NATIONSRENT COMPANIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
September 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 11 of 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 $1,127,000
for the nine months period ending September 30, 2004.
Adjustments and Restatements
The
Company recorded the following during the third quarter of 2004:
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• |
a correction of $958,000 to the prior period write-down of
capitalized betterment costs. The correction reduces repair and maintenance
expense in the current period. Betterments are repair and maintenance
expenditures that increase the capacity, efficiency, functionality, life, and/or
safety of its equipment which reduced cost of equipment rentals which the
Company recorded in the second quarter of 2004; and
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• |
cooperative advertising receivables related to the first and second quarters
of 2004 were recorded in the third quarter, which resulted in a decrease in
marketing expense included in selling, general and administrative expenses of
approximately $659,000 in the current period.
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The
Company has restated all prior periods in the accompanying condensed and
consolidated statements of operations to correct the classification of delivery
vehicle depreciation expense from operating expenses to cost of revenue. The
Company corrected the classification of these expenses in order to include all
delivery costs in cost of equipment rentals. This correction increased cost of
equipment rentals and decreased non-rental equipment depreciation and
amortization by $9,716,000 for the nine month period ending September 30, 2004,
by $6,028,000 for the four month period ending September 30, 2003, and by
$1,648,000 for the five month period ending May 31, 2003. This correction had
the impact of decreasing gross profit but had no impact on operating income, net
income, or cash flow.
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
----------------------------
September 30, December 31,
2004 2003
------------- -------------
Senior secured notes payable, net of unamortized
discount of $7,380 in 2004 and $8,275 in 2003,
bearing interest at 9.5%, interest payable
semi-annually and principal payable in October
2010.............................................................. $ 242,620 $ 241,725
Postpetition notes payable, bearing interest at
prime, interest and principal payable in January
2007.............................................................. 364 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................................... 951 --
------------- -------------
Total Debt ..................................................... $ 289,146 $ 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. As of December, 31, 2003 and September 30, 2004,
related parties owned of record approximately $22,309,000 of the convertible
subordinated notes payable. Accrued interest on the notes held by related
parties was $806,000 as of December 31, 2003 and $1,949,000 as of September 30,
2004 and is included in accrued expenses and other liabilities for the
applicable dates. During the three months ended September 30, 2003 and September
30, 2004, interest expense for the notes held by related parties was
approximately $366,000 and $390,000, respectively. For the four months of the
Successor Company ended September 30, 2003 and the nine months ended September
30, 2004, interest expense for the notes held by related parties was
approximately $433,000 and $1,143,000, respectively.
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 September 30, 2004, the Company had a debt to cash flow
ratio of 2.14 to 1.00.
As of September 30, 2004,
there were no outstanding cash borrowings. The Company had $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
---------------------
Five Months
Ended
May 31, 2003
---------------------
Gain on extinguishment of debt and settlement of operating leases... $ (930,884)
Fresh start valuation adjustments................................... (494,748)
Professional fees................................................... 15,207
Employee expenses................................................... 7,212
Facility closures................................................... 114
Interest income..................................................... (5)
Other............................................................... 1,983
----------------
Total reorganization items........................................ $ (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 $15,278,000
for the three months ended September 30, 2004 and $31,091,000 for the nine
months ended September 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 third quarter
of 2004. During the nine months ended September 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 September 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
$3,418,000 during the first nine 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 nine 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
--------------------
Five Months
Ended
May 31, 2003
--------------------
Reported net income..................................................... $ 1,351,557
Pro forma stock based compensation expense, net of tax.................. (608)
-----------------
Pro forma net income.................................................... $ 1,350,949
=================
Reported earnings per share............................................. $ 23.56
=================
Pro forma earnings per share............................................ $ 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
--------------------
Five Months
Ended
May 31, 2003
--------------------
Numerator:
Net income - basic and diluted................................... $ 1,351,557
Denominator:
Weighted average shares - basic and diluted...................... 57,364
-----------------
Basic and diluted earnings per share.............................. $ 23.56
=================
(9) Taxes
The
Company did not record a provision for income taxes in the three-month and
nine-month periods ended September 30, 2004, three-month period ended September
30, 2003, four-month period ended September 30, 2003 or five-month period ended
May 31, 2003. The tax provisions for the periods are significantly different
than the provisions expected from applying the federal statutory rate to pre-tax
income (or loss) primarily due to the valuation allowance established for the
Company’s deferred tax assets.
