CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

          Unless indicated otherwise, "the Company," "NationsRent," "we," "us" and "our" refer to NationsRent Companies, Inc., and its subsidiaries. Also, the use of these terms in this document means the "old" NationsRent, Inc. prior to June 13, 2003 (such date, being the date of the effectiveness of the consensual Plan of Reorganization (the "Plan of Reorganization"), is referred to in this report as the "Effective Date"), and the "new" NationsRent Companies, Inc., as the ultimate parent of the reorganized NationsRent, Inc. after the Effective Date. References to "Predecessor" and "Predecessor Company" refer to the "old" NationsRent, Inc., prior to the Effective Date.

          From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning our expectations, plans, objectives, goals, strategies, future events, future revenue or performance, impact on estimated gross margin from our baseload plants, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information and, in particular, appear under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." The words "could," "estimate," "expect," "anticipate," "project," "plan," "intend," "believe," "goal," "forecast" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management's examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will result or be achieved.

           There may be other factors not presently known to us or which we currently consider to be immaterial that may cause our actual results to differ materially from the forward-looking statements. Some of the risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements are described in the section entitled "Management's Discussion and Analysis of Financial Conditions and Results of Operations – Risk Factors" (Item 7).

          All forward-looking statements and projections attributable to us or persons acting on our behalf apply only as of the date of the particular statement, and are expressly qualified in their entirety by the cautionary statements included in this report. We undertake no obligation to publicly update or revise forward-looking statements, including any of the projections presented herein, to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

NATIONSRENT COMPANIES, INC.

FORM 10-K

TABLE OF CONTENTS

PART I

PART II

PART III

PART IV

PART I

Item 1.     Business

General

          We are one of the largest full-service equipment rental companies in the United States with 267 rental center locations in 26 states as of March 15, 2005. We offer a comprehensive line of equipment for rent to a broad range of construction, industrial and homeowner customers, including general contractors, subcontractors, highway contractors, manufacturing plants, distribution centers and other commercial businesses. We also sell new and used equipment, parts, supplies, and maintenance and repair services.

Our History

           NationsRent was founded in August 1997 by a group of private investors from outside of the equipment rental industry. From its inception through early 2000, the founders pursued a leveraged "roll-up" strategy by acquiring 58 independent equipment rental companies at historically high cash flow multiples. The Company was successful in identifying and acquiring well-run, market-dominant equipment companies with significant equipment rental revenue. The pre-acquisition profitability of these companies was driven by providing a full range of services to their customers, including sales of new equipment as dealers, sales of factory authorized parts and repair services, and merchandising and ancillary services that were unique to their local markets. The Company, however, focused almost exclusively on rental revenue, de-emphasized other revenue streams, such as the sale of new equipment and services, and attempted to standardize product offerings at all of its locations. This strategy resulted in a significant disruption to the acquired companies' customer base because it failed to adequately meet customer needs. By late 2000, there was increasing industry competition as other "roll-up" companies abandoned the "growth through acquisition" strategy and increased their efforts to grow market share by cutting rental rates. The Company's highly leveraged capital structure could not withstand the increased competitive environment, which severely impacted the Company's liquidity during most of 2001. The Company filed for protection under Chapter 11 of the Bankruptcy Code in December 2001.

           During the Company's Chapter 11 proceedings, the Phoenix Group, formed by a team of experienced equipment rental industry professionals, and the Baupost Group, an investment firm managing approximately $5.0 billion of equity capital, acquired a majority of our outstanding pre-petition senior secured bank debt ("Pre-Petition Debt") and facilitated our reorganization by jointly proposing the Plan of Reorganization along with the Official Committee of Unsecured Creditors and other holders of the Company's Pre-Petition Debt. The jointly proposed Plan of Reorganization was confirmed by the Bankruptcy Court in May 2003 and the Company emerged from bankruptcy protection in June 2003. Pursuant to the Plan of Reorganization, holders of allowed Pre-Petition Debt claims and a trust for the benefit of holders of allowed general unsecured claims received a package of common and preferred equity and unsecured convertible subordinated notes. In addition, on the Effective Date, Baupost invested an additional $80.0 million in the Company (the "Baupost Investment"), through the purchase of common and preferred equity and unsecured convertible subordinated notes. As a result of our reorganization and the Baupost Investment, as of March 15, 2005, the Phoenix Group and the Baupost Group collectively owned approximately 63% of our outstanding voting common stock.

          Following the reorganization, we installed a new management team with the goal of becoming a premier competitor in construction equipment distribution by re-emphasizing a full service business model offering a wider range of services to our customers in addition to rental such as sales of new equipment and service.

Industry Overview

           Based on industry sources, we estimate that the U.S. construction equipment rental industry has grown from approximately $6.6 billion in annual rental revenue in 1990 to approximately $26.4 billion in 2004, representing a compound annual growth rate of approximately 10.5%. However, beginning in 1999, the industry's growth began to slow considerably in part due to the slowdown in the U.S. economy. According to industry sources, between 2001 and 2003, the industry contracted approximately 1.8% but showed renewed growth from 2003 to 2004 of approximately 10%.

          We believe that the principal driver of the historical long-term growth rate in the equipment rental industry, in addition to general economic expansion, has been the increased recognition by equipment users of the many advantages that equipment rental offers compared with ownership. These advantages include:

           While the construction industry has been the principal user of rental equipment, industrial companies and utilities are increasingly using rental equipment for plant maintenance, plant turnarounds and other functions requiring the periodic use of equipment.

Competitive Strengths

           Conservative Capital Structure Relative to Industry Competitors. While historically our earnings have been inadequate to cover our fixed charges, as a result of our recent reorganization, we believe that our capital structure is conservative relative to our competitors. As of December 31, 2004, we had total funded debt of $288.9 million and stockholders' equity of $184.7 million, which gives us enhanced operational flexibility relative to our more highly-leveraged competitors.

           Geographic, Customer, Service and Product Diversity. As of March 15, 2005, we had 267 rental center locations in 26 states. We serve a broad range of construction, industrial and homeowner customers including general contractors, subcontractors, highway contractors, manufacturing plants, distribution centers and commercial businesses. For the year ended December 31, 2004, no customer accounted for more than 2.0% of our revenue. We have existing capabilities to offer a full range of rental services and non-rental services, which include a wide range of equipment parts and merchandise, and repair and maintenance services for customer-owned equipment. We believe that this combination of geographic, customer, service and product diversity provides us with many advantages, which include:

          Strong Nationally-Recognized Brand. As a result of a significant branding investment by the Company since its formation, NationsRent has developed a nationally-recognized brand supported by a highly distinctive logo and a uniform clean storefront image. We believe this well-established brand enables us to expand our customer base and attract a broader range of customers, including large customers with operations in a variety of geographic markets.

          Access to Retail Customer Base. In October 2000, we entered into an exclusive multi-year strategic alliance agreement with Lowe's Companies, Inc. (NYSE: LOW) to operate NationsRent locations in select Lowe's home improvement stores. Lowe's is one of the country's premier home improvement retailers and recently reported annual sales of more than $36.0 billion. Operating as a store within a store adjacent to the entrance of a Lowe's store, the NationsRent at Lowe's locations offer for rent our full line of construction tools and equipment. In addition, they provide us access to the do-it-yourself and small-to-medium contractor customer base. By managing these NationsRent at Lowe's locations, we believe that we have developed an expertise in using high traffic retail space to leverage the products and services available at our stand-alone hub and satellite locations. The NationsRent at Lowe's locations, and other high traffic retail locations we may develop, further diversify our customer base, increase cross-selling potential and enhance brand awareness. As of March 15, 2005, we operated 100 locations in Lowe's home improvement stores in eight states. Because all of our existing leases for our NationsRent at Lowe's locations expire on October 31, 2008, 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.

           Experienced Management Team. As part of our reorganization, we installed a new senior management team with individuals who average over 20 years of direct industry experience. The team is led by Thomas ("Jeff") Putman, who is our Chief Executive Officer. In addition to its extensive industry experience, the new senior management team brings a history of mutually beneficial relationships with a number of key equipment manufacturers in the industry. Over time, these relationships are expected to enable the Company to establish attractive financing terms, purchase discounts and sales and service arrangements with these manufacturers.

Business Strategy

           Diversify Our Revenue Base. For the year ended December 31, 2004, our revenue mix was approximately 78% rental revenue and 22% sales of equipment, merchandise, service, parts, and supplies, compared to approximately 87% and 13%, respectively, for the year ended December 31, 2003. We will continue to focus on returning the Company's revenue mix to a diversified base of customer services. In addition to growing our rental revenue, we are also growing:

          We expect that this increased diversification will lead to greater customer satisfaction and retention, as well as improved profitability and return on investment, since these non-rental services require minimal additional capital investment. To achieve these goals, in late 2003 we modified the compensation arrangements for our sales personnel and management to provide incentives for them to sell the full range of our product and service offerings. We are also actively seeking dealership and distributor relationships with leading equipment manufacturers to allow us to offer their new products for sale and provide warranty service.

           Focus on Our Customers, Fleet and People. We continue to focus on becoming more responsive to our customer needs and optimizing our fleet by:

Operations

          As of March 15, 2005, we operated 267 rental center locations in 26 states. Our operations consist of:

           Equipment Rentals. We rent on a daily, weekly and monthly basis a broad variety of light, medium and heavy equipment serving contractors and other commercial and industrial customers as well as homeowners. Our rental inventory includes such equipment as aerial work platforms, air compressors, backhoes, loaders, dozers, excavators, trenching equipment, forklifts, generators and a variety of small tools. The mix of equipment offered from each of our locations varies based on the needs of the local market. We make capital investments in new equipment, engage in sales of used equipment, and conduct preventive maintenance.

