Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30,
2004
or
[ ] 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 333-114115
NATIONSRENT COMPANIES, INC.
(Exact name of registrant as specified in the charter)
Delaware
(State or other jurisdiction of
incorporation or organization) |
14-1875911
(I.R.S. Employer
Identification Number) |
450 East Las Olas Blvd., Suite 1400
(Address of principal executive office) |
33301
(Zip Code) |
(954) 760-6550
(Registrant's telephone number including area code)
Indicate by check |X| 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 requirement for the past 90 days. Yes |_| No |X|
Indicate by check mark whether the registrant is an accelerated
filer (as defined in the Exchange Act Rule 12b-2). Yes |_| No |X|
As of July 31, 2004 there were 1,669,028 shares of common stock,
$0.01 par value, outstanding.
NATIONSRENT COMPANIES, INC.
INDEX
Page
No.
PART I - FINANCIAL INFORMATION....................................................................................1
Item 1: Financial Statements.............................................................................1
Condensed Consolidated Balance Sheets for the Successor Company as of June 30, 2004
(unaudited) and December 31, 2003...................................................................1
Unaudited Condensed Consolidated Statements of Operations for the Successor Company
for the Three Months Ended June 30, 2004 and One Month Ended June 30, 2003 and for the
Predecessor Company for the Two Months Ended May 31, 2003...........................................2
Condensed Consolidated Statements of Operations for the Successor Company for the Six
Months Ended June 30, 2004 (unaudited) and One Month Ended June 30, 2003 (unaudited)
and for the Predecessor Company for the Five Months Ended May 31, 2003..............................3
Condensed Consolidated Statements of Cash Flows for the Successor Company for the Six
Months Ended June 30, 2004 (unaudited) and One Month Ended June 30, 2003 (unaudited)
and for the Predecessor Company for the Five Months Ended May 31, 2003..............................4
Notes to Unaudited Condensed Consolidated Financial Statements......................................5
Item 2: Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................................................12
Item 3: Quantitative and Qualitative Disclosures About Market Risk......................................25
Item 4: Controls and Procedures.........................................................................25
PART II - OTHER INFORMATION......................................................................................26
Item 4: Submission of Matters to a Vote of Security Holders............................................26
Item 6. Exhibits and Reports on Form 8-K...............................................................27
Signatures..............................................................................................30
Certifications..........................................................................................34
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
NATIONSRENT COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
Successor Company
--------------------------------------
June 30, 2004 December 31, 2003
------------- -----------------
(unaudited)
ASSETS
Cash and cash equivalents.................................................... $ 41,512 $ 48,644
Accounts receivable, net..................................................... 70,696 72,926
Inventories.................................................................. 20,819 21,802
Prepaid expenses and other assets............................................ 11,847 11,605
Debt issuance costs, net..................................................... 6,381 7,155
Rental equipment, net........................................................ 363,836 347,076
Property and equipment, net.................................................. 60,442 60,948
Intangible assets, net....................................................... 8,371 8,479
--------------- -----------------
Total Assets.......................................................... $ 583,904 $ 578,635
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................................. $ 69,176 $ 56,319
Accrued compensation and related taxes....................................... 11,191 9,297
Accrued insurance claims..................................................... 16,484 14,500
Accrued expenses and other liabilities....................................... 31,290 28,561
Debt (Note 2)................................................................ 289,941 288,286
Income taxes payable......................................................... 473 504
--------------- -----------------
Total Liabilities..................................................... 418,555 397,467
--------------- -----------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock--$0.01 par value, 1,000,000 shares
authorized; Series A, $72,002 liquidation
preference, 72,002 shares issued and outstanding
at each of June 30, 2004 and December 31, 2003........................... 1 1
Common stock--$0.01 par value, 3,000,000 shares
authorized, 1,669,028 and 1,666,296 shares issued
and outstanding at June 30, 2004 and December 31,
2003, respectively ...................................................... 17 17
Additional paid-in capital................................................. 200,920 200,724
Deferred stock compensation................................................ (1,675) (4,560)
Accumulated deficit........................................................ (33,914) (15,014)
--------------- -----------------
Total Stockholders' Equity ........................................... 165,349 181,168
--------------- -----------------
Total Liabilities and Stockholders' Equity............................ $ 583,904 $ 578,635
=============== =================
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these balance sheets.
NATIONSRENT COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
Successor Predecessor
Company Company
------------------------------------- ----------------
Three Months One Month Two Months
Ended Ended Ended
June 30, 2004 June 30, 2003 May 31, 2003
------------- ------------- ------------
Revenue:
Equipment rentals........................................ $ 116,465 $ 37,120 $ 70,567
Sales of equipment, merchandise, service, parts and
supplies............................................... 28,224 4,812 12,939
------------- ------------- -------------
Total revenue......................................... 144,689 41,932 83,506
------------- ------------- -------------
Cost of revenue:
Cost of equipment rentals................................ 61,094 20,187 46,853
Rental equipment depreciation and lease expense.......... 26,131 7,845 22,006
Cost of sales of equipment, merchandise, service, parts
and supplies........................................... 17,077 3,358 13,154
------------- ------------- -------------
Total cost of revenue................................. 104,302 31,390 82,013
------------- ------------- -------------
Gross profit ................................................ 40,387 10,542 1,493
Operating expenses:
Selling, general and administrative expenses............. 28,895 8,101 16,248
Non-rental equipment depreciation and amortization....... 2,944 2,226 3,436
------------- ------------- -------------
Operating income (loss).................................. 8,548 215 (18,191)
------------- ------------- -------------
Other expense:
Interest expense......................................... 7,771 1,160 1,680
Other, net............................................... (96) (37) (34)
------------- ------------- -------------
Total other expense................................... 7,675 1,123 1,646
------------- ------------- -------------
Loss before reorganization items............................. 873 (908) (19,837)
Reorganization items, net.................................... - - (1,393,861)
------------- ------------- -------------
Net income (loss)............................................ $ 873 $ (908) $ 1,374,024
============= ============= =============
Net income per share:
Basic...................................................... $ 23.95
=============
Diluted.................................................... $ 23.95
=============
Weighted average common shares outstanding:
Basic...................................................... 57,364
=============
Diluted.................................................... 57,364
=============
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.
NATIONSRENT COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Successor Predecessor
Company Company
-------------------------------------- -----------------
Six Months One Month Five Months
Ended Ended Ended
June 30, 2004 June 30, 2003 May 31, 2003
------------- ------------- ------------
(unaudited) (unaudited)
Revenue:
Equipment rentals........................................ $ 209,547 $ 37,120 $ 155,567
Sales of equipment, merchandise, service, parts and
supplies............................................... 55,300 4,812 20,507
------------- ------------- --------------
Total revenue......................................... 264,847 41,932 176,074
------------- ------------- --------------
Cost of revenue:
Cost of equipment rentals................................ 120,342 20,187 103,367
Rental equipment depreciation and lease expense.......... 49,370 7,845 56,145
Cost of sales of equipment, merchandise, service, parts
and supplies........................................... 34,697 3,358 18,780
------------- ------------- --------------
Total cost of revenue................................. 204,409 31,390 178,292
------------- ------------- --------------
Gross profit (loss).......................................... 60,438 10,542 (2,218)
Operating expenses:
Selling, general and administrative expenses............. 53,905 8,101 37,173
Non-rental equipment depreciation and amortization....... 10,252 2,226 7,099
------------- ------------- --------------
Operating income (loss).................................. (3,719) 215 (46,490)
------------- ------------- --------------
Other expense:
Interest expense......................................... 15,409 1,160 3,164
Other, net............................................... (228) (37) (90)
------------- ------------- --------------
Total other expense................................... 15,181 1,123 3,074
------------- ------------- --------------
Loss before reorganization items............................. (18,900) (908) (49,564)
Reorganization items, net.................................... - - (1,401,121)
------------- ------------- --------------
Net income (loss)............................................ $ (18,900) $ (908) $ 1,351,557
============= ============= =============
Net income per share:
Basic...................................................... $ 23.56
=============
Diluted.................................................... $ 23.56
=============
Weighted average common shares outstanding:
Basic...................................................... 57,364
=============
Diluted.................................................... 57,364
=============
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.
NATIONSRENT COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Successor Predecessor
Company Company
------------------------------------ -----------------
Six Months One Month Five Months
Ended Ended Ended
June 30, 2004 June 30, 2003 May 31, 2003
------------- ------------- ------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................ $ (18,900) $ (908) $ 1,351,557
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.............................. 62,703 8,940 43,878
Provision for allowance for doubtful accounts.............. 1,913 742 3,211
Non-cash reorganization items.............................. -- -- (1,424,231)
Non-cash interest charge................................... 1,424 -- --
Loss on disposal of non-rental equipment................... 460 -- 35
(Gain) loss on disposal of rental equipment................ (14,312) (639) 1,101
Changes in operating assets and liabilities:
Accounts receivable...................................... 317 (418) (4,771)
Inventories.............................................. 983 749 (1,569)
Prepaid expenses and other assets........................ 33 (666) 8,418
Accounts payable......................................... 12,857 (644) 10,557
Accrued expenses and other liabilities................... 6,607 (6,641) 17,919
Liabilities subject to compromise........................ -- -- (1,960)
Income taxes payable..................................... (31) -- (3)
------------ ----------- ------------
Net cash provided by operating activities................ 54,054 515 4,142
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment................................ (84,842) (40,725) (15,793)
Purchases of property and equipment.......................... (8,462) (2,328) (4,953)
Proceeds from sale of rental equipment....................... 32,601 1,674 8,855
Proceeds from sale of non-rental equipment................... -- -- 12
------------ ----------- ------------
Net cash used in investing activities.................... (60,703) (41,379) (11,879)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility................................ -- -- 24,608
Proceeds from issuance of convertible notes.................. -- 15,557 --
Proceeds from issuance of preferred and common stock, net
of expenses................................................ -- 63,972 --
Payment of debt issuance costs............................... (56) (7,119) --
Repayments of debt subject to compromise..................... -- -- (1,909)
Repayments of debt not subject to compromise................. (427) (36,860) (8,449)
------------ ----------- ------------
Net cash (used in) / provided by financing activities.... (483) 35,550 14,250
------------ ----------- ------------
Net increase / (decrease) in cash and cash equivalents....... (7,132) (5,314) 6,513
Cash and cash equivalents, beginning of period............... 48,644 13,453 6,940
------------ ----------- ------------
Cash and cash equivalents, end of period..................... $ 41,512 $ 8,139 $ 13,453
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest..................................... $ 11,230 $ 518 $ 1,740
============ =========== ============
Cash paid for income taxes................................. $ 30 $ -- $ 3
============ =========== ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Fixed assets acquired under financial
obligations.............................................. $ 1,488 $ 68,429 $ 73,165
============ =========== ============
Issuance of restricted stock............................... $ 196 $ -- $ --
============ =========== ============
The accompanying notes to the Condensed Consolidated Financial Statements are an integral part of these statements.
