Edgar Filing: UNITED RENTALS INC /DE

As filed with the Securities and Exchange Commission on July 5, 2001

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

United Rentals, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware 06-1522496
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)

Five Greenwich Office Park
Greenwich, Connecticut 06830
(203) 622-3131
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)

Michael J. Nolan, Chief Financial Officer
United Rentals, Inc. Five Greenwich Office Park
Greenwich, Connecticut 06830
(203) 622-3131
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)

A copy of all communications, including communications sent to the agent for
service, should be sent to:

Joseph Ehrenreich, Esq. Malcolm E. Landau, Esq. Kris F. Heinzelman, Esq.
Ehrenreich Eilenberg & Krause LLP Weil, Gotshal & Manges LLP Cravath, Swaine & Moore
11 East 44th Street 767 Fifth Avenue Worldwide Plaza
New York, NY 10017 New York, NY 10153 825 Eighth Avenue
(212) 986-9700 (212) 310-8000 New York, NY 10019
(212) 474-1000

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]

CALCULATION OF REGISTRATION FEE

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Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Aggregate Price Per Aggregate Offering Amount of
to be Registered Registered Unit (1) Price (1) Registration Fee
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Common Stock, par value $0.01 per
share ("Common Stock").......... 10,350,000 shares $25.63(1) $265,270,500 $66,318

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(1)Calculated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) based upon the average of the high and low sales
prices of the Company's Common Stock on July 2, 2001, as reported on the New
York Stock Exchange Composite Tape.

The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated June 20, 2001.

9,000,000 Shares

[LOGO] United/TM/
Rentals

Common Stock

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All of the shares of common stock in the offering are being sold by The
Colburn Music Fund. United Rentals, Inc. will not receive any of the proceeds
from the sale of the shares.

United Rentals' common stock is traded on the New York Stock Exchange under
the symbol "URI". The last reported sale price of the common stock on June 18,
2001, was $24.41 per share.

See "Risk Factors" beginning on page 9 to read about factors you should
consider before buying shares of our common stock.

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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.

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Per Share Total
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Initial price to public.............................. $ $
Underwriting discount................................ $ $
Proceeds, before expenses, to the selling stockholder $ $

To the extent that the underwriters sell more than 9,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
1,350,000 shares from the selling stockholder at the initial public offering
price less the underwriting discount.

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The underwriters expect to deliver the shares against payment in New York,
New York on , 2001.

Goldman, Sachs & Co. Credit Suisse First Boston

JPMorgan
Deutsche Banc Alex. Brown
Legg Mason Wood Walker

Incorporated

Prospectus dated , 2001.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in, or incorporated by reference in, this
prospectus are forward-looking in nature. Such statements can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "on-track," "plan" 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 the heading "Risk Factors." We make no
commitment to revise or update any forward-looking statements in order to
reflect events or circumstances after the date any such statement is made.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements, and other information with the SEC. Such
reports, proxy statements, and other information can be read and copied at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Room. The SEC maintains an internet site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC, including our company.

INCORPORATION BY REFERENCE

The SEC allows us to "incorporate by reference" the documents that we file
with the SEC. This means that we can disclose important information to you by
referring you to those documents. Any information we incorporate in this manner
is considered part of this prospectus. Any information we file with the SEC
after the date of this prospectus and until this offering is completed will
automatically update and supersede the information contained in this
prospectus.

We incorporate by reference the following documents that we have filed with
the SEC and any filings that we will make with the SEC in the future under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
this offering is completed:

. Annual Report on Form 10-K for the year ended December 31, 2000;

. Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;

. The following Current Reports on Form 8-K: (1) Report dated January 2,
2001, (2) Report dated February 28, 2001, (3) Report dated April 13, 2001
and (4) Report dated April 30, 2001;

. Definitive Proxy Statement on Schedule 14A filed on April 30, 2001; and

. Registration Statement on Form 8-A dated November 27, 1997 (filed on
December 3, 1997), and Registration Statement on Form 8-A dated August 6,
1998.

We will provide without charge, upon written or oral request, a copy of any
or all of the documents which are incorporated by reference into this
prospectus. Requests should be directed to: United Rentals, Inc., Attention:
Corporate Secretary, Five Greenwich Office Park, Greenwich, Connecticut 06830,
telephone number: (203) 622-3131.

PROSPECTUS SUMMARY

This summary contains a general summary of the information contained in
this prospectus. It may not include all the information that is important to
you. You should read the entire prospectus and the documents incorporated by
reference before making an investment decision. Unless otherwise indicated, all
data in this prospectus assumes that the underwriters will not exercise the
over-allotment option.

United Rentals

United Rentals is the largest equipment rental company in North America
with approximately 750 locations in 47 states, seven Canadian provinces and
Mexico. We offer for rent over 600 different types of equipment to customers
that include construction and industrial companies, manufacturers, utilities,
municipalities, homeowners and others. In 2000, we served more than 1.2 million
customers, completed over 8.4 million rental transactions and generated
revenues, EBITDA and net income of $2.9 billion, $962.4 million and $176.4
million, respectively.

We have the largest fleet of rental equipment in the world, with over
500,000 units having an original purchase price of approximately $3.5 billion.
Our fleet includes:

. General construction and industrial equipment, such as backhoes,
skid-steer loaders, forklifts, earth moving equipment, material handling
equipment, compressors, pumps and generators;

. Aerial work platforms, such as scissor lifts and boom lifts;

. Traffic control equipment, such as barricades, cones, warning lights,
message boards and pavement marking systems;

. Trench safety equipment for below ground work, such as trench shields,
aluminum hydraulic shoring systems, slide rails, crossing plates,
construction lasers and line testing equipment;

. Special event equipment, such as large tents, light towers and power
units used for sporting, corporate and other events; and

. General tools and light equipment, such as power washers, water pumps,
heaters and hand tools.

In addition to renting equipment, we sell used rental equipment, act as a
dealer for new equipment and sell related merchandise, parts and service.

We estimate that the U.S. equipment rental industry has grown from
approximately $6.5 billion in annual rental revenues in 1990 to over $25
billion in 2000, representing a compound annual growth rate of approximately
14.5%. We believe that the principal driver of growth in the equipment rental
industry, in addition to general economic expansion, has been the increasing
recognition by equipment users of the many advantages that equipment rental may
offer compared with ownership. They recognize that by renting they can:

. avoid the large capital investment required for equipment purchases;

. access a broad selection of equipment and select the equipment best
suited for each particular job;

. reduce storage and maintenance costs; and

. access the latest technology without investing in new equipment.

