................... 8 PART II Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters. 8 Item 6 Selected Financial Data................................................... 10 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................ 11 Item 7A Quantitative and Qualitative Disclosures About Market Risk................ 25 Item 8 Financial Statements and Supplementary Data............................... 27 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................................................ 75 PART III Item 10 Directors and Executive Officers of the Registrant........................ 75 Item 11 Executive and Director Compensation....................................... 75 Item 12 Security Ownership of Certain Beneficial Owners and Management............ 75 Item 13 Certain Relationships and Related Transactions............................ 75 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 75

Certain statements contained in this Report are forward-looking in nature. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "on-track" or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. You are cautioned that our business and operations are subject to a variety of risks and uncertainties and, consequently, our actual results may materially differ from those projected by any forward-looking statements. Certain of such risks and uncertainties are discussed below under Item 7--"Management's Discussion and Analysis of Financial Condition and Result of Operations--Factors that May Influence Future Results and Accuracy of Forward-Looking Statements." We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. PART I Unless otherwise indicated, the information under Items 1 and 2 is as of March 1, 2001. Item 1. Business General United Rentals is the largest equipment rental company in North America with 755 locations in 47 states, seven Canadian provinces and Mexico. We offer for rent over 600 different types of equipment to more than 1.2 million customers, including construction and industrial companies, manufacturers, utilities, municipalities, homeowners and others. During 2000, we completed more than 8.4 million rental transactions. We have the largest fleet of rental equipment in the world, with over 500,000 units having an original purchase price of approximately $3.4 billion. Our fleet includes: . light to heavy construction and industrial equipment, such as aerial lifts, backhoes, skid-steer loaders, forklifts, earth moving equipment, material handling equipment, compressors, pumps and generators; . traffic control equipment, such as barricades, cones, warning lights, message boards and pavement marking systems; . trench safety equipment for below ground work, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers, and line testing equipment; . special event equipment used for sporting, corporate and other large events, such as light towers, air conditioning units, portable power units, electrical cable, temporary kitchens and tents; and . general tools and equipment, such as power washers, water pumps, heaters and hand tools. In addition to renting equipment, we sell used rental equipment, act as a dealer for new equipment, and sell related merchandise, parts and service. Competitive Advantages We believe that we benefit from the following competitive advantages: Large and Diverse Rental Fleet. We have the largest and most comprehensive equipment rental fleet in the industry, which helps us to: . attract customers by providing "one-stop" shopping; 1 . serve a diverse customer base and reduce our dependence on any particular customer or group of customers; and . serve customers that require assurance that substantial quantities of different types of equipment will be available on a continuing basis. Operating Efficiencies. We generally group our branches into clusters of 10 to 30 locations that are in the same geographic area. Our information technology systems allow each branch to access all available equipment within a cluster. We believe that our cluster strategy produces significant operating efficiencies by enabling us to: (1) market equipment within a cluster through multiple branches, (2) cross-market equipment specialties of different branches within each cluster, and (3) reduce costs by centralizing common functions such as payroll, accounts payable and credit and collection into 26 credit offices and three service centers. In 2000, approximately 10.7% of our rental revenue was attributable to equipment sharing among branches. Geographic Diversity. We have branches in 47 states, seven Canadian provinces and Mexico. We believe that our geographic diversity reduces the impact that fluctuations in regional economic conditions have on our overall financial performance. Our geographic diversity and large network of branch locations also give us the ability to better serve National Account customers, better serve customers that operate at multiple locations, and access used equipment re-sale markets across the country. Customer Diversity. Our customer base is highly diversified and ranges from Fortune 500 companies to small companies and homeowners. We estimate that our top ten customers accounted for approximately 2% of our revenues during 2000. Strong and Motivated Branch Management. Each of our branches has a full-time branch manager who is supervised by one of our 66 district managers and nine regional vice presidents. We believe that our managers are among the most knowledgeable and experienced in the industry, and we empower them--within budgetary guidelines--to make day-to-day decisions concerning staffing, pricing, equipment purchasing and other branch matters. Management closely tracks branch, district and region performance with extensive systems and controls, including performance benchmarks and detailed monthly operating reviews. We promote equipment sharing among branches through our incentive compensation program, which links the compensation of branch personnel to their branch's financial performance and return on assets. Significant Purchasing Power. We purchase large amounts of equipment and other items, which enables us to negotiate favorable terms with our vendors. Our purchasing power is further increased by our ongoing efforts to narrow our vendor base. For example, we reduced the number of our primary equipment suppliers from 111 to 28 in 2000. This allowed us to lower our equipment purchase costs by approximately $150 million in 2000 and should enable us to save additional amounts in 2001. We expect to realize additional savings by similarly consolidating our merchandise suppliers and negotiating more favorable warranty terms with key vendors. National Account Program. Our National Account sales force is dedicated to establishing and expanding relationships with larger companies, particularly those with a national or multi-regional presence. We offer our National Account customers the benefits of a consistent level of service across North America and a single point of contact for all their equipment needs. Our National Account team currently includes 39 professionals. We currently have over 1,300 National Account customers, including more than 700 new accounts added in 2000. Our revenues from National Account customers increased to approximately $244.8 million in 2000 from $89.1 million in the prior year. 2 Information Technology Systems. Our information technology systems facilitate rapid and informed decision making and permit us to respond quickly to changing market conditions. Our systems provide management with a wide range of operating and financial data, enable our branches to manage a wealth of information, such as customer requirements, equipment availability, and maintenance histories, and give our customers online access to their accounts. Our systems also enable branch personnel to search for needed equipment throughout a geographic region, determine its closest location and arrange for delivery to a customer's work site. We have an in-house team of approximately 100 information technology specialists that supports our systems and extends them to new locations. We also have a subsidiary that is the leading provider of proprietary software to the equipment rental industry for use in managing and operating multiple branch locations. Our software includes the Rentalman(TM) system developed by this subsidiary. Risk Management and Safety Programs. We place great emphasis on risk reduction and safety and believe that we have one of the most comprehensive risk management and safety programs in the industry. Our risk management department is staffed by 43 experienced professionals and is responsible for implementing our safety programs and procedures, developing our employee and customer training programs, and managing any claims against us. Our insurance and claims costs were approximately 48% below the national average for comparable industries in 2000, resulting in significant cost savings. Industry Background Industry Size and Growth. The U.S. equipment rental industry has grown from about $6 billion in annual rental revenues in 1990 to over $25 billion in 2000, representing a compound annual growth rate of approximately 14.5%. This information is based on data reported by Manfredi & Associates, Inc. In addition to reflecting general economic growth, we believe that the growth in the equipment rental industry is being driven by the following trends: Recognition of Advantages of Renting. Equipment users are increasingly recognizing the many advantages that equipment rental may offer compared with ownership. They recognize that by renting they can: . avoid the large capital investment required for equipment purchases; . access a broad selection of equipment and select the equipment best suited for each particular job; . reduce storage and maintenance costs; and . access the latest technology without investing in new equipment. Outsourcing. Although growth in the equipment rental industry has to date been largely driven by an increase in rentals by the construction industry, we believe that the cost and other advantages of renting, together with the general trend toward the corporate outsourcing of non-core competencies, are increasingly leading industrial companies, municipalities, government agencies, utilities and others to rent equipment. Corporate Background We began operations in October 1997 and have grown through a combination of internal growth, acquisitions and the opening of new rental locations. In September 1998, we merged with U.S. Rentals, Inc. At the time of the merger, U.S. Rentals was the second largest equipment rental company in the United States based on 1997 rental revenues. 3 Products and Services We offer for rent a wide variety of equipment to customers that include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and others. We also sell used equipment, act as a dealer for many types of new equipment, and sell related merchandise, parts and service. In addition, we have a subsidiary that develops and markets software for use by equipment rental companies in managing and operating multiple branch locations. For financial information concerning our foreign and domestic operations, see Note 14 of the Notes to Consolidated Financial Statements included elsewhere in this report. Equipment Rental We offer for rent over 600 different types of equipment on a daily, weekly or monthly basis. The types of equipment that we offer include light to heavy construction and industrial equipment; traffic control equipment; trench safety equipment; equipment for sporting, corporate and other special events; and general tools and equipment. We believe that our equipment rental fleet is the largest in the world and one of the newest and best maintained. As of March 1, 2001, our fleet included over 500,000 units and had an original purchase price of approximately $3.4 billion and a weighted average age of approximately 26 months. We estimate that each of the following categories accounted for 10% or more of our equipment rental revenues in 2000: (i) aerial lift equipment (approximately 24%), (ii) earth moving equipment (approximately 13%) and (iii) forklifts (approximately 10%). We vary our equipment mix from branch to branch in response to local market conditions and customer requirements. Most of our branches offer a general mix of equipment, while some specialize in specific equipment categories such as aerial work platforms and traffic control equipment. Used Equipment Sales In order to maintain a modern fleet and optimize our equipment mix, we routinely sell used rental equipment and invest in new equipment. We have generally been able to achieve favorable prices due to our comprehensive maintenance program and our national sales force that can access many resale markets across North America. We principally sell used equipment through our sales force and our web site (www.unitedrentals.com) which includes an online database of used equipment available for sale. We also sell our used equipment to used equipment dealers and through public auctions. In addition, we sometimes trade in used equipment to our vendors when we buy new equipment. New Equipment Sales We are a dealer for many leading equipment manufacturers. These include Genie Industries, Inc., JLG Industries, Inc., and SkyJack, Inc. (aerial lifts); Multiquip, Inc. (compaction equipment, generators, pumps and concrete equipment); Bomag and Wacker (compaction equipment); Sullair Corporation (compressors); Omniquip International (forklifts, skid-steer loaders and mini-excavators); Terex Corporation (off-road dump trucks and telehandlers); and Honda USA (pumps and generators). Typically, dealership agreements do not have a specific term and may be terminated at any time. The type of new equipment that we sell varies by location. 4 Related Merchandise, Parts and Other Services At most of our locations, we sell equipment parts and a variety of supplies and merchandise that may be used with our rental equipment, such as saw blades, fasteners, drill bits, hard hats, gloves and other safety equipment. At some of our branches, we also offer repair and maintenance services for equipment that is owned by our customers. Our Rentalman(TM) Software We have a subsidiary that develops and markets software for use by equipment rental companies in managing and operating multiple branch locations. Seven of the ten largest equipment rental companies, including United Rentals, use the Rentalman(TM) software package developed by our subsidiary. Customers Our customer base is highly diversified and ranges from Fortune 500 companies to small businesses and homeowners. We estimate that no single customer accounted for more than 0.5% of our revenues during 2000 and that our top 10 customers accounted for approximately 2% of our revenues in 2000. Our customer base varies by branch and is determined by several factors, including the equipment mix and marketing focus of the particular branch and the business composition of the local economy. Our customers include: . construction companies that use equipment for building and renovating commercial buildings, warehouses, industrial and manufacturing plants, office parks, airports, residential developments and other facilities; . industrial companies--such as manufacturers, chemical companies, paper mills, railroads, ship builders, and utilities--that use equipment for plant maintenance, upgrades, expansion and construction; . municipalities that require equipment for a variety of purposes such as traffic control and highway construction and maintenance; . sponsors of sporting, corporate, entertainment and other large special events--including events such as the Super Bowl, the U. S. Open Golf Championship, the NASCAR Brickyard 400, the PGA Championship, the Ryder Cup, concerts and charity events; and . homeowners and other individuals that use equipment for projects that range from simple repairs to major renovations. Sales and Marketing We market our products and services through multiple channels as described below. Sales Force. As of March 1, 2001, we had a total of 2,495 salespeople, including 1,314 store-based customer service representatives and 1,181 field-based salespeople. Our sales force calls on existing and potential customers and assists our customers in planning for their equipment needs. National Account Program. Our National Account sales force is dedicated to establishing and expanding relationships with large customers, particularly those with a national or multi-regional presence. The National Account team closely coordinates its efforts with the local sales force in each area. Our National Account team currently includes 39 sales professionals. 5 E-Rental Store(TM). Our customers can rent or buy equipment online 24 hours a day seven days a week at our E-Rental Store(TM), which is part of our web site. Our customers can also use our URdata(TM) application to access up-to-the-minute reports on their business activity with us. Advertising. We promote our business through local and national advertising in various media, including trade publications, yellow pages, the Internet, and direct mail. We also regularly participate in industry trade shows and conferences and sponsor a variety of local promotional events. Suppliers We have been making ongoing efforts to narrow our vendor base in order to further increase our purchasing power. We estimate that our largest supplier accounted for approximately 24% of our equipment purchases in 2000, and that our top 10 largest suppliers accounted for approximately 73% of our equipment purchases during that period. Information Technology Systems We have advanced information technology systems which facilitate rapid and informed decision making and enable us to respond quickly to changing market conditions. Each branch is equipped with one or more workstations that are electronically linked to our other locations and to our AS/400 system located at our data center. All rental transactions are entered at these workstations and processed on a real-time basis. Personnel at each location are able to access the system 24 hours a day in order to determine equipment availability, monitor business activity on a real-time basis, and obtain a wide range of operating and financial data. Our information technology systems and our web site are supported by our in-house group of approximately 100 information technology specialists. This group trains our personnel at the branch location; upgrades and customizes our systems; provides hardware and technology support; operates a support desk to assist branch personnel in the day-to-day use of the systems; extends the systems to newly acquired locations; and manages our web site. Competition The equipment rental industry is highly fragmented and competitive. Our competitors primarily include small, independent businesses with one or two rental locations; regional competitors which operate in one or more states; public companies or divisions of public companies; and equipment vendors and dealers who both sell and rent equipment directly to customers. We believe that, in general, large companies enjoy significant competitive advantages compared to smaller operators, including greater purchasing power, a lower cost of capital, the ability to provide customers with a broader range of equipment and services and with newer and better maintained equipment, and greater flexibility to transfer equipment among locations in response to customer demand. For additional information, see "Competitive Advantages". Environmental and Safety Regulations There are numerous federal, state and local laws and regulations governing environmental protection and occupational health and safety. Under these laws, an owner or lessee of real estate may be liable on a no-fault basis for, among other things, (1) the costs of removal or remediation of hazardous or toxic substances located on, in, or emanating from, the real estate, as well as related costs of investigation and property damage and substantial penalties, and (2) environmental contamination at facilities where its waste is or has been disposed. Activities that are or may be affected by these laws include our use of hazardous materials to clean and maintain equipment and 6 our disposal of solid and hazardous waste and wastewater from equipment washing. We also dispense petroleum products from underground and above-ground storage tanks located at certain locations, and at times we must remove or upgrade tanks to comply with applicable laws. We have acquired or lease certain locations which have or may have been contaminated by leakage from underground tanks or other sources, and we are in the process of assessing the nature of the required remediation. Based on the conditions currently known to us, we believe that any unreserved environmental remediation and compliance costs required with respect to those conditions will not have a material adverse effect on our business. However, we cannot be certain that we will not identify adverse environmental conditions that are not currently known to us, that all potential releases from underground storage tanks removed in the past have been identified, or that environmental and safety requirements will not become more stringent or be interpreted and applied more stringently in the future. If we are required to incur environmental compliance or remediation costs that are not currently anticipated by us, our business could be adversely affected depending on the magnitude of the cost. Employees As of March 1, 2001, we had 14,795 employees. Of these employees, 4,163 are salaried personnel and 10,632 are hourly personnel. Collective bargaining agreements relating to 65 separate locations cover approximately 827 of our employees. Item 2. Properties We currently operate 755 branch locations. Of these locations, 676 are in the United States, 78 are in Canada and one is in Mexico. The number of locations in each state or province is shown below. United States

.Alabama (12) .Louisiana (8) .Oklahoma (7) .Alaska (4) .Maine (2) .Oregon (26) .Arizona (22) .Maryland (19) .Pennsylvania (18) .Arkansas (3) .Massachusetts (11) .Rhode Island (2) .California (102) .Michigan (6) .South Carolina (11) .Colorado (17) .Minnesota (15) .South Dakota (9) .Connecticut (11) .Mississippi (1) .Tennessee (9) .Delaware (5) .Missouri (11) .Texas (58) .Florida (38) .Montana (1) .Utah (11) .Georgia (20) .Nebraska (8) .Virginia (12) .Idaho (2) .Nevada (16) .Washington (33) .Illinois (17) .New Hampshire (2) .Wisconsin (9) .Indiana (12) .New Jersey (9) .Wyoming (2) .Iowa (12) .New Mexico (5) .Kansas (5) .New York (19) .Kentucky (7) .North Carolina (24) .North Dakota (10) .Ohio (13)

Canada Mexico .Alberta (2) .Nuevo Leon (1) .British Columbia (16) .Manitoba (2) .Newfoundland (9) .Ontario (35) .Quebec (12) .Saskatchewan (2)

7 Our branch locations generally include facilities for displaying equipment and, depending on the location, may include separate equipment service areas and storage areas. We own 98 of our rental locations and lease the other locations. Our leases provide for varying terms and include 24 leases that are on a month-to-month basis and 42 leases that provide for a remaining term of less than one year and do not provide a renewal option. We are currently negotiating renewals for most of the leases that provide for a remaining term of less than one year. We maintain a fleet of approximately 13,440 vehicles that is used for delivery, maintenance and sales functions. We own a portion of this fleet and lease a portion. Our corporate headquarters are located in Greenwich, Connecticut, where we occupy approximately 28,000 square feet under (1) a lease for approximately 12,000 square feet that extends until 2003 and (2) a lease for approximately 16,000 square feet that extends until 2004 (subject to extension rights). Item 3. Legal Proceedings The Company is party to various litigation matters, in most cases involving ordinary and routine claims incidental to our business. The Company cannot estimate with certainty its ultimate legal and financial liability with respect to such pending litigation matters. However, the Company believes, based on its examination of such matters, that the Company's ultimate liability will not have a material adverse effect on its financial position, results of operations or cash flows. Item 4. Submission of Matters to a Vote of Security Holders During the fourth quarter of 2000, no matter was submitted to a vote of the security holders of the Company. PART II Item 5. Market For Registrant's Common Equity and Related Stockholder Matters Price Range of Common Stock The Company's Common Stock trades on the New York Stock Exchange under the symbol "URI." The following table sets forth, for the periods indicated, the high and low sales prices for the Common Stock, as reported by the New York Stock Exchange.

High Low ------ ------ 1999: First Quarter.. $35.69 $26.13 Second Quarter. 33.25 25.13 Third Quarter.. 31.00 21.75 Fourth Quarter. 21.94 14.31 2000: First Quarter.. $21.25 $13.75 Second Quarter. 19.69 13.25 Third Quarter.. 24.13 17.38 Fourth Quarter. 24.31 12.00

As of March 12, 2001, there were approximately 246 holders of record of the Common Stock. The Company believes that the number of beneficial owners is substantially greater than the number of record holders, because a large portion of the Common Stock is held of record in broker "street names." 8 Dividend Policy The Company intends to retain all earnings for the foreseeable future for use in the operation and expansion of its business and, accordingly, the Company currently has no plans to pay dividends on its Common Stock. The payment of any future dividends will be determined by the Board of Directors in light of conditions then existing, including the Company's earnings, financial condition and capital requirements, restrictions in financing agreements, business conditions and other factors. Under the terms of certain agreements governing the Company's outstanding indebtedness, the Company is prohibited or restricted from paying dividends on its Common Stock. In addition, under Delaware law, the Company is prohibited from paying any dividends unless it has capital surplus or net profits available for this purpose. See Item 7--"Management's Discussion and Analysis of Financial Condition and Results of Operations--Certain Information Concerning the Credit Facility and Other Indebtedness." Sales of Unregistered Securities During the Fourth Quarter of 2000 Set forth below is a listing of all sales by the Company of unregistered equity securities during the fourth quarter of 2000. Unless otherwise indicated, (i) such sales were exempt from registration under the Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the Act, as they were transactions not involving a public offering and (ii) the sales were made by the Company without the assistance of any underwriters. 1. In November 2000, the Company issued 2,459 shares of Common Stock to an executive officer pursuant to an employment agreement. 2. In December 2000, the Company issued 761,905 shares of Common Stock as partial consideration for an acquisition. 9 Item 6. Selected Financial Data The data presented below with respect to the Company should be read in conjunction with the Consolidated Financial Statements and related Notes thereto of the Company included elsewhere in this Report and Item 7--"Management's Discussion and Analysis of Financial Condition and Results of Operations." During the periods presented below, the Company completed certain acquisitions that were accounted for as poolings-of-interests (including a merger in September 1998 with U.S. Rentals) and others that were accounted for as purchases. The selected financial data presented below has been restated for all periods presented to include the accounts of the businesses acquired in transactions accounted for as poolings-of-interests (excluding one such transaction which was not material) as if the Company and these businesses acquired were combined for all periods presented. The accounts of businesses acquired in transactions accounted for as purchases are included from their respective acquisition dates. In view of the fact that the Company's operating results for the periods presented below were impacted by acquisitions that were accounted for as purchases, the Company believes that its results of operations for the years presented are not directly comparable. See Note 3 of the Notes to the Consolidated Financial Statements of the Company included elsewhere in this Report.