NATIONSRENT COMPANIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(1) General
Reporting Entity
NationsRent Companies, Inc. together with its subsidiaries (the
"Successor Company") is one of the largest full-service rental companies in the
United States. The Company (as defined below) offers a comprehensive line of
equipment for rent to a broad range of construction, industrial and homeowner
customers. The Company also sells new and used equipment, parts, merchandise and
supplies, and provides maintenance and repair services.
Reorganization Under Chapter 11
On June 13, 2003 (the "Effective Date"), NationsRent, Inc., a
Delaware corporation together with its subsidiaries (the "Predecessor Company"),
emerged from proceedings under Chapter 11 ("Chapter 11") of Title 11of the
United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court") pursuant to the terms of
the First Amended Joint Plan of Reorganization of NationsRent, Inc. and its
debtor subsidiaries dated February 7, 2003, as modified (the "Plan"). On the
Effective Date, the Predecessor Company merged into an indirect subsidiary of
the Successor Company.
Basis of Presentation
The unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States and with rules and regulations of the United States Securities and
Exchange Commission ("SEC") for interim financial reporting. In the opinion of
management, the financial information included herein reflects all adjustments
considered necessary for a fair presentation of interim results and all such
adjustments are of a normal recurring nature. The preparation of financial
statements in conformity with generally accepted accounting principles 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. Certain information and footnote disclosures normally
included in complete financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. These unaudited interim condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements for the year ended December 31, 2003 located in the
Successor Company's Registration Statement on Form S-4 (Registration No.
333-114115) filed April 1, 2004, as amended, with the SEC. The results of
operations for interim periods are not necessarily indicative of the results
which may be reported for the year ending December 31, 2004.
The unaudited interim condensed consolidated financial statements
include the accounts of the Company and its 100%-owned subsidiaries. All
material intercompany transactions and balances have been eliminated in
consolidation. Comprehensive income (loss) was equal to net income (loss) for
all periods presented.
In connection with its emergence from bankruptcy, the Company
reflected the terms of the Plan in its consolidated financial statements by
adopting the principles of Fresh-Start Reporting in accordance with the American
Institute of Certified Public Accountants ("AICPA") Statement of Position
("SOP") 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code." For accounting purposes, the effects of the consummation of
the Plan as well as adjustments for Fresh-Start Reporting have been recorded in
the Company's unaudited condensed consolidated financial statements as of June
1, 2003. Therefore, as used in these financial statements, the term "Company"
refers to the Predecessor Company and its operations for periods prior to June
13, 2003 (and for accounting purposes prior to June 1, 2003), and refers to the
Successor Company for periods after June 13, 2003 (and for accounting purposes
on or after June 1, 2003). Under Fresh-Start Reporting, a new entity is deemed
to be created for financial reporting purposes and the recorded amounts of
assets and liabilities are adjusted to reflect their estimated fair
values.
Between the date the Company filed for protection under the
Bankruptcy Code on December 17, 2001 and its emergence from bankruptcy on the
Effective Date, the Predecessor Company operated its business as a
debtor-in-possession subject to the jurisdiction of the Bankruptcy Court.
Accordingly, the Predecessor Company's consolidated financial statements for
periods prior to its emergence from bankruptcy were presented in conformity with
SOP 90-7 and were prepared on a going concern basis that assumed continuity of
operations and realization of assets and settlement of liabilities and
commitments in the normal course of business. Pursuant to SOP 90-7, revenue and
expenses, realized gains and losses and provisions for losses resulting from the
reorganization of the business were reported in the unaudited interim condensed
consolidated statements of operations separately as reorganization items.
Professional fees related to the reorganization were expensed as incurred and
interest expense was reported only to the extent that it was to be paid or was
an allowed claim. See "--Note 3-- Reorganization Items, Net."
The Successor Company adopted the accounting policies of the
Predecessor Company upon emergence from bankruptcy. In accordance with the
Fresh-Start Reporting provisions of SOP 90-7, the Successor Company also adopted
changes in accounting principles at the Effective Date that were required in the
consolidated financial statements of the Successor Company within the twelve
month period subsequent to the Effective Date.
The Company depreciates rental equipment and non-rental property and
equipment using the straight-line method over its estimated useful life, using
an estimated salvage value of zero to ten percent of cost. The Company has
determined that since the Effective Date it has over-depreciated certain of its
non-rental assets, which resulted in an adjustment to reduce non-rental asset
depreciation in the amount of $1,609,000 for the three months period ended June
30, 2004. The Company also determined that it had under-depreciated certain of
its rental assets in the first quarter of 2004 and accordingly recorded an
adjustment that increased depreciation and amortization in the amount of
$972,000 for the three months ended June 30, 2004.
Comparability of Financial
Information
The adoption of Fresh-Start Reporting at the Effective Date required
the Company to revalue its balance sheet to fair value based on the
reorganization value of the Company. The reorganization value of an entity
approximates the fair value of the entity before considering liabilities and
approximates the amount a willing buyer would pay for the assets immediately
after the restructuring. The reorganization value of the entity was allocated to
the assets in conformity with procedures specified by Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations." As such, the
Company's assets and liabilities were recorded at their fair values and the
excess of the specific tangible net assets over the reorganization value, or
negative goodwill, was allocated to non-current, non-monetary assets on a
pro-rata basis. A black line separates the financial data pertaining to the
period after the adoption of Fresh-Start Reporting from the financial data
pertaining to the period prior to the adoption of Fresh-Start Reporting to
signify the difference in the basis of presentation of financial information for
each respective entity.
(2) Debt
Debt consists of the following (in thousands):
Successor Company
----------------------------
June 30, December 31,
2004 2003
------------- -------------
Senior secured notes payable, net of unamortized
discount of $7,681 in 2004 and $8,275 in 2003,
bearing interest at 9.5%, interest payable
semi-annually and principal payable in October
2010.............................................................. $ 242,319 $ 241,725
Postpetition notes payable, bearing interest at
prime, interest and principal payable in January
2007.............................................................. 915 1,350
Convertible subordinated notes payable, bearing
interest at 6.5%, interest payable quarterly and
principal payable in June 2008.................................... 45,211 45,211
Capital lease obligations payable in monthly
installments through April 2005................................... 1,496 --
----------- -----------
Total Debt ..................................................... $ 289,941 $ 288,286
=========== ===========
Senior Secured Notes
In October 2003, the Company completed the sale of $250,000,000
aggregate principal amount of 9.5% senior secured notes (the
“Offering”) due 2010. The net proceeds from the Offering were used to
repay amounts outstanding under the Credit Facility (as defined below),
equipment-related purchase money obligations, equipment leases and for other
general corporate purposes. The notes are secured by substantially all of the
Company’s equipment rental fleet other than titled vehicles. The Company
may redeem all of the senior secured notes on or after October 15, 2007. The
Company may also redeem up to 35% of the notes prior to October 15, 2006 with
the net proceeds of an equity offering at 109.50% of their principal amount,
plus accrued interest; provided that at least 65% of the aggregate principal
amount of the notes issued remain outstanding after such redemption. The notes
were issued by NationsRent Companies, Inc. and are guaranteed by all of its
direct and indirect subsidiaries. NationsRent Companies, Inc. has no independent
assets or operations, the guarantees are full and unconditional and joint and
several, and there are no other subsidiaries other than the guarantors. There
are no restrictions on the ability of NationsRent Companies, Inc. to obtain
funds from its subsidiaries.
The indenture governing the notes contains various affirmative and
negative covenants, subject to a number of important limitations and exceptions,
including those limiting the Company’s ability to incur additional
indebtedness or enter into sale and leaseback transactions; pay dividends,
redeem stock or make other distributions; issue stock of the Company’s
subsidiaries; make certain investments or acquisitions; grant liens on assets;
enter into transactions with affiliates; merge, consolidate or transfer
substantially all of the Company’s assets; and transfer and sell assets.
The Company is also required to maintain a minimum collateral coverage ratio.
The indenture also contains various customary events of default, including an
event of default upon failure to pay at final maturity, or acceleration of the
final maturity of, any other indebtedness that aggregates $10,000,000 or more.
Postpetition Notes Payable
The Company renegotiated certain equipment leases as part of its
Chapter 11 proceedings. The Company has entered into settlement agreements with
respect to certain of those equipment leases. As part of such settlements, the
Company acquired the equipment underlying such leases and issued notes payable
to the lessors.
Convertible Subordinated Notes
Payable
The Successor Company issued $45,211,000 aggregate principal amount
of 6.5% subordinated convertible promissory notes, or the convertible
subordinated notes, on the Effective Date in accordance with the terms of the
Plan. The convertible subordinated notes have features that allow the holder to
convert the principal of the note, or a portion thereof, into common stock at a
conversion price of $242.00 per share. The convertible subordinated notes are
callable at any time at the Company’s option. Calls within the first two
years are at 103.25% of par if in connection with a sale of the Company or other
business combination, or otherwise at 106.5%. Calls after the first two years
are at par. In September 2003, the Company gave notice to the note holders that
it was deferring interest payments on the convertible subordinated notes until
further notice in accordance with their terms.
Capital Lease Obligations
Capital lease obligations represent leases that meet the criteria
for treatment as capital leases under accounting principles generally accepted
in the United States.
Credit Facility
On the Effective Date, the Company entered into a senior secured
revolving credit facility (the “Credit Facility”) with an aggregate
commitment of up to $150,000,000 with a syndicate of lenders. The Credit
Facility was used to provide the exit financing for the Company pursuant to the
Plan, to pay transaction expenses incurred in connection therewith and to
refinance existing indebtedness. In October 2003, the Company amended and
restated the Credit Facility to reduce the aggregate commitments to $75,000,000
(including a $30,000,000 sub-limit for letters of credit) with Wachovia Bank as
agent (the “Amended Credit Facility” or the “Working Capital
Facility”) and repaid all amounts outstanding under the Credit Facility
with the proceeds of the Offering. The Amended Credit Facility can be used to
make capital expenditures, enter into standby letters of credit, or for working
capital or other general corporate purposes. The Amended Credit Facility is
scheduled to expire in June 2007. Under the terms of the Amended Credit
Facility, availability is subject to a borrowing base test based upon eligible
trade accounts receivable and titled vehicles. Borrowings under the amended
revolver bear interest at either the Wachovia Bank base rate plus a percentage
ranging from 1.25% to 1.75% or at the Company’s option, the London
Interbank Offered Rate (“LIBOR”) plus a percentage ranging from 2.75%
to 3.25%. Letters of credit bear interest at a rate ranging from 2.75% to 3.25%.
There is an unused commitment fee of 0.375% to 0.50% and a letter of credit
fronting fee of 0.125%. The Amended Credit Facility is secured by a first
priority perfected security interest in all of the Company’s tangible and
intangible assets, except for its rental equipment, inventory and real estate.