          Used Equipment Sales. We sell used equipment in the normal course of business through several distribution channels:

The equipment that we sell is mostly from our rental fleet as well as from trade-ins from sales to third parties.

           New Equipment Sales. We sell new equipment manufactured by several nationally known equipment manufacturers.

           Merchandise, Service, Parts and Supplies. We sell merchandise, parts and supplies and offer maintenance and repair services to our entire customer base.

Customers

          As of December 31, 2004, we served over 496,000 customer accounts in the construction, industrial, homeowner and other segments of the equipment rental industry. No single customer accounted for more than 2.0% of our revenue. Our customers vary in size from large Fortune 500 companies to small-to-medium construction contractors, subcontractors, machine operators and homeowners.

          We rent equipment, sell equipment and parts and provide repair services on account to customers who are screened through a credit application process. Customers can arrange their own financing of purchases of equipment through a variety of sources including manufacturers, banks, finance companies and other financial institutions. We also arrange third-party financing for our customers to purchase new and used equipment.

Sales and Marketing

          We maintain a strong marketing and sales organization throughout our Company to better understand and serve our customers and increase our customer base. We undertake sales and marketing initiatives designed to increase revenue and market share and build brand awareness. We prepare marketing analyses which address key business issues such as market/industry history, opportunities, company philosophy, sales trends, consumer behavior trends, distribution channels, pricing issues, target markets, advertising and media analyses, competitive situations and selling strategies. Based on the results of our analyses, we develop marketing and sales strategies.

          Our regional vice presidents are responsible for training, supervising and directing the selling activities of the NationsRent sales force in their markets. In addition, regional managers also are responsible for overseeing the mix of equipment at their locations and keeping abreast of local construction and industrial activity.

          We employ approximately 300 salespeople who utilize targeted local marketing strategies to address specific customer needs and respond to competitive pressures. To remain informed of local market activity, salespeople track construction projects and new equipment sales in their area through F.W. Dodge Reports and Planning, Engineering and Construction (PEC) Reports, follow up on referrals, and visit construction sites and potential equipment users who are new to the area.

Trademarks

          We own a number of registered service marks that include the name "NationsRent." Management views these service marks as material to NationsRent.

Purchasing

          We acquire equipment from manufacturers with reputations for product quality and reliability. We believe that our size and the quantity of equipment we acquire enables us to purchase equipment directly from manufacturers pursuant to national purchasing agreements at lower prices and on more favorable terms than many smaller competitors. We maintain close relationships with our manufacturers to ensure the timely delivery of new equipment. Although we are implementing a key vendor program to standardize portions of our rental fleet, we believe that we have sufficient alternative sources of supply for the equipment we purchase in each of our principal product categories.

          We select the type and quantity of rental equipment to be purchased for each of our locations based on the expected needs of the local market. We determine rental rates for each type of equipment based on the cost and expected utilization of the equipment, and adjust rental rates at each location in response to demand, length of rental, volume of equipment rented and other competitive considerations.

Competition

          The equipment rental industry is capital intensive, highly fragmented and is characterized by intense price and service competition. We compete through a combination of pricing, service, equipment quality, availability, value and convenience. We compete with independent third parties in all of the markets in which we operate, and we compete with equipment manufacturers that sell and rent equipment to customers, directly and through their dealer networks. We also compete with the tool rental centers of national home improvement stores. As a result of industry consolidation in recent years, many of our competitors operate on a regional or national basis.

          At times, industry-wide price pressures on certain classes of equipment have adversely affected equipment rental companies, and we have, on such occasions, lowered our prices in response to these pressures. Moreover, at times when the equipment rental industry has experienced equipment oversupply, competitive pressure has intensified, with a negative impact on the industry's rental rates.

Certain Operating Restrictions

          As part of our strategic alliance agreement with Lowe's we are subject to the following restrictions in the United States and may not:

           These restrictions apply to each NationsRent at Lowe's location store only for the surrounding trade area that is within a half-hour drive (at midnight) of such store. With respect to stores that are not located in a top-25 metropolitan statistical area, the restrictions apply only to a 25-mile radius surrounding the store. These restrictions will expire when our leases expire or are terminated. Our leases currently are scheduled to expire on October 31, 2008.

Employees

          As of March 15, 2005, we employed approximately 3,400 persons, less than 170 of which were covered by collective bargaining agreements. We believe that our relations with our employees are good.

Item 2.     Properties

          Our corporate headquarters are located in Fort Lauderdale, Florida, in leased premises. As of March 15, 2005, we operated 267 rental locations located in 26 states. We lease the real estate for all but three of our locations. We believe that our facilities are sufficient for our current needs. Below is an overview of such locations:

                                                                                                 Number of
 Region         States with NationsRent Locations                                                Locations
- --------        ---------------------------------                                                ---------
Midwest         Indiana, Kentucky, Michigan, Ohio, West Virginia, Pennsylvania..................       59
Southeast       Florida.........................................................................       50
Mid-Atlantic    Georgia, North Carolina, South Carolina, Tennessee, Alabama.....................       49
Central         Louisiana, Texas................................................................       63
Northeast       Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode
                Island..........................................................................       20
West            Arizona, California, Colorado, Nevada, Utah.....................................       26
                                                                                                      ---
Total                                                                                                 267
                                                                                                      ===

Item 3.     Legal Proceedings

          On December 17, 2001, NationsRent, Inc. and its subsidiaries filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The cases were consolidated for procedural purposes and designated as Case No. 01-11628 (PJW). On May 14, 2003, after notice and a hearing, the Bankruptcy Court entered a final order to confirm our Plan of Reorganization, as modified. Thereafter, on June 13, 2003, the Effective Date, distributions were made to creditors and we emerged from bankruptcy protection. On the Effective Date, a creditors' trust for the benefit of holders of general unsecured claims was formed. Pursuant to the Plan of Reorganization, we assigned to the creditors' trust the right to object to all general unsecured claims, as well as the right to pursue all preference actions and other claims or causes of action under sections 544 through 550 of the Bankruptcy Code that were not resolved or released pursuant to the Plan of Reorganization. Pursuant to the Plan of Reorganization, we retained the obligation to administer administrative, priority and secured claims. In March 2004, we filed objections to certain claims and are presently in the process of settling such matters.

           NationsRent, Inc. was party to various legal proceedings and disputes that arose in the ordinary course of business prior to the Chapter 11 case, none of which were material to our financial condition or results of operations. All such proceedings were stayed as of December 17, 2001, or the Petition Date, and are being resolved pursuant to the terms of the Plan of Reorganization.

          We also have become party to legal proceedings and disputes arising in the ordinary course of business after December 17, 2001, the commencement date of the NationsRent, Inc. bankruptcy proceedings, none of which are material to our financial condition or results of operations.

Item 4.     Submission of Matters to a Vote of Security Holders

          None.

PART II

Item 5.     Market for the Registrant's Common Equity and Related Stockholder Matters

           There is no public established trading market for our common stock.

          As of March 31, 2005, there were approximately 60 stockholders of record of our common stock.

          We have not paid any dividends on our shares of common stock and we do not presently have any intention of paying any dividends on our common stock in the future. In addition, the indenture for our Senior Secured Notes (as more specifically defined in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Debt and Other Obligations" (Item 7)) limits our ability to pay dividends.

           During the fiscal year ended December 31, 2004 we issued 3,292 restricted shares of common stock pursuant to the Company's 2003 Restricted Stock Plan (as more specifically described in the section entitled "Directors and Officers of the Registrant—Restricted Stock Plan" (Item 10)).

          Our equity compensation plan information is included in Item 12.

Item 6.      Selected Financial Data

          The following tables set forth our selected consolidated historical financial data. The financial data for the years ended December 31, 2000, 2001 and 2002, the five months ended May 31, 2003, the seven months ended December 31, 2003 and the year ended December 31, 2004 are derived from our audited consolidated financial statements. Audited consolidated income statement data for fiscal year 2002, the five months ended May 31, 2003, the seven months ended December 31, 2003 and fiscal year ended December 31, 2004, and audited consolidated balance sheet data at December 31, 2003 and 2004, are included in our consolidated financial statements contained elsewhere in this report. You should read the consolidated historical selected financial data in conjunction with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" (Item 7), our consolidated financial statements and accompanying notes, and other financial data included elsewhere in this report.

          In connection with our emergence from bankruptcy, we reflected the terms of the Plan of Reorganization in our 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 of Reorganization, as well as adjustments for Fresh-Start Reporting, were recorded in the consolidated financial statements as of June 1, 2003. Therefore, the term “Company” as used in these financial statements 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. Since Fresh-Start Reporting materially changed the amounts previously recorded in our consolidated financial statements, a black line separates the financial data pertaining to the periods after the adoption of Fresh-Start Reporting to signify the difference in the basis of preparation of financial information for each respective entity. The Successor Company’s post-emergence financial statements are not comparable to the Predecessor Company’s pre-emergence financial statements.