Valuation
allowances are recorded related to deferred tax assets if their realization does
not meet the "more likely than not" criteria detailed in SFAS 109, "Accounting
for Income Taxes."
The
Company continually evaluates whether our deferred tax assets will be realized,
and records a valuation allowance when appropriate. We have recorded a
valuation allowance due to uncertainties related to our ability to utilize some
of the net operating loss carryforwards that make up our deferred tax assets
before they expire.
During
the third quarter of 2004, the Company recorded an increase to other
income to reflect that tax claims related to the period before bankruptcy
were settled for $893,000 lower than was originally anticipated and accrued
when the Company emerged from bankruptcy.
(10) Related-Party Transaction
During the second quarter
of 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 the Company for returning the acquired units to rent-ready
condition and for the cost of an annual inspection on each unit. Phantom has
reimbursed the Company approximately $75,000 for such costs incurred by the
Company through September 2004.
(11) Subsequent Events
On
November 15, 2004, the Company filed a Form 12b-25 with the SEC stating that the
Company could not complete its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004 due to a delay in obtaining and compiling information
required to be included in such report, which delay could not be eliminated by
the Company without unreasonable effort and expense. Pursuant to the indenture
governing the Company’s senior secured notes (described in Note 2), if the
Company is required to file a Quarterly Report on Form 10-Q with the SEC the
Company must file such report within the time period specified in the SEC’s
rules and regulations and provide a copy of such report to the trustee. On
November 16, 2004, the Company received a notice from the trustee that under the
indenture, failure to observe or perform any covenant in the indenture could
constitute an event of default if not remedied within 30 days of the date of the
notice. In the case of an event of default, the entire principal amount of the
senior secured notes plus interest accrued to such date would be accelerated by
the trustee and become immediately due and payable by the Company. By filing
this Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 on
November 22, 2004, the Company cured the default.
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, in part, a function of industry and economic
conditions. The primary drivers impacting pricing are nonresidential
construction activity and the supply of equipment in the U.S. market relative to
demand. Improving nonresidential construction during 2004 and the recent
abatement of the over-supply of construction equipment in the U.S. market has
led to a greater demand for our services which, in turn, has had a positive
impact on the revenue we generate from rentals and equipment sales. In addition,
our revenues were positively impacted 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 both the equipment and the
parts that 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 and parts are 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 from some manufacturers. 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 September 30, 2004, we had
$31.4 million in cash and we had no cash borrowings under our working capital
facility described below. As of September 30, 2004, we had $36.7 million of
availability under our working capital facility after taking into account our
borrowing base calculation and $22.8 million of outstanding letters of credit.
We restated all prior periods to correct the classification of delivery vehicle
depreciation expense from operating expenses to cost of revenue. We corrected
the classification of these expenses in order to include all delivery costs
in cost of equipment rentals. This correction increased cost of equipment rentals and
decreased non-rental equipment depreciation and amortization by $9.7 million and
$7.7 million for the nine month periods ending September 30, 2004 and 2003,
respectively. This correction decreased gross profit but had no impact on
operating income, net income, or cash flow.
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 September 30, 2004 Compared
to Three Months Ended September 30, 2003
Three Months Ended
September 30, Variance
(unaudited) Favorable/(Unfavorable)
------------------- -----------------------
2004 2003 $ %
----------- ------------ ------------ -----------
(as restated)
(dollars in thousands)
Revenue:
Equipment rentals................................ $ 132,500 $ 119,227 $ 13,273 11.1%
Sales of equipment, merchandise, service, parts &
supplies....................................... 33,343 16,199 17,144 105.8
------------ ---------- ---------- ----------
Total revenue.................................... 165,843 135,426 30,417 22.5
------------ ---------- ---------- ----------
Cost of revenue:
Cost of equipment rentals........................ 61,672 61,873 201 0.3
Rental equipment depreciation & lease expense.... 30,451 27,146 (3,305) (12.2)
Cost of sales of equipment, merchandise, service,
parts & supplies............................... 19,977 10,778 (9,199) (85.4)
------------ ---------- ---------- ----------
Total cost of revenue............................ 112,100 99,797 (12,303) (12.3)
------------ ---------- ---------- ----------
Gross profit:
Gross profit on equipment rentals including
depreciation & lease expense................... 40,377 30,208 10,169 33.7
Gross profit on sales of equipment, merchandise,
service, parts & supplies...................... 13,366 5,421 7,945 146.6
------------ ---------- ---------- ----------
Total gross profit .............................. 53,743 35,629 18,114 50.8
------------ ---------- ---------- ----------
Operating expenses:
Selling, general & administrative expenses....... 27,687 23,933 (3,754) (15.7)
Non-rental equipment depreciation & amortization. 1,436 2,198 762 34.7
------------ ---------- ---------- ----------
Operating income................................. 24,620 9,498 15,122 159.2
------------ ---------- ---------- ----------
Interest expense, net............................ 7,649 3,885 (3,764) (96.9)
Reversal of pre-petition tax liabilities......... (893) 893
Other, net....................................... (103) (175) (72) 41.1
------------ ---------- ---------- ----------
6,653 3,710 (2,943) (79.3)
------------ ---------- ---------- ----------
Net income....................................... $ 17,967 $ 5,788 $ 12,179 210.4%
============ ========== ========== ==========
Revenue. Revenue from equipment rentals was positively impacted for the three
months ended September 30, 2004 by improved pricing as well as a $0.8 million
increase in revenue at our NationsRent at Lowe's stores that opened in 2003.