While the construction industry has to date been the principal user of
rental equipment, industrial companies, utilities and others are increasingly
using rental equipment for plant maintenance, plant turnarounds and other
functions requiring the periodic use of equipment. The market for rental
equipment is also benefiting from increased government funding for
infrastructure projects, such as funding under the U.S. Transportation Equity
Act for the 21st Century ("TEA-21") and the Aviation Investment and Reform Act
for the 21st Century ("AIR-21"). TEA-21 earmarks $175 billion for highway
construction and $42 billion for transit spending over the 1998-2003 fiscal
period, a 40% increase over the prior six-year period. AIR-21 provides for $40
billion in construction spending over three years to support the FAA's airport
improvement programs.

Competitive Advantages

We believe that we benefit from the following competitive advantages:

Large and Diverse Rental Fleet. Our rental fleet is the largest and most
comprehensive in the industry, which allows us to:

. attract customers by providing "one-stop" shopping;

. serve a diverse customer base and reduce our dependence on any particular
customer or group of customers; and

. serve customers that require substantial quantities or wide varieties of
equipment.

Significant Purchasing Power. We purchase large amounts of equipment,
merchandise and other items, which enables us to negotiate favorable pricing,
warranty and other terms with our vendors. Our purchasing power is further
increased by our ongoing efforts to consolidate our vendor base. For example,
we reduced the number of our primary equipment suppliers from 111 to 28 in
2000. This reduction allowed us to lower our equipment purchase costs by
approximately $150 million in 2000 and should enable us to save additional
amounts in 2001. We expect to realize additional savings by consolidating our
merchandise suppliers and negotiating more favorable warranty terms with key
vendors.

Operating Efficiencies. We generally group our branches into clusters of 10
to 30 locations that are in the same geographic area. Our information
technology systems allow each branch to access all available equipment within a
cluster. We believe that our cluster strategy produces significant operating
efficiencies and increases equipment utilization by enabling us to: (1) market
equipment through all branches within a cluster, (2) cross-market equipment
specialties of different branches within each cluster and (3) reduce costs by
consolidating functions that are common to our approximately 750 branches, such
as payroll, accounts payable and credit and collection, into 25 credit offices
and three service centers. In 2000, approximately 10.7% of our total rental
revenue was attributable to equipment sharing among branches.

Information Technology Systems. Our information technology systems
facilitate our ability to make rapid and informed decisions, respond quickly to
changing market conditions, and share equipment among branches. These systems
allow: (1) management to obtain a wide range of operating and financial data,
(2) branch personnel to access and manage branch level data, such as customer
requirements, equipment availability and maintenance histories, and (3)
customers to access their accounts online. These systems promote equipment
sharing among branches by enabling branch personnel to locate needed equipment
within a geographic region, determine its closest location and

arrange for its delivery to a customer's work site. We have an in-house team of
approximately 100 information technology specialists that supports our systems
and extends them to new locations.

Geographic and Customer Diversity. We have approximately 750 branches in 47
states, seven Canadian provinces and Mexico and served more than 1.2 million
customers in 2000. Our customers are diverse, ranging from Fortune 500
companies to small companies and homeowners, and in 2000 our top ten customers
accounted for approximately 2% of our revenues. We believe that our geographic
and customer diversity provide us with many advantages including: (1) enabling
us to better serve National Account customers with multiple locations, (2)
helping us achieve favorable resale prices by allowing us to access used
equipment resale markets across the country, (3) reducing our dependence on any
particular customer and (4) reducing the impact that fluctuations in regional
economic conditions have on our overall financial performance.

National Account Program. Our National Account sales force is dedicated to
establishing and expanding relationships with larger companies, particularly
those with a national or multi-regional presence. We offer our National Account
customers the benefits of a consistent level of service across North America
and a single point of contact for all their equipment needs. Our National
Account team includes 39 professionals serving over 1,400 National Account
customers, including more than 200 new accounts added in the first quarter of
2001. We estimate our revenues from National Account customers will increase to
approximately $400.0 million in 2001 from $245.0 million in 2000.

Risk Management and Safety Programs. We place great emphasis on risk
reduction and safety and believe that we have one of the most comprehensive
risk management and safety programs in the industry. Our risk management
department is staffed by 43 experienced professionals and is responsible for
implementing our safety programs and procedures, developing our employee and
customer training programs and managing any claims against us.

Experienced Senior Management. Our senior management team is comprised of
executives with proven track records. Our management team includes Bradley S.
Jacobs, John N. Milne and Michael J. Nolan, who together with others founded
our company in September 1997, and Wayland R. Hicks who joined them shortly
thereafter. Prior to the founding of our company, Mr. Jacobs served as the
Chairman and Chief Executive Officer of United Waste Systems, Inc., which he
founded in 1989, and Messrs. Milne and Nolan served as members of the United
Waste senior management team for periods of seven and six years, respectively.
United Waste was sold in August 1997 and, at the time, was the sixth largest
provider of integrated, non-hazardous solid waste management services in the
United States. Mr. Hicks, prior to joining our company, held senior executive
positions at Xerox Corporation, where he worked for 28 years, including
Executive Vice President, Corporate Operations and Executive Vice President,
Corporate Marketing and Customer Support Operations. Mr. Hicks also served as
Vice Chairman and Chief Executive Officer of Nextel Communications Corp.
(1994-1995).

Strong and Motivated Branch Management. Each of our branches has a
full-time branch manager who is supervised by one of our 63 district managers
and nine regional vice presidents. We believe that our managers are among the
most knowledgeable and experienced in the industry, and we empower them--within
budgetary guidelines--to make day-to-day decisions concerning staffing,
pricing, equipment purchasing and other branch matters. Management closely
tracks branch, district and regional performance with extensive systems and
controls, including performance benchmarks and detailed monthly operating
reviews. We promote equipment sharing among branches by linking the
compensation of branch managers and other personnel to their branch's financial
performance and return on assets.

Flexible Business Strategy. We generate significant cash from operations
that is available for growth investment or debt reduction. In response to the
slowing economy at the beginning of this year, we decreased the rate at which
we purchase new equipment, open new locations and make acquisitions, thereby
increasing cash available for debt reduction. We expect to accelerate our
growth activities as economic conditions warrant.

Strategy

We have established the following key business strategies:

Enhance Industry Leadership Position. We intend to use our extensive fleet,
broad geographic coverage, advanced information technology systems and depth of
experience of our senior and branch management to generate further growth and
increase our market share by:

. actively managing the composition and size of our fleet to meet customer
needs and respond to local demand;

. promoting equipment sharing and cross-marketing of equipment specialties
among branches in geographic regions;

. focusing on providing outstanding customer service and support;

. marketing our services to existing and potential National Account
customers that can benefit from our ability to provide a broad selection
of equipment and a consistently high level of service throughout North
America;

. marketing our extensive fleet of specialized lines of equipment,
including (1) aerial work platforms for use in large projects requiring
significant amounts of equipment for extended periods of time, (2)
traffic control equipment for use in infrastructure projects and (3)
trench safety equipment required for use in below ground work in order to
comply with government worker safety standards; and

. training our sales force and branch personnel in value-added sales
techniques to achieve customer satisfaction and maximize the value of
each transaction.