Year Ended December 31, ------------------------------------------------------ 1996 1997 1998 1999 2000 -------- -------- ---------- ---------- ---------- (dollars in thousands, except per share data) Income statement data: Total revenues........................................................... $354,478 $489,838 $1,220,282 $2,233,628 $2,918,861 Total cost of revenues................................................... 241,445 340,546 796,834 1,408,710 1,830,291 -------- -------- ---------- ---------- ---------- Gross profit............................................................. 113,033 149,292 423,448 824,918 1,088,570 Selling, general and administrative expenses............................. 54,721 70,835 195,620 352,595 454,330 Merger-related expenses.................................................. 47,178 Non-rental depreciation and amortization................................. 9,387 13,424 35,248 62,867 86,301 Termination cost of deferred compensation agreements..................... 20,290 -------- -------- ---------- ---------- ---------- Operating income......................................................... 48,925 44,743 145,402 409,456 547,939 Interest expense......................................................... 11,278 11,847 64,157 139,828 228,779 Preferred dividends of a subsidiary trust................................ 7,854 19,500 19,500 Other (income) expense, net.............................................. (499) (2,021) (4,906) 8,321 (1,836) -------- -------- ---------- ---------- ---------- Income before provision for income taxes and extraordinary items......... 38,146 34,917 78,297 241,807 301,496 Provision for income taxes............................................... 420 29,508 43,499 99,141 125,121 -------- -------- ---------- ---------- ---------- Income before extraordinary items........................................ 37,726 5,409 34,798 142,666 176,375 Extraordinary items, net (1)............................................. 1,511 21,337 -------- -------- ---------- ---------- ---------- Net income............................................................... $ 37,726 $ 3,898 $ 13,461 $ 142,666 $ 176,375 ======== ======== ========== ========== ========== Pro forma provision for income taxes before extraordinary items (2)...... $ 15,487 $ 14,176 $ 44,386 Pro forma income before extraordinary items (2).......................... 22,659 20,741 33,911 Basic earnings before extraordinary items per share...................... $ 1.67 $ 0.12 $ 0.53 $ 2.00 $ 2.48 Diluted earnings before extraordinary items per share.................... $ 1.67 $ 0.11 $ 0.48 $ 1.53 $ 1.89 Basic earnings per share (3)............................................. $ 1.67 $ 0.08 $ 0.20 $ 2.00 $ 2.48 Diluted earnings per share (3)........................................... $ 1.67 $ 0.08 $ 0.18 $ 1.53 $ 1.89 Other financial data: EBITDA (4)............................................................... $123,606 $160,554 $ 403,738 $ 761,230 $ 962,371 Depreciation and amortization............................................ 74,681 95,521 211,158 343,508 414,432 Dividends on common stock................................................ December 31, ------------------------------------------------------ 1996 1997 1998 1999 2000 -------- -------- ---------- ---------- ---------- (dollars in thousands) Balance sheet data: Cash and cash equivalents................................................ $ 2,906 $ 72,411 $ 20,410 $ 23,811 $ 34,384 Rental equipment, net.................................................... 235,055 461,026 1,143,006 1,659,733 1,732,835 Total assets............................................................. 381,228 826,010 2,634,663 4,497,738 5,123,933 Total debt............................................................... 214,337 264,573 1,314,574 2,266,148 2,675,367 Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust................................................... 300,000 300,000 300,000 Stockholders' equity..................................................... 105,420 446,388 726,230 1,397,486 1,545,943

10 -------- (1) The Company recorded an extraordinary item (net of income taxes) of $1.5 million in 1997 and an extraordinary item (net of income taxes) of $21.3 million in 1998. Such charge in 1997 resulted from the prepayment of certain debt by U.S. Rentals. Such charge in 1998 resulted from the early extinguishment of certain debt and primarily reflected prepayment penalties on certain debt of U.S. Rentals. (2) U.S. Rentals was taxed as a Subchapter S Corporation until its initial public offering in February 1997, and another company acquired in a pooling-of-interests transaction was taxed as a Subchapter S Corporation until being acquired by the Company in 1998. In general, the income or loss of a Subchapter S Corporation is passed through to its owners rather than being subjected to taxes at the entity level. Pro forma provision for income taxes before extraordinary items and pro forma income before extraordinary items reflect a provision for income taxes as if all such companies were liable for federal and state income taxes as taxable corporate entities for all periods presented. (3) The Company's earnings during 1997 were impacted by $20.3 million of expenses relating to the termination of certain deferred compensation expenses in connection with U.S. Rentals' initial public offering, a $7.5 million charge to recognize deferred tax liabilities of U.S. Rentals and an extraordinary item (net of income taxes) of $1.5 million. The Company's earnings during 1998 were impacted by merger-related expenses of $47.2 million ($33.2 million net of taxes), a $4.8 million charge to recognize deferred tax liabilities of a company acquired in a pooling-of-interests transaction and an extraordinary item (net of income taxes) of $21.3 million. The Company's earnings during 1999 were impacted by $18.2 million ($10.8 million net of taxes) of expenses incurred related to a terminated tender offer. Excluding such amounts, (i) basic earnings per share for the years ended 1997, 1998 and 1999 would have been $0.70, $1.10 and $2.15, respectively, and (ii) diluted earnings per share for the years ended 1997, 1998 and 1999 would have been $0.66, $1.00 and $1.65, respectively. (4) EBITDA is defined as net income (excluding (i) non-operating income and expense, (ii) a $20.3 million non-recurring charge incurred by U.S. Rentals in 1997 arising from the termination of deferred compensation agreements with certain executives, (iii) $47.2 million in merger-related expenses in 1998 related to the three acquisitions accounted for as poolings-of-interests, including the merger with U.S. Rentals, and (iv) $8.3 million of expenses that are included in selling, general and administrative expenses for 1999 and which related to a terminated tender offer), plus interest expense, income taxes and depreciation and amortization. EBITDA data is presented to provide additional information concerning the Company's ability to meet its future debt service obligations and capital expenditure and working capital requirements. However, EBITDA is not a measure of financial performance under generally accepted accounting principles. Accordingly, EBITDA should not be considered an alternative to net income or cash flows as indicators of the Company's operating performance or liquidity. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto included elsewhere in this Report. Certain of the statements contained in such discussion are forward looking in nature. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "on-track" or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. You are cautioned that our business and operations are subject to a variety of risks and uncertainties and, consequently, our actual results may materially differ from those projected by any forward-looking statements. Certain of these factors are discussed below under "--Factors that May Influence Future Results and Accuracy of Forward-Looking Statements." We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. 11 Introduction The Company commenced equipment rental operations in October 1997 and has completed 245 acquisitions (through March 1, 2001), including the merger with U.S. Rentals (the "U.S. Rentals Merger") which was completed in September 1998. Three of the acquisitions completed by the Company (including the U.S. Rentals Merger) were accounted for as "poolings-of-interests," and the Company's financial statements have been restated to include the accounts of two of the companies acquired in such transactions (but were not restated for one that was not material, which has been combined with the Company effective July 1, 1998). See Note 3 to the Notes to the Consolidated Financial Statements of the Company included elsewhere in this Report. The other 242 acquisitions completed by the Company were accounted for as "purchases". The results of operations of the businesses acquired in these acquisitions are included in the Company's financial statements only from their respective dates of acquisition. In view of the fact that the Company's operating results for 2000, 1999 and 1998 were impacted by acquisitions that were accounted for as purchases, the Company believes that the results of its operations for such periods are not directly comparable. United Rentals, Inc. ("Holdings") is principally a holding company and primarily conducts its operations through its wholly owned subsidiary, United Rentals (North America), Inc. ("URI"), and subsidiaries of URI. General The Company primarily derives revenues from the following sources: (i) equipment rental (including additional fees that may be charged for equipment delivery, fuel, repair of rental equipment, and damage waivers), (ii) the sale of rental equipment, (iii) the sale of equipment, and (iv) the sale of related merchandise and parts and other revenue. Cost of operations consists primarily of depreciation costs associated with rental equipment, the cost of repairing and maintaining rental equipment, the cost of rental equipment and equipment and other merchandise sold, personnel costs, occupancy costs and supplies. The Company records rental equipment expenditures at cost and depreciates equipment using the straight-line method over the estimated useful life (which ranges from 2 to 10 years), after giving effect to an estimated salvage value of 0% to 10% of cost. Selling, general and administrative expenses primarily include sales commissions, advertising and marketing expenses, management salaries, and clerical and administrative overhead. Non-rental depreciation and amortization includes (i) depreciation expense associated with equipment that is not offered for rent (such as vehicles, computers and office equipment) and amortization expense associated with leasehold improvements, (ii) the amortization of deferred financing costs and (iii) the amortization of intangible assets. The Company's intangible assets include non-compete agreements and goodwill, which represents the excess of the purchase price of acquired companies over the estimated fair market value of the net assets acquired. 12 Results of Operations Years Ended December 31, 2000 and 1999 Revenues. Total revenues for 2000 were $2,918.9 million, representing an increase of 30.7% over total revenues of $2,233.6 million in 1999. The Company's revenues in 2000 and 1999 were attributable to: (i) equipment rental ($2,056.7 million, or 70.5% of revenues, in 2000 compared to $1,581.0 million, or 70.8% of revenues, in 1999), (ii) sales of rental equipment ($347.7 million, or 11.9% of revenues, in 2000 compared to $235.7 million, or 10.6% of revenues, in 1999) and (iii) sales of equipment and merchandise and other revenues ($514.5 million, or 17.6% of revenues, in 2000 compared to $416.9 million, or 18.7% of revenues, in 1999). The 30.7% increase in total revenues in 2000 reflected (i) increased revenues at locations open more than one year (which accounted for approximately 12.9 percentage points) and (ii) the net effect of new rental locations acquired through acquisitions and the opening of start-up locations partially offset by locations sold or closed (which accounted for approximately 17.8 percentage points). The increase in revenues at locations open more than one year primarily reflected (a) an increase in the volume of rental transactions, (b) an increase in the sale of related merchandise and parts which was driven by the increase in equipment rental and sales transactions and (c) an increase in the sale of used equipment. Gross Profit. Gross profit increased to $1,088.6 million in 2000 from $824.9 million in 1999. This increase in gross profit was primarily attributable to the increase in revenues described above. The Company's gross profit margin by source of revenue in 2000 and 1999 was: (i) equipment rental (39.9% in 2000 and 39.4% in 1999), (ii) sales of rental equipment (40.1% in 2000 and 42.0% in 1999) and (iii) sales of equipment and merchandise and other revenues (24.9% in 2000 and 24.6% in 1999). The increase in the gross profit margin from rental revenues in 2000 was primarily attributable to greater equipment utilization rates and to economies of scale. The decrease in the gross profit margin from the sales of rental equipment in 2000 reflected the sale of more late-model used equipment which generally generates lower gross profit margins than older equipment. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") were $454.3 million, or 15.6% of total revenues, during 2000 and $352.6 million, or 15.8% of total revenues, during 1999. SG&A in 1999 included an $8.3 million charge primarily due to professional fees incurred in connection with a terminated tender offer. Excluding this charge, SG&A as a percentage of revenues was 15.4% in 1999. Non-rental Depreciation and Amortization. Non-rental depreciation and amortization was $86.3 million, or 3.0% of total revenues, in 2000 and $62.9 million, or 2.8% of total revenues, in 1999. Interest Expense. Interest expense increased to $228.8 million in 2000 from $139.8 million in 1999. This increase primarily reflected (i) an increase in the Company's indebtedness, principally to fund acquisitions, and (ii) an increase in the interest rates applicable to the Company's variable rate debt. Preferred Dividends of a Subsidiary Trust. During 2000 and 1999, preferred dividends of a subsidiary trust of Holdings were $19.5 million. Other (Income) Expense. Other income was $1.8 million in 2000 compared to $8.3 million of other expense in 1999. The other expense in 1999 was attributable to a $9.9 million charge that principally related to fees paid by the Company for a $2.0 billion financing commitment that was subsequently cancelled upon termination of a tender offer made by the Company in 1999. 13 Income Taxes. Income taxes increased to $125.1 million, or an effective rate of 41.5%, in 2000 from $99.1 million, or an effective rate of 41.0%, in 1999. Years ended December 31, 1999 and 1998 Revenues. Total revenues for 1999 were $2,233.6 million, representing an increase of 83.0% over total revenues in 1998 of $1,220.3 million. The Company's revenues in 1999 and 1998 were attributable to: (i) equipment rental ($1,581.0 million, or 70.8% of revenues, in 1999 compared to $895.5 million, or 73.4% of revenues, in 1998), (ii) sales of rental equipment ($235.7 million, or 10.6% of revenues, in 1999 compared to $119.6 million, or 9.8% of revenues, in 1998) and (iii) sales of equipment and merchandise and other revenues ($416.9 million, or 18.6% of revenues, in 1999 compared to $205.2 million, or 16.8% of revenues, in 1998). The 83.0% increase in total revenues in 1999 reflected (i) increased revenues at locations open more than one year (which accounted for approximately 21.2 percentage points) and (ii) new rental locations acquired through acquisitions and the opening of start-up locations (which accounted for approximately 61.8 percentage points). The increase in revenues at locations open more than one year primarily reflected (a) an increase in the volume of rental transactions, (b) expansion of the product lines offered by the Company for sale, (c) an increase in the sale of related merchandise and parts which was driven by the increase in equipment rental and sales transactions and (d) an increase in the sale of used equipment. Gross Profit. Gross profit increased to $824.9 million in 1999 from $423.4 million in 1998. This increase in gross profit was primarily attributable to the increase in revenues described above. The Company's gross profit margin by source of revenue in 1999 and 1998 was: (i) equipment rental (39.4% in 1999 and 36.3% in 1998), (ii) sales of rental equipment (42.0% in 1999 and 44.7% in 1998) and (iii) sales of equipment and merchandise and other revenues (24.6% in 1999 and 22.0% in 1998). The increase in the gross profit margin from rental revenues in 1999 was primarily attributable to greater equipment utilization rates and to economies of scale. The decrease in the gross profit margin from the sales of rental equipment in 1999 primarily reflected a shift in mix towards the sale of more late-model used equipment which generally generates lower gross profit margins than older equipment. The increase in the gross profit margin from sales of equipment and merchandise and other revenue in 1999 primarily reflected the benefits of greater purchasing power. Selling, General and Administrative Expenses. SG&A was $352.6 million, or 15.8% of total revenues, during 1999 and $195.6 million, or 16.0% of total revenues, during 1998. SG&A in 1999 includes an $8.3 million charge primarily due to professional fees incurred in connection with a terminated tender offer. Excluding this charge, SG&A as a percentage of revenues decreased to 15.4% in 1999, primarily due to certain economies of scale relating to the increase in revenues described above. Merger-related Expenses. The Company incurred merger-related expenses in 1998 of $47.2 million ($33.2 million after-tax) in connection with three acquisitions completed by the Company in 1998 that were accounted for as poolings-of-interests. These expenses consisted of: (i) $18.5 million for investment banking, legal and accounting services and other merger costs, (ii) $14.5 million of expenses relating to the closing of duplicate facilities, (iii) $8.2 million for employee severance and related matters, (iv) $2.1 million for the write down of the computer systems acquired through the U.S. Rentals Merger and one of the other acquisitions accounted for as a pooling-of-interests and (v) $3.9 million in other expenses. Non-rental Depreciation and Amortization. Non-rental depreciation and amortization was $62.9 million, or 2.8% of total revenues, in 1999 and $35.2 million, or 2.9% of total revenues, in 1998. 14 Interest Expense. Interest expense increased to $139.8 million in 1999 from $64.2 million in 1998. This increase primarily reflected the fact that the Company's indebtedness significantly increased in 1999, primarily to fund acquisitions. Preferred Dividends of a Subsidiary Trust. Preferred dividends of a subsidiary trust of Holdings were $19.5 million in 1999 compared with $7.9 million in 1998. Other (Income) Expense. Other expense was $8.3 million in 1999 compared with other income of $4.9 million in 1998. The increase in other expense in 1999 primarily reflected a $9.9 million charge that principally related to fees paid by the Company for a $2.0 billion financing commitment that was subsequently cancelled upon termination of a tender offer. Income Taxes. Income taxes increased to $99.1 million, or an effective rate of 41.0%, in 1999 from $43.5 million, or an effective rate of 55.6%, in 1998. During 1998, the Company's high effective tax rate reflected (i) the non-deductibility of $7.4 million for income tax purposes of certain merger-related expenses and (ii) a $4.8 million charge to recognize deferred tax liabilities of an acquired business, which was a Subchapter S Corporation prior to being acquired by the Company. Extraordinary Item. The Company recorded an extraordinary charge of $35.6 million ($21.3 million net of taxes) in 1998. This charge was incurred in connection with the early extinguishment of certain debt and primarily reflected prepayment penalties on certain debt of U.S. Rentals. Liquidity and Capital Resources Financing Transactions in 2000 Set forth below is certain information concerning certain financing transactions entered into by the Company during 2000. Term Loan D. URI obtained a $200.0 million term loan from a group of financial institutions. For additional information concerning this loan, see "--Certain Information Concerning the Credit Facility and Other Indebtedness--Term Loan D." Receivables Securitization. In December 2000, the Company obtained $100.0 million through the securitization of certain of its accounts receivable. For additional information concerning this transaction, see "--Certain Information Concerning the Credit Facility and Other Indebtedness--Certain Other Secured Debt." Sale and Lease-Back Transactions. In 2000, the Company received an aggregate of $218.8 million of proceeds from equipment sale and lease-back transactions. For additional information concerning these transactions, see "--Certain Information Concerning Operating Leases." Sources and Uses of Cash During 2000, the Company (i) generated cash from operations of approximately $512.7 million, (ii) generated cash from the sale of rental equipment of approximately $347.7 million and (iii) generated cash from financing activities of approximately $468.1 million. The Company used cash during this period principally to (i) pay consideration for acquisitions (approximately $347.3 million), (ii) purchase rental equipment (approximately $808.2 million), (iii) purchase other property and equipment (approximately $153.8 million) and (iv) purchase and retire the Company's Common Stock (approximately $31.0 million). 15 Certain Balance Sheet Changes The Company's asset and liability accounts were all higher at December 31, 2000 than at December 31, 1999, other than accrued expenses and other liabilities which was lower. The general increase in the Company's asset and liability accounts primarily reflected the acquisitions and the equipment purchases made by the Company in 2000. The decrease in accrued expenses and other liabilities primarily reflected the refund of certain income tax payments. The decrease in additional paid-in capital at December 31, 2000 compared with December 31, 1999, primarily reflected the purchase and retirement of Common Stock offset in part by the issuance of Common Stock in connection with an acquisition. Cash Requirements Related to Operations The Company's principal existing sources of cash are borrowings available under its revolving credit facility ($407.1 million available as of March 6, 2001), cash generated from operations and cash generated from the sale of used equipment. For additional information concerning the Company's credit facility (the "Credit Facility"), see "--Certain Information Concerning the Credit Facility and Other Indebtedness--Credit Facility." The Company expects that its principal needs for cash relating to its 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 and (iii) debt service. The Company plans to fund such cash requirements relating to its existing operations from its existing sources of cash described above. The Company estimates that equipment expenditures over the next 12 months will be approximately $400 million for the existing operations of the Company. These expenditures are comprised of approximately (i) $150 million of expenditures in order to replace rental equipment sold, (ii) $200 million of discretionary expenditures to increase the size of the Company's rental fleet and (iii) $50 million of expenditures for the purchase of non-rental equipment. The Company expects that it will fund such expenditures from a combination of approximately $100 million of proceeds expected to be generated from the sale of used equipment, cash generated from operations and, if required, borrowings available under the Credit Facility. While emphasizing internal growth, the Company may also continue to expand through a disciplined acquisition program. The Company expects to pay for future acquisitions using cash, capital stock, notes and/or assumption of indebtedness. To the extent that the Company's existing sources of cash described above are not sufficient to fund such future acquisitions, the Company will require additional financing and, consequently, the Company's indebtedness may increase as the Company implements its growth strategy. There can be no assurance, however, that any additional financing will be available or, if available, will be on terms satisfactory to the Company. Based upon the terms of the Company's currently outstanding indebtedness, the Company is scheduled to repay debt principal of approximately $33.8 million during 2001. Certain Measures to Reduce Cash Requirements The Company, in response to softening economic conditions, has been focusing on measures to cut costs and reduce cash outlays. Some of the principal initiatives are discussed below. Reduce equipment purchases and supplement new equipment with used equipment. The Company, as described above, has budgeted $400 million for rental and other equipment expenditures over the next 12 months. This reflects a significant reduction from the $962 million that was expended in 2000. 16 The Company believes that it may have the opportunity to purchase late-model used equipment at attractive prices. Accordingly, while continuing to purchase new equipment, the Company will also selectively purchase late-model used equipment. The Company estimates that over the next 12 months used equipment will account for 15-20% of its total equipment purchases. The Company plans to reduce the rate at which it invests in new equipment in 2001, which will cause the weighted average age of its fleet to increase from approximately 26 months to approximately 32 months. The Company believes that, because of the young age of its fleet, the Company's operations will not be adversely affected by this six month increase in average age. The Company also plans to reduce the rate at which it sells its used rental equipment in 2001 and, as a result, revenues from the sale of rental equipment are expected to be 70-75% lower in 2001 than in 2000. Close or Consolidate Under-Performing Branches. The Company is in the process of reviewing under-performing branches and expects that, over the next several months, a number of locations will be closed or consolidated with existing locations. Continue to Consolidate Suppliers. The Company reduced the number of its primary equipment suppliers from 111 to 28 in 2000. This allowed the Company to lower its purchase costs by approximately $150 million in 2000 and should enable the Company to save additional amounts in 2001. The Company is currently in the process of similarly consolidating its merchandise suppliers. Other Cost-Cutting Measures. The Company is seeking to reduce costs in a number of other ways, including reducing administrative expenses, consolidating credit and collection centers, and streamlining advertising. Certain Projected Charges Branch Consolidation The Company, as described above, expects that over the next several months a number of underperforming locations will be closed or consolidated with other locations. The Company estimates that, as a result, it will incur a pre-tax charge in 2001 in the range of $20 million to $40 million, primarily relating to employee severance and vacating facilities. Debt Refinancing The Company is currently negotiating with various lenders to replace its existing credit facility and term loans. If this refinancing is completed, the Company estimates that it would record a pretax extraordinary charge in 2001 in the range of $16 million to $27 million, primarily relating to the write-off of financing fees. Relationship Between Holdings and URI Holdings is principally a holding company and primarily conducts its operations through its wholly owned subsidiary URI and subsidiaries of URI. Holdings provides certain services to URI in connection with its operations. These services principally include: (i) senior management services, (ii) finance related services and support, (iii) information technology systems and support and (iv) acquisition related services. In addition, Holdings leases certain equipment and real property that are made available for use by URI and its subsidiaries. URI has made, and expects to continue to make, certain payments to Holdings in respect of the services provided by Holdings to the Company. The expenses relating to URI's payments to Holdings are reflected on URI's financial statements as selling, general and administrative expenses. In addition, although not legally obligated to do so, URI has in the past, 17 and expects that it will in the future, make distributions to Holdings to, among other things, enable Holdings to pay dividends on the Trust Preferred Securities (as described under "--Certain Information Concerning Preferred Securities"). The Trust Preferred Securities are the obligation of a subsidiary trust of Holdings and are not the obligation of URI. As a result, the dividends payable on these securities are reflected as an expense on the consolidated financial statements of Holdings, but are not reflected as an expense on the consolidated financial statements of URI. Certain Information Concerning the Credit Facility and Other Indebtedness Credit Facility. URI has a credit facility (the "Credit Facility") which enables URI to borrow up to $827.5 million on a revolving basis and permits a Canadian subsidiary of URI (the "Canadian Subsidiary") to directly borrow up to $40.0 million under the Credit Facility (provided that the aggregate borrowings of URI and the Canadian Subsidiary do not exceed $827.5 million). Up to $50.0 million of the Credit Facility is available in the form of letters of credit. The agreement governing the Credit Facility requires that the aggregate commitment shall be reduced on the last day of each calendar quarter, beginning September 30, 2001 and continuing through June 30, 2003, by an amount equal to $20.7 million. The Credit Facility terminates on September 26, 2003, at which time all outstanding indebtedness is due. As of March 6, 2001, there was $414.0 million of indebtedness outstanding under the Credit Facility (not including undrawn outstanding letters of credit in the amount of $6.4 million). Borrowings by URI under the Credit Facility accrue interest at URI's option, at either (a) the Base Rate (which is equal to the greater of (i) the Federal Funds Rate plus 0.5% or (ii) Bank of America's reference rate) or (b) the Eurodollar Rate (which for borrowings by URI is equal to Bank of America's reserve adjusted Eurodollar Rate) plus a margin ranging from 1.200% to 1.875% per annum. Borrowings by the Canadian Subsidiary under the Credit Facility accrue interest, at such subsidiary's option, at either (x) the Prime Rate (which is equal to Bank of America Canada's prime rate), (y) the BA Rate (which is equal to Bank of America Canada's BA Rate) plus a margin ranging from 1.200% to 1.875% per annum or (z) the Eurodollar Rate (which for borrowing by the Canadian Subsidiary is equal to Bank of America Canada's reserve adjusted Eurodollar Rate) plus a margin ranging from 1.200% to 1.875% per annum. If at any time an event of default (as defined in the agreement governing the Credit Facility) exists, the interest rate applicable to each loan will increase by 2% per annum. The Company is also required to pay the banks an annual facility fee equal to 0.375% of the banks' $827.5 million aggregate lending commitment under the Credit Facility (which fee may be reduced to 0.300% for periods during which the Company maintains a specified funded debt to cash flow ratio). The obligations of URI under the Credit Facility are (i) secured by substantially all of its assets, the stock of its United States subsidiaries and a portion of the stock of URI's Canadian subsidiaries and (ii) guaranteed by Holdings and secured by the stock of URI. The obligations of the Canadian Subsidiary under the Credit Facility are guaranteed by URI and secured by substantially all of the assets of the Canadian Subsidiary and the stock of the subsidiaries of the Canadian Subsidiary. The Credit Facility contains certain covenants that require the Company to, among other things, satisfy certain financial tests relating to: (a) maximum leverage, (b) the ratio of senior debt to cash flow, (c) minimum interest coverage ratio, (d) the ratio of funded debt to cash flow, and (e) the ratio of senior debt to tangible assets. The agreements governing the Credit Facility also contain various other covenants that restrict the Company's ability to, among other things, (i) incur additional indebtedness, (ii) permit liens to attach to its assets, (iii) pay dividends or make other restricted payments on its common stock and certain other securities and (iv) make acquisitions unless certain financial conditions are satisfied. In addition, the agreement governing the Credit Facility provides that failure by 18 any two of Messrs. Jacobs, Milne, Nolan and Miner to continue to hold executive positions with the Company for a period of 30 consecutive days constitutes an event of default unless replacement officers satisfactory to the lenders are appointed. Term Loan B. In July 1998, URI obtained a $250.0 million term loan (the "Term Loan B") from a group of financial institutions. The Term Loan B matures on June 30, 2005. Prior to maturity, quarterly installments of principal in the amount of $0.6 million are due on the last day of each calendar quarter, commencing September 30, 1999. The amount due at maturity is $235.6 million. The Term Loan B accrues interest, at the Company's option, at either (a) the Base Rate (as defined with respect to the Credit Facility) plus a margin of 0.375% per annum, or (b) the Eurodollar Rate (as defined with respect to the Credit Facility for borrowings by URI) plus a margin of 2.25% per annum. If at any time an event of default exists, the interest rate applicable to the Term Loan B will increase by 2% per annum. The Term Loan B is secured pari passu with the Credit Facility, Term Loan C and Term Loan D (described below). The agreement governing the Term Loan B contains restrictive covenants substantially similar to those provided under the Credit Facility. Term Loan C. In July 1999, URI obtained a $750.0 million term loan (the "Term Loan C") from a group of financial institutions. The Term Loan C matures in June 2006. Prior to maturity, quarterly installments of principal in the amount of $1.9 million are due on the last day of each calendar quarter, commencing September 30, 2000. The amount due at maturity is $706.3 million. The Term Loan C accrues interest, at URI's option, at either (a) the Base Rate (as defined with respect to the Credit Facility) plus a margin of 0.625% per annum, or (b) the Eurodollar Rate (as defined with respect to the Credit Facility for borrowings by URI) plus a margin of 2.5% per annum. If at any time an event of default exists, the interest rate applicable to the Term Loan C will increase by 2% per annum. The Term Loan C is secured pari passu with the Credit Facility, Term Loan B and Term Loan D. The agreement governing the Term Loan C contains restrictive covenants substantially similar to those provided under the Credit Facility. Term Loan D. In June 2000, URI obtained a $100.0 million term loan from a financial institution (the "Term Loan D"). In October 2000, URI obtained an additional $100.0 million under the existing Term Loan D. The Term Loan D matures in June 2006. Prior to maturity, quarterly installments of principal are due on the last day of each calendar quarter, in the amount of $0.25 million on September 30, 2000 and in the amount of $0.5 million commencing December 31, 2000 to maturity. The amount due at maturity is $188.5 million. The Term Loan D accrues interest, at URI's option, at either (a) the Base Rate (as defined above with respect to the Credit Facility) plus a margin of 0.625% per annum, or (b) the Eurodollar Rate (as defined above with respect to the Credit Facility) plus a margin of 2.5% per annum. If at any time an event of default exists, the interest rate applicable to the Term Loan D will increase by 2% per annum. The Term Loan D is secured pari passu with the Credit Facility, Term Loan B and Term Loan C. The agreement governing the Term Loan D contains restrictive covenants substantially similar to those provided under the Credit Facility. Receivables Securitization. In December 2000, the Company obtained $100.0 million through the securitization of certain of its accounts receivable. In the securitization, the Company transferred $203.0 million of its accounts receivable to a special purpose subsidiary (the "SPV") which in turn pledged those receivables to secure $100.0 million of borrowings that the SPV incurred to finance its acquisition of those receivables from the Company. These borrowings accrue interest at Credit Lyonnais' blended commercial paper rate plus a margin of 0.75% per annum. These borrowings are an obligation of the SPV and not of Holdings or URI, and the lenders' recourse in respect of the borrowings is generally limited to collections that the SPV receives on the receivables. Collections on the receivables are used to service the borrowings. Subject to certain conditions, collections from the receivables may also be used by the SPV from time to time until December 2003 to acquire additional accounts receivables from the Company that the SPV will pledge to the lenders to secure the borrowings. 9 1/2% Senior Subordinated Notes. In May 1998, URI issued $200.0 million aggregate principal amount of 9 1/2% senior subordinated notes (the "9 1/2% Notes"), which are due June 1, 2008. The 19 9 1/2% Notes are unsecured. URI may, at its option, redeem the 9 1/2% Notes on or after June 1, 2003 at specified redemption prices which range from 104.75% in 2003 to 100.0% in 2006 and thereafter. In addition, on or prior to June 1, 2001, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 9 1/2% Notes, at a redemption price of 109.5%. The indenture governing the 9 1/2% Notes contains certain restrictive covenants, including (i) limitations on additional indebtedness, (ii) limitations on restricted payments, (iii) limitations on liens, (iv) limitations on dividends and other payment restrictions, (v) limitations on preferred stock of certain subsidiaries, (vi) limitations on transactions with affiliates, (vii) limitations on the disposition of proceeds of asset sales and (viii) limitations on the ability of the Company to consolidate, merge or sell all or substantially all of its assets. 8.80% Senior Subordinated Notes. In August 1998, URI issued $205.0 million aggregate principal amount of 8.80% senior subordinated notes (the "8.80% Notes"), which are due August 15, 2008. The 8.80% Notes are unsecured. URI may, at its option, redeem the 8.80% Notes on or after August 15, 2003 at specified redemption prices which range from 104.4% in 2003 to 100.0% in 2006 and thereafter. In addition, on or prior to August 15, 2001, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 8.80% Notes, at a redemption price of 108.8%. The indenture governing the 8.80% Notes contains restrictions substantially similar to those applicable to the 9 1/2% Notes. 9 1/4% Senior Subordinated Notes. In December 1998, URI issued $300.0 million aggregate principal amount of 9 1/4% senior subordinated notes (the "9 1/4% Notes"), which are due January 15, 2009. The 9 1/4% Notes are unsecured. URI may, at its option, redeem the 9 1/4% Notes on or after January 15, 2004 at specified redemption prices which range from 104.625% in 2004 to 100.0% in 2007 and thereafter. In addition, on or prior to January 15, 2002, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 9 1/4% Notes, at a redemption price of 109.25%. The indenture governing the 9 1/4% Notes contains restrictions substantially similar to those applicable to the 9 1/2% Notes. 9% Senior Subordinated Notes. In March 1999, URI sold $250.0 million aggregate principal amount of 9% senior subordinated notes, (the "9% Notes") which are due on April 1, 2009. The 9% Notes are unsecured. URI may, at its option, redeem the 9% Notes on or after April 1, 2004 at specified redemption prices which range from 104.5% in 2004 to 100.0% in 2007 and thereafter. In addition, on or prior to April 1, 2002, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 9% Notes, at a redemption price of 109.0%. The indenture governing the 9% Notes contains restrictions substantially similar to those applicable to the 9 1/2% Notes. Other Debt. In addition to the debt described above, the Company had approximately $94.1 million of other debt outstanding as of December 31, 2000. Certain Information Concerning Operating Leases The Company, from time to time, has entered into operating leases pursuant to which it leases, as lessee, equipment or real estate. Certain of these leases were entered into as part of sale and lease-back transactions, where the Company sells its equipment and then enters into an operating lease that provides for the Company to lease the equipment for a specified period. Sale and lease-back transactions in 2000 generated gross proceeds of $218.8 million and gave rise to $12.5 million of recognized gain and $4.0 million of deferred gain. For information concerning the lease payment obligations under the Company's operating leases, see Note 13 of the Notes to the Consolidated Financial Statements included elsewhere in this Report. 20 Certain Information Concerning Preferred Securities Trust Preferred Securities In August 1998, a subsidiary trust (the "Trust") of Holdings sold $300.0 million of 6 1/2% Convertible Quarterly Income Preferred Securities (the "Trust Preferred Securities"). The net proceeds from the sale of the Trust Preferred Securities were approximately $290.0 million. The Trust used such proceeds to purchase convertible subordinated debentures from Holdings which resulted in Holdings receiving all of the proceeds from the sale of the Trust Preferred Securities. Holdings in turn contributed the net proceeds from the sale of the Trust Preferred Securities to its wholly owned subsidiary URI. The Trust Preferred Securities are convertible into common stock of Holdings at a conversion price equivalent to $43.63 per share. Other Preferred Securities In January 1999, Holdings sold 300,000 shares of its Series A Preferred. The outstanding shares of Series A Preferred are convertible into an aggregate of 12,000,000 shares of Holdings common stock, subject to adjustment (equivalent to a conversion price of $25 per share based upon the liquidation preference of $1,000 per share of Series A Preferred). In September 1999, Holdings sold 150,000 shares of its Series B Preferred. The outstanding shares of Series B Preferred are convertible into an aggregate of 5,000,000 shares of Holdings common stock, subject to adjustment (equivalent to a conversion price of $30 per share based upon the liquidation preference of $1,000 per share of Series B Preferred). Fluctuations in Operating Results The Company expects that its revenues and operating results may fluctuate from quarter to quarter or over the longer term. Certain of the general factors that may cause such fluctuations are discussed under "--Factors that May Influence Future Results and Accuracy of Forward Looking Statements--Fluctuations of Operating Results." In addition, information concerning certain projected charges that may impact quarterly results over the near term is set forth under "--Certain Projected Charges." The Company is continually involved in the investigation and evaluation of potential acquisitions. In accordance with accounting principles generally accepted in the United States, the Company capitalizes certain direct out-of-pocket expenditures (such as legal and accounting fees) relating to potential or pending acquisitions. Indirect acquisition costs, such as executive salaries, general corporate overhead, public affairs and other corporate services, are expensed as incurred. The Company's policy is to charge against earnings any capitalized expenditures relating to any potential or pending acquisition that the Company determines will not be consummated. There can be no assurance that the Company in future periods will not be required to incur a charge against earnings in accordance with such policy, which charge, depending upon the magnitude thereof, could adversely affect the Company's results of operations. The Company will be required to incur significant start-up expenses in connection with establishing each start-up location. Such expenses may include, among others, pre-opening expenses related to setting up the facility, and expenses in connection with training employees, installing information systems and marketing. The Company expects that, in general, start-up locations will initially operate at a loss or at less than normalized profit levels. Consequently, the opening of a start-up location may negatively impact the Company's margins until the location achieves normalized profitability. 21 There may be a lag between the time that the Company purchases new equipment and begins to incur the related depreciation and interest expenses and the time that the equipment begins to generate revenues at normalized rates. As a result, the purchase of new equipment, particularly equipment purchased in connection with expanding and diversifying the Company's rental equipment, may periodically reduce margins. Seasonality The Company's business is seasonal with demand for the Company's rental equipment tending to be lower in the winter months. The seasonality of the Company's business has been heightened by the Company's acquisition of businesses that specialize in renting traffic control equipment. These businesses tend to generate most of their revenues and profits in the second and third quarters of the year, slow down during the fourth quarter and operate at a loss during the first quarter. Inflation Although the Company cannot accurately anticipate the effect of inflation on its operations, the Company believes that inflation has not had, and is not likely in the foreseeable future to have, a material impact on its results of operations. Impact of Recently Issued Accounting Standards In June 1999, the Financial Accounting Standards Board (''FASB") issued Statement of Financial Accounting Standards (''SFAS") No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133". This standard delays the effective date of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", for one year, to fiscal years beginning after June 15, 2000. SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities. The adoption of SFAS No. 133 on January 1, 2001 is not expected to have a material effect on the Company's consolidated financial position or results of operations. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities". This standard amends SFAS No. 133 and addresses a limited number of issues causing implementation difficulties. The Company will adopt SFAS No. 138 on January 1, 2001 and it is not expected to have a material effect on the Company's consolidated financial position or results of operations. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities--a replacement of FASB Statement No. 125". This standard revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This standard is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The adoption of SFAS No. 140 is not expected to have a material effect on the Company's consolidated financial position or results of operations. Factors that May Influence Future Results and Accuracy of Forward-Looking Statements Sensitivity to Changes in Construction and Industrial Activities Our equipment is principally used in connection with construction and industrial activities. Consequently, a downturn in construction or industrial activity may lead to a decrease in demand for 22 our equipment, which could adversely affect our business. We have identified below certain of the factors which may cause such a downturn, either temporarily or long-term: . the recent slow-down of the economy worsens or continues over the long-term; . an increase in interest rates; or . adverse weather conditions which may temporarily affect a particular region. In addition, demand for our traffic control equipment may not reach projected levels in the event that funding for highway and other construction projects under government programs, such as the Transportation Equity Act for the 21st Century ("TEA-21"), does not reach expected levels. Fluctuations of Operating Results We expect that our revenues and operating results may fluctuate from quarter to quarter or over the longer term due to a number of factors, including: . seasonal rental patterns of our customers--with rental activity tending to be lower in the winter; . our recent acquisitions of businesses that specialize in renting traffic control equipment, which tend to operate at a loss during the first quarter; . the timing of expenditures for new equipment and the disposition of used equipment; . changes in demand for our equipment or the prices therefor due to changes in economic conditions, competition or other factors; . changes in the interest rates applicable to our floating rate debt; . if we determine that a potential acquisition will not be consummated, the need to charge against earnings any expenditures relating to such transaction (such as financing commitment fees, merger and acquisition advisory fees and professional fees) previously capitalized; and . the possible need, from time to time, to take other write-offs or special charges due to a variety of occurrences, such as store consolidations or closings or the refinancing of existing indebtedness. Dependence on Additional Capital We may require additional capital for, among other purposes, purchasing rental equipment, completing acquisitions, and establishing new rental locations. If the cash that we generate from our business, together with cash that we may borrow under our credit facility, is not sufficient to fund our capital requirements, we will require additional debt and/or equity financing. We cannot, however, be certain that any additional financing will be available or, if available, will be available on terms that are satisfactory to us. If we are unable to obtain sufficient additional capital in the future, our business could be adversely affected. Certain Risks Relating to Acquisitions The making of acquisitions entails certain risks, including: . acquired companies could have unrecorded liabilities that we fail to discover during our due diligence investigations; 23 . we may have difficulty in assimilating the operations and personnel of the acquired company with our existing operations; . we may lose key employees of the acquired company; and . we may have difficulty maintaining uniform standards, controls, procedures and policies. Dependence on Management We are highly dependent upon our senior management team. Consequently, our business could be adversely affected in the event that we lose the services of any member of senior management. Furthermore, if we lose the services of certain members of senior management, it is an event of default under the agreements governing our credit facility and certain of our other indebtedness, unless we appoint replacement officers satisfactory to the lenders within 30 days. We do not maintain "key man" life insurance with respect to members of senior management. Competition The equipment rental industry is highly fragmented and competitive. Our competitors primarily include small, independent businesses with one or two rental locations; regional competitors which operate in one or more states; public companies or divisions of public companies; and equipment vendors and dealers who both sell and rent equipment directly to customers. We may in the future encounter increased competition from our existing competitors or from new companies. In addition, certain equipment manufacturers may commence (or increase their existing efforts relating to) renting and selling equipment directly to our customers. Liability and Insurance We are exposed to various possible claims relating to our business. These include claims relating to (1) personal injury or death caused by equipment rented or sold by us, (2) motor vehicle accidents involving our delivery and service personnel and (3) employment related claims. We carry a broad range of insurance for the protection of our assets and operations. However, such insurance may not fully protect us for a number of reasons, including: . our coverage is subject to a deductible of $1.0 million and limited to a maximum of $98 million per occurrence; . we do not maintain coverage for environmental liability, since we believe that the cost for such coverage is high relative to the benefit that it provides; and . certain types of claims, such as claims for punitive damages or for damages arising from intentional misconduct, which are often alleged in third party lawsuits, might not be covered by our insurance. We cannot be certain that insurance will continue to be available to us on economically reasonable terms, if at all. Environmental and Safety Regulations There are numerous federal, state and local laws and regulations governing environmental protection and occupational health and safety matters. These include laws and regulations that govern wastewater discharges, the use, treatment, storage and disposal of solid and hazardous wastes and materials, air quality and the remediation of contamination associated with the release of hazardous substances. Under these laws, an owner or lessee of real estate may be liable for, among other things, 24 (1) the costs of removal or remediation of hazardous or toxic substances located on, in, or emanating from, the real estate, as well as related costs of investigation and property damage and substantial penalties, and (2) environmental contamination at facilities where its waste is or has been disposed. These laws often impose liability whether or not the owner or lessee knew of the presence of the hazardous or toxic substances and whether or not the owner or lessee was responsible for these substances. Our activities that are or may be affected by these laws include our use of hazardous materials to clean and maintain equipment and our disposal of solid and hazardous waste and wastewater from equipment washing. We also dispense petroleum products from underground and above-ground storage tanks located at certain rental locations, and at times we must remove or upgrade tanks to comply with applicable laws. Furthermore, we have acquired or lease certain locations which have or may have been contaminated by leakage from underground tanks or other sources and are in the process of assessing the nature of the required remediation. Based on the conditions currently known to us, we believe that any unreserved environmental remediation and compliance costs required with respect to those conditions will not have a material adverse effect on our business. However, we cannot be certain that we will not identify adverse environmental conditions that are not currently known to us, that all potential releases from underground storage tanks removed in the past have been identified, or that environmental and safety requirements will not become more stringent or be interpreted and applied more stringently in the future. If we are required to incur environmental compliance or remediation costs that are not currently anticipated by us, our business could be adversely affected depending on the magnitude of the cost. Risks Related to International Operations Our operations outside the United States are subject to risks normally associated with international operations. These include the need to convert currencies, which could result in a gain or loss depending on fluctuations in exchange rates, and the need to comply with foreign laws. Dependence on Information Technology Systems Our ability to monitor and control our operations depends to a large extent on the proper functioning of our information technology systems. Any disruption in these systems or the failure of these systems to operate as expected could, depending on the magnitude and duration of the problem, adversely affect our business. Labor Matters Certain of our employees are represented by unions and covered by collective bargaining agreements. If we should experience a prolonged labor dispute involving a significant number of our employees, our business could be adversely affected. Restrictive Covenants The agreements governing our existing long-term indebtedness contain, and future agreements governing our long-term indebtedness may also contain, certain restrictive financial and operating covenants which affect, and in many respects significantly limit or prohibit, among other things, our ability to incur indebtedness, make prepayments of certain indebtedness, make investments, create liens, make acquisitions, sell assets and engage in mergers and consolidations. These covenants may significantly limit our operating and financial flexibility. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk primarily consists of (1) interest rate risk associated with our variable rate debt and (2) foreign currency exchange rate risk primarily associated with our Canadian operations. 25 Interest Rate Risk. The Company periodically utilizes interest rate swap agreements to manage and mitigate its exposure to changes in interest rates. At December 31, 2000, the Company had interest rate protection in the form of swap agreements with an aggregate notional amount of $200.0 million. The effect of these agreements is to limit the interest rate exposure to 8.75% on $200.0 million of Term Loan B. All borrowings under our $827.5 million Credit Facility bear interest at a variable rate of interest. The outstanding indebtedness under the Credit Facility was $337.0 million as of December 31, 2000. Our other variable rate debt primarily consists of a $246.9 million Term Loan B, a $748.1 million Term Loan C, a $198.1 Term Loan D and $100.0 million of receivables securitization described earlier. The weighted average interest rates applicable to our variable rate debt as of December 31, 2000 were (i) 7.8% for the Credit Facility, (ii) 8.80% for the Term Loan B, (iii) 9.26% for the Term Loan C, (iv) 9.18% for the Term Loan D and (v) 7.44% for the receivables securitization described earlier. Based upon the amount of variable debt that we had outstanding as of December 31, 2000 (approximately $1.63 billion in the aggregate), our net income would decrease by approximately $9.5 million for each one percentage point increase in the interest rates applicable to our variable rate debt. The amount of our variable rate indebtedness may fluctuate significantly as a result of changes in the amount of indebtedness outstanding under the Credit Facility from time to time. For additional information concerning the terms of our variable rate debt, see Note 7 of the Notes to the Consolidated Financial Statements included elsewhere herein. 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 current level of our Canadian operations, a 10% change in this exchange rate would not have a material impact on our earnings. In addition, the Company periodically enters into foreign exchange contracts to hedge its transaction exposures. At December 31, 2000, the Company had no outstanding foreign exchange contracts. The Company does not engage in purchasing forward exchange contracts for speculative purposes. 26 Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS

Page ---- (1) Consolidated Financial Statements: Report of Independent Auditors........................................................... 28 United Rentals, Inc. Consolidated Balance Sheets--December 31, 2000 and 1999............. 29 United Rentals, Inc. Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998....................................................... 30 United Rentals, Inc. Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998....................................................... 31 United Rentals, Inc. Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998....................................................... 32 Notes to Consolidated Financial Statements............................................... 34 Report of Independent Auditors........................................................... 55 United Rentals (North America), Inc. Consolidated Balance Sheets--December 31, 2000 and 1999............................................................................... 56 United Rentals (North America), Inc. Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998................................................. 57 United Rentals (North America), Inc. Consolidated Statements of Stockholder's Equity for the years ended December 31, 2000, 1999 and 1998....................................... 58 United Rentals (North America), Inc. Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998................................................. 59 Notes to Consolidated Financial Statements............................................... 60 (2) Financial Statement Schedules: Report of Independent Auditors on Financial Statement Schedules.......................... 69 Schedule I Condensed Financial Information of the Registrant............................. 70 Schedule II Valuation and Qualifying Accounts............................................ 74

Schedules other than those listed are omitted as they are not applicable or the required or equivalent information has been included in the financial statements or notes thereto. 27 REPORT OF INDEPENDENT AUDITORS Board of Directors United Rentals, Inc. We have audited the accompanying consolidated balance sheets of United Rentals, Inc. as of December 31, 2000 and 1999 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the management of United Rentals, Inc. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Rentals, Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP MetroPark, New Jersey February 23, 2001 28 UNITED RENTALS, INC. CONSOLIDATED BALANCE SHEETS