Utilization for the third
quarter of 2004 was 54.8% compared to 50.1% 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 drivers for the
increase in sales of equipment, merchandise, service, parts and supplies were
increases of $10.6 million, or 173.8%, in sales of used equipment and $5.3
million, or 109.0%, in sales of new equipment. The improving market conditions
for equipment and a continued emphasis on selling equipment led to the increase
in equipment sales during 2004.
Gross profit. Gross
profit margin on equipment rentals, including depreciation and lease expense,
increased from 25.3% in the third quarter of 2003 to 30.5% for the same period
in 2004. Gross profit on equipment rentals was positively impacted:
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by a $13.3 million increase in revenue; |
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the elimination of $1.9 million of
lease expense related to operating leases that were bought out as part of the
senior secured notes offering in October 2003; and |
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an adjustment of $0.9 million to correct its second quarter
write-down of capitalizable costs that increase the capacity, efficiency,
functionality, life, and/or safety of its equipment which reduced cost of
equipment rentals. |
Gross profit on equipment rentals was
negatively impacted by a $4.9 million net increase in depreciation expense that
resulted from rental fleet additions when we bought out certain leases. 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.
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 $15.3 million for the three months ended September 30, 2004.
Gross profit margin on
sales of equipment, merchandise, service, parts and supplies increased from
33.5% in the third quarter of 2003 to 40.1% 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 third quarter of 2004, $9.2 million of our
gross profit was attributable to sales of used equipment, of which $2.7 million
was the result of implementing fresh-start reporting as follows:
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Equipment which was originally assigned a fair value of $15.8 million upon
emergence from bankruptcy was written down by $6.6 million to a value of $9.2
million; and |
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Depreciation expense associated with the equipment that was sold during the
period was $3.9 million less than it otherwise would have been if such equipment
had not been written down pursuant to fresh-start reporting. |
During the
third quarter of 2003, $2.8 million of our gross profit was attributable to
sales of used equipment, of which $2.4 million was the result of fresh start
reporting as follows:
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Equipment which was originally assigned a fair value of $5.9 million upon
emergence from bankruptcy was written down by $2.7 million to a value of $3.2
million; and |
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Depreciation expense associated with the equipment that was sold during the
period was $0.3 million less than it otherwise would have been if such equipment
had not been written down pursuant to fresh-start reporting. |
Excluding the fresh-start
adjustments, the normalized gross profit margin on sales of equipment,
merchandise, service, parts and supplies increased from 18.6% in the third
quarter of 2003 to 31.8% for the same period in 2004. The increase in the
normalized margin is primarily related to the increase in the margin on sales of
used equipment from 6.0% in 2003 to 38.6% in 2004. In the second half of 2003,
following our emergence from bankruptcy, we sold older fleet at auctions at
narrower margins. As market conditions improved during 2004, we continued our
focus on equipment sales targeting more sales through retail channels at higher
margins.
Operating expenses. The increase in operating expenses was primarily due to:
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$4.0 million of compensation expense and sales commissions expense related to
additional employees to support 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”; |
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$0.8 million of auto allowance expense due to the inception of a car allowance program; and |
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$0.3 million of compensation expense for the three months ended September 30,
2004 related to the amortization of restricted stock awards made to the new
management team. |
The increase in operating
expenses was partially offset by a decreased provision for doubtful accounts and
the recognition of cooperative advertising receivables in
the third 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 $1.4 million less provision during 2004 than
during the same period in 2003. During the quarter, the Company also recognized
$1.0 million of cooperative advertising receivables from our equipment
manufacturers as compared to none in the third quarter of 2003.