                                                   Predecessor Company                         Successor Company
                                          ------------------------------------------      --------------------------
                                                                           Five Months    Seven Months
                                                                              Ended         Ended       Year Ended
                                               Year Ended December 31,        May 31,      December 31, December 31,
                                        --------------------------------
                                           2000       2001        2002          2003        2003         2004
                                        ---------- ----------  ----------  -----------     --------     -------

                                                                 (dollars in thousands)
 Statement of Operations Data (1):
 Revenue:
 Equipment rentals revenue...........   $546,434   $ 499,040   $ 419,057   $ 155,567       $ 268,704    $ 460,901
 Sales of equipment, merchandise,
  service, parts & supplies..........    122,614      95,619      43,082      20,499          41,833      128,759
                                        --------   ---------   ---------   ---------       ---------    ---------
 Total revenue.......................    669,048     594,659     462,139     176,066         310,537      589,660
                                        --------   ---------   ---------   ---------       ---------    ---------
 Cost of revenue:
 Cost of equipment rentals...........    207,466     241,959     240,324     103,367         147,099      250,365
 Rental equipment depreciation &
  lease expense, and vehicle
  depreciation.......................    137,964     143,947     152,764      57,801          62,435      117,463
 Cost of sales of equipment,
  merchandise, service, parts and
  supplies...........................     94,187     100,653      38,056      18,764          30,657       77,192
 Impairment of rental equipment......         --          --      16,923          --              --           --
                                        --------   ---------   ---------   ---------       ---------    ---------
 Total cost of revenue...............    439,617     486,559     448,067     179,932         240,191      445,020
                                        --------   ---------   ---------   ---------       ---------    ---------
 Gross profit (loss).................    229,431     108,100      14,072      (3,866)         70,346      144,640

 Operating expenses:
 Selling, general & administrative
  expenses...........................    130,189     124,374      95,998      37,173          66,397      110,050
 Restructuring charge (2)............     72,005       9,653          --          --              --           --
 Impairment of intangible assets
  related to acquired businesses (3).         --     770,833          --          --              --           --
 Non-rental equipment depreciation and
  amortization(4)....................     25,946      33,740      12,577       5,451           4,787        7,159
                                        --------   ---------   ---------   ---------       ---------    ---------
 Operating income (loss) (4).........      1,291    (830,500)    (94,503)    (46,490)           (838)      27,431
                                        --------   ---------   ---------   ---------       ---------    ---------
 Interest expense, net...............     99,285     109,751      34,389       3,164          15,702       30,346
 Reversal of pre-petition tax
  liabilities........................         --          --          --          --              --         (926)
 Other (income)/expense, net.........        548        (731)       (324)        (90)         (2,041)        (401)
                                        --------   ---------   ---------   ---------       ---------    ---------
                                          99,833     109,020      34,065       3,074          13,661       29,019
                                        --------   ---------   ---------   ---------       ---------    ---------
 Loss before reorganization items,
  provision (benefit) for income
  taxes and cumulative effect of
  change in accounting principle.....    (98,542)   (939,520)   (128,568)    (49,564)        (14,499)      (1,588)
 Reorganization items, net (5).......         --      11,333      32,061  (1,401,121)             --       (1,005)
                                        --------   ---------   ---------   ---------       ---------    ---------
 Income (loss) before provision
  (benefit) for income taxes and
  cumulative effect of change in
  accounting principle...............    (98,542)   (950,853)   (160,629)  1,351,557         (14,499)        (583)
 Provision (benefit) for income taxes    (24,852)     (9,815)         --          --              --           13
                                        --------   ---------   ---------   ---------       ---------    ---------
 Income (loss) before cumulative
  change in accounting principle.....    (73,690)   (941,038)   (160,629)  1,351,557         (14,499)        (596)
 Cumulative effect of change in
  accounting principle, net of income
  tax benefit........................         --       1,359          --          --              --           --
                                        --------   ---------   ---------   ---------       ---------    ---------
 Net income (loss)...................   $(73,690)  $(942,397)  $(160,629) $1,351,557       $ (14,499)   $    (596)
                                        =========  ==========  ========== ==========       =========    =========



                                           Predecessor Company             Successor Company
                                    --------------------------------     --------------------
                                              At December 31,                At December 31,
                                    --------------------------------     --------------------
                                       2000       2001        2002          2003        2004
                                    ---------- ----------  ----------    ----------   --------

                                                       (dollars in thousands)
Balance Sheet Data(1):
Cash and Cash equivalents.......... $   67,813 $   23,787  $    6,940   $   48,644    $   40,625
Rental equipment, net..............    526,958    427,407     348,852      347,076       368,176
Property and equipment, net........    103,977     90,717      80,146       62,076        61,992
Total assets.......................  1,719,996    687,516     561,669      579,763       615,361
Total debt (6).....................  1,117,026  1,098,552   1,100,957      288,286       288,881
Total stockholders' equity
  (deficit)........................ $  440,971 $ (501,631) $ (662,260)  $  181,683    $  184,719

____________

Item 7.     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 as described 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.

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. Since then, our new management team has focused on rebuilding our customer relationships, repositioning and renewing our rental fleet, and providing the motivation and training to our people to make them more effective.

          Our results of operations in 2004 reflect several key initiatives launched during 2003 that were designed to improve our profitability and leverage our infrastructure over the next several years. They include:

          In 2004, we achieved growth in both rental and non-rental revenue. The growth was driven by an improved industry environment and our key initiatives. 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. The higher volume of sales was largely the result of re-emphasizing a full-service business model after emerging from our reorganization.

           Rental revenue grew in 2004 partly as a result of increased pricing, and partly due to increased deployment of our rental fleet. While the average size of our rental fleet decreased in 2004 by approximately 0.9% to $948.2 million, the deployment of our fleet increased. In addition, our revenue was positively impacted by increased penetration in 2004 in other segments of the construction market through the ramp up of revenue at NationsRent at Lowe's locations opened in 2003.

          We believe better pricing for sales and rentals is, in part, a function of industry and economic conditions. Increased non-residential construction activity in 2004 and continued strong demand for construction equipment in the U.S. market, relative to supply, 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 from sales of new and used equipment.

          We have also 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 sell at auction.

          In addition to these increases in revenue, our results of operations were impacted by several other significant factors in 2004, including:

           While the increased demand for construction equipment has resulted in higher demand for our services, it has also resulted in an increase in the delivery times, and in some cases the prices, for the equipment that we purchase from manufacturers. Projected delivery schedules affect us most when planning our equipment needs for the spring and summer months, when demand for our equipment is greatest. When equipment and parts are not received as planned it can result in a loss of rental and equipment sales revenue. If manufacturer delivery times lengthen further, we will have to plan our equipment purchases for our peak periods earlier than we have in the past. Management believes, however, that our focus on reducing the number of equipment suppliers we buy from will not only enable us to negotiate better pricing, but also may enable us to become a preferred customer with these vendors. We believe preferred customer status may help us obtain better-than-average delivery times in some cases.

           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 believe that as long as the demand for construction equipment exceeds the supply, industry prices will continue to rise, thereby offsetting much of the increased equipment costs. If construction activity begins to weaken and competition intensifies, however, we cannot be certain that we will be able to continue to offset increased equipment costs through price increases.

          We emerged from our reorganization with a significantly improved capital structure. Our outstanding debt was lower, we had positive equity, and we secured a new credit facility which provided us with additional liquidity. Since the date of the reorganization, we have generated greater net cash flow from operations, and our liquidity has increased. At December 31, 2004, we had $40.6 million in cash on hand, and no borrowings under our credit facility. Borrowing availability under our credit facility was $46.2 million on that date, after taking into account $23.0 million in outstanding letters of credit.

          We funded our 2004 rental fleet additions and replacements, and our other operating cash needs, with a combination of cash generated from operations, cash received from the sale of rental equipment, and cash on hand. A further discussion of our capital needs and resources can be found later in this report in the section entitled "Liquidity and Capital Resources."

Impact of Fresh–Start Reporting

          As discussed more fully elsewhere in this report, on the Effective Date, NationsRent emerged from Chapter 11 pursuant to the Plan of Reorganization. We recognized the effects of the reorganization for accounting purposes on June 1, 2003. Accounting for the reorganization had a significant effect on the carrying value of our assets and liabilities, which makes comparing and understanding the results of our operations more difficult.

           Pursuant to Statement of Position (SOP) 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," the fair value of our assets and liabilities was determined. The excess of the fair value of our assets, net of the fair value of our liabilities, over our reorganization value at the Effective Date was recorded as a reduction of the carrying value of our long-lived assets, primarily our rental fleet, in accordance with SFAS 141, "Business Combinations." Our rental fleet was written down 44.4% below fair value by $179.1 million, and our other property and equipment was written down 44.4% below fair value by $33.2 million.

           Until these assets are disposed, the write downs recorded as a result of Fresh-–Start Reporting increase our operating income, because:

           These favorable effects on our results of operation will continue until all of the assets written down have been sold, disposed or fully depreciated. We expect that most of the rental assets written down in 2003 will be disposed of in the ordinary course of business over 2004 to 2010.

          In addition, upon completion of our reorganization, 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 to 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.

          All of these impacts are discussed individually in the review of our results of operations which follows.