The Company’s Working Capital Facility contains various
affirmative and negative covenants customary for similar working capital
facilities. In addition, the Company must maintain a debt to cash flow ratio of
not greater than (a) 3.00 to 1.00 for each fiscal quarter, commencing with the
fiscal quarter ending on September 30, 2003 through and including the fiscal
quarter ending December 31, 2004, (b) 2.75 to 1.00 for each fiscal quarter,
commencing with the fiscal quarter ending on March 31, 2005 through and
including the fiscal quarter ending December 31, 2005, and (c) 2.50 to 1.00 for
each fiscal quarter thereafter, measured as of the last day of each fiscal
quarter. As of June 30, 2004, the Company had a debt to cash flow ratio of 2.41
to 1.00.
As of June 30, 2004, there were no cash borrowings and $22,784,000
of outstanding letters of credit under the Amended Credit Facility.
(3) Reorganization Items, Net
Expenses and income directly incurred as a result of the Predecessor
Company’s Chapter 11 proceedings have been segregated from normal
operations and are disclosed separately. The major components of such are as
follows (in thousands):
Predecessor Company
-----------------------------------------------
Two Months Five Months
Ended Ended
May 31, 2003 May 31, 2003
---------------------- -----------------------
Gain on extinguishment of debt and
settlement of operating leases.............. $ (920,115) $ (930,884)
Fresh start valuation adjustments............. (494,748) (494,748)
Professional fees............................. 11,986 15,207
Employee expenses............................. 7,006 7,212
Facility closures............................. 31 114
Interest income............................... (4) (5)
Other......................................... 1,983 1,983
------------- -----------------
Total reorganization items.................. $ (1,393,861) $ (1,401,121)
------------- -----------------
Gains on settlement of operating leases and extinguishment of debt
represent the settlement of certain equipment operating leases and debt for
amounts less than the Predecessor Company’s recorded obligations.
Professional fees consist of costs for financial advisors, legal counsel,
consulting and other costs related to professional services incurred. Employee
expenses primarily consist of retention bonuses paid under a retention program
approved by the Bankruptcy Court to ensure the retention of certain key
employees. Facility closure costs consist of miscellaneous charges related to
the closing of the stores identified in the reorganization. Interest income
consists of interest earned on excess cash balances. Reorganization items
excluding the gains on settlement of operating leases and extinguishment of debt
were cash charges.
(4) Change in Depreciation
Estimate
At the Effective Date, the Company changed the useful lives and
salvage values for certain of its rental assets to reflect the new
management’s change in fleet strategy and therefore to better allocate the
cost of the rental assets over the time that such assets are in its rental
fleet. This change in estimate resulted in an increase in rental equipment
depreciation expense of approximately $8,291,000 for the three months ended June
30, 2004 and $15,813,000 for the six months ended June 30, 2004.
(5) Restricted Stock
On the Effective Date, the Company adopted a restricted stock plan
(the “Restricted Stock Plan”), pursuant to which directors, officers,
management and key employees of the Company are eligible to receive grants of
restricted shares of common stock. Under the Restricted Stock Plan, the Company
may grant up to an aggregate of 141,000 shares of common stock. Such restricted
shares are not transferable (except under limited circumstances) and subject to
forfeiture upon such terms and conditions as the Company’s Board of
Directors or any Committee thereof (if so delegated by the Board of Directors)
shall determine. The Company accounts for restricted stock awards in accordance
with Accounting Principles Board Opinion (“APB”) No. 25,
“Accounting for Stock Issued to Employees,” and related
interpretations.
The Company did not issue shares of common stock under the
Restricted Stock Plan during the second quarter of 2004. During the six months
ended June 30, 2004, the Company issued 2,732 shares of common stock valued at
$71.59 per share to certain of its directors under the Restricted Stock Plan.
Deferred compensation is charged for the difference between the market value of
the restricted shares and the sales price of the shares and was recorded as a
reduction of stockholders’ equity in the unaudited condensed consolidated
balance sheets. As of June 30, 2004, there were an aggregate of 128,349 shares
of restricted stock outstanding under the Restricted Stock Plan. Deferred
compensation for such shares of restricted stock is amortized as compensation
expense over the vesting periods of such shares which range from immediate
vesting to a four-year vesting schedule. The Company recognized compensation
expense for restricted stock of $3,081,000 during the first six months of 2004.
Additionally, the Company made “gross-up” payments in the amount of
$157,000 related to the restricted shares issued during the first six months of
2004. Compensation expense is included in selling, general and administrative
expenses in the condensed consolidated statement of operations.
(6) Predecessor Company Stock Option
Plans
Prior to its emergence from bankruptcy, the Company accounted for
stock option arrangements in accordance with APB No. 25 and accordingly,
recognized no compensation expense for the stock option arrangements with
employees or directors since the stock options were granted at exercise prices
at or greater than the fair market value of the shares at the date of grant. The
Company followed the disclosure requirements of SFAS No. 123, “Accounting
for Stock Based Compensation,” as amended by SFAS No. 148,
“Stock-Based Compensation — Transition and Disclosure.”
Pro forma information regarding net income (loss) and earnings
(loss) per share is required by SFAS No. 123 as amended by SFAS No. 148, as if
the Company had accounted for its granted employee stock options under the fair
value method of SFAS No. 123. Upon the Effective Date of the Plan, all options
under the Predecessor Company’s stock option plans were cancelled and such
plans terminated. If compensation cost for all options previously granted had
been determined based on the fair value at the grant date consistent with SFAS
No. 123, the Predecessor Company’s net income and earnings per share would
have been as follows (in thousands, except per share data):
Predecessor Company
-----------------------------------
Two Months Five Months
Ended Ended
May 31, 2003 May 31, 2003
----------------- ----------------
Reported net income......................................... $ 1,374,024 $ 1,351,557
Pro forma stock based compensation expense, net of tax...... (237) (608)
---------------- --------------
Pro forma net income........................................ $ 1,373,787 $ 1,350,949
================ ==============
Reported earnings per share................................. $ 23.95 $ 23.56
================ ==============
Pro forma earnings per share................................ $ 23.95 $ 23.55
================ ==============
Pursuant to the Plan, no value or other distribution was made on
account of the Predecessor Company’s stock option plans.
(7) Seasonality
The Company’s revenue and results of operations are dependent
upon activity in the construction industry in the markets it serves.
Construction activity is dependent upon weather and other seasonal factors
affecting construction in the geographic areas where the Company operates.
Because of this variability in demand, the Company’s quarterly revenue and
results of operations may fluctuate. Accordingly, quarterly or other interim
results should not be considered indicative of results to be expected for any
other quarter or for a full year.
(8) Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share for the Predecessor Company (in thousands, except per share
data):
Predecessor Company
-----------------------------------
Two Months Five Months
Ended Ended
May 31, 2003 May 31, 2003
--------------- ---------------
Numerator:
Net income - basic and diluted.............................. $ 1,374,024 $ 1,351,557
-------------- ------------
Denominator:
Weighted average shares - basic and diluted................ 57,364 57,364
-------------- ------------
Basic and diluted earnings per share........................ $ 23.95 $ 23.56
============== ============
(9) Income Taxes
The Company did not record a tax benefit in the three-month and
six-month periods ended June 30, 2004 or one month ended June 30, 2003, two
months ended May 31, 2003 and five months ended May 31, 2003, respectively. The
tax benefits for the periods are significantly different than the benefits
expected from applying the federal statutory rate to pre-tax losses primarily
due to a valuation allowance established for the Company’s deferred tax
assets, primarily resulting from net operating loss carryforwards, as the
Company believes it is more likely than not that the deferred tax assets will
not be realized.
(10) Related-Party
Transaction
In May 2004, the Company acquired approximately 250 units of rental
equipment from Phantom Equipment Rental Corp., an entity affiliated with one of
our co-chairmen, for approximately $6,100,000. As part of such acquisition,
Phantom agreed to reimburse us for returning the acquired units to rent-ready
condition and for the cost of an annual inspection on each unit. Phantom has
reimbursed us approximately $50,000 for such costs incurred by us through June
2004.
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
You should read the following discussion of our results of
operations and financial condition in conjunction with our financial statements
and related notes. Upon emergence in June 2003 from bankruptcy proceedings under
Chapter 11 (referred to herein as “Chapter 11”) of Title 11 of the
United States Code, known as the Bankruptcy Code, we adopted the provisions of
fresh-start reporting in the American Institute of Certified Public
Accountants’ (“referred to herein as “AICPA”) Statement Of
Position (“referred to herein as “SOP”) 90-7 that resulted in the
Company revaluing its balance sheet to fair value based on the reorganization
value of the Company. The allocation of the reorganization value of the Company
to its assets in conformity with Statement of Financial Accounting Standards
(referred to herein as “SFAS”) No. 141, “Business
Combinations” materially changed the amounts previously recorded in our
consolidated financial statements prior to emergence. As a result, there are
certain items in such financial statements that are not comparable. As used in
these financial statements, the term “Company” refers to the
Predecessor Company and its operations for periods prior to June 13, 2003 (and
for accounting purposes prior to June 1, 2003), and refers to the Successor
Company for periods after June 13, 2003 (and for accounting purposes on or after
June 1, 2003).
Overview
In June 2003 we emerged from bankruptcy with the long-term objective
of becoming a premier competitor in the construction equipment industry in terms
of safety, reputation and financial performance. In recent periods we achieved
growth in both rental and non-rental revenue. The growth was driven by an
improved industry environment and company initiatives, as discussed below.
Non-rental revenue accounted for the majority of the overall revenue growth as
higher volume and better pricing drove increases in new and used equipment
sales. Higher sales volume was largely a result of re-emphasizing a full-service
business model after emerging from bankruptcy. We believe rental revenue grew
primarily as a result of better pricing despite the decrease in the average size
of our rental fleet.
We believe better pricing for sales and rentals is a function of
industry and economic conditions. The key pricing drivers are non-residential
construction activity and the supply of equipment in the U.S. market relative to
demand. Although non-residential construction activity has been declining since
late 2000, the rate of decline has decreased in recent periods. We believe that
in recent periods the impact of declining non-residential construction activity
was offset by a greater demand for construction equipment which had a positive
impact on the revenue we generated from rentals and sales prices for most
categories of equipment sold. We believe the increase in demand for construction
equipment was driven by the recent abatement of the over-supply of equipment in
the U.S. market. In addition, we believe that the impact of the decline in
non-residential construction activity in 2004 was mitigated by our increased
penetration in other segments of the construction market through the ramping up
of revenue at NationsRent at Lowe’s stores opened in 2002 and 2003.