Selling, general and
administrative expenses as a percentage of total revenue were 16.7% and 17.7%
for the three months ended September 30, 2004 and September 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 September 30, 2004, we
recorded $6.4 million of interest expense and amortization of debt issuance
costs related to the senior secured notes issued in October 2003 discussed below
and (ii) during the three months ended September 30, 2004, we incurred $1.7
million lower interest expense due to the payoff of purchase money financing
with proceeds from the senior secured notes.
During the third quarter of 2004,
tax claims related to the period before bankruptcy were settled for $0.9 million
lower than was originally anticipated and accrued when the Company emerged from
bankruptcy.
Nine Months Ended September 30, 2004 Compared to Nine
Months Ended September 30, 2003
Nine months Ended
September 30, Variance
(unaudited) Favorable/(Unfavorable)
------------------ -----------------------
2004 2003 $ %
------------ ---------- ---------- --------
(as restated)
(dollars in thousands)
Revenue:
Equipment rentals................................... $ 342,047 $ 311,914 $ 30,133 9.7%
Sales of equipment, merchandise, service, parts &
supplies.......................................... 87,961 41,491 46,470 112.0
---------- ---------- --------- ------
Total revenue....................................... 430,008 353,405 76,603 21.7
---------- ---------- --------- ------
Cost of revenue:
Cost of equipment rentals........................... 182,014 185,427 3,413 1.8
Rental equipment depreciation & lease expense....... 87,290 94,281 6,991 7.4
Cost of sales of equipment, merchandise, service,
parts & supplies.................................. 53,992 32,889 (21,103) (64.2)
---------- ---------- --------- ------
Total cost of revenue............................... 323,296 312,597 (10,699) (3.4)
---------- ---------- --------- ------
Gross profit :
Gross profit on equipment rentals including
depreciation & lease expense...................... 72,743 32,206 40,537 125.9
Gross profit on sales of equipment, merchandise,
service, parts & supplies......................... 33,969 8,602 25,367 294.9
---------- ---------- --------- ------
Total gross profit ................................. 106,712 40,808 65,904 161.5
---------- ---------- --------- ------
Operating expenses:
Selling, general & administrative expenses.......... 81,592 69,207 (12,385) (17.9)
Non-rental equipment depreciation & amortization.... 4,219 8,378 4,159 49.6
---------- ---------- --------- ------
Operating income (loss)............................ 20,901 (36,777) 57,678
---------- ---------- --------- ------
Interest expense, net............................... 23,058 8,209 (14,849) (180.9)
Reversal of pre-petition tax
liabilities......................................... (893) - 893
Other, net.......................................... (331) (302) 29 9.6
---------- ---------- --------- ------
21,834 7,907 (13,927) (176.1)
---------- ---------- --------- ------
Loss before reorganization Items.................... (933) (44,684) 43,751 (97.9)
Reorganization items, net........................... - (1,401,121) (1,401,121)
---------- ---------- --------- ------
Net income (loss)................................... $ (933) $ 1,356,437 $(1,357,370) (100.1)
---------- ---------- --------- ------
Revenue. Revenue from equipment rentals was positively impacted for the nine
months ended September 30, 2004 by improved pricing as well as a $2.0 million
increase in revenue at our NationsRent at Lowe's stores that opened in 2003.
Utilization for the nine
months ended September 30, 2004 was 48.2% compared to 43.5% in the nine months
ended September 30, 2003. We believe that the better pricing as discussed above
was the key factor in the increase.
The primary drivers for the
increase in sales of equipment, merchandise, service, parts and supplies were
increases of $32.0 million, or 192.9%, in sales of used equipment and $10.5
million, or 93.4%, in sales of new 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 beginning in July 2003. 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 10.3% in the nine months ended September 30, 2003 to 21.3% in the
nine months ended September 30, 2004. Gross profit on equipment rentals was
positively impacted by:
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a $30.1 million increase in revenue; and |
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the elimination of $29.0 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 and with the proceeds from the senior secured notes. |
Gross profit on equipment rentals was negatively impacted by:
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a $15.1 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 |
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a $4.9 million increase in repair and maintenance expense primarily related to
the increase in rental revenue discussed above and an increase in the average
age of our rental fleet from approximately 45.9 months in 2003 to approximately
48.4 months in 2004. |
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 $31.1 million for the nine months ended September 30, 2004.