Results of Operations

           Year Ended December 31, 2004 as Compared to Year Ended December 31, 2003

                                                                                            Year Over Year
                                                                                               Variance
                                                      Year Ended December 31,          favorable/(unfavorable)
                                                  --------------------------------  -----------------------------
                                                       2004             2003              $                %
                                                  -----------       ------------    ------------      ---------
                                                                       (dollars in thousands)
Revenue:
Equipment rentals revenue.....................    $   460,901      $   424,271     $    36,630             8.6%
Rental equipment sales........................         74,519           28,593          45,926           160.6
New equipment sales...........................         30,644           15,212          15,432           101.4
Sales of merchandise,
  service, parts & supplies...................         23,596           18,527           5,069            27.4
                                                  -----------      -----------     -----------          ------
Total revenue.................................        589,660          486,603         103,057            21.2
                                                  -----------      -----------     -----------          ------
Cost of revenue:
Cost of equipment rentals.....................        250,365          250,466             101              --
Rental equipment depreciation & lease expense,
    and vehicle depreciation..................        117,463          120,236           2,773             2.3
Cost of sales of equipment,
  merchandise, service, parts & supplies......         77,192           49,421         (27,771)          (56.2)
                                                  -----------      -----------     -----------          ------
Total cost of revenue.........................        445,020          420,123         (24,897)           (5.9)
                                                  -----------      -----------     -----------          ------
Gross profit:
Gross profit on equipment rentals
  including depreciation & lease
  expense & vehicle
  depreciation..............                           93,073           53,569          39,504            73.7
Gross profit on sales of equipment,
  merchandise, service, parts & supplies......         51,567           12,911          38,656           299.4
                                                  -----------      -----------     -----------          ------
Total gross profit............................        144,640           66,480          78,160           117.6
                                                  -----------      -----------     -----------          ------
Operating expenses:
Selling, general & administrative expenses....        110,050          103,570          (6,480)           (6.3)
Non-rental equipment depreciation
  & amortization..............................          7,159           10,238           3,079            30.1
                                                  -----------      -----------     -----------          ------
Operating income (loss).......................         27,431          (47,328)         74,759              --
                                                  -----------      -----------     -----------          ------
Interest expense, net.........................         30,346           18,866         (11,480)          (60.9)
Other, net....................................         (1,327)          (2,131)           (804)          (37.7)
                                                  -----------      -----------     -----------          ------
                                                       29,019           16,735         (12,284)          (73.4)
                                                  -----------      -----------     -----------          ------
Loss before reorganization items and provision
  for income taxes............................         (1,588)         (64,063)         62,475            97.5
Reorganization items, net.....................         (1,005)      (1,401,121)     (1,400,116)         (100.0)
                                                  -----------      -----------     -----------          ------
Income (loss) before provision for income taxes.         (583)       1,337,058       1,337,641              --
Provision for income taxes....................             13               --             (13)             --
                                                  -----------      -----------     -----------          ------
  Net income (loss)...........................    $      (596)     $ 1,337,058     $(1,337,654)             --%
                                                  ===========      ===========     ===========          ======

           Revenue. Equipment rentals revenue was impacted positively in 2004 primarily by improved pricing and higher deployment, which resulted from:

           Utilization in 2004 was 48.6% compared to 44.4% in 2003. We believe that the better pricing discussed above was the key factor in the increase. Utilization, measured as total rental revenue divided by the average first cost of the rental fleet over the applicable period, is used as an approximate measure of financial return on the investment in our rental fleet. For equipment acquired new from a manufacturer, whether leased or owned, first cost is the purchase price paid for the equipment. For equipment acquired in connection with business acquisitions, first cost is an estimate of the purchase price paid by the acquired company for such equipment where available and, if unavailable, first cost is the estimated fair value of such equipment.

          The primary driver for the increase in sales of equipment was improved market conditions in 2004. With respect to sales of used equipment, upon our emergence from reorganization, we were no longer prohibited from selling used equipment and had the capital resources to purchase replacement fleet. In addition, we continued to emphasize the sale of new and used equipment through our sales compensation and training programs.

           Gross profit. Gross profit margin on equipment rentals, including depreciation and lease expense and vehicle depreciation, increased from 12.6% in 2003 to 20.2% in 2004.

           Gross profit on equipment rentals was positively impacted primarily by:

           Gross profit on equipment rentals was negatively impacted primarily by:

           Gross profit margin on sales of equipment, merchandise, service, parts and supplies increased from 20.7% in 2003 to 40.0% for the same period in 2004. The increase was primarily a result of the increase in gross profit margin on rental equipment sales.

           Gross profit on rental equipment sales was positively impacted primarily by:

          In addition, during 2004, $38.3 million of our gross profit was attributable to the sale of rental equipment, of which $14.7 million was the result of implementing Fresh-–Start Reporting as follows:

           Excluding these fresh start adjustments, the normalized gross profit margin on rental equipment sales increased from 8.2% in 2003 to 31.6% for the same period of 2004.

           Operating expenses. Operating expenses were negatively impacted in 2004 primarily by:

           Operating expenses were positively impacted primarily by:

          The decrease in non-rental depreciation in 2004 was primarily due to a $2.7 million decrease in amortization and depreciation of leasehold improvements and information system assets, which were written down as a result of our Fresh–Start Reporting.

          Selling, general and administrative expenses as a percentage of total revenue were 18.7% and 21.3% in 2004 and 2003, respectively.

           Other income and expense. Interest expense increased as a result of:

           Year Ended December 31, 2003 as Compared to Year Ended December 31, 2002

                                                                                            Year Over Year
                                                                                               Variance
                                                      Year Ended December 31,          favorable/(unfavorable)
                                                  --------------------------------  -----------------------------
                                                       2003             2002              $                %
                                                   ------------     ------------    ------------      ---------
                                                                       (dollars in thousands)
Revenue:
Equipment rentals revenue.....................    $   424,271      $   419,057     $     5,214             1.2%
Rental equipment sales........................         28,593           16,660          11,933            71.6
New equipment sales...........................         15,212            8,594           6,618            77.0
Sales of equipment, merchandise,
  service, parts & supplies...................         18,527           17,828             699             3.9
                                                  -----------      -----------     -----------          ------
Total revenue.................................        486,603          462,139          24,464             5.3
                                                  -----------      -----------     -----------          ------
Cost of revenue:
Cost of equipment rentals.....................        250,466          240,324         (10,142)           (4.2)
Rental equipment depreciation & lease expense,
    and vehicle depreciation..................        120,236          152,764          32,528            21.3
Cost of sales of equipment,
  merchandise, service, parts & supplies......         49,421           38,056         (11,365)          (29.9)
Impairment of rental equipment................             --           16,923          16,923           100.0
                                                  -----------      -----------     -----------          ------
Total cost of revenue.........................        420,123          448,067          27,944             6.2
                                                  -----------      -----------     -----------          ------
Gross profit:
Gross profit on equipment rentals
  including depreciation & lease
  expense and impairment of rental equipment..         53,569            9,046          44,523           492.2
Gross profit on sales of equipment,
  merchandise, service, parts & supplies......         12,911            5,026           7,885           156.9
                                                  -----------      -----------     -----------          ------
Total gross profit............................         66,480           14,072          52,408           372.4
                                                  -----------      -----------     -----------          ------
Operating expenses:
Selling, general & administrative expenses....        103,570           95,998          (7,572)           (7.9)
Non-rental equipment depreciation
  & amortization..............................         10,238           12,577           2,339            18.6
                                                  -----------      -----------     -----------          ------
Operating loss................................        (47,328)         (94,503)         47,175            49.9
                                                  -----------      -----------     -----------          ------
Interest expense, net.........................         18,866           34,389          15,523            45.1
Other, net....................................         (2,131)            (324)          1,807           557.7
                                                  -----------      -----------     -----------          ------
                                                       16,735           34,065          17,330            50.9
                                                  -----------      -----------     -----------          ------
Loss before reorganization items..............        (64,063)        (128,568)         64,505            50.2
Reorganization items, net.....................     (1,401,121)          32,061       1,433,182             --
                                                  -----------      -----------     -----------          ------
   Net income (loss)..........................    $ 1,337,058      $  (160,629)    $ 1,497,687             --%
                                                  ===========      ===========     ===========          ======

           Revenue. Equipment rentals revenue was positively impacted in 2003 primarily by:

           Equipment rentals revenue was negatively impacted by:

           Utilization in 2003 was 44.4% compared to 41.6% in 2002. We believe that the better pricing discussed above was the key factor in the increase.

          The primary driver for the increase in sales of equipment was improved market conditions in 2003. With respect to sales of used equipment, upon our emergence from reorganization, we were no longer prohibited from selling used equipment and had the capital resources to purchase replacement fleet. In addition, we continued to emphasize the sale of new and used equipment through our sales compensation and training programs.

           Gross profit. Gross profit margin on equipment rentals, including depreciation and lease expense and impairment of rental equipment, increased from 2.2% in 2002 to 12.6% in 2003.

           Gross profit on equipment rentals was positively impacted primarily by:

           Gross profit on equipment rentals was negatively impacted primarily by:

           Gross profit margin on sales of equipment, merchandise, service, parts and supplies increased from 11.7% in 2002 to 20.7% for the same period in 2003.

          In addition, during 2003, $5.9 million of our gross profit was attributable to the sale of used equipment which includes a $7.8 million positive effect resulting from implementing fresh-–start reporting as follows:

           Excluding these fresh-–start adjustments, the normalized gross profit margin on rental equipment sales was 8.2% in 2003 as compared to 0.2% in 2002.

           Operating expenses. Operating expenses were negatively impacted primarily by:

           Operating expenses were positively impacted primarily by a $3.0 million decrease in the provision for doubtful accounts in 2003, resulting from improved collection efforts.

           Selling, general and administrative expenses as a percentage of total revenue were 21.3% and 20.8% in 2003 and 2002, respectively.

          Other income and expense. Interest expense reported in 2002 was attributable to pre-petition borrowings under our pre-petition revolving credit and term loan facility, and our debtor-in-possession financing facility. In September 2002 we suspended interest payments on the pre-petition revolving credit and term loan facility and, in accordance with SOP 90-7, we accrued interest expense only to the extent that it was to be paid. Interest expense in 2003 reflects no interest expense related to the pre-petition revolving credit and term loan facility.

Liquidity and Capital Resources

          In our statements of cash flows included elsewhere in this report, cash flows from operations do not include purchases of rental equipment and 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 rental equipment 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 operating cash needs of our business.

           Sources and Uses of Cash

           Our business is highly capital intensive as a result of our significant investment in rental equipment and delivery vehicles. The annual capital expenditures necessary to maintain, replace and grow our fleet are substantial. While we can manage the replacement requirements to a degree, by reducing or increasing the amount of used equipment we sell, the annual cash needs are nonetheless considerable. In addition, while less significant, we must make annual expenditures to maintain and invest in new and improved information systems, and to upgrade and maintain our store locations.