Maintain Disciplined Approach to Growth Through New Branches and
Acquisitions. We intend to continue to selectively open new branches and make
acquisitions that will expand our geographic reach, enhance our operating
efficiency and increase our market share. In seeking acquisition candidates, we
generally focus on those that have the potential to be immediately accretive to
earnings.

Rapidly Adapt to Changing Economic Conditions. We have made significant
investments in new equipment over the past several years and, as a result, have
one of the most modern rental fleets in the industry. The young age of our
fleet gives us the flexibility to respond to an economic downturn by reducing
the rate at which we purchase new equipment and sell used equipment. We
anticipate significantly increasing our free cash flow from operations in 2001
by reducing our equipment expenditures to approximately $400 million, compared
to $962 million in 2000.

The Offering

Common stock offered by the selling stockholder.. 9,000,000 shares

Common stock to be outstanding after the offering 72,672,722 shares(1)

New York Stock Exchange Symbol................... URI

Use of Proceeds.................................. United Rentals will not
receive any proceeds from
this offering.

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(1) We calculated the outstanding shares based on the number of shares
outstanding as of June 8, 2001. The outstanding shares do not include: (i)
12,000,000 shares issuable upon conversion of outstanding preferred shares
of United Rentals, which provide for a conversion price of $25 per share,
(ii) 5,000,000 shares issuable upon conversion of outstanding preferred
shares of United Rentals, which provide for a conversion price of $30 per
share, (iii) 6,875,580 shares issuable upon conversion of outstanding
preferred securities of a subsidiary trust of United Rentals, which provide
for a conversion price of $43.625 per share, (iv) 7,094,296 shares issuable
upon the exercise of outstanding warrants, which provide for a weighted
average exercise price of $11.76 per share, (v) 16,566,328 shares issuable
upon the exercise of outstanding options, which provide for a weighted
average exercise price of $20.44 per share, and (vi) 232,586 shares
issuable upon conversion of outstanding debt of United Rentals, which
provide for a weighted average conversion price of $33.25 per share.

Summary Consolidated Financial Information

The tables below present selected financial information for our company.
You should read this information together with (1) the information set forth
under "Capitalization," "Selected Consolidated Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (2) the consolidated financial statements of our company and
the related notes which are included herein.

We refinanced an aggregate of $1,695.7 million of indebtedness and other
obligations in April 2001. As part of this refinancing, we (1) issued $450
million of 10 3/4% Senior Notes Due 2008, (2) obtained a new senior secured
credit facility comprised of a $750 million term loan and a $750 million
revolving credit facility and (3) used proceeds from the notes and the new
secured credit facility to repay indebtedness and other obligations that were
outstanding under our old revolving credit facility, certain term loans and a
synthetic lease. The balance sheet data under the heading "Pro Forma" adjusts
the historical balance sheet data to give effect to the borrowings under our
old credit facility subsequent to March 31, 2001 and the refinancing
transactions, as if such transactions had occurred on March 31, 2001.

Certain of our acquisitions were accounted for as purchases and certain
acquisitions were accounted for as poolings-of-interests, including our
September 1998 merger with U.S. Rentals, Inc. For further information
concerning the accounting for these acquisitions, see (1) note 3 to the audited
consolidated financial statements of our company included herein, and (2) note
2 to the unaudited consolidated financial statements of our company included
herein.

Summary Consolidated Financial Information

Three Months
Ended
Year Ended December 31, March 31,
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1998 1999 2000 2000 2001
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(dollars in millions, except per share da

Income statement data:
Total revenues...................................... $1,220 $2,234 $2,919 $ 579 $ 619
Gross profit........................................ 423 825 1,089 206 203
Operating income.................................... 145 409 548 84 68
Interest expense.................................... 64 140 229 50 57
Preferred dividends of a subsidiary trust........... 8 20 20 5 5
Income before provision for income taxes and
extraordinary item................................ 78 242 301 30 6
Net income(1)(2).................................... 13 143 176 17 3
Basic earnings per share before extraordinary item.. $ 0.53 $ 2.00 $ 2.48 $0.24 $0.05
Diluted earnings per share before extraordinary item $ 0.48 $ 1.53 $ 1.89 $0.19 $0.04
Basic earnings per share(2)......................... $ 0.20 $ 2.00 $ 2.48 $0.24 $0.05
Diluted earnings per share(2)....................... $ 0.18 $ 1.53 $ 1.89 $0.19 $0.04

Other financial data:
Diluted earnings per share, as adjusted(2).......... $ 1.00 $ 1.65 $ 1.89 $0.19 $0.04
EBITDA(3)........................................... $ 404 $ 761 $ 962 $ 178 $ 170

As of March 31, 2001
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Historical Pro Forma
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(dollars in millions)

Balance sheet data:
Cash and cash equivalents..................................... $ 26 $ 26
Rental equipment, net......................................... 1,720 1,751
Total assets.................................................. 5,112 5,143
Total debt.................................................... 2,751 2,807
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust............................ 300 300
Stockholders' equity.......................................... 1,514 1,514

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(1) We recorded an extraordinary item (net of income taxes) of $21.3 million in
1998. Such charge resulted from the early extinguishment of certain debt
and primarily reflected prepayment penalties on certain debt of U.S.
Rentals.
(2) Our 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. Our earnings during 1999 were impacted by $18.2 million ($10.8
million net of taxes) of expenses incurred related to a terminated tender
offer. Our earnings per share, as adjusted, exclude such amounts. Basic
earnings per share, as adjusted, were $1.10 and $2.15 for 1998 and 1999,
respectively. Diluted earnings per share, as adjusted, were $1.00 and $1.65
for 1998 and 1999, respectively.
(3) EBITDA is defined as net income (excluding (i) non-operating income and
expense, (ii) $47.2 million in merger-related expenses in 1998 related to
the three acquisitions accounted for as poolings-of-interests, including
the merger with U.S. Rentals and (iii) $8.3 million of expenses that are
included in selling, general and administrative expenses for 1999 and which
related to a terminated tender offer), plus interest expense, income taxes
and depreciation and amortization. We have presented EBITDA data to provide
you with additional information concerning our ability to meet our 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, you should not
consider EBITDA an alternative to net income or cash flows as indicators of
our operating performance or liquidity.

RISK FACTORS

In addition to the other information in this document, you should carefully
consider the following factors before making an investment decision.

Our business could be hurt by a decline in construction and industrial
activities.

Our equipment is principally used in connection with construction and
industrial activities. Consequently, a downturn in construction or industrial
activity may lead to a decrease in the demand for our equipment or depress
rental rates and the sales prices for the equipment we sell. We have identified
below certain of the factors which may cause such a downturn, either
temporarily or long-term:

. a continuation or a worsening of the recent slow-down of the economy over
the long-term;

. an increase in interest rates; or

. adverse weather conditions which may temporarily affect a particular
region.