We believe there are currently a few significant trends affecting
our markets. One trend is that as a result of the greater demand for new
construction equipment, companies such as ours have faced an increase in the
delivery times for the equipment we purchase from manufacturers. Projected
delivery schedules affect us most when planning our equipment needs for the
Spring/Summer period when demand for our equipment is greatest. If equipment is
not received as planned during our Spring/Summer period, it may result in a loss
of expected rental and sales revenue. In addition, if the delivery times
continue to lengthen, it is likely we will have to plan our equipment purchases
for the 2005 Spring/Summer period earlier than we have in the past. Management
believes, however, that our focus on reducing the number of our equipment
suppliers will not only enable us to negotiate better pricing, but also may
enable us to become a preferred customer with many of our vendors. We believe
this status can help us obtain better-than-average delivery times in some cases.
Another significant trend is that worldwide price increases for
steel have led to an increase in our equipment costs. Our sales prices and
rental rates generally have increased in advance of these cost increases.
We also have observed an increase in auction prices for used
equipment. As we are a seller of used equipment through auctions, this trend has
benefited us as we have received higher prices for the equipment we dispose of
through auctions.
Management anticipates that as long as the increased demand for
construction equipment continues, prices will continue to rise, thereby
offsetting most of the increased equipment costs incurred by the Company.
However, if the construction equipment industry begins to weaken, we cannot be
certain that we will be able to continue to offset increased equipment costs
through price increases.
Our cost of revenue in recent periods was impacted by several
factors:
|
• |
the restructuring of operating leases in connection
with our reorganization during the last half of 2003 significantly reduced our
lease expense; |
|
• |
a change in our depreciation estimates and rental fleet
additions resulted in increased depreciation expense; |
|
• |
new stores drove an increase in labor and facility
costs; |
|
• |
revaluing our assets according to fresh-start reporting
reduced depreciation expense and cost of goods sold as described below; |
|
• |
an older rental fleet and additional shop labor
increased repair and maintenance expense; and |
|
• |
higher equipment and merchandise sales resulted in
increased cost of goods sold. |
Operating expenses increased in recent periods due primarily to
increases in compensation expense and the purchase of delivery fleet, which
increased depreciation. In addition, our results of operations beginning in June
2003 reflect the transition to a new management team with a new business
strategy. Beginning in June 2003, the new management team launched several key
initiatives to improve profitability and leverage our infrastructure which
include:
|
• |
focusing on diversifying our revenue mix to increase
sales of new and used equipment, in-shop and on-site maintenance and repairs for
our customers, and sales of parts and merchandise; |
|
• |
dividing our territories into six regions instead of
three so that operating, customer service and fleet mix decisions are made
closer to the local markets; |
|
• |
implementing a new incentive compensation plan for
sales people that rewards higher volumes of revenue at higher margins; and |
|
• |
focusing on relationships with key manufacturers to
leverage pricing, service and manufacturer training. |
Beginning in June 2003, we also established a solid liquidity
profile. As of June 30, 2004, we had $41.5 million in cash and we had no
borrowings under our working capital facility described below. As of June 30,
2004 we had $30.4 million of availability under our working capital facility
after taking into account our borrowing base and $22.8 million of outstanding
letters of credit.
Reorganization Under Chapter 11
On June 13, 2003, the effective date, NationsRent, Inc., a Delaware
corporation together with its subsidiaries emerged from proceedings under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware pursuant to the terms of the First Amended Joint Plan of
Reorganization of NationsRent, Inc. and its debtor subsidiaries dated February
7, 2003, or the plan, as modified. On the effective date, the Predecessor
Company merged into an indirect subsidiary of the Successor Company. We
recognized our emergence from bankruptcy for accounting purposes on June 1,
2003.
As of the effective date, the fair value of each of our assets and
liabilities was determined. The excess of the fair value of these assets and
liabilities over the Company’s reorganization value, in accordance with
SFAS No. 141, “Business Combinations,” or negative goodwill, was
allocated to our long-lived assets, including our rental fleet. The result of
such allocation of negative goodwill primarily to our rental fleet was that the
value of our rental fleet was written down below its fair value by approximately
$179.4 million. As a result, our gross profit on the sale of such rental fleet
in the normal course of business will be favorably impacted until the rental
fleet is sold and replaced, which we expect will occur in the normal course of
our business over the next five to seven years.
Results of Operations
Three Months Ended June 30, 2004 Compared to
Three Months Ended June 30, 2003
Three Months Three Months
Ended Ended Variance
June 30, 2004 June 30, 2003 Favorable/(Unfavorable)
------------- ------------- -----------------------
(unaudited) $ %
------------ ----------
(dollars in thousands)
Revenue:
Equipment rentals................................ $ 116,465 $ 107,687 $ 8,778 8.2%
Sales of equipment, merchandise, service,
parts & supplies............................... 28,224 17,751 10,473 59.0
------------ ------------ -------- ----------
Total revenue.................................... 144,689 125,438 19,251 15.3
------------ ------------ -------- ----------
Cost of revenue:
Cost of equipment rentals........................ 61,094 67,040 5,946 8.9
Rental equipment depreciation & lease expense.... 26,131 29,851 3,720 12.5
Cost of sales of equipment, merchandise,
service, parts & supplies...................... 17,077 16,512 (565) (3.4)
------------ ------------ -------- ----------
Total cost of revenue............................ 104,302 113,403 9,101 8.0
------------ ------------ -------- ----------
Gross profit:
Gross profit on equipment rentals including
depreciation & lease expense................... 29,240 10,796 18,444 170.8
Gross profit on sales of equipment,
merchandise, service, parts & supplies......... 11,147 1,239 9,908 799.7
------------ ------------ -------- ----------
Total gross profit .............................. 40,387 12,035 28,352 235.6
------------ ------------ -------- ----------
Operating expenses:
Selling, general & administrative expenses....... 28,895 24,349 (4,546) (18.7)
Non-rental equipment depreciation & amortization. 2,944 5,662 2,718 48.0
------------ ------------ -------- ----------
Operating income (loss) ......................... 8,548 (17,976) 26,524
------------ ------------ -------- ----------
Interest expense, net............................ 7,771 2,840 (4,931) (173.6)
Other, net....................................... (96) (71) 25 35.2
------------ ------------ -------- ----------
7,675 2,769 (4,906) (177.2)
------------ ------------ -------- ----------
Loss before reorganization Items................. 873 (20,745) 21,618
Reorganization items, net........................ - 1,393,861 (1,393,861) (100.0)
------------ ------------ ----------- ----------
Net income (loss)................................ $ 873 $ 1,373,116 $(1,372,243) (99.9)%
============ ============ =========== ===========
Revenue. Revenue from equipment rentals was positively
impacted for the three months ended June 30, 2004 by a $2.8 million increase in
revenue at our NationsRent at Lowe's stores that opened in 2003 as well as
improved pricing.
Utilization for the second quarter in 2004 was 49.8% compared to
45.1% in the same period in 2003. We believe that the better pricing as
discussed above was the key factor in the increase. Utilization, measured as
total rental revenue divided by the average first cost of the rental fleet over
the applicable period, is used as an approximate measure of financial return on
the investment in our rental fleet. For equipment acquired new from a
manufacturer, whether leased or owned, first cost is the purchase price paid for
the equipment. For equipment acquired in connection with business acquisitions,
first cost is an estimate of the purchase price paid by the acquired company for
such equipment where available and, if unavailable, first cost is the estimated
fair value of such equipment.
The primary driver for the increase in sales of equipment,
merchandise, service, parts and supplies was an increase of $7.0 million, or
80.0%, in sales of used equipment. Upon our emergence from bankruptcy in June
2003, we were no longer prohibited from selling used equipment and had the
capital resources to purchase replacement fleet. This, coupled with the
improving market conditions for used equipment, led to an emphasis on used
equipment sales in the second quarter of 2004. The remaining increase was driven
by the new management team’s focus on sales of new equipment and related
merchandise.
Gross profit. Gross profit margin on equipment rentals,
including depreciation and lease expense, increased from 10.0% in the second
quarter of 2003 to 25.1% for the same period in 2004. Gross profit on equipment
rentals was positively impacted primarily by an $8.8 million increase in revenue
and the elimination of $9.7 million of lease expense related to operating leases
that were eliminated when we rejected or bought out the leases as part of the
plan and subsequent recapitalization of the Company in June 2003. Gross profit
was also positively impacted by a $1.2 million reduction in transportation
expense, a $0.9 million reduction in repairs and maintenance expense and a $0.9
million reduction in facilities expense. Gross profit on equipment rentals was
negatively impacted by a $3.3 million net increase in depreciation expense that
resulted from rental fleet additions when we bought out certain leases and from
a change in our depreciation estimates, as discussed below, as well as an
adjustment to increase depreciation expense in the amount of $0.9 million for
the three months ended June 30, 2004 relating to certain rental assets that were
under-depreciated in the first quarter of 2004. Such net increase in
depreciation expense was partially offset by the write-down of our rental fleet
as a result of the adoption of fresh-start reporting, as discussed above.
Gross profit margin on sales of equipment, merchandise, service,
parts and supplies increased from 7.0% in the second quarter of 2003 to 39.5%
for the same period in 2004. As discussed above, in connection with our
emergence from bankruptcy, we applied the principles required by fresh-start
reporting and the value of our rental fleet was written down below its fair
value. Accordingly, upon the sale of these assets in the ordinary course of
business, we would expect a higher margin until these assets are replaced.
During the second quarter, $7.5 million of our gross profit was attributable to
sales of used equipment; of which $3.4 million was the result of implementing
fresh-start reporting as follows:
|
• |
Equipment which was originally assigned a fair value of
$19.1 million upon emergence from bankruptcy was written down by $6.6 million to
a value of $12.5 million; and |
|
• |
Depreciation expense associated with the equipment that
was sold during the period was $3.2 million less than it otherwise would have
been if such equipment had not been written down pursuant to fresh-start
reporting. |
Upon emergence from bankruptcy, we changed the useful lives and
salvage values for certain of our rental assets to reflect our new
management’s change in fleet strategy and therefore better allocate the
expense over the time that such assets are in our rental fleet. This change
increased the estimated useful lives and decreased the salvage values for
certain rental assets. The change in accounting estimates resulted in an
increase of rental equipment depreciation expense of approximately $8.3 million
for the three months ended June 30, 2004.
Operating expenses. The increase in operating expenses was
primarily due to:
|
• |
$2.7 million of compensation expense and sales
commissions expense related to the increase in revenue discussed above and an
incentive compensation plan initiated by our new management team during 2004 in
support of the key initiatives discussed in the subsection entitled
“Overview”; |
|
• |
$1.4 million of compensation expense for the three
months ended June 30, 2004 related to the amortization of restricted stock
awards made to the new management team in the fourth quarter of 2003 and first
quarter of 2004; and |
|
• |
$1.0 million of professional/outside services expense
related to accounting and legal services for Sarbanes-Oxley Act compliance, fees
related to the registration of our senior secured notes, lease negotiations and
auditing. |
The increase in operating expenses was partially offset by a
decreased provision for doubtful accounts in the second quarter of 2004. During
the quarter, the Company experienced an improvement in the collection of its
outstanding receivables. With the associated improvement in the aging, the
Company evaluated the collectibility of its receivables and recognized $2.2
million less provision during 2004 than during the same period in 2003. In
addition, operating expenses was also partially offset by an adjustment to
reduce non-rental equipment depreciation in the amount of $1.6 million for the
three months ended June 30, 2004 relating to certain non-rental assets that were
over-depreciated since the effective date.