           From 1998 through 2000, we purchased a substantial amount of rental equipment as we rapidly grew our rental fleet. Our financial difficulties before and during our Chapter 11 reorganization restricted our ability to replace rental fleet assets in 2001, 2002 and early 2003. As a result, when we emerged from our reorganization in 2003, a portion of our rental fleet had not been replaced and maintained on normal cycles. While we have repaired and replaced a portion of this fleet since that time, we have approximately $100.0 million to $120.0 million in expected replacement cost of fleet still remaining from those older model years. We expect to replace this fleet over the course of the next three to four years, which will increase our annual capital expenditure requirements by approximately $25.0 million to $50.0 million and require additional cash.

           Our historical sources of cash have been cash generated from operations, proceeds from the sale of rental equipment, borrowings under credit facilities, and proceeds from the issuance of debt and equity securities.

           Cash Flows in 2003 and 2004

           In connection with the completion of our reorganization, certain of our current stockholders invested $80.0 million through the purchase of a combination of common stock, preferred stock and convertible subordinated notes. These funds, along with funds obtained from our credit facility, were used to pay the costs of our reorganization, to purchase rental fleet previously financed under leases, and for general working capital purposes. In October 2003, we issued $250.0 million in senior secured notes and used the net proceeds to fund the purchase of new and replacement rental fleet, and to retire then existing other indebtedness. Detailed descriptions of our credit facility and Senior Secured Notes are included in the discussion under "Debt and Other Obligations" which follows.

           We generated cash from operations of $69.6 million in 2003 and generated cash from the sale of rental equipment and vehicles of $28.9 million. Our capital expenditures in 2003 were principally for purchases of $154.8 million of new and replacement rental equipment and $18.4 million for purchases and improvements to other property and equipment.

           In 2004, we had sufficient cash on hand and cash generated from operations to meet our cash needs. We generated cash from operations of $105.2 million, and generated cash from the sale of rental equipment and vehicles of $75.4 million. Our capital expenditures in 2004 were principally for purchases of $167.2 million of new and replacement rental equipment and $18.7 million for purchases and improvements to other property and equipment. In 2004, we had no borrowings under our credit facility, and our availability under this facility was $46.2 million at December 31, 2004, after taking into account $23.0 million of outstanding letters of credit.

           Adequacy of Capital Resources

           Our sources of cash in 2005 are expected to be cash on hand, cash generated from operations, proceeds from the sale of rental equipment, borrowings under our credit facility and other anticipated financing arrangements.

           Our uses of cash in 2005 are expected to be principally for the purchase of new and replacement rental equipment and other non-rental capital expenditures, for working capital needs and for debt service. We are currently planning rental equipment expenditures in 2005, net of proceeds from sales of rental equipment, of between $150.0 million and $175.0 million. We estimate that capital expenditures for non-rental assets in 2005 will range between $20.0 million and $30.0 million, primarily for delivery vehicles, information systems and store improvements. Capital expenditures in future years will depend on several factors, including economic conditions and our growth prospects at the time.

           We believe that our existing infrastructure of stores, service bays and personnel is largely sufficient to support our current and near-term operating activities. We expect to complete our investment in a new point-of-sale information system in 2005, which is intended to support our key initiatives. In addition, while we are presently focused primarily on internal growth, we may explore new store openings and strategic acquisitions that are available at favorable prices. If these activities are significant, we may be required to raise additional capital through debt or equity financing.

           We believe we can fund our planned business activities in 2005 with a combination of cash on hand, cash generated from operations, proceeds from the sale of rental equipment, funds from our credit facility, and other anticipated financing arrangements. There can be no assurance that we will be able to obtain any necessary additional financing on terms that are acceptable to us, if at all. In the event we are unable to obtain additional financing, we may not be able to purchase a sufficient amount of rental equipment to execute our business plan.

           Debt and Other Obligations

           Senior Secured Notes. In October 2003, we completed a private offering of $250.0 million aggregate principal amount of 9.5% senior secured notes (the "Original Notes") due 2010. The net proceeds 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. We can redeem all of the Senior Secured Notes on or after October 15, 2007. We may also redeem up to 35% of the notes prior to October 15, 2006 with the net proceeds of an equity offering at 109.5% of their principal amount, plus accrued interest; provided that at least 65% of the aggregate principal amount of the notes issued must remain outstanding after such redemption. The notes were issued by NationsRent Companies, Inc. and are guaranteed by all of our 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 our ability to obtain funds from our subsidiaries.

           In April 2004, we filed a registration statement on Form S-4 (Registration No. 333-114115), as amended (the "Registration Statement"), with the SEC with respect to the 9.5% senior secured notes (the "New Notes," and together with the Original Notes, the "Senior Secured 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 in July 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 Senior Secured Notes and the guarantees are secured by a first priority lien on substantially all of our 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. At December 31, 2004, we were in compliance with this requirement.

           We pay interest on the Senior Secured Notes semi-annually in cash, in arrears, on October 15 and April 15 at an annual interest rate of 9.5%.

           The indenture governing the notes contains various affirmative and negative covenants, subject to a number of important limitations and exceptions, including those limiting our ability to incur additional indebtedness or enter into sale and leaseback transactions; pay dividends, redeem stock or make other distributions; issue stock of our subsidiaries; make certain investments or acquisitions; grant liens on assets; enter into transactions with affiliates; merge, consolidate or transfer substantially all our assets; and transfer and sell assets. 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 $10.0 million or more.

           Credit Facility. On the Effective Date, we entered into a senior secured revolving credit facility (the "Credit Facility") with an aggregate commitment of up to $150.0 million with a syndicate of lenders. The Credit Facility was used to provide the exit financing for the Company pursuant to the Plan of Reorganization, to pay transaction expenses incurred in connection therewith and was used to refinance the Company's then existing indebtedness. In October 2003 we amended and restated the Credit Facility to reduce the aggregate commitments to up to $75.0 million (including a $30.0 million sub-limit for letters of credit) with Wachovia Bank as agent and repaid all amounts outstanding under the Credit Facility with the proceeds of the offering of the Senior Secured Notes. In December 2004, we entered into a second amendment to the Credit Facility to amend certain items including extending the maturity date (the "Amended Credit Facility"). The Amended Credit Facility can be used to make capital expenditures, enter into standby letters of credit or for working capital and other general corporate purposes. The Amended Credit Facility is scheduled to expire in June 2008.

           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 0.50% to 1.00% or, at our option, the London Interbank Offered Rate ("LIBOR") rate plus a percentage ranging from 2.00% to 2.50%. Letters of credit bear interest at the LIBOR rate plus a percentage ranging from 2.00% to 2.50%. 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 our 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.

           Our Amended Credit Facility contains various affirmative and negative covenants customary for similar working capital facilities. In addition, we must maintain a debt to cash flow ratio, as defined, 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, 2005, (b) 2.75 to 1.00 for each fiscal quarter, commencing with the fiscal quarter ending on March 31, 2006 through and including the fiscal quarter ending December 31, 2006, and (c) 2.50 to 1.00 for each fiscal quarter thereafter, measured as of the last day of each fiscal quarter. At December 31, 2004, we were in compliance with this requirement. The Amended Credit Facility also defines certain customary events of default, including the occurrence of any event of default under the Senior Secured Notes described above.

           As of March 19, 2005, we had $35.5 million of availability under the Amended Credit Facility after taking into account $23.9 million of outstanding letters of credit.

           Off-Balance Sheet Arrangements and Other Contractual Obligations

           The following table of contractual obligations includes information with respect to our known contractual obligations as of December 31, 2004.

Table of Contractual Obligations

                                                                   Payment due by period (dollars in millions)
                                                              ------------------------------------------------
                                                                          Less than      1-3        3-5     More than
Contractual Obligations                                         Total       1 Year      Years      Years     5 Years
- -----------------------                                       ---------    --------    --------  ---------  ---------
Long-Term Debt Obligations (1).............................   $ 450.5      $  27.1     $  55.1   $  94.5    $ 273.8
Capital Lease Obligations (2)..............................       0.5          0.5          --        --        --
Operating Lease Obligations (3)............................     307.3         26.0        50.2      40.8      190.3
Purchase Obligations (4)...................................      38.4         38.4          --        --        --
Other Long-Term Liabilities Reflected on the Registrant's
  Balance Sheet under GAAP.................................         -            -           -         -         -
                                                              ---------    --------    --------  ---------  ---------
Total......................................................   $ 796.7      $  92.0     $ 105.3    $ 135.3   $ 464.1
                                                              =========    ========    ========  =========  =========

__________

Critical Accounting Policies

          The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These assumptions and estimates are often subjective and may materially alter our results of operations. We have identified below those of our accounting policies that we believe may produce materially different results were we to change underlying assumptions and estimates. We base our estimates on, among other things, currently available information, our historical experience and on various assumptions, the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Although we believe that these assumptions are reasonable under the circumstances, our estimates would differ if different assumptions were utilized.

           We believe the following critical accounting policies affect our more significant estimates, and underlying assumptions, used in the preparation of our consolidated financial statements.

           Allowance for doubtful accounts. We maintain an allowance for doubtful accounts which reflects our estimate of the amount of our receivables that we will be unable to collect and is based on current trends and our historical collection experience. Our estimate could require adjustment based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may increase or decrease our allowance. In determining whether to extend credit, we make an assessment of the probability of our collecting our receivables by evaluating, among other things, the customer's financial condition. In evaluating the adequacy of our allowance for doubtful accounts receivable, we primarily analyze accounts receivable balances, the percentage of accounts receivable by aging category and historical bad debts. We also consider, secondarily, among other things, customer creditworthiness and changes in customer payment patterns. If the financial conditions of our customers deteriorate, and impair their ability to make payments, we may determine that an increase to the allowance is required. Additionally, if actual collections of accounts receivable differ from the estimates we used to determine our allowance, we will increase or decrease, as applicable, the allowance through charges or credits to selling, general and administrative expenses in the consolidated statements of operations of the period in which such changes in collection become known. If conditions change in future periods, additional allowances or reversals may be required. Such additional allowances could be significant.