Gross profit margin on
sales of equipment, merchandise, service, parts and supplies increased from
20.7% in the nine months ended September 30, 2003 to 38.6% for the nine months
ended September 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 nine
months ended September 30, 2004, $23.8 million of our gross profit was
attributable to sale of used equipment, of which $11.6 million was the result of
implementing fresh-start reporting as follows:
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Equipment which was originally assigned a fair value of $50.2 million upon
emergence from bankruptcy was written down by $21.4 million to a value of $28.8
million; and |
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Depreciation expense associated with the equipment that was sold during the
period was $9.8 million less than it otherwise would have been if such equipment
had not been written down pursuant to fresh-start reporting. |
During the nine months
ended September 30, 2003, $2.6 million of our gross profit was attributable to
sales of used equipment, of which $2.9 million was the result of fresh start
reporting as follows:
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Equipment which was originally assigned a fair value of $6.9 million upon
emergence from bankruptcy was written down by $3.2 million to a value of $3.7
million; and |
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Depreciation expense associated with the equipment that was sold during the
period was $0.3 million less than it otherwise would have been if such equipment
had not been written down pursuant to fresh-start reporting. |
Excluding the fresh-start
adjustments, the normalized gross profit margin on sales of equipment,
merchandise, service, parts and supplies increased from 13.9% during the first
nine months of 2003 to 25.4% for the same period in 2004. The increase in the
normalized margin is primarily related to the increase in the margin on sales of
used equipment from a loss in 2003 to 25.1% in 2004. We sold used equipment at a
loss during the first nine months of 2003. As market conditions improved during
2004, we continued our focus on equipment sales targeting more sales through
retail channels at higher margins.
Operating expenses. The increase in operating expenses was primarily due to:
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$8.3 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; |
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$3.4 million of compensation expense for the nine months ended September 30,
2004 related to the amortization of restricted stock awards made to the new
management team; and |
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$1.8 million of auto allowance expense due to the inception of a car allowance program. |
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 $3.5 million less provision during 2004 than during the same period
in 2003. In addition, the increase in operating expenses was also partially
offset by an adjustment to reduce non-rental equipment depreciation in the
amount of $1.6 million for the nine months ended September 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 19.0% and 19.6 %
for the nine months ended September 30, 2004 and September 30, 2003,
respectively.
Other income and
expense. The increase in interest expense was related primarily to the
following two factors: (i) during the nine months ended September 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 nine months ended September 30, 2004, we
recorded $18.9 million of interest expense and amortization of debt issuance
costs related to the senior secured notes issued in October 2003 discussed
below.
During the third quarter of 2004, tax claims related to the period before
bankruptcy were settled for $0.9 million lower than was originally anticipated
and accrued when the Company emerged from bankruptcy.
Reorganization items,
net. For 2003, 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
operating activities 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
Nine months ended
September 30, 2004. The net cash provided by our operations was $98.5
million for the nine months ended September 30, 2004. The increase over the
comparable period in 2003 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 $113.8 million
for the nine months ended September 30, 2004, primarily reflecting $150.4
million of rental equipment/fleet purchases and $11.9 million for purchases of
and improvements to property and equipment, partially offset by $48.6 million of
proceeds from the sale of rental equipment. Cash used by financing activities
during the nine months ended September 30, 2004 of $1.9 million was due to
repayments of debt and payment of debt issuance costs.
Cash Flow for 2003
Four months ended
September 30, 2003. The net cash provided by our operations was $56.1
million for the four months ended September 30, 2003. Net cash used in investing
activities was $85.9 million for the four months ended September 30, 2003,
primarily reflecting $88.1 million of rental fleet purchases and $5.5 million
for purchases of and improvements to property and equipment, partially offset by
$7.8 million of proceeds from the sale of rental equipment. Cash provided by
financing activities during the four months ended September 30, 2003 was $22.5
million and was primarily a result of $110.6 million of proceeds from the
issuance of convertible notes, and $64.0 million of proceeds from the issuance
of preferred and common stock, partially offset by $144.6 million of repayments
of debt and the payment of $7.4 million of debt issuance costs.
Five Months ended May
31, 2003. The net cash provided by our operations was $4.2 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, partially offset by $8.8 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 are expected to 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, payroll related, working capital and debt service. We estimate
that equipment expenditures over the next twelve months will range between $80.0
million and $100.0 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 $15.0 million and $25.0 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 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. In
addition, we may explore new store openings and acquisitions that arise at
favorable pricing. If any such activities are significant, we may be required to
raise additional capital through additional debt or equity financing.