December 31 ---------------------- 2000 1999 ---------- ---------- (In thousands, except share data) Assets Cash and cash equivalents.............................................. $ 34,384 $ 23,811 Accounts receivable, net of allowance for doubtful accounts of $55,624 and $58,376 at 2000 and 1999, respectively........................... 469,594 434,985 Inventory.............................................................. 133,380 129,473 Prepaid expenses and other assets...................................... 104,493 81,457 Rental equipment, net.................................................. 1,732,835 1,659,733 Property and equipment, net............................................ 422,239 304,907 Intangible assets, net of accumulated amortization of $108,066 and $51,231 at 2000 and 1999, respectively............................... 2,227,008 1,863,372 ---------- ---------- $5,123,933 $4,497,738 ========== ========== Liabilities and Stockholders' Equity Liabilities: Accounts payable.................................................... $ 260,155 $ 242,946 Debt................................................................ 2,675,367 2,266,148 Deferred taxes...................................................... 206,243 81,229 Accrued expenses and other liabilities.............................. 136,225 209,929 ---------- ---------- Total liabilities............................................... 3,277,990 2,800,252 Commitments and contingencies Company-obligated manditorily redeemable convertible preferred securities of a subsidiary trust..................................... 300,000 300,000 Stockholders' equity: Preferred stock--$.01 par value, 5,000,000 shares authorized: Series A perpetual convertible preferred stock--$300,000 liquidation preference, 300,000 shares issued and outstanding in 2000 and 1999................................................ 3 3 Series B perpetual convertible preferred stock--$150,000 liquidation preference, 150,000 shares issued and outstanding in 2000 and 1999................................................ 2 2 Common stock--$.01 par value, 500,000,000 shares authorized, 71,065,707 shares issued and outstanding in 2000 and 72,051,095 shares issued and outstanding in 1999.................. 711 721 Additional paid-in capital.......................................... 1,196,324 1,216,968 Retained earnings................................................... 355,850 179,475 Accumulated other comprehensive (loss) income....................... (6,947) 317 ---------- ---------- Total stockholders' equity...................................... 1,545,943 1,397,486 ---------- ---------- $5,123,933 $4,497,738 ========== ==========

See accompanying notes. 29 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31 ---------------------------------------- 2000 1999 1998 ---------- ---------- ---------- (in thousands, except per share amounts) Revenues: Equipment rentals............................................. $2,056,683 $1,581,026 $ 895,466 Sales of rental equipment..................................... 347,678 235,678 119,620 Sales of equipment and merchandise and other revenues......... 514,500 416,924 205,196 ---------- ---------- ---------- Total revenues................................................. 2,918,861 2,233,628 1,220,282 Cost of revenues: Cost of equipment rentals, excluding depreciation............. 907,477 676,972 394,750 Depreciation of rental equipment.............................. 328,131 280,641 175,910 Cost of rental equipment sales................................ 208,182 136,678 66,136 Cost of equipment and merchandise sales and other operating costs............................................. 386,501 314,419 160,038 ---------- ---------- ---------- Total cost of revenues......................................... 1,830,291 1,408,710 796,834 ---------- ---------- ---------- Gross profit................................................... 1,088,570 824,918 423,448 Selling, general and administrative expenses................... 454,330 352,595 195,620 Merger-related expenses........................................ 47,178 Non-rental depreciation and amortization....................... 86,301 62,867 35,248 ---------- ---------- ---------- Operating income............................................... 547,939 409,456 145,402 Interest expense............................................... 228,779 139,828 64,157 Preferred dividends of a subsidiary trust...................... 19,500 19,500 7,854 Other (income) expense, net.................................... (1,836) 8,321 (4,906) ---------- ---------- ---------- Income before provision for income taxes and extraordinary item 301,496 241,807 78,297 Provision for income taxes..................................... 125,121 99,141 43,499 ---------- ---------- ---------- Income before extraordinary item............................... 176,375 142,666 34,798 Extraordinary item, net of tax benefit of $14,255.............. 21,337 ---------- ---------- ---------- Net income..................................................... $ 176,375 $ 142,666 $ 13,461 ========== ========== ========== Earnings per share--basic: Income before extraordinary item.............................. $ 2.48 $ 2.00 $ 0.53 Extraordinary item, net....................................... 0.33 ---------- ---------- ---------- Net income.................................................... $ 2.48 $ 2.00 $ 0.20 ========== ========== ========== Earnings per share--diluted: Income before extraordinary item.............................. $ 1.89 $ 1.53 $ 0.48 Extraordinary item, net....................................... 0.30 ---------- ---------- ---------- Net income.................................................... $ 1.89 $ 1.53 $ 0.18 ========== ========== ==========

See accompanying notes. 30 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Series A Series B Perpetual Perpetual Convertible Convertible Preferred Stock Preferred Stock Common Stock --------------- --------------- ------------------ Number Number Number Additional Compre- of of of Paid-in Retained hensive Shares Amount Shares Amount Shares Amount Capital Earnings Income ------- ------ ------- ------ ---------- ----- ---------- -------- -------- (In thousands, except share amounts) Balance, December 31, 1997......... 56,239,375 $562 $ 401,758 $ 44,068 Comprehensive income: Net income...................... 13,461 $ 13,461 Other comprehensive income: Foreign currency translation adjustments................... (281) -------- Comprehensive income............. $ 13,180 ======== Issuance of common stock and warrants........................ 10,813,255 108 267,214 Conversion of convertible notes.. 30,947 461 Cancellation of common stock..... (137,600) (1) 1 Reclassification of Subchapter S accumulated earnings to paid- in-capital...................... 18,979 (18,979) Pooling-of-interests............. 1,456,997 15 (14) 1,795 Exercise of common stock options......................... 25,025 619 Subchapter S distributions of a pooled entity................... (3,536) ---------- ----- ---------- -------- Balance, December 31, 1998......... 68,427,999 684 689,018 36,809 Comprehensive income: Net income...................... 142,666 $142,666 Other comprehensive income: Foreign currency translation adjustments................... 598 -------- Comprehensive income............. $143,264 ======== Issuance of Series A perpetual convertible preferred stock..... 300,000 $3 286,997 Issuance of Series B perpetual convertible preferred stock..... 150,000 $2 143,798 Issuance of common stock......... 2,291,568 23 64,678 Exercise of common stock options......................... 1,331,528 14 32,477 ------- ------ ------- ------ ---------- ----- ---------- -------- Balance, December 31, 1999......... 300,000 3 150,000 2 72,051,095 721 1,216,968 179,475 Comprehensive income: Net income...................... 176,375 $176,375 Other comprehensive income: Foreign currency translation adjustments................... (7,264) -------- Comprehensive income............. $169,111 ======== Issuance of common stock......... 773,320 8 9,867 Exercise of common stock options......................... 26,307 421 Shares repurchased and retired... (1,785,015) (18) (30,932) ------- ------ ------- ------ ---------- ----- ---------- -------- Balance, December 31, 2000......... 300,000 $3 150,000 $2 71,065,707 $711 $1,196,324 $355,850 ======= ====== ======= ====== ========== ===== ========== ======== Accumulated Other Comprehensive (Loss) Income ------------ Balance, December 31, 1997......... Comprehensive income: Net income...................... Other comprehensive income: Foreign currency translation adjustments................... $ (281) Comprehensive income............. Issuance of common stock and warrants........................ Conversion of convertible notes.. Cancellation of common stock..... Reclassification of Subchapter S accumulated earnings to paid- in-capital...................... Pooling-of-interests............. Exercise of common stock options......................... Subchapter S distributions of a pooled entity................... ------------ Balance, December 31, 1998......... (281) Comprehensive income: Net income...................... Other comprehensive income: Foreign currency translation adjustments................... 598 Comprehensive income............. Issuance of Series A perpetual convertible preferred stock..... Issuance of Series B perpetual convertible preferred stock..... Issuance of common stock......... Exercise of common stock options......................... ------------ Balance, December 31, 1999......... 317 Comprehensive income: Net income...................... Other comprehensive income: Foreign currency translation adjustments................... (7,264) Comprehensive income............. Issuance of common stock......... Exercise of common stock options......................... Shares repurchased and retired... ------------ Balance, December 31, 2000......... $(6,947) ============

See accompanying notes. 31 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31 ------------------------------------ 2000 1999 1998 --------- ----------- ----------- (In thousands) Cash Flows From Operating Activities: Net income....................................................................... $ 176,375 $ 142,666 $ 13,461 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................................. 414,432 343,508 212,311 Gain on sales of rental equipment.............................................. (139,496) (99,000) (53,484) Gain on sales of businesses.................................................... (4,084) (1,842) (4,189) Write down of assets held for sale............................................. 4,040 Extraordinary item............................................................. 35,592 Deferred taxes................................................................. 109,280 41,820 27,345 Changes in operating assets and liabilities: Accounts receivable............................................................ 8,613 (93,716) (53,368) Inventory...................................................................... 69,706 (6,544) (6,392) Prepaid expenses and other assets.............................................. (29,848) 7,257 (3,526) Accounts payable............................................................... (16,091) 64,453 39,251 Accrued expenses and other liabilities......................................... (76,166) 22,758 5,088 --------- ----------- ----------- Net cash provided by operating activities..................................... 512,721 421,360 216,129 --------- ----------- ----------- Cash Flows From Investing Activities: Purchases of rental equipment.................................................... (808,204) (718,112) (479,534) Purchases of property and equipment.............................................. (153,770) (123,649) (84,617) Proceeds from sales of rental equipment.......................................... 347,678 235,678 119,620 Proceeds from sales of businesses................................................ 19,246 6,521 10,640 Purchases of other companies..................................................... (347,337) (986,790) (911,837) Payments of contingent purchase price............................................ (16,266) (8,216) (3,956) In-process acquisition costs..................................................... (4,285) (1,002) (241) --------- ----------- ----------- Net cash used in investing activities......................................... (962,938) (1,595,570) (1,349,925) --------- ----------- ----------- Cash Flows From Financing Activities: Proceeds from issuance of common stock, net of issuance costs.................... 64,701 207,005 Proceeds from the issuance of Series A Preferred, net of issuance costs.......... 287,000 Proceeds from the issuance of Series B Preferred, net of issuance costs.......... 143,800 Proceeds from debt............................................................... 456,202 1,083,616 1,263,637 Payments on debt................................................................. (134,599) (497,650) (685,667) Proceeds from sale-leaseback..................................................... 193,478 88,000 35,000 Proceeds from the issuance of redeemable convertible preferred securities........ 300,000 Payments of financing costs...................................................... (16,408) (19,443) (34,982) Proceeds from the exercise of common stock options............................... 331 26,989 619 Subchapter S distributions of a pooled entity.................................... (3,536) Shares repurchased and retired................................................... (30,950) --------- ----------- ----------- Net cash provided by financing activities..................................... 468,054 1,177,013 1,082,076 Effect of foreign exchange rates................................................. (7,264) 598 (281) --------- ----------- ----------- Net increase (decrease) in cash and cash equivalents............................. 10,573 3,401 (52,001) Cash and cash equivalents at beginning of year................................... 23,811 20,410 72,411 --------- ----------- ----------- Cash and cash equivalents at end of year......................................... $ 34,384 $ 23,811 $ 20,410 ========= =========== ===========

See accompanying notes. 32 UNITED RENTALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)

Year Ended December 31 ---------------------------------- 2000 1999 1998 --------- ---------- ---------- (In thousands) Supplemental disclosure of cash flow information: Cash paid for interest...................................................... $ 248,763 $ 124,285 $ 43,157 Cash paid for taxes, net of refunds......................................... $ 23,746 $ 17,509 $ 10,224 Supplemental schedule of non-cash investing and financing activities The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired.............................................. $ 565,114 $1,468,567 $1,501,467 Liabilities assumed....................................................... (142,277) (472,382) (518,861) Less: Amounts paid in common stock and warrants................................ (10,000) (60,304) Amounts paid through issuance of debt.................................... (65,500) (9,395) (10,465) --------- ---------- ---------- Net cash paid............................................................... $ 347,337 $ 986,790 $ 911,837 ========= ========== ==========

See accompanying notes. 33 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation United Rentals, Inc. is principally a holding company ("Holdings") and conducts its operations primarily through its wholly owned subsidiary United Rentals (North America), Inc. ("URI") and subsidiaries of URI. Holdings was incorporated in July 1998 and became the parent of URI on August 5, 1998, pursuant to the reorganization of the legal structure of URI described in Note 9. Prior to such reorganization, the name of URI was United Rentals, Inc. References herein to the "Company" refer to Holdings and its subsidiaries, with respect to periods following the reorganization, and to URI and its subsidiaries, with respect to periods prior to the reorganization. As a result of the reorganization, Holdings' primary asset is its sole ownership of all issued and outstanding shares of common stock of URI. URI's various credit agreements and debt instruments place restrictions on its ability to transfer funds to its shareholder. The Company rents a broad array of equipment to a diverse customer base that includes construction industry participants, industrial companies, homeowners and others in the United States, Canada and Mexico. The Company also engages in related activities such as selling rental equipment, acting as a distributor for certain new equipment and selling related merchandise and parts. The nature of the Company's business is such that short-term obligations are typically met by cash flow generated from long-term assets. Therefore, the accompanying balance sheets are presented on an unclassified basis. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, giving retroactive effect for the reorganization for all periods presented. All significant intercompany accounts and transactions have been eliminated. The accompanying consolidated financial statements for the year ended December 31, 1998 include the accounts of certain acquisitions completed in 1998 that were accounted for as poolings-of-interests, as described in Note 3. 2. Summary of Significant Accounting Policies Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Inventory Inventory consists of equipment, tools, parts, fuel and related supply items. Inventory is stated at the lower of cost or market and is net of a reserve for obsolescence and shrinkage of $15.5 million and $16.8 million at December 31, 2000 and 1999, respectively. Cost is determined on either a weighted average or first-in, first-out method. Rental Equipment Rental equipment is recorded at cost and depreciated over the estimated useful lives of the equipment using the straight-line method. The range of estimated useful lives for rental equipment is two to ten years. Rental equipment is depreciated to a salvage value of zero to ten percent of cost. Ordinary repair and maintenance costs are charged to operations as incurred. 34 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. The range of estimated useful lives for property and equipment is two to thirty-nine years. Ordinary repair and maintenance costs are charged to operations as incurred. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the remaining life of the lease, whichever is shorter. Intangible Assets Intangible assets consist of the excess of cost over the fair value of identifiable net assets of businesses acquired and non-compete agreements. The non-compete agreements are being amortized on a straight-line basis for a period ranging from three to eight years. The remaining intangible assets are being amortized on a straight-line basis over forty years. Long-Lived Assets Long-lived assets are recorded at the lower of amortized cost or fair value. As part of an ongoing review of the valuation of long-lived assets, the Company assesses the carrying value of such assets if facts and circumstances suggest they may be impaired. If this review indicates that the carrying value of these assets may not be recoverable, as determined by a nondiscounted cash flow analysis over the remaining useful life, the carrying value would be reduced to its estimated fair value. There have been no material impairments recognized in these financial statements. Derivative Financial Instruments Derivative financial instruments, which are periodically used by the Company in the management of its interest rate and foreign currency exposures, are accounted for on an accrual basis. Income and expense are recorded in the same category as that arising from the related asset or liability. The fair value of these agreements are not recognized in the financial statements. Derivative financial instruments are not used for trading purposes. Fair Value of Financial Instruments The carrying amounts reported in the balance sheets for accounts receivable, accounts payable, accrued expenses and other liabilities approximate fair value due to the immediate to short-term maturity of these financial instruments. The fair values of the Credit Facility, Term Loan B, Term Loan C, Term Loan D, receivables securitization and certain other debt are determined using current interest rates for similar instruments as of December 31, 2000 and 1999 and approximate the carrying value of these financial instruments due to the fact that the underlying instruments include provisions to adjust interest rates to approximate fair market value. The estimated fair value of the Company's other financial instruments at December 31, 2000 and 1999 are based upon available market information and are as follows:

2000 1999 -------------------------- -------------------------- Carrying Amount Fair Value Carrying Amount Fair Value --------------- ---------- --------------- ---------- (In thousands) Redeemable convertible preferred securities.................... $300,000 $133,125 $300,000 $192,375 Senior subordinated notes....... 951,153 702,500 950,653 906,400 Other debt...................... 94,086 94,086 73,745 73,745

Revenue Recognition Revenue related to the sale of equipment and merchandise is recognized at the time of delivery to, or pick-up by, the customer. Revenue related to rental equipment is recognized over the contract term. 35 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Advertising Expense The Company advertises primarily through trade publications and yellow pages. Advertising costs are expensed as incurred and totaled $23.8 million, $19.0 million and $13.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. Income Taxes The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between financial statement and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not realized in future periods. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash investments and accounts receivable. The Company maintains cash and cash equivalents with high quality financial institutions. Concentration of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company's customer base. No single customer represents greater than 10% of total accounts receivable. The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. Stock-Based Compensation The Company accounts for its stock based compensation arrangements under the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". Since stock options are granted by the Company with exercise prices at or greater than the fair value of the shares at the date of grant, no compensation expense is recognized. Insurance The Company is insured for general liability, workers' compensation, and group medical claims up to a specified claim and aggregate amounts (subject to a deductible of one million dollars). Insured losses subject to this deductible are accrued based upon the aggregate liability for reported claims incurred and an estimated liability for claims incurred but not reported. These liabilities are not discounted. Impact of Recently Issued Accounting Standards In June 1999, the Financial Accounting Standards Board ("FASB'') issued Statement of Financial Accounting Standards ("SFAS'') No. 137, "Accounting for Derivative Instruments and Hedging 36 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Activities--Deferral of the Effective Date of FASB Statement No. 133". This standard delays the effective date of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", for one year, to fiscal years beginning after June 15, 2000. SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities. The adoption of SFAS No. 133 on January 1, 2001 is not expected to have a material effect on the Company's consolidated financial position or results of operations. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities". This standard amends SFAS No. 133 and addresses a limited number of issues causing implementation difficulties. The Company will adopt SFAS No. 138 on January 1, 2001 and it is not expected to have a material effect on the Company's consolidated financial position or results of operations. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities--a replacement of FASB Statement No. 125". This standard revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This standard is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The adoption of SFAS No. 140 is not expected to have a material effect on the Company's consolidated financial position or results of operations. Reclassifications Certain prior year balances have been reclassified to conform to the 2000 presentation. 3. Acquisitions Acquisitions Accounted for as Poolings-of-Interests On August 24, 1998, the Company issued 2,744,368 shares of its common stock for all of the outstanding shares of common stock of Rental Tools. On September 24, 1998, the Company issued 1,456,997 shares of its common stock for all of the outstanding shares of common stock of Wynne Systems, Inc. This transaction was accounted for as a pooling-of-interests; however, this transaction was not material to the Company's consolidated operations and financial position and, therefore, the Company's financial statements have not been restated for this transaction but have been combined beginning July 1, 1998. On September 29, 1998, a merger (the "Merger") of United Rentals, Inc. and U.S. Rentals was completed. The Merger was effected by having a wholly owned subsidiary of United Rentals, Inc. merge with and into U.S. Rentals. Following the Merger, United Rentals, Inc. contributed the capital stock of U.S. Rentals to URI, a wholly owned subsidiary of United Rentals, Inc. Pursuant to the Merger, each outstanding share of common stock of U.S. Rentals was converted into the right to receive 0.9625 of a share of common stock of United Rentals, Inc. An aggregate of approximately 29.6 million shares of United Rentals, Inc. common stock were issued in the Merger in exchange for the outstanding shares of U.S. Rentals common stock. 37 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The table below shows the separate revenue and net income (loss) of the Company prior to the above mergers ("United"), U.S. Rentals and Rental Tools for periods prior to combination:

U.S. Rental United Rentals Tools Combined -------- -------- ------- -------- (In thousands) For the nine months ended September 30, 1998: Revenues.................................. $311,919 $451,101 $41,242 $804,262 Net income (loss)......................... (53,178) 43,670 4,695 (4,813)

Acquisitions Accounted for as Purchases The acquisitions completed during the years ended December 31, 2000, 1999 and 1998 include 53, 102 and 81 acquisitions, respectively, that were accounted for as purchases. The results of operations of the businesses acquired in these acquisitions have been included in the Company's results of operations from their respective acquisition dates. During 2000, the Company purchased the outstanding stock and certain assets of (i) Liddell Brothers Inc., in February, (ii) Safety Lites Sales and Leasing, Inc., in March, (iii) Durante Equipment Corp., Inc., in June, (iv) Horizon High Reach, Inc., in September, and (v) Wiese Planning & Engineering Inc., in December. The aggregate initial consideration paid for these five acquisitions that were accounted for as purchases was approximately $153.1 million and consisted of $83.8 million in cash and 761,905 shares of common stock and $59.3 million in seller notes. In addition, the Company repaid or assumed outstanding indebtedness of these companies acquired in the aggregate amount of approximately $5.5 million. The aggregate initial consideration paid by the Company for other 2000 acquisitions that were accounted for as purchases was $210.2 million and consisted of approximately $184.6 million in cash and $6.2 million in seller notes. In addition, the Company repaid or assumed outstanding indebtedness of the companies acquired in the other 2000 acquisitions in the aggregate amount of $77.5 million. During 1999, the Company purchased the outstanding stock and certain assets of (i) National Equipment Finance Company, in June, (ii) Mi-Jack Products, Inc. and related entities, in May, (iii) Elmen Rent All, Inc., in June (iv) Forte, Inc., in March, and (v) Arayco, Inc. in June. The aggregate initial consideration paid for these five acquisitions that were accounted for as purchases was approximately $275.4 million and consisted of $270.4 million in cash and $5.0 million in seller notes. In addition, the Company repaid or assumed outstanding indebtedness of these companies acquired in the aggregate amount of approximately $99.8 million. The aggregate initial consideration paid by the Company for other 1999 acquisitions accounted for as purchases was $663.6 million and consisted of approximately $659.2 million in cash and $4.4 million in seller notes. In addition, the Company repaid or assumed outstanding indebtedness of the companies acquired in the other 1999 acquisitions in the aggregate amount of approximately $239.3 million. In January 1998 the Company purchased the outstanding stock and certain assets of (i) Access Rentals, Inc. and Affiliate, (ii) the BNR Group of Companies and (iii) Mission Valley Rentals, Inc. The aggregate initial consideration paid by the Company for these three acquisitions that were accounted for as purchases was $88.7 million and consisted of approximately $81.4 million in cash and 370,231 38 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) shares of common stock and warrants to purchase an aggregate of 30,000 shares of the Company's common stock. In addition, the Company repaid or assumed outstanding indebtedness of these three companies acquired in the aggregate amount of $64.0 million. Also during 1998, the Company purchased the outstanding stock and certain assets of (i) Power Rental Co., Inc., in June (ii) Equipment Supply Co., Inc. and Affiliates in June and (iii) McClinch Inc. and Subsidiaries and McClinch Equipment Services, Inc. in September. The aggregate initial consideration paid by the Company for these three acquisitions that were accounted for as purchases was $298.4 million and consisted of approximately $278.0 million in cash and 496,063 shares of common stock. In addition, the Company repaid or assumed outstanding indebtedness of these three companies acquired in the aggregate amount of $155.4 million. The aggregate initial consideration paid by the Company for other 1998 acquisitions that were accounted for as purchases was $550.4 million and consisted of approximately $507.3 million in cash and 1,083,997 shares of common stock, and seller notes of $10.5 million. In addition, the Company repaid or assumed outstanding indebtedness of the other companies acquired in 1998 in the aggregate amount of $211.8 million. The purchase prices for all acquisitions accounted for as purchases have been allocated to the assets acquired and liabilities assumed based on their respective fair values at their respective acquisition dates. However, the Company has not completed its valuation of all of its purchases and, accordingly, the purchase price allocations are subject to change when additional information concerning asset and liability valuations are completed. The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company for the years ended December 31, 2000 and 1999 as though each acquisition described above was made on January 1, for each of the periods.