Selling, general and administrative expenses as a percentage of
total revenue were 20.0% and 19.4% for the three months ended June 30, 2004 and
June 30, 2003, respectively.
Other income and expense. The increase in interest expense
was related primarily to the following two factors: (i) during the three months
ended June 30, 2003, in accordance with SOP 90-7, we recognized interest expense
only to the extent that it was to be paid, and (ii) during the three months
ended June 30, 2004, we recorded $6.7 million of interest expense and
amortization of debt issuance costs related to the senior secured notes issued
in October 2003 discussed below.
Reorganization items, net. This item is primarily related to
gains on debt and operating lease settlements through the bankruptcy process
which was partially offset by professional fees paid to bankruptcy
professionals.
Six Months Ended June 30, 2004 Compared to Six
Months Ended June 30, 2003
Six Months Six Months
Ended Ended Variance
June 30, 2004 June 30, 2003 Favorable/(Unfavorable)
------------- ------------- -----------------------
(unaudited) $ %
------------ ----------
(dollars in thousands)
Revenue:
Equipment rentals.................................. $ 209,547 $ 192,687 $ 16,860 8.8%
Sales of equipment, merchandise, service, parts &
supplies......................................... 55,300 25,319 29,981 118.4
---------- ------------ ------------ --------
Total revenue...................................... 264,847 218,006 46,841 21.5
---------- ------------ ------------ --------
Cost of revenue:
Cost of equipment rentals.......................... 120,342 123,554 3,212 2.6
Rental equipment depreciation & lease expense...... 49,370 63,990 14,620 22.8
Cost of sales of equipment, merchandise, service,
parts & supplies................................. 34,697 22,138 (12,559) (56.7)
---------- ------------ ------------ --------
Total cost of revenue.............................. 204,409 209,682 5,273 2.5
---------- ------------ ------------ --------
Gross profit :
Gross profit on equipment rentals including
depreciation & lease expense..................... 39,835 5,143 34,692 674.5
Gross profit on sales of equipment, merchandise,
service, parts & supplies........................ 20,603 3,181 17,422 547.7
---------- ------------ ------------ --------
Total gross profit ................................ 60,438 8,324 52,114 626.1
---------- ------------ ------------ --------
Operating expenses:
Selling, general & administrative expenses......... 53,905 45,274 (8,631) (19.1)
Non-rental equipment depreciation & amortization... 10,252 9,325 (927) (9.9)
---------- ------------ ------------ --------
Operating loss .................................... (3,719) (46,275) 42,556 92.0
---------- ------------ ------------ --------
Interest expense, net.............................. 15,409 4,324 (11,085) (256.4)
Other, net......................................... (228) (127) 101 79.5
---------- ------------ ------------ --------
15,181 4,197 (10,984) (261.7)
---------- ------------ ------------ --------
Loss before reorganization items................... (18,900) (50,472) 31,572 62.6
Reorganization items, net.......................... - 1,401,121 (1,401,121) (100.0)
---------- ------------ ------------ --------
Net income (loss).................................. $ (18,900) $ 1,350,649 $ (1,369,549)
========== ============ ============ ========
Revenue. Revenue from equipment rentals was positively
impacted for the six months ended June 30, 2004 by a $5.2 million increase in
revenue at our NationsRent at Lowe's stores that opened in 2003 as well as
improved pricing.
Utilization for the six months ended June 30, 2004 was 44.7%
compared to 40.2% in the six months ended June 30, 2003. We believe that the
better pricing as discussed above was the key factor in the increase.
The primary driver for the increase in sales of equipment,
merchandise, service, parts and supplies was an increase of $22.1 million, or
209.6%, in sales of used equipment. Upon our emergence from bankruptcy in June
2003, we were no longer prohibited from selling used equipment and had the
capital resources to purchase replacement fleet. This, coupled with the
improving market conditions for used equipment, led to an emphasis on used
equipment sales in the six months ended June 30, 2004. The remaining increase
was driven by the new management team’s focus on sales of new equipment and
related merchandise.
Gross profit. Gross profit margin on equipment rentals,
including depreciation and lease expense, increased from 2.7% in the six months
ended June 30, 2003 to 19.0% in the six months ended June 30, 2004. Gross profit
on equipment rentals was positively impacted by:
|
• |
a $16.9 million increase in revenue and the elimination
of $27.1 million of lease expense related to operating leases that were
eliminated when we rejected or bought out the leases as part of the plan and
subsequent recapitalization of the Company in June 2003. |
Gross profit on equipment rentals was negatively impacted
by:
|
• |
a $5.9 million net increase in depreciation expense
that resulted from rental fleet additions when we bought out certain leases and
from a change in our depreciation estimates, as discussed below. Such increase
in depreciation expense was partially offset by the write-down of our rental
fleet as a result of our adoption of fresh-start reporting, as discussed above;
and |
|
• |
a $3.2 million increase in repair and maintenance
expense primarily related to the increase in rental revenue discussed above, an
increase in the average age of our rental fleet from approximately 45 months in
2003 to approximately 49 months in 2004 and a 16.8% increase in shop labor
related to headcount increase in support of our full-service business
model. |
Gross profit margin on sales of equipment, merchandise, service,
parts and supplies increased from 12.6% in the six months ended June 30, 2003 to
37.3% for the six months ended June 30, 2004. As discussed above, in connection
with our emergence from bankruptcy, we applied the principles required by
fresh-start reporting and the value of our rental fleet was written down below
its fair value. Accordingly, upon the sale of these assets in the ordinary
course of business, we would expect a higher margin until these assets are
replaced. During the six months ended June 30, 2004, $14.6 million of our gross
profit was attributable to sale of used equipment; of which $8.8 million was the
result of implementing fresh-start reporting as follows:
|
• |
Equipment which was originally assigned a fair value of
$39.5 million upon emergence from bankruptcy was written down by $14.7 million
to a value of $24.8 million; and. |
|
• |
Depreciation expense associated with the equipment that
was sold during the period was $5.9 million less than it otherwise would have
been if such equipment had not been written down pursuant to fresh-start
reporting. |
Upon emergence from bankruptcy, we changed the useful lives and
salvage values for certain of our rental assets to reflect our new
management’s change in fleet strategy and therefore better allocate the
expense over the time that such assets are in our rental fleet. This change
increased the estimated useful lives and decreased the salvage values for
certain rental assets. The change in accounting estimates resulted in an
increase of rental equipment depreciation expense of approximately $15.8 million
for the six months ended June 30, 2004.
Operating expenses. The increase in operating expenses was
primarily due to:
|
• |
$4.3 million of non-rental equipment depreciation
expense resulting from the settlement and buy-out of non-rental vehicle
operating leases on our delivery fleet after our emergence from bankruptcy; |
|
• |
$4.3 million of compensation expense and sales
commissions expense related to the increase in revenue discussed above and an
incentive compensation plan put in place by our new management team during 2004
in support of the key initiatives discussed in the overview above; |
|
• |
$3.1 million of compensation expense for the six months
ended June 30, 2004 related to the amortization of restricted stock awards made
to the new management team; and |
|
• |
$1.0 million of professional/outside services related
to accounting and legal services for Sarbanes-Oxley Act compliance, fees related
to the registration of our senior secured notes, lease negotiations and
auditing. |
The increase in operating expenses was partially offset by a
decreased provision for doubtful accounts in 2004. During the period, the
Company experienced an improvement in the collection of its outstanding
receivables. With the associated improvement in the aging, the Company evaluated
the collectibility of its receivables and recognized $2.0 million less provision
during 2004 than during the same period in 2003. In addition, operating expenses
was also partially offset by an adjustment to reduce non-rental equipment
depreciation in the amount of $1.6 million for the six months ended June 30,
2004 relating to certain non-rental assets that were over-depreciated since the
effective date.
Selling, general and administrative expenses as a percentage of
total revenue were 20.4% and 20.8 % for the six months ended June 30, 2004 and
June 30, 2003, respectively.
Other income and expense. The increase in interest expense
was related primarily to the following two factors: (i) during the six months
ended June 30, 2003, in accordance with SOP 90-7, we recognized interest expense
only to the extent that it was to be paid, and (ii) during the six months ended
June 30, 2004, we recorded $13.3 million of interest expense and amortization of
debt issuance costs related to the senior secured notes issued in October 2003
discussed below.
Reorganization items, net. This item is primarily related to
gains on debt and operating lease settlements through the bankruptcy process
which was partially offset by professional fees paid to bankruptcy
professionals.
Liquidity and Capital Resources
Cash Flows
In our condensed consolidated statements of cash flows included
elsewhere herein, cash flows from operations do not include purchases of rental
equipment and the proceeds from the sale of rental equipment, which are included
in cash flows from investing activities. When evaluating our cash flow it is
important to consider cash flows from the purchase and sale of our equipment
rental fleet in conjunction with operating cash flow. Purchasing and selling
rental fleet to manage fleet mix and fleet age is an integral part of our
business and failure to consider cash flows from these activities would not
accurately reflect the cash needs of our business.
Cash Flow for 2004
Six Months ended June 30, 2004. The net cash provided by our
operations was $54.0 million for the six months ended June 30, 2004 and was
primarily due to the elimination of lease payments on our rental fleet and
delivery vehicles and a positive change in our working capital needs. Net cash
used in investing activities was $60.7 million for the six months ended June 30,
2004, primarily reflecting $84.8 million of rental fleet purchases and $8.5
million for purchases of and improvements to property and equipment offset by
$32.6 million of proceeds from the sale of rental equipment. Cash used by
financing activities during the six months ended June 30, 2004 of $0.5 million
was due to repayments of debt and payment of debt issuance costs.
Cash Flow for 2003
One Month ended June 30, 2003. The net cash provided by our
operations was $0.5 million for the one month ended June 30, 2003. Net cash used
in investing activities was $41.4 million for the one month ended June 30, 2003,
primarily reflecting $40.7 million of rental fleet purchases and $2.3 million
for purchases of and improvements to property and equipment offset by $1.7
million of proceeds from the sale of rental equipment. Cash provided by
financing activities during the one month ended June 30, 2003 was $35.6 million
and was primarily a result of $64.0 million of proceeds from the issuance of
preferred and common stock, $15.6 million of proceeds from the issuance of
convertible notes partially offset by $36.9 million of repayments of debt and
the payment of $7.1 million of debt issue costs.