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
$36.7 million of availability as of September 30, 2004 and other equipment
financing arrangements.
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 were 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. In September 2004 we
completed the exchange offer with 100% of the Original Notes being exchanged for
New 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 certificate dated June 14, 2004, our Collateral Value Coverage Ratio
was 2.46 to 1.00.
Beginning on April 15,
2004, we pay interest on the notes semi-annually in cash, in arrears, on October
15 and April 15 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 September 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 $36.7 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 September 30, 2004, we had a debt-to-cash flow ratio of
2.14 to 1.00.
Our working capital
facility also defines certain 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 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 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. In September 2004, the SEC issued an order granting us
the requested exemption.
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:
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the impact of the fresh-start reporting; |
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changes in general economic conditions including changes in national, regional
or local construction or industrial activities; |
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the timing of expenditures for new rental equipment and the disposition of used equipment; |
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competitive pricing pressures; and |
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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 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. 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. Important factors that could cause actual results to
differ materially from our forward-looking statements are set forth below and
elsewhere in this 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 compare
our future financial statements with prior periods may be limited. |
|
• |
Our substantial level of indebtedness could prevent us from fulfilling our debt
obligations and may have a negative effect on the market value of our senior
secured notes. |
|
• |
Contraction in the private non-residential construction industry may weaken
demand and pricing for our equipment. |
|
• |
Operating losses may decrease our future cash flow which would limit
our ability to reinvest in our business and obtain financing, primarily for the
purchase of new rental equipment, and may cause us not to have enough funds to
satisfy our debt obligations. |
|
• |
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 negatively impacted. |
|
• |
Implementing our new business strategy may cause significant disruptions, which
could cause customer dissatisfaction and negatively affect our cash flows and
profitability. |
|
• |
Disruptions in our information technology systems could limit our ability 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. |
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 September 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.
In
the third quarter of 2004, we reviewed our internal control over financial
reporting and have determined that we had a material weakness over financial
reporting relating to our interim closing procedures. A material weakness is a
significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected within a timely
period by employees in the normal course of performing their assigned functions.
The failure of quarterly review controls relating to the financial statement
close process allowed for significant deficiencies to occur that, when assessed
in the aggregate, constituted a material weakness. The significant deficiencies
identified include but are not limited to:
|
• |
the failure in quarterly controls to properly accrue for advertising cooperation
receivables from our manufacturers; |
|
• |
the failure in quarterly controls to properly calculate a write-down related to
capitalized repair and maintenance costs that increase the capacity, efficiency,
functionality, life, and/or safety of our equipment; |
|
• |
the failure in quarterly controls to assess whether the Company’s
obsolescence inventory reserve is appropriate and supported in the interim
financial periods; and |
|
• |
the failure in controls to properly classify delivery vehicle depreciation
expense as part of the Company's other delivery expenses included as
a cost of equipment rentals as opposed to non-rental equipment depreciation
expense in accordance with accounting principles
generally accepted in the United States. |
Any material impact of these significant deficiencies on our financial statements is described in more
detail in the footnotes to our financial statements, which are included
elsewhere in this report.
We changed our internal
control over financial reporting by requiring additional review relating to the
items noted above and for other transactions relating to non-routine, judgmental
and estimation processes. Further, we will be dedicating additional personnel
with the appropriate level of financial expertise to improve the review of the
financial statement close process.
Other than correcting the
material weaknesses identified above, there were no changes in our internal
control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Rule 13a-15 under the Exchange Act that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
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.* |
| 10.28 |
Employment agreement, effective May 20, 2004, by and between
the Company and Gary N. Golden** |
| 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 filed a Current Report on Form 8-K with the Securities and Exchange
Commission dated August 18, 2004 providing supplemental information regarding
the Company’s interim financial statements for the periods ended June 30,
2004. |
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: November 22, 2004 |
By: /s/ Thomas J. Putman
Name: Thomas J. Putman
Title: President, Chief Executive Officer and Director |
| Dated: November 22, 2004 |
By: /s/ Thomas J. Hoyer
Name: Thomas J. Hoyer
Title: Executive Vice President and Chief Financial Officer |
| Dated: November 22, 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.* |
| 10.28 |
Employment agreement, effective May 20, 2004, by and between
the Company and Gary N. Golden** |
| 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. |