In addition, demand for our equipment may not reach projected levels in the
event that funding for highway and other construction projects under government
programs, such as the Transportation Equity Act for the 21st Century ("TEA-21")
or the Aviation Investment and Reform Act for the 21st Century ("AIR-21"), does
not reach expected levels.

The loss of any member of senior management could hurt our business.

We are highly dependent upon our senior management team. Consequently, our
business could be adversely affected in the event that we lose the services of
any member of senior management. For information on our employment and
severance arrangements with senior management, see "Management--Employment
Agreements and Change-in-Control Agreements." We do not maintain "key man" life
insurance with respect to members of senior management.

Our business is highly competitive and competition may increase.

The equipment rental industry is highly fragmented and competitive. Our
competitors primarily include small, independent businesses with one or two
rental locations, regional competitors which operate in one or more states,
public companies or divisions of public companies, and equipment vendors and
dealers who both sell and rent equipment directly to customers. We may in the
future encounter increased competition from our existing competitors or from
new companies. In addition, equipment manufacturers may commence or increase
their existing efforts relating to renting and selling equipment directly to
our customers or potential customers.

Our operating results may fluctuate which could affect the trading value of our
common stock.

We expect that our revenues and operating results may fluctuate from
quarter to quarter or over the longer term due to a number of factors,
including:

. seasonal rental patterns of our customers, with rental activity tending
to be lower in the winter;

. our recent acquisition of businesses that specialize in renting traffic
control equipment, which tend to operate at a loss during the first
quarter;

. the timing of expenditures for new equipment and the disposition of used
equipment;

. changes in demand for our equipment or the prices therefor due to changes
in economic conditions, competition or other factors;

. changes in the interest rates applicable to our floating rate debt;

. if we determine that a potential acquisition will not be consummated, the
need to charge against earnings any expenditures relating to such
transaction (such as financing commitment fees, merger and acquisition
advisory fees and professional fees) previously capitalized; and

. the possible need, from time to time, to take other write-offs or special
charges due to a variety of occurrences, such as store consolidations or
closings or the refinancing of existing indebtedness.

Fluctuations in our operating results could adversely affect the trading value
of our common stock.

Our business could be hurt if we are unable to obtain additional capital as
required.

We may require additional capital for, among other purposes, purchasing
rental equipment, completing acquisitions, establishing new rental locations
and refinancing existing indebtedness. If the cash that we generate from our
business, together with cash that we may borrow under our credit facility, is
not sufficient to fund our capital requirements, we will require additional
debt and/or equity financing. We cannot, however, be certain that any
additional financing will be available or, if available, will be available on
terms that are satisfactory to us. If we are unable to obtain sufficient
additional capital in the future, our business could be adversely affected.

We have made acquisitions, which entails certain risks.

We have grown in part through acquisitions. The making of acquisitions
entails certain risks, including:

. unrecorded liabilities of acquired companies that we fail to discover
during our due diligence investigations;

. difficulty in assimilating the operations and personnel of the acquired
company with our existing operations;

. loss of key employees of the acquired company; and

. difficulty maintaining uniform standards, controls, procedures and
policies.

We depend on our information technology systems, and any disruption in these
systems could hurt our business.

Our ability to monitor and control our operations depends to a large extent
on the proper functioning of our information technology systems. Any disruption
in these systems or the failure of these systems to operate as expected could,
depending on the magnitude and duration of the problem, adversely affect our
business.

We are exposed to various possible claims relating to our business, and our
insurance may not fully protect us.

We are exposed to various possible claims relating to our business. These
possible claims include those relating to (1) personal injury or death caused
by equipment rented or sold by us, (2) motor vehicle accidents involving our
delivery and service personnel and (3) employment related claims. We carry a
broad range of insurance for the protection of our assets and operations.
However, such insurance may not fully protect us for a number of reasons,
including:

. our coverage is subject to a deductible of $1.0 million and limited to a
maximum of $98.0 million per occurrence;

. we do not maintain coverage for environmental liability (other than
legally required fuel storage tank coverage), since we believe that the
cost for such coverage is high relative to the benefit that it provides;
and

. certain types of claims, such as claims for punitive damages or for
damages arising from intentional misconduct, which are often alleged in
third party lawsuits, might not be covered by our insurance.

We cannot be certain that insurance will continue to be available to us on
economically reasonable terms, if at all.

We are subject to numerous environmental and safety regulations. Our business
could be hurt if we are required to incur compliance or remediation costs that
are not currently anticipated.

Our operations are subject to numerous laws governing environmental
protection and occupational health and safety matters. These laws regulate such
issues as wastewater, stormwater, solid and hazardous wastes and materials, and
air quality. Under these laws, we may be liable for, among other things, (1)
the costs of investigating and remediating contamination at our sites as well
as sites to which we sent hazardous wastes for disposal or treatment regardless
of fault and (2) fines and penalties for non-compliance. Our operations
generally do not raise significant environmental risks, but we use hazardous
materials to clean and maintain equipment, and dispose of solid and hazardous
waste and wastewater from equipment washing, and store and dispense petroleum
products from underground and above-ground storage tanks located at certain of
our locations.

Based on the conditions currently known to us, we do not believe that any
pending or likely remediation and compliance costs will have a material adverse
effect on our business. We cannot be certain, however, as to the potential
financial impact on our business if new adverse environmental conditions are
discovered or environmental and safety requirements become more stringent. If
we are required to incur environmental compliance or remediation costs that are
not currently anticipated by us, our business could be adversely affected
depending on the magnitude of the cost.

A prolonged labor dispute could hurt our business.

Certain of our employees are represented by unions and covered by collective
bargaining agreements. If we should experience a prolonged labor dispute
involving a significant number of our employees, our business could be
adversely affected.

Restrictive covenants could adversely affect our business by limiting our
flexibility.

We are subject to various restrictive financial and operating covenants
under the agreements governing our indebtedness. These covenants limit or
prohibit, among other things, our ability to incur indebtedness, make
prepayments of certain indebtedness, make investments, create liens, make
acquisitions, sell assets and engage in mergers and acquisitions. These
covenants could adversely affect our business by significantly limiting our
operating and financial flexibility.

Our operations outside the United States are subject to the risks normally
associated with international operations.

Our operations outside the United States are subject to the risks normally
associated with international operations. These include the need to convert
currencies, which could result in a gain or loss depending on fluctuations in
exchange rates, and the need to comply with foreign laws.

Absence of dividends could reduce our attractiveness to investors.

We have never paid any dividends on our common stock and have no plans to
pay any such dividends in the foreseeable future. Certain of the agreements
governing our outstanding indebtedness prohibit us from paying dividends on our
common stock or restrict our ability to pay such dividends. See "Dividend
Policy."

Shares eligible for future sale could adversely affect the market price of our
common stock.