Five Months ended May 31, 2003. The net cash provided by our
operations was $4.1 million for the five months ended May 31, 2003. Net cash
used in investing activities was $11.9 million for the five months ended May 31,
2003, primarily reflecting $15.8 million of rental fleet purchases and $5.0
million for purchases of and improvements to property and equipment offset by
$8.9 million of proceeds from the sale of rental equipment. Cash provided by
financing activities during the five months ended May 31, 2003 was $14.3 million
and was primarily a result of $24.6 million of proceeds from our
debtor-in-possession financing facility, partially offset by $10.4 million of
repayments of debt.
Adequacy of Capital Resources
Our sources of cash for the next twelve months will be cash
generated by operations, including proceeds from the sale of used equipment,
access to our working capital facility described below and other equipment
financing agreements.
Our uses of cash for the next twelve months are primarily related to
the purchase of rental fleet and other capital expenditures, repair and
maintenance expenditures, store expenditures, employee expenditures, working
capital and debt service. We estimate that equipment expenditures over the next
twelve months will range between $77.0 million and $94.0 million, net of
proceeds from sales of used equipment. We estimate that expenditures for
non-rental assets for the next twelve months will range between $23.0 million
and $29.0 million, net of proceeds from sales of such assets. We expect that
non-rental expenditures over the next twelve months will be primarily related to
store improvements, information systems and transportation equipment for our
rental fleet. We do not anticipate significant cash expenditures for
acquisitions or new store openings. In addition, we believe that our new key
initiatives will not require significant investment. We believe that our
existing infrastructure of stores, service bays and personnel is largely
sufficient to support sales of new and used equipment and service. We do expect
to make an investment in a new point-of-sale system to support our key
initiatives which is included in the non-rental expenditure estimate above.
We believe that we can fund our business activities for the next
twelve months with a combination of cash on hand; cash generated by operations,
including proceeds from the sale of used equipment; our working capital facility
described below, under which we had $30.4 million of availability as of June 30,
2004 and other equipment financing agreements.
Debt and Other Obligations
Senior Secured Notes. On October 23, 2003, we completed a
private offering of $250.0 million in aggregate principal amount of 9½%
senior secured notes due October 15, 2010 (the “Original Notes”). The
Original Notes are fully and unconditionally guaranteed on a senior secured
basis by all of our present and future restricted subsidiaries. On April 1,
2004, we filed a registration statement on Form S-4 (Registration No.
333-114115), as amended (the “Registration Statement”) with the
Securities and Exchange Commission (the “SEC”) with respect to the
9½% senior secured notes (the “New Notes”, and together with the
Original Notes, the “Notes”) that have substantially identical terms
as the Original Notes, except that the New Notes are freely transferable. The
Registration Statement was declared effective by the SEC on July 28, 2004 and
promptly thereafter, we commenced an exchange offer, pursuant to which holders
of the Original Notes are able to exchange Original Notes for the New Notes. The
New Notes evidence the same debt as the Original Notes, are entitled to the
benefits of the indenture governing the Original Notes and will be treated under
the indenture as a single class with the Original Notes.
The Notes and the guarantees are secured by a first priority lien on
substantially all of our and our subsidiaries’ rental equipment (other than
titled vehicles), subject to certain permitted liens and certain other liens. We
are required to maintain a Collateral Value Coverage Ratio of at least 2.0 to
1.0. As of the latest collateral coverage certificate dated June 14, 2004, our
Collateral Value Coverage Ratio was 2.46 to 1.00.
We pay interest on the notes semi-annually in cash, in arrears, on
October 15 and April 15, beginning on April 15, 2004, at an annual interest rate
of 9½%.
We can redeem the notes on or after October 15, 2007. The Company
may also redeem up to 35% of the notes prior to October 15, 2006 with the net
proceeds of an equity offering at 109.500% of their principal amount, plus
accrued interest; provided that at least 65% of the aggregate principal amount
of the notes originally issued in the Original Notes offering remain outstanding
after such a redemption.
Working Capital Facility. Concurrently with the closing of
the Original Notes offering, we entered into an amended and restated working
capital facility with Wachovia Bank, National Association and other lenders.
Under the terms of our working capital facility, revolving advances are
available up to $75.0 million (with a $30.0 million sub-limit for letters of
credit), subject to a borrowing base test. As of June 30, 2004, we had no
borrowings and based on our borrowing base, and after taking into account $22.8
million of outstanding letters of credit, we had $30.4 million of availability
under the working capital facility. Our working capital facility has an initial
term of approximately 3½ years and is secured by a first priority perfected
security interest in all of our and our subsidiaries’ existing and
after-acquired tangible and intangible assets, except for our rental equipment,
inventory and real estate, and secured by a first priority pledge of the capital
stock of our subsidiaries. Interest accrues on borrowings under the working
capital facility, at floating rates equivalent to either the prime rate of
interest plus a percentage ranging from 1.25% to 1.75%, or at LIBOR plus a
percentage ranging from 2.75% to 3.25%.
Our working capital facility contains various affirmative and
negative covenants customary for similar working capital facilities. In
addition, we must maintain a debt to cash flow ratio of not greater than (a)
3.00 to 1.00 for each fiscal quarter, commencing with the fiscal quarter ending
on September 30, 2003 through and including the fiscal quarter ending December
31, 2004, (b) 2.75 to 1.00 for each fiscal quarter, commencing with the fiscal
quarter ending on March 31, 2005 through and including the fiscal quarter ending
December 31, 2005, and (c) 2.50 to 1.00 for each fiscal quarter thereafter,
measured as of the last day of each fiscal quarter. As of June 30, 2004, we had
a debt-to-cash flow ratio of 2.41 to 1.00.
Our working capital facility also contains customary events of
default, including the occurrence of any event of default under the senior
secured notes described above.
Application for Exemption under the Trust
Indenture Act
We have submitted an application to the SEC requesting an order
under section 304(d) of the Trust Indenture Act exempting us from the
requirement under section 314(d)(1) of the Trust Indenture Act to furnish
certificates of fair value in connection with sales of specified collateral in
the ordinary course of our business in accordance with the indenture and
providing that such sales are not to be included in determining whether releases
of collateral require that the certificate of fair value must be provided by an
independent expert.
We have applied for this exemption primarily because we sell rental
equipment, which is the collateral for the Notes, on a daily basis. Due to the
frequency of these dispositions, the prohibitively high cost, delay and
distraction of constantly obtaining certificates or opinions would create an
overwhelming administrative burden and interrupt the smooth operation of our
stores.
Seasonality and Fluctuations in Operating
Results
Our revenue and income are dependent upon activity in the
construction industry in the markets we serve. Construction activity is
dependent upon weather and other seasonal factors affecting construction in the
geographic areas where we have operations. Because of this variability in
demand, our revenue and income fluctuates. Accordingly, quarterly or other
interim results should not be considered indicative of results to be expected
for any other quarter or for a full year.
Operating results may fluctuate due to other factors including, but
not limited to:
|
• |
the impact of the fresh-start reporting; |
|
• |
changes in general economic conditions including
changes in national, regional or local construction or industrial
activities; |
|
• |
the timing of expenditures for new rental equipment and
the disposition of used equipment; |
|
• |
competitive pricing pressures; and |
|
• |
changes in interest rates. |
Inflation
We do not believe that inflation has been a significant factor to
the cost of our operations other than the increase in steel prices discussed in
the subsection entitled “Overview”.
Factors That May Affect Future
Results
Certain statements and information in this quarterly report may
include "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including in particular the statements about
our plans, strategies and prospects under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
These statements are based on our current plans and expectations and involve
risks and uncertainties that could cause actual future activities and results to
be materially different from those set forth in these forward-looking
statements. Important factors that could cause actual results to differ
materially from our forward-looking statements are set forth below and elsewhere
in this quarterly report and in the Company's Registration Statement. Such
factors include, among others:
|
• |
As a result of our adoption of fresh-start reporting,
your ability to accurately compare our future financial statements with prior
periods may be limited. |
|
• |
Our substantial level of indebtedness could prevent us
from fulfilling our obligations on the notes and may have a negative effect on
the market value of our notes. |
|
• |
Contraction in the private non-residential construction
industry may continue which may weaken demand and pricing for our
equipment. |
|
• |
Continued operating losses may decrease our future cash
flow which would limit our ability to reinvest in our business, primarily for
the purchase of new rental equipment, and may cause us not to have enough funds
to satisfy our debt obligations, including payment on the notes. |
|
• |
As we dispose of our rental fleet in the ordinary
course of business, we may not realize as much cash as we anticipate which could
negatively impact our cash flow. As we operate a capital-intensive business,
reductions in operating cash flow could severely impact our ability to purchase
new rental fleet, which in turn could put us at a competitive disadvantage in
the marketplace. |
|
• |
Competitors with greater financial resources may have a
competitive advantage over us by being able to sustain reduced rental rates for
longer periods of time and being able to offer a broader range and volume of
rental equipment. If they employ such strategies, our cash flows and
profitability may be reduced. |
|
• |
Implementing our new business strategy may cause
significant disruptions, which could cause customer dissatisfaction and affect
our cash flows and profitability. |
|
• |
Disruptions in our information technology systems could
limit our capacity to effectively monitor and control our operations. |
|
• |
Because all of our existing leases for our NationsRent
at Lowe’s locations expire on the same date, if we are not able to renew
these leases we may be forced to close or relocate up to 100 locations at
substantially the same time. |
|
• |
Cost associated with compliance with, and changes in,
environmental laws and regulations could subject us to increased liabilities and
expenses. |
|
• |
Potential and certain existing claims against the
Company may not be covered by our insurance. Additionally, we may not be able to
renew our coverage on terms favorable to us that could lead to increased costs
in the event of future claims. |
We make no commitment to disclose any revisions to forward-looking
statements, or any fact, events or circumstances after the date hereof that may
bear upon forward-looking statements.
We make “forward-looking statements” throughout this
report. Whenever you read a statement that is not solely a statement of
historical fact (such as when we state that we “believe,”
“expect,” “anticipate” or “plan” that an event
will occur, and other similar statements), you should understand that our
expectations may not be correct, although we believe they are reasonable, and
that our plans may change. We do not guarantee that the transactions and events
described in this report will happen as described or that any positive trends
noted in this report will occur or will continue. The forward-looking
information contained in this report is generally located in this section, but
may be found in other locations as well. These forward-looking statements
generally relate to our strategies, plans and objectives for future operations
and are based upon our current plans and beliefs or estimates of future results
or trends.