2000 1999 ---------- ---------- (In thousands, except per share data) Revenues.................. $3,095,872 $2,956,543 Net income................ 182,342 154,084 Basic earnings per share.. $ 2.54 $ 2.14 ========== ========== Diluted earnings per share $ 1.94 $ 1.64 ========== ==========

The unaudited pro forma results are based upon certain assumptions and estimates which are subject to change. These results are not necessarily indicative of the actual results of operations that might have occurred, nor are they necessarily indicative of expected results in the future. Merger-Related Expenses, Extraordinary Item and Other Costs The results of operations for the year ended December 31, 1999 include pre-tax expenses related to a terminated tender offer totaling approximately $18.2 million ($10.8 million after tax), primarily consisting of $8.3 million in professional fees recorded in selling, general and administrative expense and $9.9 million in financing commitment fees recorded in other (income) expense, net. The results of operations for the year ended December 31, 1998, include pre-tax expenses related to three acquisitions accounted for as poolings-of-interests totaling approximately $47.2 million 39 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) ($33.2 million after-tax), consisting of (i) $18.5 million for investment banking, legal, accounting services and other merger costs, (ii) $14.5 million of expenses relating to the closing of duplicate facilities, (iii) $8.2 million for employee severance and related matters, (iv) $2.1 million for the write down of computer systems acquired through the U.S. Rentals merger and one of the other acquisitions accounted for as a pooling-of-interests and (v) $3.9 million in other expenses. The Company recorded a pre-tax extraordinary item of $35.6 million ($21.3 million after-tax) in 1998. The charge related to the early extinguishment of debt primarily related to the Merger with U.S. Rentals. 4. Rental Equipment Rental equipment consists of the following:

December 31 ----------------------- 2000 1999 ---------- ---------- (In thousands) Rental equipment............. $2,281,994 $2,098,624 Less accumulated depreciation (549,159) (438,891) ---------- ---------- Rental equipment, net........ $1,732,835 $1,659,733 ---------- ----------

5. Property and Equipment Property and equipment consist of the following:

December 31 -------------------- 2000 1999 --------- -------- (In thousands) Land.......................................... $ 53,612 $ 50,143 Buildings..................................... 104,925 91,934 Transportation equipment...................... 228,265 139,944 Machinery and equipment....................... 36,587 31,484 Furniture and fixtures........................ 56,109 46,507 Leasehold improvements........................ 48,952 26,387 --------- -------- 528,450 386,399 Less accumulated depreciation and amortization (106,211) (81,492) --------- -------- Property and equipment, net................... $ 422,239 $304,907 ========= ========

6. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consist of the following:

December 31 ----------------- 2000 1999 -------- -------- (In thousands) Accrued profit sharing $ 39,485 $ 39,052 Accrued insurance..... 15,428 22,738 Accrued interest...... 36,993 37,477 Other................. 44,319 110,662 -------- -------- $136,225 $209,929 ======== ========

40 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. Debt Debt consists of the following:

December 31 --------------------- 2000 1999 ---------- ---------- (In thousands) Credit Facility, interest payable at a weighted average rate of 7.8% and 6.9% at December 31, 2000 and 1999, respectively.............................................. $ 337,000 $ 243,000 Term Loan B, interest payable at 8.89% and 8.71% at December 31, 2000 and 1999, respectively.................. 246,875 248,750 Term Loan C, interest payable at 9.26% and 8.96% at December 31, 2000 and 1999, respectively.................. 748,125 750,000 Term Loan D, interest payable at a weighted average rate of 9.18% at December 31, 2000................................ 198,128 Senior Subordinated Notes, interest payable semi-annually, (9 1/2% at December 31, 2000 and 1999).................... 200,000 200,000 Senior Subordinated Notes, interest payable semi-annually, (8.80% at December 31, 2000 and 1999)..................... 201,153 200,653 Senior Subordinated Notes, interest payable semi-annually, (9 1/4% at December 31, 2000 and 1999).................... 300,000 300,000 Senior Subordinated Notes, interest payable semi-annually, (9% at December 31, 2000 and 1999)........................ 250,000 250,000 Receivables securitization, interest payable at 7.44% at December 31, 2000......................................... 100,000 Other debt, interest payable at various rates ranging from 4% to 11% and 6% to 12.3% at December 31, 2000 and 1999, respectively, due through 2007...................... 94,086 73,745 ---------- ---------- $2,675,367 $2,266,148 ========== ==========

Credit Facility. The Company has a credit facility (the "Credit Facility") which enables URI to borrow up to $827.5 million on a revolving basis and permits a Canadian subsidiary of URI (the "Canadian Subsidiary") to directly borrow up to $40.0 million under the Credit Facility (provided that the aggregate borrowings of URI and the Canadian Subsidiary do not exceed $827.5 million). Up to $50.0 million ($1.4 million outstanding at December 31, 2000) of the Credit Facility is available in the form of letters of credit. The agreement governing the Credit Facility requires that the aggregate commitment shall be reduced on the last day of each calendar quarter, beginning September 30, 2001 and continuing through June 30, 2003, by an amount equal to $20.7 million. The Credit Facility terminates on September 26, 2003, at which time all outstanding indebtedness is due. Borrowings by URI under the Credit Facility accrue interest at URI's option, at either (a) the Base Rate (which is equal to the greater of (i) the Federal Funds Rate plus 0.5% or (ii) Bank of America's reference rate) or (b) the Eurodollar Rate (which for borrowings by URI is equal to Bank of America's reserve adjusted eurodollar rate) plus a margin ranging from 1.200% to 1.875% per annum. Borrowings by the Canadian Subsidiary under the Credit Facility accrue interest, at such subsidiary's option, at either (x) the Prime Rate (which is equal to Bank of America Canada's prime rate), (y) the BA Rate (which is equal to Bank of America Canada's BA Rate) plus a margin ranging from 1.200% to 1.875% per annum or (z) the Eurodollar Rate (which for borrowing by the Canadian Subsidiary is equal 41 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) to Bank of America Canada's reserve adjusted Eurodollar Rate) plus a margin ranging from 1.200% to 1.875% per annum. If at any time an event of default (as defined in the agreement governing the Credit Facility) exists, the interest rate applicable to each loan will increase by 2% per annum. The Company is also required to pay the banks an annual facility fee equal to 0.375% of the banks' $827.5 million aggregate lending commitment under the Credit Facility (which fee may be reduced to 0.300% for periods during which the Company maintains a specified funded debt to cash flow ratio). The obligations of URI under the Credit Facility are (i) secured by substantially all of its assets, the stock of its United States subsidiaries and a portion of the stock of URI's Canadian subsidiaries and (ii) guaranteed by Holdings and secured by the stock of URI. The obligations of the Canadian Subsidiary under the Credit Facility are guaranteed by URI and secured by substantially all of the assets of the Canadian Subsidiary and the stock of the subsidiaries of the Canadian Subsidiary. The Credit Facility contains certain covenants that require the Company to, among other things, satisfy certain financial tests relating to: (a) maximum leverage, (b) the ratio of senior debt to cash flow, (c) minimum interest coverage ratio, (d) the ratio of funded debt to cash flow, and (e) the ratio of senior debt to tangible assets. The agreements governing the Credit Facility also contain various other covenants that restrict the Company's ability to, among other things, (i) incur additional indebtedness, (ii) permit liens to attach to its assets, (iii) pay dividends or make other restricted payments on its common stock and certain other securities and (iv) make acquisitions unless certain financial conditions are satisfied. In addition, the agreement governing the Credit Facility (a) requires the Company to maintain certain financial ratios and (b) provides that failure by any two of certain of the Company's executive officers to continue to hold executive positions with the Company for a period of 30 consecutive days constitutes an event of default unless replacement officers satisfactory to the lenders are appointed. Term Loan B. URI obtained a $250.0 million term loan (the "Term Loan B") from a group of financial institutions. The Term Loan B matures on June 30, 2005. Prior to maturity, quarterly installments of principal in the amount of $0.6 million are due on the last day of each calendar quarter, commencing September 30, 1999. The amount due at maturity is $235.6 million. The Term Loan B accrues interest, at URI's option, at either (a) the Base Rate (as defined above with respect to the Credit Facility) plus a margin of 0.375% per annum, or (b) the Eurodollar Rate (as defined above with respect to the Credit Facility for borrowings by the Company) plus a margin of 2.25% per annum. The Term Loan B is secured pari passu with the Credit Facility and the agreement governing the Term Loan B contains restrictive covenants substantially similar to those provided under the Credit Facility. Term Loan C. URI obtained a $750.0 million term loan from a group of financial institutions (the "Term Loan C"). The Term Loan C matures in June 2006. Prior to maturity, quarterly installments of principal in the amount of $1.9 million are due on the last day of each calendar quarter, commencing September 30, 2000. The amount due at maturity is $706.3 million. The Term Loan C accrues interest, at URI's option, at either (a) the Base Rate (as defined above with respect to the Credit Facility) plus a margin of 0.625% per annum, or (b) the Eurodollar Rate (as defined above with respect to the Credit Facility) plus a margin of 2.50% per annum. The Term Loan C is secured pari passu with the Credit Facility and the agreement governing the Term Loan C contains restrictive covenants substantially similar to those provided under the Credit Facility. Term Loan D. URI obtained a $200.0 million term loan from a financial institution (the "Term Loan D"). The Term Loan D matures in June 2006. Prior to maturity, quarterly installments of principal 42 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) are due on the last day of each calendar quarter, in the amount of $0.25 million on September 30, 2000 and in the amount of $0.5 million commencing December 31, 2000 to maturity. The amount due at maturity is $188.5 million. The Term Loan D accrues interest, at URI's option, at either (a) the Base Rate (as defined above with respect to the Credit Facility) plus a margin of 0.625% per annum, or (b) the Eurodollar Rate (as defined above with respect to the Credit Facility) plus a margin of 2.5% per annum. The Term Loan D is secured pari passu with the Credit Facility, and the agreement governing the Term Loan D contains restrictive covenants substantially similar to those provided under the Credit Facility. At December 31, 2000, the Company had interest rate protection in the form of swap agreements with an aggregate notional amount of $200.0 million. The effect of these agreements is to limit the interest rate exposure to 8.75% on $200.0 million of Term Loan B. The overall weighted average interest rate on the Term Loan B was 8.80% at December 31, 2000. While it is not the Company's intention to terminate the interest rate swap agreements, the fair values were estimated by obtaining quotes from brokers which represented the amounts that the Company would receive or pay if the agreements were terminated. These fair values indicated that termination of the agreements at December 31, 2000, would have resulted in a pretax loss of $4.3 million. 9 1/2% Senior Subordinated Notes. URI issued $200.0 million aggregate principal amount of 9 1/2% senior subordinated notes, (the "9 1/2 Notes") which are due June 1, 2008. The 9 1/2% Notes are unsecured. URI may, at its option, redeem the 9 1/2% Notes on or after June 1, 2003 at specified redemption prices which range from 104.75% in 2003 to 100.0% in 2006 and thereafter. In addition, on or prior to June 1, 2001, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 9 1/2% Notes, at a redemption price of 109.5%. The indenture governing the 9 1/2% Notes contains certain restrictive covenants, including (i) limitations on additional indebtedness, (ii) limitations on restricted payments, (iii) limitations on liens, (iv) limitations on dividends and other payment restrictions, (v) limitations on preferred stock of certain subsidiaries, (vi) limitations on transactions with affiliates, (vii) limitations on the disposition of proceeds of asset sales and (viii) limitations on the ability of the Company to consolidate, merge or sell all or substantially all of its assets. 8.80% Senior Subordinated Notes. URI issued $205.0 million aggregate principal amount of 8.80% senior subordinated notes, (the "8.80% Notes") which are due August 15, 2008. The 8.80% Notes are unsecured. URI may, at its option, redeem the 8.80% Notes on or after August 15, 2003 at specified redemption prices which range from 104.4% in 2003 to 100.0% in 2006 and thereafter. In addition, on or prior to August 15, 2001, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 8.80% Notes, at a redemption price of 108.8%. The indenture governing the 8.80% Notes contains restrictions substantially similar to those applicable to the 9 1/2% Notes. 9 1/4% Senior Subordinated Notes. URI issued $300.0 million aggregate principal amount of 9 1/4% senior subordinated notes, (the "9 1/4% Notes") which are due January 15, 2009. The 9 1/4% Notes are unsecured. URI may, at its option, redeem the 9 1/4% Notes on or after January 15, 2004 at specified redemption prices which range from 104.625% in 2004 to 100.0% in 2007 and thereafter. In addition, on or prior to January 15, 2002, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 9 1/4% Notes, at a redemption price of 109.25%. The indenture governing the 9 1/4% Notes contains restrictions substantially similar to those applicable to the 9 1/2% Notes. 43 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9% Senior Subordinated Notes. URI issued $250.0 million aggregate principal amount of 9% senior subordinated notes, (the "9% Notes") which are due April 1, 2009. The 9% Notes are unsecured. URI may, at its option, redeem the 9% Notes on or after April 1, 2004 at specified redemption prices which range from 104.5% in 2004 to 100.0% in 2007 and thereafter. In addition, on or prior to April 1, 2002, URI may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding 9% Notes, at a redemption price of 109.0%. The indenture governing the 9% Notes contains restrictions substantially similar to those applicable to the 9 1/2% Notes. Receivables Securitization. In December 2000, the Company obtained $100.0 million through the securitization of certain of its accounts receivable. In the securitization, the Company transferred $203.0 million of its accounts receivable to a special purpose subsidiary (the "SPV") which in turn pledged those receivables to secure $100.0 million of borrowings that the SPV incurred to finance its acquisition of those receivables from the Company. These borrowings accrue interest at Credit Lyonnais' blended commercial paper rate plus a margin of 0.75% per annum. These borrowings are an obligation of the SPV and not of Holdings or URI, and the lenders' recourse in respect of the borrowings is generally limited to collections that the SPV receives on the receivables. Collections on the receivables are used to service the borrowings. Subject to certain conditions, collections from the receivables may also be used by the SPV from time to time until December 2003 to acquire additional accounts receivables from the Company that the SPV will pledge to the lenders to secure the borrowings. Maturities of the Company's debt for each of the next five years at December 31, 2000 are as follows (In thousands):

2001...... $ 33,787 2002...... 29,512 2003...... 464,498 2004...... 33,984 2005...... 250,043 Thereafter 1,863,543

44 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8. Income Taxes The provision for historical federal and state income taxes is as follows:

Year ended December 31 ------------------------- 2000 1999 1998 -------- ------- ------- (In thousands) Historical: Domestic federal: Current............ $ 10,419 $39,643 $14,291 Deferred........... 97,756 37,598 21,047 -------- ------- ------- 108,175 77,241 35,338 Domestic state: Current............ 3,587 10,405 1,067 Deferred........... 6,815 3,437 7,020 -------- ------- ------- 10,402 13,842 8,087 -------- ------- ------- Total domestic..... 118,577 91,083 43,425 Foreign federal: Current............ 1,061 4,917 519 Deferred........... 3,590 465 (492) -------- ------- ------- 4,651 5,382 27 Foreign provincial: Current............ 774 2,356 277 Deferred........... 1,119 320 (230) -------- ------- ------- 1,893 2,676 47 -------- ------- ------- Total foreign...... 6,544 8,058 74 -------- ------- ------- $125,121 $99,141 $43,499 ======== ======= =======

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

Year ended December 31 -------------------------- 2000 1999 1998 -------- ------- ------- (In thousands) Computed tax rate at statutory tax rate.................... $105,524 $84,632 $27,404 State income taxes, net of federal tax benefit............. 6,762 8,997 4,177 Non-deductible expenses.................................... 9,992 6,265 7,400 Provision for deferred taxes of Subchapter S Corporation at time of pooling.......................................... 4,750 Other...................................................... 2,843 (753) (232) -------- ------- ------- $125,121 $99,141 $43,499 ======== ======= =======

45 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The components of deferred income tax assets (liabilities) are as follows:

December 31 --------------------- 2000 1999 --------- --------- (In thousands) Property and equipment..................... $(298,058) $(175,180) Intangibles................................ (32,518) (13,188) Reserves and allowances.................... 37,460 48,577 Net operating loss and credit carryforwards 84,257 56,266 Other...................................... 2,616 2,296 --------- --------- $(206,243) $ (81,229) ========= =========

The current and deferred tax assets and liabilities at December 31, 2000 include the effects of certain reclassifications related to differences between the income tax provisions and tax returns for prior years. These reclassifications had no effect on net income. For financial reporting purposes, income before income taxes and extraordinary items for the Company's foreign subsidiaries was $15.6 million and $19.9 million for the years ended December 31, 2000 and 1999, respectively. At December 31, 2000 and 1999, unremitted earnings of foreign subsidiaries were approximately $22.9 million and $13.8 million, respectively. Since it is the Company's intention to indefinitely reinvest these earnings, no United States taxes have been provided. Determination of the amount of unrecognized deferred tax liability on these unremitted taxes is not practicable. The Company has net operating loss carryforwards ("NOL's") of $138.2 million for federal income tax purposes that expire through 2018. 9. Holding Company Reorganization URI was formerly named United Rentals, Inc. On August 5, 1998, a reorganization was effected pursuant to which (i) URI became a wholly owned subsidiary of Holdings, a newly formed holding company, (ii) the name of URI was changed from United Rentals, Inc. to United Rentals (North America), Inc., (iii) the name of the new holding company became United Rentals, Inc., (iv) the outstanding common stock of URI was automatically converted, on a share-for-share basis, into common stock of Holdings and (v) the common stock of Holdings commenced trading on the New York Stock Exchange under the symbol "URI" instead of the common stock of URI. The purpose of the reorganization was to facilitate certain financings. The business operations of the Company did not change as a result of the new legal structure. The stockholders of Holdings have the same rights, privileges and interests with respect to Holdings as they had with respect to URI immediately prior to the reorganization. 10. Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of a Subsidiary Trust In August 1998, a subsidiary trust (the "Trust") of Holdings issued and sold in a private offering (the "Preferred Securities Offering") $300.0 million of 30 year, 6 1/2% Convertible Quarterly Income Preferred Securities (the "Preferred Securities"). The net proceeds from the Preferred Securities Offering were approximately $290.0 million. The Trust used the proceeds from the Preferred Securities Offering to purchase 6 1/2% convertible subordinated debentures due 2028 (the "Debentures") from Holdings which resulted in Holdings receiving all of the net proceeds of the Preferred Securities Offering. Holdings in turn contributed the net proceeds of the Preferred Securities Offering to URI. The Preferred Securities are non-voting securities, carry a liquidation value of $50 per security and are 46 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) convertible into the Company's common stock at an initial rate of 1.146 shares per security (equivalent to an initial conversion price of $43.63 per share). They are convertible at any time at the holders' option and are redeemable, at the Company's option, after three years, subject to certain conditions. Holders of the Preferred Securities are entitled to preferential cumulative cash distributions from the Trust at an annual rate of 6 1/2% of the liquidation value, accruing from the original issue date and payable quarterly in arrears beginning February 1, 1999. The distribution rate and dates correspond to the interest rate and payments dates on the Debentures. Holdings may defer interest payments on the Debentures for up to twenty consecutive quarters, but not beyond the maturity date of the Debentures. If interest payments on the Debentures are deferred, so are the payments on the Preferred Securities. Under this circumstance, Holdings will be prohibited from paying dividends on any of its capital stock or making payments with respect to its debt that rank pari passu with or junior to the Debentures. Holdings has executed a guarantee with regard to payment of the Preferred Securities to the extent that the Trust has sufficient funds to make the required payments. 11. Capital Stock Series A Perpetual Convertible Preferred Stock. On January 7, 1999, Holdings sold 300,000 shares of its Series A Perpetual Convertible Preferred Stock ("Series A Preferred"). Subject to certain thresholds related to the aggregate number of shares issuable upon conversion of Series A Preferred, the holders of the Series A Preferred, voting separately as a single class, have the right, on an as-converted basis, to elect up to two directors. Currently, holders of the Series A Preferred may elect two directors. Except for the election of directors, the holders of the Series A Preferred have the same voting rights as those belonging to holders of Holdings common stock. The net proceeds from the sale of the Series A Preferred were approximately $287.0 million. Holdings contributed such net proceeds to URI. The Series A Preferred is convertible into 12,000,000 shares of Holdings common stock at $25 per share based upon a liquidation preference of $1,000 per share of Series A Preferred, subject to adjustment. The Series A Preferred has no stated dividend. However, in the event Holdings declares or pays any dividends on, or distributions of, its common stock, it must (subject to certain exceptions) also declare and pay to the holders of Series A Preferred the dividends and distributions which would have been declared and paid upon conversion of the Series A Preferred. Series B Perpetual Convertible Preferred Stock. On September 30, 1999, Holdings sold 150,000 shares of its Series B Perpetual Convertible Preferred Stock ("Series B Preferred"). The Series B Preferred is divided into two classes designated as Class B-1 and Class B-2. Other than voting rights, the classes are substantially the same. The holders of the 105,252 shares of Class B-1 are entitled to the same voting rights, on an as-converted basis, as those belonging to holders of Holdings common stock. The holders of the 44,748 shares of Class B-2 have no such voting rights. The net proceeds from the sale of the Series B Preferred were approximately $143.8 million. Holdings contributed such net proceeds to URI. The Series B Preferred is convertible into 5,000,000 shares of Holding's common stock at $30 per share based upon a liquidation preference of $1,000 per share of Series B Preferred, subject to adjustment. The Series B Preferred has no stated dividend. However, in the event Holdings declares or pays any dividends on, or distributions of, its common stock, it must (subject to certain exceptions) also declare and pay to the holders of Series B Preferred the dividends and distributions which would have been declared and paid upon conversion of the Series B Preferred. 47 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Warrants. As of December 31, 2000 there are outstanding warrants to purchase an aggregate of 7,094,296 shares of common stock. The weighted average exercise price of the warrants is $11.76 per share. All warrants are currently exercisable and may be exercised at any time through 2009. Common Stock. On March 9, 1999, Holdings completed a public offering of 2,290,000 shares of common stock. The net proceeds to the Company from this offering were approximately $64.7 million (after deducting underwriting discounts and offering expenses). Holdings contributed such net proceeds to URI. During 2000, the Company approved a share repurchase program to acquire up to $200 million of its issued and outstanding common stock. Share repurchases under the program may be made from time to time, continuing through May 2002. During 2000, the Company repurchased and retired 1,785,015 shares of common stock. 1997 Stock Option Plan. The Company's 1997 Stock Option Plan provides for the granting of options to purchase not more than an aggregate of 5,000,000 shares of common stock. Some or all of such options may be "incentive stock options" within the meaning of the Internal Revenue Code. All officers, directors and employees of the Company and other persons who perform services on behalf of the Company are eligible to participate in this plan. Each option granted pursuant to this plan must provide for an exercise price per share that is at least equal to the fair market value per share of common stock on the date of grant. No options may be granted under this plan after August 31, 2007. As of December 31, 2000 and 1999, options to purchase an aggregate of 4,950,536 shares and 4,731,183 shares of common stock, respectively, were outstanding under this plan. The exercise price of each option, the period during which each option may be exercised and other terms and conditions of each option are determined by the Board of Directors (or by a committee appointed by the Board of Directors). 1998 Stock Option Plan. The Company's 1998 Stock Option Plan provides for the granting of options to purchase not more than an aggregate of 4,200,000 shares of common stock. Some or all of the options issued under the 1998 Stock Option Plan may be "incentive stock options" within the meaning of the Internal Revenue Code. All officers and directors of the Company and its subsidiaries are eligible to participate in the 1998 Stock Option Plan. Each option granted pursuant to the 1998 Stock Option Plan must provide for an exercise price per share that is at least equal to the fair market value per share of common stock on the date of grant. No options may be granted under the 1998 Stock Option Plan after August 20, 2008. As of December 31, 2000 and 1999, options to purchase an aggregate of 4,200,000 shares of common stock were outstanding pursuant to this plan to executive officers and directors. The exercise price of each option, the period during which each option may be exercised and other terms and conditions of each option are determined by the Board of Directors (or by a committee appointed by the Board of Directors). 1998 Supplemental Stock Option Plan. The Company has adopted a stock option plan pursuant to which options, for up to an aggregate of 5,600,000 shares of common stock, may be granted to employees who are not officers or directors and to consultants and independent contractors who perform services for the Company or its subsidiaries. As of December 31, 2000 and 1999, options to purchase an aggregate of 5,373,509 shares and 4,140,384 shares of common stock, respectively, were outstanding pursuant to this plan. The exercise price of each option, the period during which each option may be exercised and other terms and conditions of each option are determined by the Board of Directors (or by a committee appointed by the Board of Directors). 1997 Performance Award Plan. Effective February 20, 1997, U.S. Rentals adopted the 1997 Performance Award Plan under which stock options and other awards could be granted to key employees and directors at prices and terms established by U.S. Rentals at the date of grant. The options expire in 2007. As a result of the Merger, all outstanding options to purchase shares of U.S. 48 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Rentals common stock became fully vested and were converted into options to purchase the Company's common stock. As of December 31, 2000 and 1999, options to purchase an aggregate of 2,572,050 shares and 2,581,675 shares of common stock , respectively, were outstanding pursuant to this plan. A summary of the transactions within the Company's stock option plans follows:

Weighted Average Exercise Shares Price ---------- -------- Outstanding at January 1, 1998.. 4,825,699 $19.52 Granted...................... 9,453,718 19.78 Exercised.................... (25,025) 20.78 Canceled..................... (209,578) 22.94 ---------- -------- Outstanding at December 31, 1998 14,044,814 19.60 Granted...................... 3,092,462 26.77 Exercised.................... (1,331,528) 20.74 Canceled..................... (152,506) 26.70 ---------- -------- Outstanding at December 31, 1999 15,653,242 20.86 Granted...................... 1,921,125 16.56 Exercised.................... (26,307) 16.91 Canceled..................... (451,965) 27.03 ---------- -------- Outstanding at December 31, 2000 17,096,095 $20.23 ========== ======== Exercisable at December 31, 2000 11,906,938 $19.58 ========== ========

Options Outstanding Options Exercisable -------------------------------- -------------------- Weighted Average Weighted Weighted Remaining Average Average Amount Contractual Exercise Amount Exercise Range of Exercise Prices Outstanding Life Price Exercisable Price ------------------------ ----------- ----------- -------- ----------- -------- $10.00 - $15.00......... 4,722,077 7.7 years $12.38 4,317,980 $12.30 15.01 - 20.00......... 1,995,359 9.0 years 16.79 293,787 18.72 20.01 - 25.00......... 7,146,663 7.1 years 21.77 5,543,191 21.64 25.01 - 30.00......... 1,821,230 8.2 years 27.33 888,666 27.27 30.01 - 50.00......... 1,410,766 7.4 years 34.67 863,314 35.08 ----------- ----------- 17,096,095. 7.6 years 20.23 11,906,938 19.58 =========== ===========

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting for stock-based employee compensation arrangements whereby no compensation cost related to stock options is deducted in determining net income. Had compensation cost for the Company's stock option plans been determined pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's net income and earnings per share would have differed. The weighted average fair value of options granted was $7.70, $10.99 and $11.94 during 2000, 1999 and 1998, respectively. The fair value is estimated on the date of grant using the Black-Scholes option pricing model which uses subjective assumptions which can materially affect fair value estimates and, therefore, does not necessarily provide a single measure of fair value of options. Using the Black-Scholes option pricing model and a risk-free interest rate average of 5.15%, 6.29% and 4.6% in 2000, 49 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 1999 and 1998, respectively, a volatility factor for the market price of the Company's common stock of 69%, 52% and 85% in 2000, 1999 and 1998, respectively, and a weighted-average expected life of options of approximately three years in 2000, 1999 and 1998, the Company's net income (loss), basic earnings (loss) per share and diluted earnings (loss) per share would have been $156.4 million, $2.20 and $1.69, respectively, for the year ended December 31, 2000, $104.3 million, $1.46 and $1.12, respectively, for the year ended December 31, 1999, and $(13.3 million), $(0.20) and $(0.20), respectively, for the year ended December 31, 1998. For purposes of these pro forma disclosures, the estimated fair value of options is amortized over the options' vesting period. Since the number of options granted and their fair value may vary significantly from year to year, the pro forma compensation expense in future years may be materially different. At December 31, 2000 there are (i) 7,094,296 shares of common stock reserved for the exercise of warrants, (ii) 17,338,256 shares of common stock reserved for issuance pursuant to options granted and that may be granted in the future under the Company's stock option plans, (iii) 6,875,580 shares of common stock reserved for the issuance of outstanding preferred securities of a subsidiary trust, (iv) 17,000,000 shares of common stock reserved for the issuance of Series A and Series B preferred stock and (v) 232,586 shares of common stock reserved for the conversion of convertible debt. 50 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 12. Earnings Per Share The following table sets forth the computation of historical basic and diluted earnings per share:

Year Ended December 31 ----------------------------------- 2000 1999 1998 ----------- ----------- ----------- (In thousands, except share and per share data) Numerator: Income before extraordinary item............ $ 176,375 $ 142,666 $ 34,798 Plus: preferred dividends of a subsidiary trust, net of taxes....................... 11,406 ----------- ----------- ----------- Income available to common stockkholders.... $ 187,781 $ 142,666 $ 34,798 =========== =========== =========== Denominator: Denominator for basic earnings per share- weighted-average shares................... 71,069,174 71,353,127 66,225,492 Effect of dilutive securities: Employee stock options.................... 1,517,015 4,651,237 2,641,194 Warrants.................................. 2,791,387 3,978,536 4,208,434 Series A Preferred........................ 12,000,000 11,802,740 Series B Preferred........................ 5,000,000 1,250,000 Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust........ 6,876,003 ----------- ----------- ----------- Denominator for dilutive earnings per share- adjusted weighted-average shares.......... 99,253,579 93,035,640 73,075,120 =========== =========== =========== Earnings per share-basic: Income before extraordinary item............ $ 2.48 $ 2.00 $ 0.53 Extraordinary item, net..................... 0.33 ----------- ----------- ----------- Net income.................................. $ 2.48 $ 2.00 $ 0.20 =========== =========== =========== Earnings per share-diluted: Income before extraordinary item............ $ 1.89 $ 1.53 $ 0.48 Extraordinary item, net..................... 0.30 ----------- ----------- ----------- Net income.................................. $ 1.89 $ 1.53 $ 0.18 =========== =========== ===========

51 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 13. Commitments and Contingencies Operating Leases The Company leases rental equipment, real estate and certain office equipment under operating leases. Certain real estate leases require the Company to pay maintenance, insurance, taxes and certain other expenses in addition to the stated rentals. Future minimum lease payments, by year and in the aggregate, for noncancellable operating leases with initial or remaining terms of one year or more are as follows at December 31, 2000:

Real Rental Other Estate Equipment Equipment Leases Leases Leases -------- --------- --------- (In thousands) 2001...... $ 51,815 $ 98,158 $17,318 2002...... 46,464 93,864 15,372 2003...... 42,739 77,597 12,076 2004...... 39,706 55,889 10,827 2005...... 34,153 43,352 2,487 Thereafter 108,175 34,830 -------- --------- --------- $323,052 $403,690 $58,080 ======== ========= =========

The Company was the seller-lessee in sale-leaseback transactions in 2000 where it sold rental equipment for aggregate proceeds of $218.8 million, in 1999 where it sold rental equipment for aggregate proceeds of $88.0 million and in 1998 where it sold rental equipment for aggregate proceeds of $35.0 million. For the 2000 transactions, the Company agreed to lease back the rental equipment over periods ranging from eight months to five years. In connection with the 2000 transactions, the Company recognized a gain of $12.5 million and recorded deferred gains on the sales of approximately $4.0 million. For the 1999 transaction, the Company agreed to lease back the rental equipment over a five year period beginning December 1999 and will recognize a deferred gain on the sale of approximately $6.3 million over the five year period. For the 1998 transaction, the Company agreed to lease back the rental equipment over a five year period beginning December 1998 and will recognize a deferred gain on the sale of approximately $0.6 million over the five year period. The future payments under these leases are included in the table above. Rent expense under non-cancelable operating leases totaled $137.3 million, $65.5 million and $20.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. The Company's real estate leases provide for varying terms and include 24 leases that are on a month-to-month basis and 42 leases that provide for a remaining term of less than one year and do not provide a renewal option. Employee Benefit Plans The Company currently sponsors one defined contribution 401(k) retirement plan which is subject to the provisions of ERISA. The Company also sponsors a deferred profit sharing plan for the benefit of the full time employees of its Canadian subsidiaries. Under these plans, the Company matches a percentage of the participants contributions up to a specified amount. Company contributions to the plans were $6.2 million, $4.6 million and $1.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. Legal Matters The Company is party to legal proceedings and potential claims arising in the ordinary course of its business. In the opinion of management, the Company has adequate legal defenses, reserves, or 52 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) insurance coverage with respect to these matters so that the ultimate resolution will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. The Company had accrued $7.6 million and $13.7 million at December 31, 2000 and 1999, respectively, to cover the uninsured portion of possible costs arising from these pending claims and other potential unasserted claims. Environmental Matters The Company and its operations are subject to various laws and related regulations governing environmental matters. Under such laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in, or emanating from, such property, as well as investigation of property damage. The Company incurs ongoing expenses associated with the removal of underground storage tanks and the performance of appropriate remediation at certain of its locations. The Company believes that such removal and remediation will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. 14. Segment Information The Company operates in one industry segment consisting of the rental and sales of equipment and related merchandise and parts. The Company's operations are managed as one segment, or strategic unit, because it offers similar products and services in similar markets and the factors determining strategic decisions are comparable for all products and services. The Company operates in the United States, Canada and Mexico. Revenues are attributable to countries based upon the location of the customers. Geographic area information for the years ended December 31, 2000, 1999 and 1998 is as follows:

Year ended December 31 -------------------------------- 2000 1999 1998 ---------- ---------- ---------- (In thousands) Revenues from external customers Domestic..................................... $2,753,266 $2,086,808 $1,168,071 Foreign...................................... 165,595 146,820 52,211 ---------- ---------- ---------- Total revenues from external customers........ $2,918,861 $2,233,628 $1,220,282 ========== ========== ========== Rental equipment, net Domestic..................................... $1,604,191 $1,537,199 $1,099,539 Foreign...................................... 128,644 122,534 43,467 ---------- ---------- ---------- Total consolidated rental equipment, net...... $1,732,835 $1,659,733 $1,143,006 ========== ========== ========== Property and equipment, net Domestic..................................... $ 405,873 $ 285,456 $ 180,777 Foreign...................................... 16,366 19,451 4,734 ---------- ---------- ---------- Total consolidated property and equipment, net $ 422,239 $ 304,907 $ 185,511 ========== ========== ========== Intangible assets, net Domestic..................................... $2,092,882 $1,740,326 $ 867,090 Foreign...................................... 134,126 123,046 54,975 ---------- ---------- ---------- Total consolidated intangible assets, net..... $2,227,008 $1,863,372 $ 922,065 ========== ========== ==========

53 UNITED RENTALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 15. Quarterly Financial Information (Unaudited) Selected Financial Data The following table of quarterly financial information has been prepared from unaudited financial statements of the Company, and reflects adjustments which are, in the opinion of management, necessary for a fair presentation of the interim periods presented.

First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- (In thousands, except per share data) For the year ended December 31, 2000: Total revenues...................... $578,962 $729,946 $859,033 $750,920 Gross profit........................ 205,984 271,798 340,704 270,084 Net income.......................... 17,411 47,199 75,391 36,374 Basic earnings per share............ $ 0.24 $ 0.66 $ 1.07 $ 0.51 Diluted earnings per share.......... 0.19 0.51 0.79 0.40 For the year ended December 31, 1999: Total revenues...................... $392,309 $503,662 $668,618 $669,039 Gross profit........................ 133,991 184,064 256,979 249,884 Net income.......................... 16,225 25,886 56,208 44,347 Basic earnings per share............ $ 0.24 $ 0.36 $ 0.78 $ 0.62 Diluted earning per share........... 0.18 0.28 0.60 0.48

54 REPORT OF INDEPENDENT AUDITORS Board of Directors United Rentals, Inc. (Parent Company of United Rentals (North America), Inc.) We have audited the accompanying consolidated balance sheets of United Rentals (North America), Inc. as of December 31, 2000 and 1999 and the related consolidated statements of operations, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the management of United Rentals (North America), Inc. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Rentals (North America), Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States. /S/ ERNST & YOUNG LLP MetroPark, New Jersey February 23, 2001 55 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED BALANCE SHEETS

December 31 ---------------------- 2000 1999 ---------- ---------- (In thousands, except share data) Assets Cash and cash equivalents................................................. $ 34,384 $ 23,811 Accounts receivable, net of allowance for doubtful accounts of $55,624 and $58,376 at 2000 and 1999, respectively.................................. 469,594 434,985 Inventory................................................................. 133,380 129,473 Prepaid expenses and other assets......................................... 104,493 37,125 Rental equipment, net..................................................... 1,732,835 1,659,733 Property and equipment, net............................................... 387,432 276,524 Intangible assets, net of accumulated amortization of $108,066 and $51,231 at 2000 and 1999, respectively.................................. 2,227,008 1,863,372 ---------- ---------- $5,089,126 $4,425,023 ========== ========== Liabilities and Stockholder's Equity Liabilities: Accounts payable....................................................... $ 260,155 $ 212,565 Debt................................................................... 2,675,367 2,266,148 Deferred taxes......................................................... 206,243 81,229 Accrued expenses and other liabilities................................. 119,172 171,807 ---------- ---------- Total liabilities.................................................. 3,260,937 2,731,749 Commitments and contingencies Stockholder's equity: Common stock--$.01 par value, 3,000 shares authorized, 1,000 shares issued and outstanding........................................ Additional paid-in capital............................................. 1,507,661 1,507,330 Retained earnings...................................................... 327,475 185,627 Accumulated other comprehensive (loss) income.......................... (6,947) 317 ---------- ---------- Total stockholder's equity......................................... 1,828,189 1,693,274 ---------- ---------- $5,089,126 $4,425,023 ========== ==========

See accompanying notes. 56 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31 ----------------------------------- 2000 1999 1998 ---------- ---------- ---------- (In thousands) Revenues: Equipment rentals.................................... $2,056,683 $1,581,026 $ 895,466 Sales of rental equipment............................ 347,678 235,678 119,620 Sales of equipment and merchandise and other revenues 514,500 416,924 205,196 ---------- ---------- ---------- Total revenues........................................ 2,918,861 2,233,628 1,220,282 Cost of revenues: Cost of equipment rentals, excluding depreciation.... 907,477 676,972 394,750 Depreciation of rental equipment..................... 328,131 280,641 175,910 Cost of rental equipment sales....................... 208,182 136,678 66,136 Cost of equipment and merchandise sales and other operating costs.................................... 386,501 314,419 160,038 ---------- ---------- ---------- Total cost of revenues................................ 1,830,291 1,408,710 796,834 ---------- ---------- ---------- Gross profit.......................................... 1,088,570 824,918 423,448 Selling, general and administrative expenses.......... 454,330 344,328 195,620 Merger-related expenses............................... 47,178 Non-rental depreciation and amortization.............. 78,583 57,941 34,684 ---------- ---------- ---------- Operating income...................................... 555,657 422,649 145,966 Interest expense...................................... 228,779 139,828 64,157 Other (income) expense, net........................... (1,836) (1,646) (5,097) ---------- ---------- ---------- Income before provision for income taxes and extraordinary item.................................. 328,714 284,467 86,906 Provision for income taxes............................ 136,416 116,628 46,971 ---------- ---------- ---------- Income before extraordinary item...................... 192,298 167,839 39,935 Extraordinary item, net of tax benefit of $14,255..... 21,337 ---------- ---------- ---------- Net income............................................ $ 192,298 $ 167,839 $ 18,598 ========== ========== ==========

See accompanying notes. 57 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

Common Stock Accumulated ---------------- Additional Other Number Paid-in Retained Comprehensive Comprehensive of Shares Amount Capital Earnings Income (Loss) Income --------- ------ ---------- -------- ------------ ------------ (In thousands except share amounts) Balance, December 31, 1997............. 1,000 $ 402,320 $ 44,068 Comprehensive Income: Net income.......................... 18,598 $ 18,598 Other comprehensive income: Foreign currency translation adjustments-.................... (281) $ (281) ------------ Comprehensive income................ $ 18,317 ============ Contributed capital from Parent..... 563,045 Reclassification of Subchapter S accumulated earnings to capital from Parent................ 18,979 (18,979) Pooling-of-interests................ 1 1,795 Subchapter S distributions of a pooled entity...................... (3,536) Dividend distribution to Parent..... (4,658) --------- ------ ---------- -------- ------------ Balance, December 31, 1998............. 1,000 984,345 37,288 (281) Comprehensive income: Net income.......................... 167,839 $167,839 Other comprehensive income: Foreign currency translation adjustments..................... 598 598 ------------ Comprehensive income................ $168,437 ============ Contributed capital from parent..... 522,985 Dividend distributions to parent.... (19,500) --------- ------ ---------- -------- ------------ Balance, December 31, 1999............. 1,000 1,507,330 185,627 317 Comprehensive income: Net income.......................... 192,298 192,298 Other comprehensive income: Foreign currency translation adjustments..................... (7,264) (7,264) ------------ Comprehensive income................ $185,034 ============ Contributed capital from parent..... 331 Dividend distributions to parent.... (50,450) --------- ------ ---------- -------- ------------ Balance, December 31, 2000............. 1,000 $1,507,661 $327,475 $(6,947) ========= ====== ========== ======== ============

See accompanying notes. 58 UNITED RENTALS (NORTH AMERICA), INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31 ------------------------------------ 2000 1999 1998 --------- ----------- ----------- (In thousands) Cash Flows From Operating Activities: Net income....................................................................... $ 192,298 $ 167,839 $ 18,598 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................................. 406,714 342,403 211,747 Gain on sales of rental equipment.............................................. (139,496) (99,000) (53,484) Gain on sale of businesses..................................................... (4,084) (1,842) (4,189) Write down of assets held for sale............................................. 4,040 Extraordinary item............................................................. 35,592 Deferred taxes................................................................. 109,280 41,820 27,345 Changes in operating assets and liabilities: Accounts receivable........................................................... 8,613 (93,716) (53,368) Inventory..................................................................... 69,706 (6,544) (6,392) Prepaid expenses and other assets............................................. (77,579) 34,701 12,693 Accounts payable.............................................................. 14,290 47,586 25,737 Accrued expenses and other liabilities........................................ (65,062) (8,065) (7,713) --------- ----------- ----------- Net cash provided by operating activities.................................. 514,680 425,182 210,606 --------- ----------- ----------- Cash Flows From Investing Activities: Purchases of rental equipment.................................................... (808,204) (718,112) (479,534) Purchases of property and equipment.............................................. (140,699) (109,468) (69,643) Proceeds from sales of rental equipment.......................................... 347,678 235,678 119,620 Proceeds from sale of businesses................................................. 19,246 6,521 10,640 Purchases of other companies..................................................... (347,337) (986,790) (911,837) Payments of contingent purchase price............................................ (16,266) (8,216) (3,956) --------- ----------- ----------- Net cash used in investing activities...................................... (945,582) (1,580,387) (1,334,710) --------- ----------- ----------- Cash Flows From Financing Activities: Capital contributions by Parent.................................................. 331 522,985 492,590 Proceeds from debt............................................................... 456,202 1,083,616 1,263,637 Payments on debt................................................................. (134,599) (497,650) (685,667) Proceeds from sale-leaseback..................................................... 193,478 88,000 35,000 Dividend distributions to Parent................................................. (50,450) (19,500) (4,658) Subchapter S distributions of a pooled entity.................................... (3,536) Payments of financing costs...................................................... (16,223) (19,443) (24,982) --------- ----------- ----------- Net cash provided by financing activities.................................. 448,739 1,158,008 1,072,384 Effect of foreign exchange rates................................................. (7,264) 598 (281) --------- ----------- ----------- Net increase (decrease) in cash and cash equivalents............................. 10,573 3,401 (52,001) Cash and cash equivalents at beginning of year................................... 23,811 20,410 72,411 --------- ----------- ----------- Cash and cash equivalents at end of year......................................... $ 34,384 $ 23,811 $ 20,410 ========= =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest........................................................... $ 229,263 $ 104,785 $ 38,499 Cash paid for taxes, net of refunds.............................................. $ 23,746 $ 17,509 $ 10,224 Supplemental schedule of non cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired................................................... $ 565,114 $ 1,468,567 $ 1,501,467 Liabilities assumed............................................................ (142,277) (472,382) (518,861) Less: Amounts paid in common stock and warrants of the Parent....................... (10,000) (60,304) Amounts paid through issuance of debt......................................... (65,500) (9,395) (10,465) --------- ----------- ----------- Net cash paid.................................................................... $ 347,337 $ 986,790 $ 911,837 ========= =========== ===========

See accompanying notes. 59 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation United Rentals (North America), Inc., ("URI") and subsidiaries is a wholly owned subsidiary of United Rentals, Inc., which is principally a holding company ("Holdings" or "Parent"). Holdings was incorporated in July 1998 and became the parent of URI on August 5, 1998, pursuant to the reorganization of the legal structure of URI. Prior to such reorganization, the name of URI was United Rentals, Inc. References herein to the "Company" refer to URI and its subsidiaries. Certain footnotes are not provided for the accompanying financial statements as the information in Notes 1 through 9, 11 and 13 through 15 to the consolidated financial statements of United Rentals, Inc. included elsewhere in this report is substantially equivalent to that required for the consolidated financial statements of URI and its subsidiaries. Earnings per share data is not provided for the operating results of URI and subsidiaries, as they are wholly owned subsidiaries of Holdings. URI's various credit agreements and debt instruments place restrictions on its ability to transfer funds to its shareholder. Holdings provides certain services to URI in connection with its operations. These services principally include: (i) senior management services, (ii) finance related services and support, (iii) information technology systems and support and (iv) acquisition related services. In addition, Holdings leases certain equipment and real property that are made available for use by URI and its subsidiaries. URI has made, and expects to continue to make, certain payments to Holdings in respect of the services provided by Holdings to the Company. The expenses relating to URI's payments to Holdings are reflected on URI's financial statements as selling, general and administrative expenses. In addition, although not legally obligated to do so, URI has in the past, and expects that it will in the future, make distributions to Holdings for, among other things, enabling Holdings to pay dividends on its preferred securities. 2. Capital Stock and Contributions At December 31, 2000, the Company has authorized 3,000 shares of its $0.01 par value common stock of which 1,000 shares are issued and outstanding. All of the issued and outstanding common shares are owned by its Parent. Pursuant to the reorganization described in Note 1, the net proceeds from the Company's initial public offering completed in December 1997 and the public offering completed in March 1998 have been reflected as Contributed Capital from the Parent in the accompanying statement of stockholder's equity. Holdings also contributed the net proceeds from the issuance of redeemable convertible preferred securities in August 1998 to URI. During 1999, Holdings contributed the net proceeds from the issuance of common stock in a public offering and the net proceeds from the issuance of perpetual convertible preferred stock to URI. 3. Condensed Consolidating Financial Information of Guarantor Subsidiaries Certain indebtedness of URI is guaranteed by URI's United States subsidiaries (the "guarantor subsidiaries") but is not guaranteed by URI's foreign subsidiaries (the "non-guarantor subsidiaries"). The guarantor subsidiaries are all wholly-owned and the guarantees are made on a joint and several basis and are full and unconditional (subject to subordination provisions and subject to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent 60 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) conveyance laws). All expenses incurred by URI have been charged by URI to its guarantor and non-guarantor subsidiaries. Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors. However, condensed consolidating financial information as of December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, are presented. The condensed consolidating financial information of URI and its subsidiaries are as follows: CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2000