If our stockholders sell substantial amounts of our common stock (including
shares issued upon exercise of warrants, options or convertible securities),
the market price of our common stock could fall. Subject to certain lock-up
agreements to be entered into by the selling stockholder and by our officers
and directors in connection with the offering (as described under
"Underwriting"), substantially all of the outstanding shares of our common
stock may be sold in the public market.

Anti-takeover provisions in our charter and by-laws could limit our share price
and deter a third party from acquiring our company.

Certain provisions of our Certificate of Incorporation and By-laws, as well
as applicable Delaware law, could make it difficult for a third party to
acquire our company without the consent of the incumbent board. These
provisions provide, among other things, that:

. the directors of our company (other than directors elected by the holders
of our outstanding preferred stock) are divided into three classes, with
directors of each class serving for a staggered three-year period;
. directors may be removed only for cause and only upon the affirmative
vote of at least 66 2/3% of the voting power of all the then outstanding
shares of stock entitled to vote;
. stockholders may not act by written consent;
. stockholder nominations and proposals may only be made if specified
advance notice requirements are complied with;
. stockholders are precluded from calling a special meeting of
stockholders; and
. the board of directors has the authority to issue shares of preferred
stock in one or more series and to fix the powers, preferences and rights
of any such series without stockholder approval.

USE OF PROCEEDS

United Rentals will not receive any proceeds from the sale of common stock
in this offering by the selling stockholder.

PRICE RANGE OF COMMON STOCK

Our common stock trades on the New York Stock Exchange under the symbol
"URI." The following table sets forth, for the periods indicated, the high and
low 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 21.50
Fourth quarter......................... 21.94 14.31

2000:
First quarter.......................... $22.31 $13.44
Second quarter......................... 19.94 13.00
Third quarter.......................... 24.19 17.00
Fourth quarter......................... 24.31 11.69

2001:
First quarter.......................... $19.73 $12.75
Second quarter (through June 18, 2001). 26.40 15.06

On June 18, 2001, the last reported sale price of the common stock as
reported on the New York Stock Exchange was $24.41. As of June 18, 2001, there
were approximately 312 holders of record of the common stock. We believe 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 name."

DIVIDEND POLICY

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

CAPITALIZATION

The following table summarizes our capitalization as of March 31, 2001 on
an historical basis and on a pro forma basis. You should read this table
together with (1) the information set forth under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and (2) the
consolidated financial statements of our company and the related notes which
are included herein.

We refinanced an aggregate of $1,695.7 million of indebtedness and other
obligations in April 2001. As part of this refinancing, we (1) issued $450
million of 10 3/4% Senior Notes Due 2008, (2) obtained a new senior secured
credit facility comprised of a $750 million term loan and a $750 million
revolving credit facility and (3) used proceeds from the notes and the new
secured credit facility to repay indebtedness and other obligations that were
outstanding under our old revolving credit facility, certain term loans and a
synthetic lease. The data under the heading "Pro Forma" adjusts the historical
data to give effect to the borrowings under our old credit facility subsequent
to March 31, 2001 and the refinancing transactions, as if such transactions had
occurred on March 31, 2001.

As of March 31, 2001
--------------------
Historical Pro Forma
------ ------
(dollars in millions,
except share data)

Cash and cash equivalents..................................................... $ 26 $ 26
====== ======
Debt (including current portion):
Revolving credit facility.................................................. $ 429 $ 474
Term loans................................................................. 1,189 750
Receivables securitization................................................. 100 100
10 3/4% senior notes due 2008.............................................. 450
9 1/2% senior subordinated notes due 2008.................................. 200 200
8.8% senior subordinated notes due 2008.................................... 201 201
9 1/4% senior subordinated notes due 2009.................................. 300 300
9% senior subordinated notes due 2009...................................... 250 250
Other debt................................................................. 82 82
------ ------
Total debt............................................................. 2,751 2,807
Company-obligated mandatorily redeemable convertible preferred securities of a
subsidiary trust............................................................ 300 300
Stockholders' equity:
Preferred stock--$.01 par value, 5,000,000 shares authorized:
Series A perpetual convertible preferred stock--$300 liquidation
preference, 300,000 shares issued and outstanding....................
Series B perpetual convertible preferred stock--$150 liquidation
preference, 150,000 shares issued and outstanding....................
Common stock--$.01 par value, 500,000,000 shares authorized,
69,813,652 shares issued and outstanding(1)(2)........................... 1 1
Additional paid in capital................................................. 1,173 1,173
Retained earnings.......................................................... 359 359
Accumulated other comprehensive loss....................................... (19) (19)
------ ------
Total stockholders' equity............................................. 1,514 1,514
------ ------
Total capitalization.......................................................... $4,565 $4,621
====== ======

--------
(1) We issued an aggregate of 2,859,070 shares of common stock subsequent to
March 31, 2001 (through June 8, 2001). These shares are not reflected in
the table.
(2) Does not include (i) 12,000,000 shares issuable upon conversion of the
outstanding shares of Series A Perpetual Convertible Preferred Stock, which
provide for a conversion price of $25 per share, (ii) 5,000,000 shares
issuable upon conversion of the outstanding shares of Series B Perpetual
Convertible Preferred Stock, which provide for a conversion price of $30
per share, (iii) 6,875,580 shares issuable upon conversion of the
outstanding preferred securities of a subsidiary trust, which provide for a
conversion price of $43.625 per share, (iv) 7,094,296 shares issuable upon
the exercise of outstanding warrants, which provide for a weighted average
exercise price of $11.76 per share, (v) 16,566,328 shares issuable upon the
exercise of outstanding options, which provide for a weighted average
exercise price of $20.44 per share, and (vi) 232,586 shares issuable upon
conversion of outstanding debt of United Rentals, which provide for a
weighted average conversion price of $33.25 per share.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The tables below present selected financial information for our company.
You should read this information together with (1) the information set forth
under "Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and (2) the consolidated financial
statements of our company and the related notes which are included herein.

The balance sheet data presented below as of December 31, 2000 and 1999 and
the income statement data for the years ended December 31, 2000, 1999 and 1998
are derived from our audited consolidated financial statements which are
included herein. The balance sheet data presented below as of December 31,
1998, 1997 and 1996 and the income statement data for the years ended December
31, 1997 and 1996 are derived from audited consolidated financial statements of
our company which are not included or incorporated by reference in this
prospectus. The balance sheet data presented below as of March 31, 2001 and the
income statement data for the three-month periods ended March 31, 2001 and 2000
are derived from our unaudited consolidated financial statements which are
included herein.

Certain of our acquisitions were accounted for as purchases and certain
acquisitions were accounted for as poolings-of-interests, including our
September 1998 merger with U.S. Rentals, Inc. For further information
concerning the accounting for these acquisitions, see (1) note 3 to the audited
consolidated financial statements of our company included herein and (2) note 2
to the unaudited consolidated financial statements of our company included
herein.