Forward-looking statements regarding our present plans or
expectations for new product and service offerings, capital expenditures, sales,
cost-saving strategies, growth, and business strategies involve risks and
uncertainties relative to return expectations and related allocation of
resources, and changing economic or competitive conditions, as well as the
negotiation of agreements with third parties, which could cause actual results
to differ from present plans or expectations, and such differences could be
material. Similarly, forward-looking statements regarding our present
expectations for operating results and cash flow involve risks and uncertainties
relative to these and other factors, such as the ability to increase revenue, to
diversify the revenue stream and/or to achieve cost reductions, which also would
cause actual results to differ from present plans. Such differences could be
material.
All forward-looking statements speak only as of the date of this
report. We do not undertake any obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Although we believe that our plans, intentions and
expectations reflected in or suggested by the forward-looking statements we make
in this report are reasonable, we can give no assurance that these plans,
intentions or expectations will be achieved. Future economic and industry trends
that could potentially impact revenues and profitability are difficult to
predict.
Item 3: Quantitative and Qualitative Disclosures
About Market Risk
The inherent risk in market risk sensitive instruments and positions
primarily relates to potential losses arising from adverse changes in foreign
currency exchange rates and interest rates. Our exposure to market risk is
limited primarily to the fluctuating interest rates associated with our working
capital facility. Our variable interest rates are subject to interest rate
changes in the United States and the Eurodollar market. At June 30, 2004, we did
not have any variable rate debt outstanding.
Item 4: Controls and Procedures
Our management, including the Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness of disclosure
controls and procedures. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the disclosure controls and
procedures are effective in ensuring that all material information required to
be filed in this quarterly report has been made known to them in a timely
fashion. There have been no significant changes in internal controls, or in
factors that could significantly affect internal controls, subsequent to the
date the Chief Executive Officer and Chief Financial Officer completed their
evaluation.
PART II - OTHER INFORMATION
Item 4: Submission of Matters to a Vote of
Security Holders
On June 14, 2004, we distributed written consents to the holders of
common stock of the Company for the election of directors of the Company.
Pursuant to such written consents the following individuals were elected as
directors of the Company as follows:
Abstentions or
Director Votes For Votes Against Non-Votes
- ------------------- ----------- ------------- --------------
Thomas J. Putman 1,549,374 -- 119,654
Bryan T. Rich 1,549,374 -- 119,654
Douglas M. Suliman, Jr. 1,549,374 -- 119,654
Thomas W. Blumenthal 1,549,374 -- 119,654
Andrew P. Hines 427,302(1) -- 119,654
Irving M. Levine 1,549,374 -- 119,654
Greg A. Rosenbaum 1,549,374 -- 119,654
(1) Pursuant to the terms of the Company's
Stockholders' Agreement, Mr. Hines, as the minority representative, is selected
by a majority of the outstanding shares of common stock, not including shares
held by The Baupost Group, L.L.C., Phoenix Rental Partners, LLC or any of their
affiliates.
ITEM 6: Exhibits and Reports on Form
8-K
(a) Exhibits:
Exhibit
Number |
Description |
| 2.1 |
First Amended Joint Plan of Reorganization of
NationsRent, Inc. and its Debtor Subsidiaries, dated February 7, 2003, as filed
in the United States Bankruptcy Court District of Delaware on February 11,
2003*(1) |
| 2.2 |
Modifications to First Amended Joint Plan of
Reorganization of NationsRent, Inc. and its Debtor Subsidiaries* |
| 2.3 |
Modifications (Second) to First Amended Joint Plan of
Reorganization of NationsRent, Inc. and its Debtor Subsidiaries* |
| 2.4 |
Modifications (Third) to First Amended Joint Plan of
Reorganization of NationsRent, Inc. and its Debtor Subsidiaries* |
| 3.1 |
Certificate of Incorporation of the Company* |
| 3.2 |
Certificate of Amendment of Certificate of
Incorporation of the Company* |
| 3.3 |
Certificate of Amendment of Certificate of
Incorporation of the Company* |
| 3.4 |
Certificate of Designation for Series A Preferred Stock
of the Company* |
| 3.5 |
Certificate of Amendment to Certificate of Designation
for Series A Preferred Stock* |
| 3.6 |
By-Laws of the Company* |
| 3.7 |
Certificate of Incorporation of NationsRent, Inc.* |
| 3.8 |
By-Laws of NationsRent, Inc.* |
| 3.9 |
Certificate of Incorporation of Las Olas Fourteen
Corporation* |
| 3.10 |
By-Laws of Las Olas Fourteen Corporation* |
| 3.11 |
Certificate of Incorporation of Las Olas Twelve
Corporation* |
| 3.12 |
By-Laws of Las Olas Twelve Corporation* |
| 3.13 |
Certificate of Incorporation of NRGP, Inc., as
amended* |
| 3.14 |
By-Laws of NRGP, Inc.* |
| 3.15 |
Certificate of Incorporation of NationsRent USA, Inc.* |
| 3.16 |
By-Laws of NationsRent USA, Inc.* |
| 3.17 |
Certificate of Incorporation of NationsRent West,
Inc.* |
| 3.18 |
By-Laws of NationsRent West, Inc.* |
| 3.19 |
Certificate of Incorporation of Logan Equipment Corp.,
as amended* |
| 3.20 |
By-Laws of Logan Equipment Corp.* |
| 3.21 |
Certificate of Incorporation of NationsRent
Transportation Services, Inc.* |
| 3.22 |
By-Laws of NationsRent Transportation Services,
Inc.* |
| 3.23 |
Articles of Incorporation of BDK Equipment Company,
Inc.* |
| 3.24 |
Amended and Restated Bylaws of BDK Equipment Company,
Inc.* |
| 3.25 |
Certificate of Incorporation of NR Delaware, Inc.* |
| 3.26 |
By-Laws of NR Delaware, Inc.* |
| 3.27 |
Certificate of Limited Partnership of NationsRent of
Texas, LP* |
| 3.28 |
Amended and Restated Agreement of Limited Partnership
of NationsRent of Texas, LP* |
| 4.1 |
Form of 9 1/2% Senior Secured Notes due 2010* |
| 4.2 |
Indenture, dated as of October 23, 2003, by and among
Company, the Guarantors and Wilmington Trust Company* |
| 4.2.1 |
First Supplement, dated as of July 27, 2004, to the
Indenture, dated as of October 23, 2003, by and among Company, the Guarantors
and Wilmington Trust Company* |
| 4.3 |
Registration Rights Agreement, dated as of October 23,
2003, by and among the Company, the Guarantors and the initial purchasers* |
| 4.4 |
Amended and Restated Credit Agreement, dated as of
October 23, 2003, by and among the Company, certain of its subsidiaries,
Wachovia Bank, National Association and the other lending institutions party
thereto, as administrative agent and as a lender.* |
| 4.5 |
First Amendment to Amended and Restated Credit
Agreement, dated as of December 22, 2003, by and among the Company, certain of
its subsidiaries, Wachovia Bank, National Association, as administrative agent
and a lender, Fleet Capital Corporation as a lender and Bank of America, N.A. as
a lender* |
| 4.6 |
Amended and Restated Security Agreement, dated as of
October 23, 2003, between the Company, certain of its subsidiaries, and Wachovia
Bank, National Association, as administrative agent* |
| 4.7 |
Form of 6.5% Unsecured Convertible Subordinated
Promissory Note due 2008* |
| 10.1 |
NationsRent Liquidating Trust Agreement, dated as of
June 13, 2003, by and among NationsRent, Inc. and its subsidiaries, as settlors,
and Perry Mandarino, as trustee of the NationsRent Unsecured Creditor's
Liquidating Trust* |
| 10.2 |
Call Agreement, dated as of June 13, 2003, by and
between NR Holdings, Inc. and Perry Mandarino, as trustee on behalf of
NationsRent Unsecured Creditor's Liquidating Trust* |
| 10.3 |
2003 Restricted Stock Plan of NR Holdings, Inc.* |
| 10.4 |
Stockholders' Agreement, dated as of June 13, 2003, by
and among NR Holdings, Inc. and the stockholders party thereto* |
| 10.5 |
First Amendment to Stockholders' Agreement, dated as of
July 9, 2003, by and among NR Holdings, Inc. and the stockholders party
thereto* |
| 10.6 |
Indemnification Agreement, dated as of June 13, 2003,
by and among NR Holdings, Inc. and the indemnitees signatory thereto* |
| 10.6.1 |
Amended and Restated Indemnification Agreement, dated
as of June 13, 2003, by and among NationsRent Companies, Inc. and the indemnitees
signatory thereto** |
| 10.7 |
Employment Agreement, effective June 13, 2003, by and
between the Company and Thomas J. Putman* |
| 10.8 |
Employment Agreement, effective July 9, 2003, by and
between the Company and Bryan T. Rich* |
| 10.9 |
Employment Agreement, effective July 9, 2003, by and
between the Company and Douglas M. Suliman* |
| 10.10 |
Employment Agreement, effective June 23, 2003, by and
between the Company and Thomas J. Hoyer* |
| 10.11 |
Employment Agreement, effective June 13, 2003, by and
between the Company and Joseph H. Izhakoff* |
| 10.12 |
Employment Agreement, effective July 9, 2003, by and
between the Company and John Scherer* |
| 10.13 |
Form of Key Employee Housing Assistance Program* |
| 10.14 |
Indenture, dated March 1, 1998, between Francis P. Rich
and/or Catherine L. Rich and Logan Equipment Corporation* |
| 10.15 |
First Amendment to Lease, dated April 21, 2000, between
Francis P. Rich and/or Catherine L. Rich and NationsRent USA, Inc.
(successor-in-interest to Logan Equipment Corporation)* |
| 10.16 |
Lease Agreement, dated December 14, 1998, between Jim
Joy Holdings, LLC and NationsRent of New Hampshire, Inc.* |
| 10.17 |
Lease Assignment, dated September 17, 1999, between Jim
Joy Holdings, LLC and 1216 West Hammond Street, LLC* |
| 10.18 |
First Amendment to Lease, dated January 10, 2000,
between 1216 Hammond Street, LLC and NationsRent USA, Inc.
(successor-in-interest to NationsRent of New Hampshire, Inc.)* |
| 10.19 |
Lease Agreement, dated March 15, 2000, between Jim Joy Holdings, LLC and
NationsRent USA, Inc.* |
| 10.20 |
Lease Agreement, dated December 7, 1999, between TREC,
LLC and NationsRent USA, Inc.* |
| 10.21 |
Lease Agreement, dated December 14, 1998, between TREC,
LLC and NRI/LEC Merger Corp., Inc.* |
| 10.22 |
Lease Agreement, dated March 1, 2000, between TREC, LLC
and NationsRent USA, Inc.* |
| 10.23 |
First Amendment to Lease, dated May 24, 2001, between
TREC, LLC and NationsRent USA, Inc.* |
| 10.24 |
Subscription Agreement, dated June 13, 2003, among NR
Holdings, Inc. and the subscribers party thereto* |
| 10.25 |
Asset Purchase Agreement, dated June 13, 2003, among
Boston Rental Partners, LLC, NationsRent, Inc. and its subsidiaries* |
| 10.26 |
Rental Agreement, dated January 31, 2003, by and
between Boston Rental Partners, LLC and NationsRent, Inc. and Term Sheet
Regarding Settlement Program referenced therein* |
| 10.27 |
Strategic Alliance Agreement, dated October 12, 2000,
between NationsRent, Inc. and Lowe's Companies, Inc.* |
| 31.1 |
Certification of Thomas J. Putman pursuant to Section
302 of the Sarbanes-Oxley Act of 2002** |
| 31.2 |
Certification of Thomas J. Hoyer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002** |
| 32.1 |
Certification of Thomas J. Putman pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002** |
| 32.2 |
Certification of Thomas J. Hoyer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002** |
* Incorporated by reference to the Company’s Registration
Statement on Form S-4 (Registration No. 333-114115), filed April 1, 2004, as
amended.