           Useful lives and salvage value of rental equipment. We depreciate rental equipment using the straight-line method over its estimated useful life, using an estimated salvage value. The useful life of an asset is determined based on our estimate of the period we expect the asset to generate revenue, and the salvage value is determined based on our estimate of the minimum value we expect to realize from the disposal of the asset after such period.

           Historically, this estimate has been accurate when we did not deviate from our original assumptions in determining the lives and salvage values. Historically, this estimate was less accurate when we sold our fleet much earlier than planned, when we had a change of usage such as abandoning a certain line of equipment, and when we had to sell fleet in less desirable markets due to cash flow considerations. At the Effective Date, 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 to 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.

          We may adjust these estimates based on changes in our industry or other changing circumstances. If these estimates change in the future, we may recognize increased or decreased depreciation expense for these assets.

           Useful lives and salvage value of property and equipment. We depreciate property and equipment using the straight-line method over its estimated useful life, using an estimated salvage value. The useful life of an asset is determined based on our estimate of the period the asset will be utilized, and the salvage value is determined based on our estimate of the minimum value we could realize from the asset after such period. This estimate has historically been accurate as we have not had any impairment related to property and non-rental equipment. We may adjust these estimates based on changes in our industry or other changing circumstances. If these estimates change in the future, we recognize increased or decreased depreciation expense for these assets.

           Reserves for claims. We are exposed to various claims relating to our business. These may include claims relating to personal injury or death caused by equipment rented or sold, motor vehicle accidents involving our delivery and service personnel and employment-related claims. We establish reserves for reported claims that are asserted against us and the claims that we believe have been incurred but not reported. These reserves reflect our estimates of the amounts that we will be required to pay in connection with these claims, net of expected insurance recoveries. Our estimate of reserves is based upon an actuarial reserve analysis that takes into consideration the probability of losses and our historical payment experience related to claims settlements. These estimates may change based on, among other things, changes in our claims history or receipt of additional information relevant to assessing the claims. These estimates have varied considerably in the past. Our estimates may be impacted by such factors as increases in the market price for medical services, unpredictability of the size of jury awards and limitations inherent in the estimation process. Accordingly, we may increase or decrease our reserves for claims, and such changes could be significant.

           Revenue recognition. Equipment rentals revenue in the consolidated statements of operations includes revenue earned on equipment rentals, rental equipment pick-up and delivery fees, loss damage waiver fees and fuel sales. Revenue earned on equipment rentals, rental equipment pick-up and delivery fees, and loss damage waiver fees are recognized on a straight-line basis over the rental contract period. Fuel sales are recognized at the end of the rental contract period.

          As a result of our billing and rental cycles, there are a certain number of rental contracts that have not been billed to customers at the end of the reporting period. We identify each rental contract that has not been billed at the end of such period and calculate and record unbilled revenue based on the assumption that the equipment was returned on the last day of the reporting period.

           We defer revenue on open rental contracts that have been invoiced for a monthly billing cycle for the pro-rata portion of the contract duration that falls in the next reporting period.

           Revenue from the sales of equipment, merchandise, parts and supplies is recognized at the time of delivery to or pick-up by the customer. The vast majority of the Company's equipment does not require registration and is not subject to a statutory title process; therefore the sales invoice transfers title subject to payment in full. Auction sales are recorded when collected from the auction house.

           Revenue from the sale of equipment includes revenue earned in connection with sale/purchase agreements with certain manufacturers from whom we purchase new equipment. If the transaction meets the accounting requirements of a monetary transaction under APB. No. 29, "Accounting for Nonmonetary Transactions," then revenue is recognized at the time of delivery to, or pick up by, the manufacturer. In certain instances, the sale transaction may contain a limited subjective right of return which extends the date of the revenue recognition to the date the subjective right of return period lapses. We establish fair market value for each unit of equipment sold in sale/purchase agreements based on independent appraisals. Any excess sale proceeds over the fair market value of the used equipment sold is accounted for as a reduction of the cost of new equipment we purchased from the same manufacturer. This excess of sale price over the established fair market value is recorded as a reduction to depreciation expense over the average useful life of the new equipment purchased from the same manufacturers.

          Betterment of Assets. We charge ordinary maintenance and repair costs, such as damage caused by a customer and preventive maintenance, to operations as incurred. Costs incurred to extend the useful life, increase efficiency, increase capacity or improve the safety of rental equipment are capitalized as betterments as incurred. Examples of such betterments include rebuilding tracks and undercarriages, filling pneumatic tires with foam, adding truck bodies to bare chassis and installing safety devices.

           Impairment of long-lived assets. We review the valuation of our long-lived assets if the facts and circumstances suggest that the carrying value may be impaired. If this review indicates that the carrying value of long-lived assets will not be recoverable, then the carrying value is reduced to its estimated fair value. Recoverability is determined using an undiscounted cash flow analysis over the remaining amortization period. This analysis requires the use of estimates and assumptions. We may adjust these estimates based on changes in economic conditions or other circumstances. If these estimates change in the future, we may recognize write-downs on our long-lived assets. See the sections entitled "Useful lives and salvage value of rental equipment" and "Useful lives and salvage value of property and equipment" above.

           Valuation allowance related to deferred tax assets. As part of the process of preparing our consolidated financial statements, we estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We then assess the likelihood that our deferred tax assets will be recovered in the future and to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we include an expense within the tax provision in the consolidated statement of operations.

           Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. The valuation allowance is based on our estimates of taxable income and the period over which our deferred tax assets will be recoverable.

Seasonality and Fluctuations in Operating Results

           Our revenue and income are dependent upon activity in the construction industry which 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:

          We incur significant expenses in opening new locations, such as employee training, marketing and facility set-up costs. Initially, new locations may generate lower operating margins than established locations and may operate at a loss for a period of time. Our new locations have, on average, achieved profitability within six months of their opening. In addition, when we purchase new rental equipment, the depreciation related to such equipment may contribute to near-term margin decline because such equipment may not initially generate revenue at a rate that is sufficient to match such increased depreciation expense. As such, the opening of new rental locations and the purchase of rental equipment may reduce our operating margins during a start–up period.

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 above in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations – Overview" (Item 7).

Impact of Recently Issued Accounting Standards

           In December 2004, the FASB issued SFAS No. 123 (R), "Share-Based Payment" (SFAS No. 123(R)). SFAS No. 123(R) requires that the cost relating to share-based payment transactions, including share options, restricted share plans, and employee share purchase plans, be recognized in financial statements. The cost of these transactions will be measured based on the fair value of the equity or liability instruments issued. SFAS No. 123(R) replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, SFAS No. 123 permitted entities the option of continuing to apply the guidance in APB Opinion No. 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public companies will be required to apply the provisions of SFAS No. 123(R) as of the first interim or annual reporting period that begins after June 15, 2005.

           In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29," which eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The statement defines a nonmonetary exchange with commercial substance as one in which the future cash flows of an entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for fiscal years beginning after June 15, 2005. We will adopt this statement as required, and management does not believe the adoption will have a material effect on our results of operations, financial condition or liquidity.

Risk Factors

Risks Related to Our Business and Our Industry

Future operating losses may decrease our cash flow which would limit our ability to reinvest in our business, primarily for the purchase of new rental equipment, and may cause us not to have enough funds to satisfy our debt obligations.

          While we generated operating income of $27.4 million in 2004, we experienced operating losses of $94.5 million and $47.3 million in 2002 and 2003, respectively. Future operating losses, and the resulting impact on operating cash flow, could adversely affect our business strategy, our existing indebtedness and our ability to obtain financing in the future.

Our substantial level of indebtedness could materially adversely affect our ability to execute our business strategy.

           Historically, we have made, and continue to make, use of indebtedness to finance our equipment purchases and capital investments. As of December 31, 2004, we had approximately $288.9 million of indebtedness. We anticipate that we will incur additional indebtedness in the near future. Our high level of indebtedness could have important consequences to our stockholders and other investors. We must use a substantial portion of our cash flow from operations to pay interest on our Senior Secured Notes and, to the extent incurred, our other indebtedness, which may reduce the funds available to us to reinvest in our business. Greater levels of indebtedness might also limit our flexibility to adjust to changing economic or market conditions or new competitive pressures.

Disruptions in our information technology systems could limit our ability to effectively monitor and control our operations.

           Our current point of sale system facilitates our ability to monitor and control our operations. The system was designed primarily to support a rental business model which is not consistent with our new strategy to diversify our revenue mix through increased sales of new and used equipment, merchandise, parts and service. As such, our current systems do not adequately support our future strategy. In addition, our current systems are not sufficiently sophisticated to support an automation of manual controls and processes. Limitations such as these have led us to begin the replacement of our point of sale system. Any disruptions in our current systems or in connection with our transition to a new point of sale system or the failure of our current or new systems to operate as expected could adversely affect our operating results by limiting our ability to effectively monitor and control our operations and adjust to changing market conditions in a timely manner.

Failure to achieve and maintain effective internal controls and procedures could adversely impact our business and operating results.

           In 2004 and during the audit of our 2004 financial statements, as part of our review of our internal controls over financial reporting, we determined that we had certain material weaknesses over financial reporting.

           We continue to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). During the course of our testing, we may identify deficiencies which we may not be able to remediate prior to the reporting deadline imposed by the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act and therefore, we may report additional material weaknesses in internal controls in the future.

           We believe that our efforts are addressing the material weaknesses and significant deficiencies in internal controls over financial reporting. However, for the reasons stated above, we cannot give any assurances that all material weaknesses and significant deficiencies have been entirely corrected or that internal control weaknesses will not be identified from time to time in the future. Effective internal controls are necessary for us to produce reliable financial reports. If we cannot produce reliable financial reports, our ability to effectively manage our business and raise capital and the market value of our outstanding securities may be impaired.