Selected Consolidated Financial Information

Three Months
Ended
Year Ended December 31, March 31,
----------------------------------- ------------
1996 1997 1998 1999 2000 2000 2001
----- ----- ------ ------ ------ ----- -----
(dollars in millions, except per share data)

Income statement data:
Total revenues............................................ $ 354 $ 490 $1,220 $2,234 $2,919 $ 579 $ 619
Total cost of operations.................................. 241 341 797 1,409 1,830 373 416
----- ----- ------ ------ ------ ----- -----
Gross profit.............................................. 113 149 423 825 1,089 206 203
Selling, general and administrative expenses.............. 55 71 196 353 454 102 109
Merger-related expenses................................... 47
Non-rental depreciation and amortization.................. 9 13 35 63 87 20 26
Termination cost of deferred compensation agreements...... 20
----- ----- ------ ------ ------ ----- -----
Operating income.......................................... 49 45 145 409 548 84 68
Interest expense.......................................... 11 12 64 140 229 50 57
Preferred dividends of a subsidiary trust................. 8 20 20 5 5
Other (income) expense, net............................... (2) (5) 7 (2) (1)
----- ----- ------ ------ ------ ----- -----
Income before provision for income taxes and extraordinary
items.................................................... 38 35 78 242 301 30 6
Provision for income taxes................................ 30 44 99 125 13 3
----- ----- ------ ------ ------ ----- -----
Income before extraordinary items......................... 38 5 34 143 176 17 3
Extraordinary items, net (1).............................. 1 21
----- ----- ------ ------ ------ ----- -----
Net income (3)............................................ $ 38 $ 4 $ 13 $ 143 $ 176 $ 17 $ 3
===== ===== ====== ====== ====== ===== =====
Pro forma provision for income taxes before extraordinary
items (2)................................................ $ 15 $ 14 $ 44
Pro forma income before extraordinary items (2)........... 23 21 34
Basic earnings per share before extraordinary items....... $1.67 $0.12 $ 0.53 $ 2.00 $ 2.48 $0.24 $0.05
Diluted earnings per share before extraordinary items..... $1.67 $0.11 $ 0.48 $ 1.53 $ 1.89 $0.19 $0.04
Basic earnings per share (3).............................. $1.67 $0.08 $ 0.20 $ 2.00 $ 2.48 $0.24 $0.05
Diluted earnings per share (3)............................ $1.67 $0.08 $ 0.18 $ 1.53 $ 1.89 $0.19 $0.04

Other financial data:
EBITDA (4)................................................ $ 124 $ 161 $ 404 $ 761 $ 962 $ 178 $ 170

As of December 31, As of March 31, 2001
------------------------------ --------------------
1996 1997 1998 1999 2000 Historical Pro Forma
---- ---- ------ ------ ------ ------ ------
(dollars in millions)

Balance sheet data:
Cash and cash equivalents........................... $ 3 $ 72 $ 20 $ 24 $ 34 $ 26 $ 26
Rental equipment, net............................... 235 461 1,143 1,660 1,733 1,720 1,751
Total assets........................................ 381 826 2,635 4,498 5,124 5,112 5,143
Total debt.......................................... 214 265 1,315 2,266 2,675 2,751 2,807
Company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust......... 300 300 300 300 300
Stockholders' equity................................ 105 446 726 1,397 1,546 1,514 1,514

--------
(1) The charge in 1997 resulted from the prepayment of debt by U.S. Rentals.
The charge in 1998 resulted from the early extinguishment of certain debt
and primarily reflected prepayment penalties on certain debt of U.S.
Rentals.
(2) U.S. Rentals was taxed as a Subchapter S Corporation until its initial
public offering in February 1997, and another company that we acquired in a
pooling-of-interests transaction was taxed as a Subchapter S Corporation
until being acquired by us in 1998. In general, the income or loss of a
Subchapter S Corporation is passed through to is owners rather than being
subjected to taxes at the entity level. Pro forma provisions for income
taxes before extraordinary items and pro forma income before extraordinary
items reflects a provision for income taxes as if all such companies were
liable for federal and state income taxes as taxable corporate entities for
all periods presented.
(3) Our earnings during 1997 were impacted by $20.3 million of expenses related
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. Our 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. Our 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, (1) 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. We have presented EBITDA data to provide you with additional
information concerning our ability to meet out 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, you should not consider EBITDA
an alternative to net income or cash flows as indicators of our operating
performance or liquidity.

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 of our company and the related notes which
are included herein.

General

We primarily derive 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 used
rental equipment, (iii) the sale of new 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.

We record rental equipment expenditures at cost and depreciate 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. Our 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.

Accounting For Acquisitions

We commenced operations in October 1997 and have completed 247
acquisitions, including a merger with U.S. Rentals, Inc., which was completed
in September 1998. We accounted for three of these acquisitions (including the
U.S. Rentals merger) as "poolings-of-interests," which means that for
accounting and financial reporting purposes the acquired company is treated as
having been combined with us at all time since the inception of the acquired
company. Accordingly, we have restated our financial statements to include the
accounts of two of the companies acquired in these pooling-of-interest
transactions (but have not restated our financial statements for the third
transaction, which was not material and which has been combined with us
effective July 1, 1998). For additional information concerning this
restatement, see note 3 to our audited consolidated financial statements
included herein. We accounted for our other acquisitions as "purchases," which
means that the results of operations of the acquired company are included in
our financial statements only from the date of acquisition. In view of the fact
that our operating results for 2001, 2000, 1999 and 1998 were affected by
acquisitions that were accounted for as purchases, we believe that our results
for these periods are not directly comparable.

Results of Operations

Three Months Ended March 31, 2001 and 2000

Revenues. Total revenues for the three months ended March 31, 2001 were
$619.1 million, representing an increase of 6.9% over total revenues of $579.0
million for the three months ended March 31, 2000. Our revenues during these
periods were attributable to the following sources.

. Revenues from Equipment Rentals. These revenues were $461.4 million in
the first quarter of 2001, representing an increase of 15.3% from $400.1
million in the first quarter of 2000. These revenues accounted for 74.5%
of our total revenues in the first quarter of 2001 compared with 69.1% of
our total revenues in the first quarter of 2000. The 15.3% increase in
these revenues in the first quarter of 2001 reflected (i) increased
revenues at locations open more than one year (which accounted for
approximately 8.2 percentage points) and (ii) new rental locations
acquired through acquisitions and the opening of start-up locations,
partially offset by locations sold or closed (which accounted for
approximately 7.1 percentage points).

. Revenues from the Sales of Rental Equipment. These revenues were $39.1
million in the first quarter of 2001, representing a decrease of 44.4%
from $70.3 million in the first quarter of 2000. These revenues accounted
for 6.3% of our total revenues in the first quarter of 2001 compared with
12.1% of our total revenues in the first quarter of 2000.