** Filed herewith.
|
(1) |
The Company agrees to furnish supplementally a copy of
any omitted schedule to the SEC upon request. |
(b) Reports on Form 8-K:
The Company has not filed any Current Report on Form 8-K with the
Securities and Exchange Commission during the period for which this report is
filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
NATIONSRENT COMPANIES, INC.
(Registrant) |
| Dated: August 16, 2004 |
By: /s/ Thomas J. Putman
Name: Thomas J. Putman
Title: President, Chief Executive Officer and Director |
| Dated: August 16, 2004 |
By: /s/ Thomas J. Hoyer
Name: Thomas J. Hoyer
Title: Executive Vice President and Chief Financial Officer |
| Dated: August 16, 2004 |
By: /s/ Gary N. Golden
Name: Gary N. Golden
Title: Vice President and Controller |
Exhibits Index
Exhibit
Number |
Description |
| 2.1 |
First Amended Joint Plan of Reorganization of
NationsRent, Inc. and its Debtor Subsidiaries, dated February 7, 2003, as filed
in the United States Bankruptcy Court District of Delaware on February 11,
2003*(1) |
| 2.2 |
Modifications to First Amended Joint Plan of
Reorganization of NationsRent, Inc. and its Debtor Subsidiaries* |
| 2.3 |
Modifications (Second) to First Amended Joint Plan of
Reorganization of NationsRent, Inc. and its Debtor Subsidiaries* |
| 2.4 |
Modifications (Third) to First Amended Joint Plan of
Reorganization of NationsRent, Inc. and its Debtor Subsidiaries* |
| 3.1 |
Certificate of Incorporation of the Company* |
| 3.2 |
Certificate of Amendment of Certificate of
Incorporation of the Company* |
| 3.3 |
Certificate of Amendment of Certificate of
Incorporation of the Company* |
| 3.4 |
Certificate of Designation for Series A Preferred Stock
of the Company* |
| 3.5 |
Certificate of Amendment to Certificate of Designation
for Series A Preferred Stock* |
| 3.6 |
By-Laws of the Company* |
| 3.7 |
Certificate of Incorporation of NationsRent, Inc.* |
| 3.8 |
By-Laws of NationsRent, Inc.* |
| 3.9 |
Certificate of Incorporation of Las Olas Fourteen
Corporation* |
| 3.10 |
By-Laws of Las Olas Fourteen Corporation* |
| 3.11 |
Certificate of Incorporation of Las Olas Twelve
Corporation* |
| 3.12 |
By-Laws of Las Olas Twelve Corporation* |
| 3.13 |
Certificate of Incorporation of NRGP, Inc., as
amended* |
| 3.14 |
By-Laws of NRGP, Inc.* |
| 3.15 |
Certificate of Incorporation of NationsRent USA, Inc.* |
| 3.16 |
By-Laws of NationsRent USA, Inc.* |
| 3.17 |
Certificate of Incorporation of NationsRent West,
Inc.* |
| 3.18 |
By-Laws of NationsRent West, Inc.* |
| 3.19 |
Certificate of Incorporation of Logan Equipment Corp.,
as amended* |
| 3.20 |
By-Laws of Logan Equipment Corp.* |
| 3.21 |
Certificate of Incorporation of NationsRent
Transportation Services, Inc.* |
| 3.22 |
By-Laws of NationsRent Transportation Services,
Inc.* |
| 3.23 |
Articles of Incorporation of BDK Equipment Company,
Inc.* |
| 3.24 |
Amended and Restated Bylaws of BDK Equipment Company,
Inc.* |
| 3.25 |
Certificate of Incorporation of NR Delaware, Inc.* |
| 3.26 |
By-Laws of NR Delaware, Inc.* |
| 3.27 |
Certificate of Limited Partnership of NationsRent of
Texas, LP* |
| 3.28 |
Amended and Restated Agreement of Limited Partnership
of NationsRent of Texas, LP* |
| 4.1 |
Form of 9 1/2% Senior Secured Notes due 2010* |
| 4.2 |
Indenture, dated as of October 23, 2003, by and among
Company, the Guarantors and Wilmington Trust Company* |
| 4.2.1 |
First Supplement, dated as of July 27, 2004, to the
Indenture, dated as of October 23, 2003, by and among Company, the Guarantors
and Wilmington Trust Company* |
| 4.3 |
Registration Rights Agreement, dated as of October 23,
2003, by and among the Company, the Guarantors and the initial purchasers* |
| 4.4 |
Amended and Restated Credit Agreement, dated as of
October 23, 2003, by and among the Company, certain of its subsidiaries,
Wachovia Bank, National Association and the other lending institutions party
thereto, as administrative agent and as a lender.* |
| 4.5 |
First Amendment to Amended and Restated Credit
Agreement, dated as of December 22, 2003, by and among the Company, certain of
its subsidiaries, Wachovia Bank, National Association, as administrative agent
and a lender, Fleet Capital Corporation as a lender and Bank of America, N.A. as
a lender* |
| 4.6 |
Amended and Restated Security Agreement, dated as of
October 23, 2003, between the Company, certain of its subsidiaries, and Wachovia
Bank, National Association, as administrative agent* |
| 4.7 |
Form of 6.5% Unsecured Convertible Subordinated
Promissory Note due 2008* |
| 10.1 |
NationsRent Liquidating Trust Agreement, dated as of
June 13, 2003, by and among NationsRent, Inc. and its subsidiaries, as settlors,
and Perry Mandarino, as trustee of the NationsRent Unsecured Creditor's
Liquidating Trust* |
| 10.2 |
Call Agreement, dated as of June 13, 2003, by and
between NR Holdings, Inc. and Perry Mandarino, as trustee on behalf of
NationsRent Unsecured Creditor's Liquidating Trust* |
| 10.3 |
2003 Restricted Stock Plan of NR Holdings, Inc.* |
| 10.4 |
Stockholders' Agreement, dated as of June 13, 2003, by
and among NR Holdings, Inc. and the stockholders party thereto* |
| 10.5 |
First Amendment to Stockholders' Agreement, dated as of
July 9, 2003, by and among NR Holdings, Inc. and the stockholders party
thereto* |
| 10.6 |
Indemnification Agreement, dated as of June 13, 2003,
by and among NR Holdings, Inc. and the indemnitees signatory thereto* |
| 10.6.1 |
Amended and Restated Indemnification Agreement, dated
as of June 13, 2003, by and among NationsRent Companies, Inc. and the indemnitees
signatory thereto** |
| 10.7 |
Employment Agreement, effective June 13, 2003, by and
between the Company and Thomas J. Putman* |
| 10.8 |
Employment Agreement, effective July 9, 2003, by and
between the Company and Bryan T. Rich* |
| 10.9 |
Employment Agreement, effective July 9, 2003, by and
between the Company and Douglas M. Suliman* |
| 10.10 |
Employment Agreement, effective June 23, 2003, by and
between the Company and Thomas J. Hoyer* |
| 10.11 |
Employment Agreement, effective June 13, 2003, by and
between the Company and Joseph H. Izhakoff* |
| 10.12 |
Employment Agreement, effective July 9, 2003, by and
between the Company and John Scherer* |
| 10.13 |
Form of Key Employee Housing Assistance Program* |
| 10.14 |
Indenture, dated March 1, 1998, between Francis P. Rich
and/or Catherine L. Rich and Logan Equipment Corporation* |
| 10.15 |
First Amendment to Lease, dated April 21, 2000, between
Francis P. Rich and/or Catherine L. Rich and NationsRent USA, Inc.
(successor-in-interest to Logan Equipment Corporation)* |
| 10.16 |
Lease Agreement, dated December 14, 1998, between Jim
Joy Holdings, LLC and NationsRent of New Hampshire, Inc.* |
| 10.17 |
Lease Assignment, dated September 17, 1999, between Jim
Joy Holdings, LLC and 1216 West Hammond Street, LLC* |
| 10.18 |
First Amendment to Lease, dated January 10, 2000,
between 1216 Hammond Street, LLC and NationsRent USA, Inc.
(successor-in-interest to NationsRent of New Hampshire, Inc.)* |
| 10.19 |
Lease Agreement, dated March 15, 2000, between Jim Joy Holdings, LLC and
NationsRent USA, Inc.* |
| 10.20 |
Lease Agreement, dated December 7, 1999, between TREC,
LLC and NationsRent USA, Inc.* |
| 10.21 |
Lease Agreement, dated December 14, 1998, between TREC,
LLC and NRI/LEC Merger Corp., Inc.* |
| 10.22 |
Lease Agreement, dated March 1, 2000, between TREC, LLC
and NationsRent USA, Inc.* |
| 10.23 |
First Amendment to Lease, dated May 24, 2001, between
TREC, LLC and NationsRent USA, Inc.* |
| 10.24 |
Subscription Agreement, dated June 13, 2003, among NR
Holdings, Inc. and the subscribers party thereto* |
| 10.25 |
Asset Purchase Agreement, dated June 13, 2003, among
Boston Rental Partners, LLC, NationsRent, Inc. and its subsidiaries* |
| 10.26 |
Rental Agreement, dated January 31, 2003, by and
between Boston Rental Partners, LLC and NationsRent, Inc. and Term Sheet
Regarding Settlement Program referenced therein* |
| 10.27 |
Strategic Alliance Agreement, dated October 12, 2000,
between NationsRent, Inc. and Lowe's Companies, Inc.* |
| 31.1 |
Certification of Thomas J. Putman pursuant to Section
302 of the Sarbanes-Oxley Act of 2002** |
| 31.2 |
Certification of Thomas J. Hoyer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002** |
| 32.1 |
Certification of Thomas J. Putman pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002** |
| 32.2 |
Certification of Thomas J. Hoyer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002** |
* Incorporated by reference to the Company’s Registration
Statement on Form S-4 (Registration No. 333-114115), filed April 1, 2004, as
amended.
** Filed herewith.
|
(1) |
The Company agrees to furnish supplementally a copy of
any omitted schedule to the SEC upon request. |