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.

          If prices for used equipment weaken, we may have to seek additional cash from other sources, such as additional indebtedness, to purchase new equipment. In addition, if we must retain older pieces of equipment instead of selling them, such equipment is more likely to require additional repair and maintenance costs, and given such repairs, be available for rent for shorter periods of time, thus negatively impacting the rental rates and revenue of such equipment and negatively impacting our cash flow.

Contraction in the private non–residential construction industry may weaken demand and pricing for our equipment.

           Much of the growth of our business is dependent on private non-residential construction activity. According to government sources, private non-residential construction activity contracted during the period 2001 through 2003 and had slight growth during 2004. During the period of contraction there was decreased demand and pricing for our equipment, and the equipment rental industry had significant excess equipment capacity. If private non-residential construction activity begins to contract again, it may weaken equipment rental rates and have an adverse effect on our operating cash flow.

Implementing our new business strategy may cause significant disruptions, which could cause customer dissatisfaction and affect our cash flows and profitability.

           Our new management team has continued implementing our new business strategy, which emphasizes a diversification of our customer and service base, a decentralized management structure, a revitalized focus on our local managers' and regional customers' needs, better utilization of our infrastructure, and further development of strategic relationships. Making the transition to our new business model could cause significant disruptions in the Company and with our customers. We may not have adequate management and financial resources to achieve the goals of our new business strategy.

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.

           Our existing leases at these Lowe's locations expire on October 31, 2008. Lowe's may not allow us to renew any of those leases or offer to renew such leases on terms that are commercially acceptable to us. If we are unable to relocate such locations within their respective markets to comparable high traffic, retail space with another retailer, it could increase our costs to reposition such operations and create disruptions in repositioning our fleet. These events would have a negative effect on our customers and revenue in those markets. Revenue from our NationsRent at Lowe's locations was approximately $60.0 million for the year ended 2004, which represented approximately 10% of total revenues for the Company.

           The strategic alliance agreement with Lowe's also subjects us to certain non-competition provisions, primarily geographic restrictions, which continue for the duration of our existing leases. See the section entitled "Business – Certain Operating Restrictions" (Item 1).

Competitors with greater financial resources may have a competitive advantage over us by being able to sustain reduced rental rates for longer periods of time and being able to offer a broader range and volume of rental equipment. If they employ such strategies, our cash flows and profitability may be reduced.

           We believe that price is one of the primary competitive factors in the equipment rental industry. From time to time, we or our competitors may attempt to compete aggressively by lowering rental rates. To the extent that we lower rental rates to attempt to increase or retain market share, our operating margins may be adversely impacted. In some cases, we may not be able to match larger competitors' rate reductions because of their greater financial resources. If we do not match competitors' rate reductions, we may lose market share, resulting in decreased revenue and cash flow.

Although we are actively negotiating to establish dealership and distributor relationships with equipment manufactures to diversify our revenue base, our strategy may not succeed as quickly as anticipated, or at all.

           As part of our strategy to diversify our revenue base, we have been actively negotiating agreements with leading equipment manufacturers that allow us, in a dealership or distributor capacity, to offer new products and ancillary customer services, including warranty service, to our customers. In some cases, our relationship with these manufacturers is new and we have no experience with them. As we enter into more of these types of contracts, we will become significantly more dependent upon our relationships with, and the success of, the manufacturers with whom we have relationships. We will depend on the manufacturers to provide us with an inventory of new equipment. General economic downturns or factors such as labor strikes, supply shortages, product defects, negative publicity, including safety recalls of particular equipment, or poor product mix affecting those manufacturers with whom we have contracts would likely have a material adverse effect on our ability to generate revenues and diversify our product mix.

           Finally, because the majority of these contracts are short-term, non-exclusive and subject to termination on a minimal amount of notice, we cannot predict with any certainty whether our new relationships with these manufacturers will succeed over the long-term and result in a more high-quality and desirable product mix that satisfies customer demand and generates additional significant revenue for the Company.

We have made, and will likely continue to make, strategic acquisitions. If we are not successful in operating or integrating these newly acquired businesses in an effective and timely manner, our ability to take advantage of further growth opportunities and our revenue and gross margins could be adversely affected.

           We have made and may continue to make selective opportunistic acquisitions of companies or businesses with resources and product or service offerings capable of providing us with additional product and/or market strengths. These acquisitions would involve significant risks and uncertainties, such as:

           Our ability to successfully operate and integrate newly acquired businesses could also determine whether our future acquisitions will be successful, or whether we will attempt further acquisitions at all.

Costs associated with compliance with, and changes in, environmental laws and regulations could subject us to increased liabilities and expenses.

           We are subject to federal, state and local laws and regulations governing occupational health and safety and environmental protection. Under these laws, an owner or operator of real estate may be liable for the costs of removal or remediation of hazardous substances located on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous substances. Some of our existing and former locations use and have used substances that are or may be considered hazardous or otherwise are subject to applicable environmental requirements. We currently use hazardous materials such as solvents to clean and maintain our rental equipment and vehicles. We also generate and dispose of waste such as used motor oil, radiator fluid and solvents, and we may be liable under various federal, state and local laws for environmental contamination at facilities where our waste is or has been disposed. In addition, we dispense petroleum products from underground and above-ground storage tanks located at certain rental properties that we own or operate. We incur ongoing expenses associated with the removal of older underground storage tanks and other activities to comply with environmental laws, and we also perform remediation at certain of our locations. Environmental and safety requirements may become more stringent or be interpreted and applied more stringently in the future, and we may indemnify other parties for adverse environmental conditions that are currently known to us. Such future changes or interpretations, or the indemnification for such adverse environmental conditions, could cause us to incur substantial additional and unanticipated environmental compliance or remediation costs or penalties related to violations of these laws and regulations.

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.

           Our business exposes us to potential claims for personal injury or death resulting from the use of the equipment we rent or sell, and from injuries caused in motor vehicle accidents in which our delivery or service personnel are involved. We have in the past sought to reduce our exposure to such claims by maintaining comprehensive insurance, subject to a deductible. When our current insurance policy covering such claims expires, we may be unable to renew such coverage upon terms acceptable to us, if at all. If we are able to renew our coverage we expect that the premium rates and deductibles may increase as a result of general rate increases for this type of insurance as well as our historical claims experience and that of our competitors in the industry. If we cannot obtain insurance coverage, it could adversely affect our business by increasing our costs with respect to any claims. Additionally, existing or future claims may exceed the level of our present insurance, and our insurance may not continue to be available on economically reasonable or desirable terms, if at all.

           Risks Related to Our Reorganization

Our adoption of Fresh-–Start reporting and related accounting rules may limit your ability to accurately compare our financial results.

          Since emerging from bankruptcy, we have been operating our business under a new capital structure and became subject to the Fresh-–Start reporting rules, as discussed above. Accordingly, our financial results relating to periods prior to the Effective Date may not be comparable to periods after our emergence from bankruptcy.

Item 7A.      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 Amended Credit Facility. Our variable interest rates are subject to interest rate changes in the United States and the Eurodollar market. At December 31, 2004, we did not have any variable rate debt outstanding.

Item 8.      Financial Statements and Supplementary Data

           Consolidated financial statements and supplementary data are included hereto in Item 15.

Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

          None.

Item 9A.      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 and notwithstanding the items described below, 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 annual report has been made known to them in a timely fashion.

           In 2004, as part of our review of our internal controls over financial reporting, we determined that the failure of quarterly review controls relating to the financial statement closing process allowed for significant deficiencies to occur that, when assessed in the aggregate, constituted a material weakness. We identified the following significant deficiencies, among others:

           We have since restated our condensed consolidated financial statements to correct the errors related to these significant deficiencies. In addition, we have taken and are continuing to take remedial measures to strengthen our internal controls and to address these deficiencies, including the addition of staff and additional review for transactions relating to non-routine, judgmental and estimation processes.

           During the audit of our 2004 financial statements, we determined that we had a material weakness regarding our failure to properly assess the impact of not consistently obtaining a written customer acknowledgement of the terms of certain rental and sales transactions on open account. We have taken and are continuing to take remedial measures to strengthen our internal controls and to address this material weakness. These measures include the addition of staff and timely periodic review of rental and sales transactions.

           We continue to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act. During the course of our testing, we may identify deficiencies which we may not be able to remediate prior to the reporting deadline imposed by the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act and therefore, we may report additional material weaknesses in internal controls in the future.

           We believe that our efforts are addressing the material weaknesses and significant deficiencies in internal controls over financial reporting. However, for the reasons stated above, we cannot give any assurances that all material weaknesses and significant deficiencies have been entirely corrected or that internal control weaknesses will not be identified from time to time in the future. Effective internal controls are necessary for us to produce reliable financial reports. If we cannot produce reliable financial reports, our ability to effectively manage our business and raise capital and the market value of our outstanding securities may be impaired.

Item 9B.     Other Information

          None.

PART III

Item 10.      Directors and Executive Officers of the Registrant

           Each of the officers identified below hold such positions at the Company and each of its direct and indirect subsidiaries.