Guarantor Non-Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total ---------- ----------- ------------ ----------- ----------- (In thousands) Assets Cash and cash equivalents.................. $ 29,733 $ 4,651 $ 34,384 Accounts receivable, net................... $ 216,444 143,295 109,855 469,594 Intercompany receivable (payable).......... 319,423 (55,187) (264,236) Inventory.................................. 54,022 73,979 5,379 133,380 Prepaid expenses and other assets.......... 28,263 75,633 597 104,493 Rental equipment, net...................... 837,972 766,219 128,644 1,732,835 Property and equipment, net................ 139,871 231,195 16,366 387,432 Investment in subsidiaries................. 2,257,692 $(2,257,962) Intangible assets, net..................... 960,444 1,132,438 134,126 2,227,008 ---------- ----------- ------------ ----------- ----------- $4,814,131 $2,397,305 $ 135,382 $(2,257,962) $5,089,126 ========== =========== ============ =========== =========== Liabilities and Stockholder's Equity Liabilities: Accounts payable........................ $ 78,623 $ 165,677 $ 15,855 $ 260,155 Debt.................................... 2,647,144 3,484 24,739 2,675,367 Deferred taxes.......................... 186,091 20,702 (550) 206,243 Accrued expenses and other liabilities.. 86,560 18,862 13,750 119,172 ---------- ----------- ------------ ----------- ----------- Total liabilities.................... 2,998,418 208,725 53,794 3,260,937 Commitments and contingencies Stockholder's equity: Common stock............................ Additional paid-in capital.............. 1,488,238 1,830,500 65,657 (1,876,734) 1,507,661 Retained earnings....................... 327,475 358,080 22,878 (380,958) 327,475 Accumulated other comprehensive loss................................... (6,947) (6,947) ---------- ----------- ------------ ----------- ----------- Total stockholder's equity........... 1,815,713 2,188,580 81,588 $(2,257,692) 1,828,189 ---------- ----------- ------------ ----------- ----------- $4,814,131 $2,397,305 $ 135,382 $(2,257,692) $5,089,126 ========== =========== ============ =========== ===========

61 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 1999 --------------------------------------------------------------- Guarantor Non-Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total ---------- ------------ ------------ ----------- ------------ (In thousands) Assets Cash and cash equivalents.................. $ 3,689 $ 16,414 $ 3,708 $ 23,811 Accounts receivable, net................... 200,419 199,981 34,585 434,985 Intercompany receivable (payable).......... 142,156 42,906 (185,062) Inventory.................................. 56,086 64,253 9,134 129,473 Prepaid expenses and other assets.......... 1,020 18,296 17,809 37,125 Rental equipment, net...................... 747,232 789,967 122,534 1,659,733 Property and equipment, net................ 150,841 106,232 19,451 276,524 Investment in subsidiaries................. 2,072,115 $(2,072,115) Intangible assets, net..................... 792,198 948,128 123,046 1,863,372 ---------- ------------ ------------ ----------- ------------ $4,165,756 $2,186,177 $ 145,205 $(2,072,115) $4,425,023 ========== ============ ============ =========== ============ Liabilities and Stockholder's Equity Liabilities: Accounts payable........................ $ 71,995 $ 120,511 $ 20,059 $ 212,565 Debt.................................... 2,231,923 380 33,845 2,266,148 Deferred income taxes................... 80,476 753 81,229 Accrued expenses and other liabilities.. 107,828 53,177 10,802 171,807 ---------- ------------ ------------ ----------- ------------ Total liabilities.................... 2,492,222 174,068 65,459 2,731,749 Commitments and contingencies Stockholder's equity: Common stock............................ Additional paid-in capital.............. 1,487,907 1,830,182 65,644 $(1,876,403) 1,507,330 Retained earnings....................... 185,627 181,927 13,785 (195,712) 185,627 Accumulated other comprehensive income................................. 317 317 ---------- ------------ ------------ ----------- ------------ Total stockholder's equity........... 1,673,534 2,012,109 79,746 (2,072,115) 1,693,274 ---------- ------------ ------------ ----------- ------------ $4,165,756 $2,186,177 $ 145,205 $(2,072,115) $4,425,023 ========== ============ ============ =========== ============

62 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the Year Ended December 31, 2000

Guarantor Non-Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total ---------- ----------- ------------- ----------- ----------- (In thousands) Revenues: Equipment rentals......................... $ 851,541 $1,094,613 $ 110,529 $2,056,683 Sales of rental equipment................. 145,519 178,576 23,583 347,678 Sales of equipment and merchandise and other revenues........................... 253,798 229,219 31,483 514,500 ---------- ----------- ------------- ----------- ----------- Total revenues.............................. 1,250,858 1,502,408 165,595 2,918,861 Cost of revenues: Cost of equipment rentals, excluding depreciation............................. 364,047 494,350 49,080 907,477 Depreciation of rental equipment.......... 152,640 155,239 20,252 328,131 Cost of rental equipment sales............ 87,161 106,617 14,404 208,182 Cost of equipment and merchandise sales and other operating costs................ 197,190 164,186 25,125 386,501 ---------- ----------- ------------- ----------- ----------- Total cost of revenues...................... 801,038 920,392 108,861 1,830,291 ---------- ----------- ------------- ----------- ----------- Gross profit................................ 449,820 582,016 56,734 1,088,570 Selling, general and administrative expenses 184,135 245,431 24,764 454,330 Non-rental depreciation and amortization.... 33,692 39,618 5,273 78,583 ---------- ----------- ------------- ----------- ----------- Operating income............................ 231,993 296,967 26,697 555,657 Interest expense............................ 217,904 135 10,740 228,779 Other (income) expense, net................. 2,129 (4,285) 320 (1,836) ------------ ---------- ----------- ------------- ----------- Income before provision for income taxes.... 11,960 301,117 15,637 328,714 Provision for income taxes.................. 4,908 124,964 6,544 136,416 ---------- ----------- ------------- ----------- ----------- Income before equity in net earnings of subsidiaries............................... 7,052 176,153 9,093 $ (185,246) 7,052 Equity in net earnings of subsidiaries...... 185,246 185,246 ---------- ----------- ------------- ----------- ----------- Net income.................................. $ 192,298 $ 176,153 $ 9,093 $ (185,246) $ 192,298 ========== =========== ============= =========== ===========

63 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the Year Ended December 31, 1999

Guarantor Non-Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total -------- ----------- ------------- ----------- ----------- (In thousands) Revenues: Equipment rentals......................... $600,431 $ 880,182 $100,413 $1,581,026 Sales of rental equipment................. 113,982 106,737 14,959 235,678 Sales of equipment and merchandise and other revenues........................... 195,647 189,829 31,448 416,924 -------- ----------- ------------- ----------- ----------- Total revenues.............................. 910,060 1,176,748 146,820 2,233,628 Cost of revenues: Cost of equipment rentals, excluding depreciation............................. 250,959 381,718 44,295 676,972 Depreciation of rental equipment.......... 116,385 146,622 17,634 280,641 Cost of rental equipment sales............ 62,972 64,945 8,761 136,678 Cost of equipment and merchandise sales and other operating costs................ 161,902 128,328 24,189 314,419 -------- ----------- ------------- ----------- ----------- Total cost of revenues...................... 592,218 721,613 94,879 1,408,710 -------- ----------- ------------- ----------- ----------- Gross profit................................ 317,842 455,135 51,941 824,918 Selling, general and administrative expenses 144,341 177,456 22,531 344,328 Non-rental depreciation and amortization.... 29,667 24,617 3,657 57,941 -------- ----------- ------------- ----------- ----------- Operating income............................ 143,834 253,062 25,753 422,649 Interest expense............................ 132,929 1,428 5,471 139,828 Other (income) expense, net................. (1,549) (524) 427 (1,646) -------- ----------- ------------- ----------- ----------- Income before provision for income taxes.... 12,454 252,158 19,855 284,467 Provision for income taxes.................. 3,039 105,531 8,058 116,628 -------- ----------- ------------- ----------- ----------- Income before equity in net earnings of subsidiaries............................... 9,415 146,627 11,797 $(158,424) 9,415 Equity in net earnings of subsidiaries...... 158,424 158,424 -------- ----------- ------------- ----------- ----------- Net income.................................. $167,839 $ 146,627 $ 11,797 $(158,424) $ 167,839 ======== =========== ============= =========== ===========

64 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the Year Ended December 31, 1998

Guarantor Non-Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total -------- ----------- ------------ ----------- ----------- (In thousands) Revenues: Equipment rentals.......................... $213,823 $649,508 $32,135 $ 895,466 Sales of rental equipment.................. 17,992 96,739 4,889 119,620 Sales of equipment and merchandise and other revenues............................ 58.582 131,427 15,187 205,196 -------- ----------- ------------ ----------- ----------- Total revenues................................ 290,397 877,674 52,211 1,220,282 Cost of revenues: Cost of equipment rentals, excluding depreciation.............................. 91,100 289,892 13,758 394,750 Depreciation of rental equipment........... 45,602 125,810 4,498 175,910 Cost of rental equipment sales............. 8,586 54,805 2,745 66,136 Cost of equipment and merchandise sales and other operating costs................. 49,754 98,332 11,952 160,038 -------- ----------- ------------ ----------- ----------- Total cost of revenues........................ 195,042 568,839 32,953 796,834 -------- ----------- ------------ ----------- ----------- Gross profit.................................. 95,355 308,835 19,258 423,448 Selling, general and administrative expenses.. 31,092 155,512 9,016 195,620 Merger-related expenses....................... 47,178 47,178 Non-rental depreciation and amortization...... 8,682 24,769 1,233 34,684 -------- ----------- ------------ ----------- ----------- Operating income.............................. 55,581 81,376 9,009 145,966 Interest expense.............................. 33,006 24,193 6,958 64,157 Other (income) expense, net................... (2,481) (2,605) (11) (5,097) -------- ----------- ------------ ----------- ----------- Income before provision for income taxes and extraordinary item........................... 25,056 59,788 2,062 86,906 Provision for income taxes.................... 13,850 33,047 74 46,971 -------- ----------- ------------ ----------- ----------- Income before extraordinary item and equity in net earnings of subsidiaries................. 11,206 26,741 1,988 39,935 Extraordinary item, net....................... 21,337 21,337 -------- ----------- ------------ ----------- ----------- Income before equity in net earnings of subsidiaries................................. 11,206 5,404 1,988 $(7,392) 11,206 Equity in net earnings of subsidiaries........ 7,392 7,392 -------- ----------- ------------ ----------- ----------- Net income.................................... $ 18,598 $ 5,404 $ 1,988 $(7,392) $ 18,598 ======== =========== ============ =========== ===========

65 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING CASH FLOW INFORMATION For the Year Ended December 31, 2000

Guarantor Non-Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total --------- ----------- ------------ ------------ ----------- (In thousands) Net cash provided by operating activities... $ 243,759 $ 227,855 $ 43,066 $ 514,680 Cash Flows From Investing Activities: Purchases of rental equipment............ (489,259) (283,488) (35,457) (808,204) Purchases of property and equipment...... (34,477) (102,510) (3,712) (140,699) Proceeds from sales of rental equipment.. 145,519 178,576 23,583 347,678 Proceeds from sale of businesses......... 16,246 3,000 19,246 Payments of contingent purchase price.... (3,030) (13,236) (16,266) Purchases of other companies............. (337,257) (10,080) (347,337) --------- ----------- ------------ ------------ ----------- Net cash used in investing activities........................... (702,258) (217,658) (25,666) (945,582) Cash Flows from Financing Activities: Dividend distributions to Parent......... (50,450) (50,450) Proceeds from debt....................... 452,912 3,290 456,202 Repayments of debt....................... (125,238) (168) (9,193) (134,599) Proceeds from sale-leaseback............. 193,478 193,478 Payments of financing costs.............. (16,223) (16,223) Capital contributions by parent.......... 331 331 --------- ----------- ------------ ------------ ----------- Net cash provided by financing activities........................... 454,810 3,122 (9,193) 448,739 Effect of foreign exchange rates......... (7,264) (7,264) --------- ----------- ------------ ------------ ----------- Net increase (decrease) in cash and cash equivalents................................ (3,689) 13,319 943 10,573 Cash and cash equivalents at beginning of period..................................... 3,689 16,414 3,708 23,811 --------- ----------- ------------ ------------ ----------- Cash and cash equivalents at end of period..................................... $ 29,733 $ 4,651 $ 34,384 ========= =========== ============ ============ =========== Supplemental disclosure of cash flow information: Cash paid for interest...................... $ 218,346 $ 135 $ 10,782 $ 229,263 Cash paid for income taxes.................. $ 19,833 $ 3,913 $ 23,746 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired............. $ 554,077 $ 11,037 $ 565,114 Liabilities assumed...................... (141,320) (957) (142,277) Less: Amounts paid in common stock and warrants of Parent...................... (10,000) (10,000) Amounts paid through issuance of debt................................. (65,500) (65,500) --------- ----------- ------------ ------------ ----------- Net cash paid............................ $ 337,257 $ 10,080 $ 347,337 ========= =========== ============ ============ ===========

66 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING CASH FLOW INFORMATION For the Year Ended December 31, 1999

Guarantor Non-Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total ----------- ----------- ------------ ------------ ----------- (In thousands) Net cash provided by operating activities. $ 292,412 $ 13,185 $ 119,585 $ 425,182 Cash Flows From Investing Activities: Purchases of rental equipment.......... (539,775) (99,365) (78,972) (718,112) Purchases of property and equipment.... (74,634) (20,366) (14,468) (109,468) Proceeds from sales of rental equipment............................. 113,982 106,737 14,959 235,678 Proceeds from sale of businesses....... 1,040 2,354 3,127 6,521 Payments of contingent purchase price.. (2,387) (4,265) (1,564) (8,216) Purchases of other companies........... (915,937) (70,853) (986,790) ----------- ----------- ------------ ------------ ----------- Net cash used in investing activities......................... (1,417,711) (14,905) (147,771) (1,580,387) Cash Flows from Financing Activities: Dividend distributions to Parent....... (19,500) (19,500) Proceeds from debt..................... 1,025,843 26,524 31,249 1,083,616 Repayments of debt..................... (474,808) (20,958) (1,884) (497,650) Proceeds from sale-leaseback........... 88,000 88,000 Payments of financing costs............ (18,995) (448) (19,443) Capital contributions by parent........ 522,985 522,985 ----------- ----------- ------------ ------------ ----------- Net cash provided by financing activities......................... 1,123,525 5,566 28,917 1,158,008 Effect of foreign exchange rates....... 598 598 ----------- ----------- ------------ ------------ ----------- Net increase (decrease) in cash and cash equivalents.............................. (1,774) 3,846 1,329 3,401 Cash and cash equivalents at beginning of period................................... 1,774 16,257 2,379 20,410 ----------- ----------- ------------ ------------ ----------- Cash and cash equivalents at end of period................................... $ 20,103 $ 3,708 $ 23,811 =========== =========== ============ ============ =========== Supplemental disclosure of cash flow information: Cash paid for interest.................... $ 98,728 $ 1,194 $ 4,863 $ 104,785 Cash paid for income taxes................ $ 16,372 $ 1,137 $ 17,509 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired........... $ 1,371,807 $ 96,760 $ 1,468,567 Liabilities assumed.................... (448,685) (23,697) (472,382) Less: Amounts paid through issuance of debt.................................. (7,185) (2,210) (9,395) ----------- ----------- ------------ ------------ ----------- Net cash paid.......................... $ 915,937 $ 70,853 $ 986,790 =========== =========== ============ ============ ===========

67 UNITED RENTALS (NORTH AMERICA), INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) CONDENSED CONSOLIDATING CASH FLOW INFORMATION For the Year Ended December 31, 1998

Non- Guarantor Guarantor Consolidated URI Subsidiaries Subsidiaries Eliminations Total ----------- ----------- ----------- ------------ ----------- (In thousands) Net cash provided by (used in) operating activities.................................... $ (63,760) $ 206,996 $ 67,370 $ 210,606 Cash Flows From Investing Activities: Purchases of rental equipment............... (415,140) (50,494) (13,900) (479,534) Purchases of property and equipment......... (65,742) (2,851) (1,050) (69,643) Proceeds from sales of rental equipment.................................. 17,992 96,739 4,889 119,620 Proceeds from sale of businesses............ 10,640 10,640 Payments of contingent purchase price....... (2,800) (1,156) (3,956) Purchases of other companies................ (840,730) (12,510) (58,597) (911,837) ----------- ----------- ----------- ------------ ----------- Net cash used in investing activities.............................. (1,292,980) 28,084 (69,814) (1,334,710) Cash Flows from Financing Activities: Dividend distributions to Parent............ (4,658) (4,658) Proceeds from debt.......................... 1,225,586 10,187 27,864 1,263,637 Repayments of debt.......................... (432,222) (230,685) (22,760) (685,667) Proceeds from sale-leaseback................ 35,000 35,000 Payments of financing costs................. (24,982) (24,982) Capital contributions by parent............. 492,590 492,590 Distributions to stockholders............... (3,536) (3,536) ----------- ----------- ----------- ------------ ----------- Net cash provided by (used in) financing activities.................... 1,291,314 (224,034) 5,104 1,072,384 Effect of foreign exchange rates............ (281) (281) ----------- ----------- ----------- ------------ ----------- Net increase (decrease) in cash and cash equivalents................................... (65,426) 11,046 2,379 (52,001) Cash and cash equivalents at beginning of period........................................ 67,200 5,211 72,411 ----------- ----------- ----------- ------------ ----------- Cash and cash equivalents at end of period..... $ 1,774 $ 16,257 $ 2,379 $ 20,410 =========== =========== =========== ============ =========== Supplemental disclosure of cash flow information: Cash paid for interest......................... $ 27,085 $ 11,098 $ 316 $ 38,499 Cash paid for income taxes..................... $ 8,034 $ 2,190 $ 10,224 Supplemental disclosure of non-cash investing and financing activities: The Company acquired the net assets and assumed certain liabilities of other companies as follows: Assets, net of cash acquired................ $ 1,409,516 $ 12,510 $ 79,441 $ 1,501,467 Liabilities assumed......................... (500,228) (18,633) (518,861) Less: Amounts paid in common stock and warrants of Parent......................... (58,093) (2,211) (60,304) Amounts paid through issuance of debt....... (10,465) (10,465) ----------- ----------- ----------- ------------ ----------- Net cash paid............................... $ 840,730 $ 12,510 $ 58,597 $ 911,837 =========== =========== =========== ============ ===========

68 REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES Board of Directors United Rentals, Inc. We have audited the consolidated financial statements of United Rentals, Inc. as of December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, and have issued our report thereon dated February 23, 2001, included elsewhere in this Form 10-K. Our audits also included the financial statement schedules listed in Item 14(a)(2). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP MetroPark, New Jersey February 23, 2001 69 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT UNITED RENTALS, INC. CONDENSED BALANCE SHEET

December 31 ---------------------- 2000 1999 ---------- ---------- (In thousands) Assets Prepaid expenses and other assets................ $ 31,554 Property and equipment, net...................... $ 34,807 28,383 Investment in and advances to subsidiaries....... 1,839,952 1,702,802 ---------- ---------- $1,874,759 $1,762,739 ========== ========== Liabilities and Stockholders' Equity Liabilities: Accounts payable.............................. $ 30,381 Debt.......................................... $ 300,000 300,000 Accrued expenses and other liabilities........ 28,816 34,872 ---------- ---------- Total liabilities......................... 328,816 365,253 Commitments and contingencies Stockholders' equity: Preferred stock............................... 5 5 Common stock.................................. 711 721 Additional paid-in capital.................... 1,196,324 1,216,968 Retained earnings............................. 355,850 179,475 Accumulated other comprehensive (loss) income. (6,947) 317 ---------- ---------- Total stockholders' equity................ 1,545,943 1,397,486 ---------- ---------- $1,874,759 $1,762,739 ========== ==========

See accompanying notes. 70 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT UNITED RENTALS, INC. CONDENSED STATEMENT OF OPERATIONS

Year Ended December 31 ---------------------------- 2000 1999 1998 -------- -------- ------- (In thousands) Selling, general and administrative expenses...... $ 8,267 Non-rental depreciation and amortization.......... $ 7,718 4,926 $ 561 -------- -------- ------- Operating loss.................................... (7,718) (13,193) (561) Interest expense.................................. 19,500 19,500 7,854 Other (income) expense, net....................... 9,689 -------- -------- ------- Loss before benefit for income taxes.............. (27,218) (42,382) (8,415) Benefit for income taxes.......................... 11,295 17,487 3,472 -------- -------- ------- Net loss before equity in earnings of subsidiaries (15,923) (24,895) (4,943) Equity in earnings of subsidiaries................ 192,298 167,561 18,404 -------- -------- ------- Net income........................................ $176,375 $142,666 $13,461 ======== ======== =======

See accompanying notes. 71 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT UNITED RENTALS, INC. CONDENSED CASH FLOW INFORMATION

Year Ended December 31, ------------------------------- 2000 1999 1998 -------- --------- --------- (In thousands) Net cash used in operating activities................ $(37,379) $ (4,824) $ (4,157) Cash Flows from Investing Activities: Purchase of property and equipment................ (13,071) (14,181) (15,535) Capital contributed to subsidiary................. (331) (522,985) (492,590) -------- --------- --------- Net cash used in investing activities......... (13,402) (537,166) (508,125) Cash Flows from Financing Activities: Proceeds from issuance of common stock and warrants, net of issuance costs................. 64,701 207,005 Proceeds from the issuance of preferred stock, net of issuance costs.................... 430,800 Proceeds from debt................................ 300,000 Proceeds from the exercise of stock options....... 331 26,989 619 Proceeds from dividends from subsidiary........... 50,450 19,500 4,658 -------- --------- --------- Net cash provided by financing activities..... 50,781 541,990 512,282 -------- --------- --------- Net increase in cash and cash equivalents......... Cash and cash equivalents at beginning of period.......................................... -------- --------- --------- Cash and cash equivalents at end of period...................................... ======== ========= =========