We have, in response to softening economic conditions, been focusing on
measures to reduce our cash outlays. These measures include reducing our
2001 budget for new equipment purchases and slowing the rate at which we
sell our used rental equipment. The 44.4% reduction in revenues from the
sales of rental equipment during the first quarter of 2001 reflects these
actions. For additional information, see "--Liquidity and Capital
Resources--Certain Measures to Reduce Cash Requirements."

. Revenues from the Sales of Equipment and Merchandise and Other Revenues.
These revenues were $118.6 million in the first quarter of 2001,
representing an increase of 9.3% from $108.5 million in the first quarter
of 2000. These revenues accounted for 19.2% of our total revenues in the
first quarter of 2001 compared with 18.7% of our total revenues in the
first quarter of 2000. The 9.3% increase in sales of equipment and
merchandise and other revenues was attributable to the increase in the
volume of transactions.

Gross Profit. Gross profit decreased to $202.6 million in the three months
ended March 31, 2001, from $206.0 million in the three months ended March 31,
2000. This decrease primarily reflected the following: (i) the sales of used
rental equipment, which generally produces higher gross profit margins than our
other sources of revenues, accounted for a smaller percentage of our total
revenues as discussed above, and (ii) our business of renting traffic control
equipment, which generally operates at a loss during the first quarter due to
seasonal factors, increased in size, making our overall results during the
first quarter more subject to this seasonality.

Our gross profit margin by source of revenues in the three months ended
March 31, 2001 and 2000 was: (i) equipment rental (33.1% in the three months
ended March 31, 2001 and 38.1% in the three months ended March 31, 2000), (ii)
sales of rental equipment (41.0% in the three months ended March 31, 2001 and
41.6% in the three months ended March 31, 2000) and (iii) sales of equipment
and merchandise and other revenues (28.6% in the three months ended March 31,
2001 and 22.5% in the three months ended March 31, 2000). The decrease in the
gross profit margin from rental revenues in the three months ended March 31,
2001 was primarily attributable to the impact of our traffic control business
as described above. The increase in the gross profit margin from sales of
equipment and merchandise and other revenue in the three months ended March 31,
2001, primarily reflected the following: (i) lower costs resulting from our
ongoing efforts to consolidate our suppliers and further capitalize on our
purchasing power and (ii) a shift in mix which resulted in more of our sales
being attributable to higher margin areas such as providing services and
selling parts.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") were $108.9 million, or 17.6% of total
revenues, during the three months ended March 31, 2001 and $101.9 million, or
17.6% of total revenues, during the three months ended March 31, 2000.

Non-rental Depreciation and Amortization. Non-rental depreciation and
amortization was $26.1 million, or 4.2% of total revenues, in the three months
ended March 31, 2001 and $20.0 million, or 3.5% of total revenues, in the three
months ended March 31, 2000. The increase in the dollar amount of non-rental
depreciation and amortization in the first three months of 2001 primarily
reflected the amortization of goodwill attributable to acquisitions completed
subsequent to the first quarter of 2000.

Interest Expense. Interest expense increased to $57.5 million in the three
months ended March 31, 2001 from $49.7 million in the three months ended March
31, 2000. This increase primarily reflected an increase in our indebtedness,
principally to fund acquisitions.

Preferred Dividends of a Subsidiary Trust. During the three months ended
March 31, 2001 and 2000, preferred dividends of a subsidiary trust were $4.9
million.

Other (Income) Expense. Other income was $0.7 million in the three months
ended March 31, 2001 compared with $0.2 million in the three months ended March
31, 2000.

Income Taxes. Income taxes were $2.4 million, or an effective rate of
41.5%, in the three months ended March 31, 2001 compared to $12.4 million, or
an effective rate of 41.5%, in the three months ended March 31, 2000.

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. Our 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. Our 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. SG&A was $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
our indebtedness, principally to fund acquisitions, and (ii) an increase in the
interest rates applicable to our variable rate debt.

Preferred Dividends of a Subsidiary Trust. During 2000 and 1999, preferred
dividends of a subsidiary trust 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 that we
paid for a $2.0 billion financing commitment that was subsequently cancelled
upon termination of a tender offer made by us in 1999.

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. Our 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 that we offer 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. Our 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. We incurred merger-related expenses in 1998 of
$47.2 million ($33.2 million after-tax) in connection with three acquisitions
completed by us 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 our merger with U.S. Rentals 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.

Interest Expense. Interest expense increased to $139.8 million in 1999 from
$64.2 million in 1998. This increase primarily reflected the fact that our
indebtedness significantly increased in 1999, primarily to fund acquisitions.

Preferred Dividends of a Subsidiary Trust. Preferred dividends of a
subsidiary trust 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 us 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, our 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 us.

Extraordinary Item. We 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

Recent Financing Transactions

In April 2001, United Rentals (North America), Inc. ("URI"), a wholly owned
subsidiary of United Rentals, Inc. ("Holdings"), refinanced $1,664.5 million of
its outstanding secured indebtedness. In order to effect this refinancing, URI:

. issued $450.0 million of 10 3/4% Senior Notes Due 2008;

. obtained a new senior secured credit facility comprised of a $750.0
million term loan and a $750.0 million revolving credit facility;

. made an initial draw under the new revolving credit facility in the
amount of $525.0 million; and

. used the proceeds from the notes, the new term loan and the initial draw
under the new revolving credit facility to (i) permanently repay the
outstanding balance under URI's old revolving credit facility ($476.0
million); (ii) repay outstanding term loans ($1,188.5 million) and (iii)
repay an outstanding synthetic lease ($31.2 million).

Certain Information Concerning Our Revolving Credit Facility

Our revolving credit facility enables URI to borrow up to $750 million on a
revolving basis and enables one of our Canadian subsidiaries to borrow up to
$40 million (provided that the aggregate borrowings of URI and the Canadian
subsidiary may not exceed $750 million). Up to $100 million of the revolving
credit facility is available in the form of letters of credit. The revolving
credit facility will mature and terminate on October 20, 2006.

Borrowings by URI under the revolving credit facility will until October
20, 2001 accrue interest, at our option, at either (A) the ABR rate (which is
equal to the greater of (i) the Federal Funds Rate plus 0.5% or (ii) The Chase
Manhattan Bank's prime rate) plus a margin of 1.00% or (B) an adjusted IBOR
rate plus a margin of 2.0%. From and after October 20, 2001, the above interest
rate margins will be adjusted quarterly based on our funded debt to cash flow
ratio, up to maximum margins of 1.75% and 2.75%, for revolving loans based on
the ABR rate and the adjusted IBOR rate, respectively, and down to minimum
margins of 0.75% and 1.75%, for revolving loans based on the ABR rate and the
adjusted IBOR rate, respectively. If at any time an event of default exists,
the interest rate applicable to each loan will increase to the maximum margins
set forth above and, if we fail to pay any principal or interest under the
credit facility when due, the interest rates will increase by an additional 2%
per annum.

We are also required to pay the lenders a commitment fee equal to 0.5% per
annum in respect of undrawn commitments under the revolving credit facility.