See accompanying notes. 72 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT UNITED RENTALS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. Basis of Presentation United Rentals, Inc. is principally a holding company ("Holdings") and conducts its operations primarily through its wholly owned subsidiary United Rentals (North America), Inc. ("URI") and subsidiaries. In the parent company-only financial statements, Holdings, investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. Holdings share of net income of its unconsolidated subsidiaries is included in consolidated income using the equity method. The parent company-only financial statements should be read in conjunction with the Company's consolidated financial statements. 2. Debt See Note 10 to the Consolidated Financial Statements for information concerning debt. 3. Guarantee See Note 10 to the Consolidated Financial Statements for information concerning the guarantee. 73 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS UNITED RENTALS, INC. (In thousands)

Additions --------------------- Balance at Charged to Balance Beginning Costs and at End Description of Period Expenses Other Deductions of Period ----------- ---------- ---------- ------- ------- --------- Year ended December 31, 2000: Allowance for doubtful accounts.................. $58,376 $38,431 $14,791(a) $55,974(c) $55,624 Reserve for inventory obsolescence and shrinkage. 16,782 9,124 11,302(b) 21,747(d) 15,461 Insurance reserves............................... 22,750 30,027 37,333(e) 15,444 Year ended December 31, 1999: Allowance for doubtful accounts.................. 43,481 46,121 23,568(a) 54,794(c) 58,376 Reserve for inventory obsolescence and shrinkage. 9,288 6,857 11,975(b) 11,338(d) 16,782 Insurance reserves............................... 20,553 49,223 47,026(e) 22,750 Year ended December 31, 1998: Allowance for doubtful accounts.................. 11,085 24,810 19,079(a) 11,493(c) 43,481 Reserve for inventory obsolescence and shrinkage. 620 3,254 6,068(b) 654(d) 9,288 Insurance reserves............................... 11,665 16,456 7,568(e) 11,665

-------- (a) Represents allowance for doubtful accounts established through acquisitions. (b) Represents reserve for inventory obsolescence and shrinkage assumed through acquisitions. (c) Represents write-offs of accounts, net of recoveries. (d) Represents write-offs of inventory items. (e) Represents payments. 74 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The information required by this Item is incorporated by reference to the applicable information in the 2001 Proxy Statement, including the information set forth under the captions "Election of Directors" and "Compliance with Section 11(A) of the Securities Exchange Act of 1934". The "2001 Proxy Statement" refers to the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, prior to April 30, 2001. Item 11. Executive and Director Compensation The information required by this Item is incorporated by reference to the applicable information in the 2001 Proxy Statement, including the information set forth under the captions "Executive and Director Compensation" and "Compensation Committee Interlocks and Insider Participation". Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this Item is incorporated by reference to the applicable information in the 2001 Proxy Statement, including the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management". Item 13. Certain Relationships and Related Transactions The information required by this Item is incorporated by reference to the applicable information in the 2001 Proxy Statement, including the information set forth under the caption "Certain Transactions". Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) Consolidated Financial Statements: Report of Independent Auditors United Rentals, Inc. Consolidated Balance Sheets--December 31, 2000 and 1999 United Rentals, Inc. Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 United Rentals, Inc. Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998 United Rentals, Inc. Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements Report of Independent Auditors United Rentals (North America), Inc. Consolidated Balance Sheets--December 31, 2000 and 1999 United Rentals (North America), Inc. Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 75 United Rentals (North America), Inc. Consolidated Statements of Stockholder's Equity for the years ended December 31, 2000, 1999 and 1998 United Rentals (North America), Inc. Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules: Report of Independent Auditors on Financial Statement Schedules Schedule I Condensed Financial Information of Registrant Schedule II Valuation and Qualifying Accounts Schedules other than those listed are omitted as they are not applicable or the required or equivalent information has been included in the financial statements or notes thereto. (a)(3) Exhibits

Exhibit Number Description of Exhibit ------ ---------------------- 2(a) Amended and Restated Agreement and Plan of Merger dated as of August 31, 1998, among United Rentals, Inc., UR Acquisition Corporation and U.S. Rentals, Inc. (incorporated by reference to Exhibit 2 of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171) 3(a) Amended and Restated Certificate of Incorporation of United Rentals, Inc., in effect as of the date hereof (incorporated by reference to exhibit 3.1 of United Rentals, Inc. Report on Form 10-Q for the quarter ended June 30, 1998) 3(b) Certificate of Amendment to the United Rentals, Inc. Certificate of Incorporation dated September 29, 1998 (incorporated by reference to Exhibit 4.2 to the United Rentals, Inc. Registration Statement on Form S-3, No. 333-70151) 3(c) By-laws of United Rentals, Inc., in effect as of the date hereof (incorporated by reference to exhibit 3.2 of United Rentals, Inc. Report on Form 10-Q for the quarter ended June 30, 1998) 3(d) Form of Certificate of Designation for Series A Perpetual Convertible Preferred Stock (incorporated by reference to Exhibit 4(k) to the United Rentals, Inc. Registration Statement on Form S-3, No. 333-64463) together with a certificate of amendment thereto (incorporated by reference to exhibit A of the United Rentals, Inc. Proxy Statement dated July 22, 1999) 3(e) Form of Certificate of Designation for Series B Perpetual Convertible Preferred Stock (incorporated by reference to exhibit B of the United Rentals, Inc. Proxy Statement on Schedule 14A dated July 22, 1999) 3(f) Amended and Restated Certificate of Incorporation of United Rentals (North America), Inc., in effect as of the date hereof (incorporated by reference to Exhibit 3.3 of the United Rentals (North America), Inc. Report on Form 10-Q for the quarter ended June 30, 1998) 3(g) By-laws of United Rentals (North America), Inc., in effect as of the date hereof (incorporated by reference to Exhibit 3.4 of the United Rentals (North America), Inc. Report on Form 10-Q for the quarter ended June 30, 1998) 4(a) Form of certificate representing United Rentals, Inc. Common Stock (incorporated by reference to Exhibit 4 of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117) 4(b) Certificate of Trust of United Rentals Trust I (incorporated by reference to Exhibit 4(a) of the United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-64463)-

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Exhibit Number Description of Exhibit ------ ---------------------- 4(c) Amended and Restated Trust Agreement dated August 5, 1998 among United Rentals, Inc., The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the Administrative Trustees named therein (incorporated by reference to Exhibit 10(ii) of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171) 4(d) Indenture dated August 5, 1998 by and between United Rentals, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10(hh) of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171) 4(e) Guarantee Agreement dated August 5, 1998 between United Rentals, Inc. and The Bank of New York (incorporated by reference to Exhibit 10(jj) of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171) 4(f) Form of Certificate representing 6 1/2% Convertible Quarterly Income Preferred Securities (incorporated by reference to Exhibit 4(e) of the United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-64463)- 4(g) Form of Certificate representing 6 1/2% Convertible Subordinated Debentures (incorporated by reference to Exhibit 4(f) of the United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-64463)- 4(h) Indenture dated May 22, 1998, among United Rentals (North America), Inc., the Guarantors named therein and State Street Bank and Trust Company, as trustee (incorporated by reference to Exhibit 4(b) of the Registration Statement on Form S-4 filed by United Rentals (North America), Inc., Registration No. 333-60467) 4(i) Indenture dated August 12, 1998, among United Rentals (North America), Inc., the Guarantors named therein and State Street Bank and Trust Company, as trustee (incorporated by reference to Exhibit 10(bb) of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171) 4(j) Form of Registration Rights Agreement with certain affiliates of U.S. Rentals (incorporated by reference to Exhibit 10(gg) of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171) 4(k) Indenture dated December 15, 1998, among United Rentals (North America), Inc., the Guarantors named therein and State Street Bank and Trust Company, as trustee (incorporated by reference to Exhibit 10(uu) to Amendment No. 1 to the United Rentals (North America), Inc. Registration Statement on Form S-4, No. 333-64227) 4(l) Amended and Restated Registration Rights Agreement relating to Series A Perpetual Convertible Preferred Stock and Series B Perpetual Convertible Preferred Stock among United Rentals, Inc., Bradley S. Jacobs, Apollo Investment Fund IV, LP and Apollo Overseas Partners IV, LP (incorporated by reference to exhibit D of the United Rentals, Inc. Proxy Statement dated July 22, 1999) 4(m) Indenture dated March 23, 1999 among United Rentals (North America), Inc., the Guarantors named therein and The Bank of New York, as trustee (incorporated by reference to exhibit 4(q) of the United Rentals, Inc. Annual Report on Form 10-K for the Year Ended December 31, 1998) 4(n) Notes Registration Rights Agreement dated as of March 23, 1999 among United Rentals (North America), Inc., the subsidiaries of United Rentals (North America), Inc. named therein, and the initial purchasers named therein (incorporated by reference to exhibit 4(r) of the United Rentals, Inc. Annual Report on Form 10-K for the Year Ended December 31, 1998)

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Exhibit Number Description of Exhibit ------ ---------------------- 4(o) Form of Registration Rights Agreement relating to the Series B Perpetual Convertible Preferred Stock between United Rentals, Inc. and Chase Equity Associates, LP (incorporated by reference to exhibit 10(c) of the United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999) 10(a) The following agreements (i) Second Amended and Restated Credit Agreement dated as of March 30, 1998, between United Rentals (North America), Inc., various financial institutions, Bank of America Canada, as Canadian agent, and Bank of America National Trust and Savings Association, as U.S. agent (incorporated by reference to Exhibit 10.1 to United Rentals, Inc. Report on Form 10-Q for the quarterly period ended March 31, 1998), (ii) Third Amended and Restated Credit Agreement dated as of May 12, 1998, between United Rentals (North America), Inc., various financial institutions, Bank of America Canada, as Canadian agent, and Bank of America National Trust and Savings Association, as U.S. agent (incorporated by reference to Exhibit 10(a)(ii) to the Registration Statement on Form S-4 filed by United Rentals (North America), Inc., Registration No. 333-60467) and (iii) First Amendment to Third Amended and Restated Credit Agreement dated as of July 10, 1998 (incorporated by reference to Exhibit 10(a)(iii) to the Registration Statement on Form S-4 filed by United Rentals (North America), Inc., Registration No. 333-60467)- 10(b) Credit Agreement dated as of September 29, 1998, between United Rentals (North America), Inc., various financial institutions, Bank of America Canada, as Canadian agent, and Bank of America National Trust, as U.S. Agent (incorporated by reference to exhibit 10.2 of United Rentals, Inc. Report on From 10-Q for the quarter ended September 30, 1998). 10(c) Term Loan Agreement dated as of July 10, 1998 among United Rentals (North America), Inc., various financial institutions and Bank of America National Trust and Savings Association, as Agent---- (incorporated by reference to Exhibit 10(cc) of the Registration Statement on Form S-4 filed by United Rentals (North America), Inc., Registration No. 333-60467) 10(d) First Amendment to the Term Loan Agreement dated as of September 29, 1998 among United Rentals (North America), Inc., various financial institutions and Bank of America National Trust and Savings Association, as Agent (incorporated by reference to exhibit 10.3 of United Rentals, Inc. Report on Form 10-Q for the quarter ended September 30, 1998). 10(e) Term Loan Agreement dated as of July 15, 1999 among United Rentals, Inc., United Rentals (North America), Inc., various financial institutions, Goldman Sachs Credit Partners L.P., as Syndication Agent and Bank of America National Trust and Savings Association, as Administrative Agent (incorporated by reference to exhibit 10(d) of the United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999) 10(f) First Amendment dated as of August 12, 1999, to Term Loan Agreement dated as of July 15, 1999 among United Rentals, Inc., United Rentals (North America), Inc., various financial institutions, Goldman Sachs Credit Partners L.P., as syndication Agent and Bank of America National Trust and Savings Association, as administrative Agent (incorporated by reference to exhibit 10(e) of the United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999) 10(g) Second Amendment dated as of July 14, 1999, to Term Loan Agreement dated as of July 10, 1998 among United Rentals, Inc., United Rentals (North America), Inc., various financial institutions and Bank of America National Trust and -Savings Association, as Agent (incorporated by reference to exhibit 10(f) of the United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999) -

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Exhibit Number Description of Exhibit ------ ---------------------- 10(h) Second Amendment dated as of July 14, 1999, to Credit Agreement dated as of September 29, 1998, between United Rentals, Inc., United Rentals (North America), Inc., various financial institutions, Bank of America Canada, as Canadian agent, and Bank of America National Trust and Savings Association, as U.S. Agent (incorporated by reference to exhibit 10(g) of the United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999) 10(i) Third Amendment dated as of December 15, 1999, to Credit Agreement dated as of September 29, 1998, between United Rentals, Inc., United Rentals (North America), Inc., various financial institutions, Bank of America Canada, as Canadian agent, and Bank of America, N.A. (formerly known as Bank of America National Trust and Savings Association), as U.S. Agent (incorporated by reference to exhibit 10(i) of the United Rentals Annual Report on Form 10-K for the year ended December 31, 1999) 10(j) Form of Warrant Agreement (incorporated by reference to exhibit 10(c) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)(1)++ 10(k) Form of Indemnification Agreement for Officers and Directors (incorporated by reference to exhibit 10(f) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)++ 10(l) 1997 Stock Option Plan (incorporated by reference to exhibit 10(b) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)++ 10(m) 1998 Stock Option Plan of United Rentals, Inc. (incorporated by reference to Exhibit 99.1 to United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171)++ 10(n) 1998 Supplemental Stock Option Plan of United Rentals, Inc. (incorporated by reference to Exhibit 4.6 to the United Rentals, Inc. Registration Statement on Form S-8, No. 333-70345) 10(o) Employment Agreement with Bradley S. Jacobs, dated as of September 19, 1997 (incorporated by reference to exhibit 10(g) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)++ 10(p) Amendment No. 1 to Employment Agreement with Bradley S. Jacobs, dated as of December 24, 1999 (incorporated by reference to exhibit 10(p) of the United Rentals Annual Report on Form 10-K for the year ended December 31, 1999)++ 10(q) Employment Agreement with John N. Milne, dated as of September 19, 1997 (incorporated by reference to exhibit 10(h) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)++ 10(r) Amendment No. 1 to Employment Agreement with John N. Milne, dated as of December 24, 1999 (incorporated by reference to exhibit 10(r) of the United Rentals Annual Report on Form 10-K for the year ended December 31, 1999)++ 10(s) Employment Agreement with Michael J. Nolan, dated as of October 14, 1997 (incorporated by reference to exhibit 10(i) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)++ 10(t) Amendment No. 1 to Employment Agreement with Michael J. Nolan, dated as of December 24, 1999 (incorporated by reference to exhibit 10(t) of the United Rentals Annual Report on Form 10-K for the year ended December 31, 1999)++ 10(u) Employment Agreement with Robert P. Miner, dated as of October 10, 1997 (incorporated by reference to exhibit 10(j) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)++

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Exhibit Number Description of Exhibit ------ ---------------------- 10(v) Amendment No. 1 to Employment Agreement with Robert Miner, dated as of December 24, 1999 (incorporated by reference to exhibit 10(v) of the United Rentals Annual Report on Form 10-K for the year ended December 31, 1999)++ 10(w) Subscription Agreement dated November 14, 1997, from Wayland R. Hicks (Incorporated by reference to exhibit 10(r) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)++ 10(x) Agreement dated November 14, 1997, with Wayland R. Hicks (incorporated by reference to exhibit 10(s) of United Rentals, Inc., Registration Statement on Form S-1, Registration No. 333-39117)++ 10(y) Amendment No. 1 to Employment Agreement with Wayland R. Hicks, dated as of December 24, 1999 (incorporated by reference to exhibit 10(y) of the United Rentals Annual Report on Form 10-K for the year ended December 31, 1999)++ 10(z)* Amendment No. 2 to Employment Agreement with Wayland R. Hicks, dated as of November 14, 2000++ 10(aa) Form of Employment Agreement with William Berry (incorporated by reference to Exhibit 10(ee) of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333- 63171)++ 10(bb) Form of Employment Agreement with John McKinney (incorporated by reference to Exhibit 10(ff) of United Rentals, Inc. Registration Statement on Form S-4, Registration No. 333-63171)++ 10(cc) Form of Private Placement Purchase Agreement entered into by certain officers in connection with purchasing shares and warrants from United Rentals, Inc., together with the form of Amendment No. 1 thereto (the Private Placement Purchase Agreement is incorporated by reference to exhibit 10(d) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117; and Amendment No. 1 is incorporated by reference to Exhibit 10.2 to United Rentals, Inc. Report on Form 10-Q for the quarterly period ended March 31, 1998)(2)++ 10(dd) Form of Subscription Agreement for September 1997 Private Placement (incorporated by reference to exhibit 10(e) of United Rentals, Inc. Registration Statement on Form S-1, Registration No. 333-39117)(3) 10(ee) Preferred Stock Purchase Agreement dated December 21, 1998 between United Rentals, Inc., Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. (incorporated by reference to exhibit 10(y) of the United Rentals, Inc. Annual Report on Form 10-K for the Year Ended December 31, 1998) 10(ff) Form of U.S. Underwriting Agreement for the public offering completed on March 9, 1999 (incorporated by reference to Exhibit 1(a) to the United Rentals, Inc. Registration Statement on Form S-3, No. 333-71775) 10(gg) Purchase Agreement dated March 16, 1999 relating to the initial sale by United Rentals (North America), Inc. of $250 million aggregate principal amount of 9% Senior Subordinated Notes due 2009 (incorporated by reference to exhibit 10(dd) of the United Rentals, Inc. Annual Report on Form 10-K for the Year Ended December 31, 1998) 10(hh) Preferred Stock Purchase Agreement, Series B Perpetual Convertible Preferred Stock, dated June 28, 1999, among United Rentals, Inc., Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P., together with an Amendment dated as of July 16, 1999 (incorporated by reference to exhibit C of the United Rentals, Inc. Proxy Statement dated July 22, 1999)

80

Exhibit Number Description of Exhibit ------ ---------------------- 10(ii) Preferred Stock Purchase Agreement, Series B Perpetual Convertible Preferred Stock dated July 16, 1999 between United Rentals, Inc. and Chase Equity Associates, L.P. (incorporated by reference to exhibit 10(c) of the United Rentals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999) 21* Subsidiaries of United Rentals, Inc. 23* Consent of Ernst & Young LLP

-------- * Filed herewith. + Filed without exhibits and schedules (to be provided supplementally upon request of the Commission). ++ This document is a management contract or compensatory plan or arrangement. (1) United Rentals, Inc. issued a warrant in this form to the following officers and other employees of United Rentals, Inc. (or in certain cases to an entity controlled by such officer) for the number of shares indicated: Bradley S. Jacobs (5,000,000); John N. Milne (714,286); Michael J. Nolan (285,715); Robert P. Miner (142,857); Sandra E. Welwood (50,000); Joseph J. Kondrup, Jr. (50,000); Kai E. Nyby (50,000); and Richard A. Volonino (50,000). (2) Each officer or other employee of United Rentals, Inc. who purchased securities of United Rentals, Inc. prior to December 18, 1997, other than Messrs. Jacobs and Hicks, entered into a Private Placement Purchase Agreement in this form (modified, in the case of Messrs. Barker and Imig, to reflect the fact that said officers did not purchase warrants) with respect to the shares of Common Stock and warrants purchased by such individual from United Rentals, Inc. United Rentals, Inc. entered into Amendment No. 1 with each of Mr. Milne, Mr. Nolan and Mr. Miner. (3) Each purchaser of shares of Common Stock in United Rentals, Inc.'s September 1997 private placement entered into a Subscription Agreement in this form with respect to the shares purchased. (b) Reports on Form 8-K: 1. Form 8-K dated December 18, 2000 (earliest event reported December 18, 2000); Item 5 was reported. 2. Form 8-K dated December 18, 2000 (earliest event reported December 18, 2000); Item 5 was reported. 81 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED RENTALS, INC. Date: March 21, 2001 /S/ MICHAEL J. NOLAN By: _________________________________ Michael J. Nolan Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signatures Title Date ---------- ----- ---- /S/ BRADLEY S. JACOBS Chairman of the Board March 21, 2001 ---------------------- of Directors and Chief Bradley S. Jacobs Executive Officer (Principal Executive Officer) /S/ WAYLAND R. HICKS Director March 21, 2001 ---------------------- Wayland R. Hicks /S/ JOHN N. MILNE Director March 21, 2001 ---------------------- John N. Milne /S/ JOHN S. MCKINNEY Director March 21, 2001 ---------------------- John S. McKinney /S/ LEON D. BLACK Director March 21, 2001 ---------------------- Leon D. Black /S/ RICHARD D. COLBURN Director March 21, 2001 ---------------------- Richard D. Colburn /S/ RONALD M. DEFEO Director March 21, 20001 ---------------------- Ronald M. DeFeo /S/ MICHAEL S. GROSS Director March 21, 2001 ---------------------- Michael S. Gross 82 Signatures Title Date ---------- ----- ---- /S/ RICHARD J. HECKMANN Director March 21, 2001 ----------------------- Richard J. Heckmann /S/ GERALD TSAI, JR. Director March 21, 2001 ----------------------- Gerald Tsai, Jr. /S/ CHRISTIAN M. WEYER Director March 21, 2001 ----------------------- Christian M. Weyer /S/ MICHAEL J. NOLAN Chief Financial Officer (Principal March 21, 2001 ----------------------- Financial Officer) Michael J. Nolan /S/ PETER R. BORZILLERI Vice President, Corporate March 21, 2001 ----------------------- Controller (Principal Peter R. Borzilleri Accounting Officer) 83 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED RENTALS (NORTH AMERICA), INC. Date: March 21, 2001 /s/ MICHAEL J. NOLAN By: _________________________________ Michael J. Nolan Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signatures Title Date ---------- ----- ---- /S/ BRADLEY S. JACOBS Chairman of the Board March 21, 2001 ---------------------- of Directors and Chief Bradley S. Jacobs Executive Officer (Principal Executive Officer) /S/ WAYLAND R. HICKS Director March 21, 2001 ---------------------- Wayland R. Hicks /S/ JOHN N. MILNE Director March 21, 2001 ---------------------- John N. Milne /S/ JOHN S. MCKINNEY Director March 21, 2001 ---------------------- John S. McKinney /S/ LEON D. BLACK Director March 21, 2001 ---------------------- Leon D. Black /S/ RICHARD D. COLBURN Director March 21, 2001 ---------------------- Richard D. Colburn /S/ RONALD M. DEFEO Director March 21, 2001 ---------------------- Ronald M. DeFeo /S/ MICHAEL S. GROSS Director March 21, 2001 ---------------------- Michael S. Gross 84 Signatures Title Date ---------- ----- ---- /S/ RICHARD J. HECKMANN Director March 21, 2001 ----------------------- Richard J. Heckmann /s/ DAVID C. KATZ Director March 21, 2001 ----------------------- David C. Katz /S/ GERALD TSAI, JR. Director March 21, 2001 ----------------------- Gerald Tsai, Jr. /S/ CHRISTIAN M. WEYER Director March 21, 2001 ----------------------- Christian M. Weyer /s/ MICHAEL J. NOLAN Chief Financial Officer (Principal March 21, 2001 ----------------------- Financial Officer) Michael J. Nolan /s/ PETER R. BORZILLERI Vice President, Corporate March 21, 2001 ----------------------- Controller (Principal Peter R. Borzilleri Accounting Officer) 85