Sources and Uses of Cash

During the first three months of 2001, we (i) generated cash from
operations of approximately $56.1 million, (ii) generated cash from the sale of
rental equipment of approximately $39.1 million and (iii) obtained net proceeds
from financing activities of approximately $52.1 million. We used cash during
this period principally to (i) pay consideration for acquisitions and settle
certain outstanding liabilities due to former owners of businesses that we
acquired (approximately $27.7 million), (ii) purchase rental equipment
(approximately $98.3 million), (iii) purchase other property and equipment
(approximately $16.7 million) and (iv) purchase and retire shares of our
outstanding common stock (approximately $23.2 million).

During 2000, we (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. We 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 shares of our outstanding common stock (approximately $31.0 million).

Certain Balance Sheet Changes

Changes in the First Three Months of 2001. The decrease in accounts
receivable at March 31, 2001 compared to December 31, 2000 was primarily due to
collection of accounts receivable generated in the seasonally stronger prior
fiscal quarters. The increase in prepaid expenses and other

assets at March 31, 2001 compared to December 31, 2000 was primarily
attributable to payment of certain prepaid expenses during the first quarter.
The decrease in rental equipment at March 31, 2001 compared to December 31,
2000 was primarily attributable to the depreciation of the assets and to the
disposal of rental equipment, partially offset by purchases of rental
equipment, during the first quarter.

The decrease in accounts payable at March 31, 2001 compared to December 31,
2000 was attributable to the payment of accounts payable. The increase in debt
at March 31, 2001 compared to December 31, 2000 was primarily attributable to
borrowings for acquisition related payments and equipment purchases. The
decrease in accrued expenses and other liabilities at March 31, 2001 compared
to December 31, 2000 was primarily attributable to the payment of certain
accrued bonus compensation. The decrease in additional paid-in capital at March
31, 2001 compared to December 31, 2000, primarily reflected the purchase and
retirement of shares of our outstanding common stock.

Changes in 2000. Our 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 our asset and
liability accounts primarily reflected the acquisitions and the equipment
purchases made that we made 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
shares of our outstanding common stock offset in part by the issuance of common
stock in connection with an acquisition.
Cash Requirements Related to Operations

Our principal existing sources of cash are borrowings available under our
revolving credit facility ($260.5 million available as of June 19, 2001) and
cash generated from operations.

We expect that our principal needs for cash relating to our existing
operations over the next 12 months will be to fund (i) operating activities and
working capital, (ii) the purchase of rental equipment and inventory items
offered for sale, (iii) debt service and (iv) costs relating to the matters
described below under "--Certain Projected Charges--Branch Consolidation." We
plan to fund such cash requirements relating to our existing operations from
our existing sources of cash described above. In addition, we plan to seek
additional financing through the securitization of certain of our accounts
receivable.

We estimate that equipment expenditures for the year 2001 will be
approximately $400 million for our existing operations (compared to $962
million in 1999). 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 our rental fleet
and (iii) $50 million of expenditures for the purchase of non-rental equipment.
We expect that we will fund such expenditures from proceeds from the sale of
used equipment, cash generated from operations and, if required, borrowings
available under our revolving credit facility.

While emphasizing internal growth, we may also continue to expand through a
disciplined acquisition program. We expect to pay for future acquisitions using
cash, capital stock, notes and/or assumption of indebtedness. To the extent
that our existing sources of cash described above are not sufficient to fund
such future acquisitions, we will require additional financing and,
consequently, our indebtedness may increase as we implement our growth
strategy. There can be no assurance, however, that any additional financing
will be available or, if available, will be on terms that are satisfactory to
us.

The recent refinancing of $1,664.5 million of our indebtedness (described
under "--Recent Financing Transactions") extended the maturities of a
significant amount of our indebtedness. Based on the scheduled maturities of
our current indebtedness, we are required to make principal payments of
approximately $19.3 million over the next 12 months. We may also, at our
option, make additional principal payments.

We plan to reduce the rate at which we sell our used equipment in 2001. The
magnitude of the reduction will depend on a number of future developments,
including the economic outlook, conditions in the used equipment market, and
our equipment utilization rate. Based on current conditions, we estimate that
our revenues from the sale of used equipment will be 50-75% lower in 2001 than
in 2000.

We estimate that the weighted average age of our rental fleet, which
currently is approximately 28 months, will increase to approximately 32 months
as a result of the planned reduction in the rate at which we purchase new
equipment and sell used equipment. We believe that, because of the young age of
our fleet, our business will not be adversely affected by this increase in
average age.

Certain Projected Charges

Branch Consolidation

We estimate that we will incur a pre-tax charge in 2001 in the range of $20
million to $40 million in connection with our plan to close or consolidate 25
to 30 under-performing branches. This charge will primarily relate to severance
for employees and vacating facilities.

Debt Refinancing

We refinanced $1,664.5 million of indebtedness during the second quarter of
2001 (as described under "--Recent Financing Transactions"). We have recorded a
pre-tax extraordinary charge of approximately $18 million during the second
quarter of 2001, primarily relating to the write-off of financing fees.

Relationship Between Holdings and URI

United Rentals, Inc. ("Holdings") is principally a holding company and
primarily conducts its operations through its wholly owned subsidiary United
Rentals (North America), Inc. ("URI") and subsidiaries of URI. Holdings
provides certain services to URI in connection with its operations. These
services principally include: (i) senior management services, (ii) finance
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 URI. The
expenses relating to URI's payments to Holdings are reflected on URI's
financial statements as selling, general and administrative expenses. In
addition, although not legally obligated to do so, URI has in the past, and
expects that it will in the future, make distributions to Holdings to, among
other things, enable Holdings to pay dividends on certain preferred securities
(the "Trust Preferred Securities") that were issued by a subsidiary trust of
Holdings in August 1998.

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. This is the principal reason why the net income
reported on the consolidated financial statements of URI is higher than the net
income reported on the consolidated financial statements of Holdings.

Fluctuations in Operating Results

We expect that our 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 "Risk Factors--Our operating
results may fluctuate which could affect the trading value of our common
stock." In addition, information concerning certain projected charges that may
impact quarterly results over the near term is set forth under "--Certain
Projected Charges."

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

We 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. We expect 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 our margins until the
location achieves normalized profitability.

There may be a lag between the time that we purchase new equipment and
begin 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 our rental equipment, may periodically reduce
margins.

Seasonality

Our business is seasonal with demand for our rental equipment tending to be
lower in the winter months. The seasonality of our business has been heightened
by our 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 we cannot accurately anticipate the effect of inflation on our
operations, we believe that inflation has not had, and is not likely in the
foreseeable future to have, a material impact on our results of operations.

Recently Issued Accounting Standards

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. We adopted SFAS No. 133 on January 1, 2001 and it did not have a
material effect on our 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 our
consolidated financial position or results of operations.

BUSINESS

The Company