      Name                                         Age             Position
      ----                                        ----             --------

      Thomas ("Jeff") J. Putman (1)............... 54    President, Chief Executive Officer and Director
      Bryan T. Rich............................... 48    Executive Director (an officer position) and
                                                         Co-Chairman of the Board of Directors
      Douglas M. Suliman, Jr. (2)................. 49    Executive Director (an officer position) and
                                                         Co-Chairman of the Board of Directors
      Thomas J. Hoyer............................. 42    Executive Vice President and Chief Financial Officer
      Joseph H. Izhakoff.......................... 39    Executive Vice President-- Corporate Development, General
                                                         Counsel and Secretary
      John C. Scherer............................. 48    Vice.President and Treasurer
      Robert W. Schiller.......................... 52    Vice.President and Controller
      Thomas W. Blumenthal (2).................... 46    Director
      Andrew P. Hines (2)......................... 65    Director
      Irving M. Levine (1)........................ 70    Director
      Greg A. Rosenbaum (1)....................... 52    Director

          Thomas ("Jeff") J. Putman has been a director and our President and Chief Executive Officer since June 2003. From September 2001 to June 2003, Mr. Putman was self-employed as a consultant and from March 2002 to August 2002, he additionally served as an industry consultant to the Committee of Unsecured Creditors of NationsRent. Between 1990 and September 2001, Mr. Putman served in a number of capacities at Fluor Corporation and its subsidiaries. From January 2001 to September 2001, he was the Chief Executive Officer of GlobEquip LLC, a global, internet-enabled trading company focused on the mining and construction equipment vertical markets. From 1999 to 2000, he served as Senior Vice President of Fluor Global Services and, from 1997 to 1999, he served as Group President for Fluor Daniel Diversified Services Group. From 1990 to 1997, Mr. Putman served as President of American Equipment Company, Fluor's equipment distribution subsidiary.

          Bryan T. Rich has been a Co-Chairman of the Board of Directors and an Executive Director (an officer position) since June 2003. Mr. Rich is co-founder and a Managing Member of Phoenix Rental Partners, LLC and was a Managing Director of Boston Rental Partners, LLC ("Boston Rental"). He was Senior Vice President of NationsRent for the Northeast Region from 1998 to 2000, is a trustee of two real estate investment trusts and since 1998 has been the President of TREC, LLC, an active commercial real estate company currently leasing three properties to NationsRent. Mr. Rich was the majority stockholder and President of Logan Equipment, Corp. which was acquired by NationsRent in December 1998. He was a co-founder of Commonwealth National Bank and currently serves on its board of directors. Mr. Rich is a 1978 graduate of Boston College, where he received his Bachelor of Science degree in Operations Management.

           Douglas M. Suliman, Jr. has been a Co-Chairman of the Board of Directors and an Executive Director (an officer position) since June 2003. Mr. Suliman is co-founder and a Managing Member of Phoenix Rental Partners, LLC and was a Managing Director of Boston Rental. Mr. Suliman also is the founder and President of Island Partners, Ltd., a private merchant banking firm specializing in corporate restructuring, leveraged acquisitions and mergers and acquisitions for both public and private companies, a position he has held since 1990. He graduated in 1977 with a Bachelor of Science degree from the University of Massachusetts at Amherst and in 1980 with a Masters of Business Administration degree from Northeastern University.

          Thomas J. Hoyer has been our Executive Vice President and Chief Financial Officer since June 2003. From 2002 to 2003, Mr. Hoyer was Vice President of Corporate Finance at MWH Global, Inc., a privately held environmental consulting/engineering/construction company. He served as Chief Financial Officer of GlobEquip LLC in 2001. Mr. Hoyer began his career at Fluor Corporation, where he served in various positions with increasing levels of responsibility, most recently as Assistant Treasurer from January 1998 to January 2001. Mr. Hoyer earned a Bachelor's degree and a Master's Degree in Business Administration from Clemson University.

           Joseph H. Izhakoff has been our Executive Vice President — Corporate Development, General Counsel and Secretary since June 2003. Mr. Izhakoff joined NationsRent in 1998 and was the executive vice president, general counsel and secretary to NationsRent. Previously, Mr. Izhakoff was a shareholder/partner of Akerman, Senterfitt & Edison, P.A., one of Florida's premier law firms, where his practice focused on corporate finance and mergers and acquisitions. Mr. Izhakoff began his career in New York with Paul, Weiss, Rifkind, Wharton & Garrison, a globally oriented, full service law firm with offices worldwide. He received a Bachelor of Science degree with highest honors from the State University of New York at Albany in 1987 and a Juris Doctor degree with honors from Harvard Law School in 1990.

          John C. Scherer has been a Vice President and our Treasurer since June 2003. Mr. Scherer joined NationsRent in March 1998 and has served in positions of increasing responsibility in the treasury department. In his role as Vice President and Treasurer, Mr. Scherer is responsible for maintaining the Company's relationships with investment banks and other lenders, as well as providing financial reports to executive management and the Board of Directors. Prior to joining NationsRent, Mr. Scherer worked in positions of increasing responsibility at OHM Corporation from 1985 to 1998, most recently as Assistant Treasurer. Mr. Scherer holds a Bachelor of Science degree in business administration and a Master of Business Administration degree from Bowling Green State University.

           Robert W. Schiller has been our Vice President and Controller since January 2005. Mr. Schiller joined NationsRent in August 1999 as Director of the internal audit group, most recently as our Vice President of Internal Audit and was responsible for administering financial, operational and compliance audits of the Company's processes, systems, and store operations. Mr. Schiller holds a Bachelor of Science, Accounting degree from the State University of New York at Albany, and a Masters in Business Administration degree from Pace University. He is a member of the Institute of Internal Auditors and the American Institute of Certified Public Accountants.

           Thomas W. Blumenthal has been a director since June 2003. Mr. Blumenthal is a Managing Director of Baupost, a registered investment adviser that manages discretionary equity capital following a value investment philosophy. He joined Baupost in 1993. Mr. Blumenthal has previously served on the boards of directors of Data Documents, Inc., Richey Electronics, Inc. and RMA Home Services, Inc. He graduated from Claremont McKenna College with a Bachelor of Arts degree in Economics in 1981.

          Andrew P. Hines has been a director since June 2003 and has more than 25 years of experience as a senior level executive of various companies. Since 2000, Mr. Hines has been a senior partner of Hines & Associates, a management-consulting group. Since 2000, he also served as Interim Chief Financial Officer of C.P. Kelco and as Chief Financial Officer, Chief Operating Officer and Executive Vice President of Ardent Communications (formerly CAIS Internet). In 1997, Mr. Hines was one of two initial members of a new management team of Outboard Marine Corporation, a marine engine manufacturing company, and from 1997 to 2000, he served as Outboard Marine's Executive Vice President and Chief Financial Officer. Mr. Hines is a Certified Public Accountant and has a Bachelor of Business Administration degree from St. John's University. He is a member of the American Institute of Certified Public Accountants, the New York Society of Certified Public Accountants and the Financial Executives Institute.

          Irving M. Levine has been a director since June 2003 and has over 40 years experience in the construction industry. At the end of 2002, Mr. Levine retired as the Chairman and Chief Executive Officer of Multiquip, Inc., a manufacturer and distributor of small and medium-sized construction equipment and a major supplier to NationsRent, where he worked since 1973. Mr. Levine holds a Bachelor of Science degree in Civil Engineering from Northeastern University.

           Greg A. Rosenbaum has been a director since June 2003. Mr. Rosenbaum is President of Palisades Associates, Inc., a merchant banking and consulting company which he founded in 1989. Mr. Rosenbaum serves as a director of Playcore Holdings, Inc., TVC Communications, LLC, EK Holdings, Inc., Empire Kosher Poultry, Inc., Harvard Debate, Inc. and The Whaler on Kaanapali Beach and is a member of The Dean's Councils, as well as Chair of the Dean's Alumni Leadership Council, at Harvard's John F. Kennedy School of Government. He is also a member of Harvard University's Committee on University Resources. Mr. Rosenbaum received a Bachelor of Arts degree from Harvard College in 1974, a Master in Public Policy degree from Harvard's Kennedy School in 1978, and a Juris Doctor degree from Harvard Law School in 1978. He is admitted to the active practice of law in Ohio and Illinois and is a member of the American Bar Association and its Sections on Business Law, including its committee on Corporate Governance, and Antitrust.

           Each of our directors shall hold such position until the next annual meeting of stockholders and until such time as their successors shall have been duly elected and qualified.

Employment Agreements

          The Company has entered into an employment agreement with each of the following executive officers:

          Thomas ("Jeff") J. Putman, our President and Chief Executive Officer since June 2003, has a four–year employment agreement that provides for a minimum annual base salary of $500,000 per year and annual incentive compensation awards of up to 100% of base salary based on performance targets. Mr. Putman received 21,406 shares of restricted stock pursuant to the terms of the Company's 2003 Restricted Stock Plan as described below. Thirty-four percent (34%) of such shares vested on the date of the grant, and the balance will vest in equal amounts (33%) over the next two years, on each anniversary of the date of the grant. If Mr. Putman's employment is terminated "without cause" or "due to a change in control" he would be entitled to a severance payment equal to three times his annual base salary in effect at the time of termination.

           Bryan T. Rich, one of our two Executive Directors since June 2003, has a four-year employment agreement that provides for a minimum annual base salary of $400,000 per year and annual incentive compensation awards of up to 100% of base salary based on performance targets. Mr. Rich received 41,862 shares of restricted stock pursuant to the Company's Restricted Stock Plan. Fifty percent (50%) of such shares vested on the date of the grant, and the remaining 50% will vest on the first anniversary of the date of the grant. If Mr. Rich's employment is terminated "without cause" or "due to a change in control" he would be entitled to a severance payment equal to two times his annual base salary in effect at the time of termination.

           Douglas M. Suliman, Jr., one of our two Executive Directors since June 2003, has a four-year employment agreement that provides for a minimum annual base salary of $400,000 per year and annual incentive compensation awards of up to 100% of base salary based on performance targets. Mr. Suliman received 41,863 shares of restricted stock pursuant to the Company's Restricted Stock Plan. Fifty percent (50%) of such shares vested on the date of the grant, and the remaining 50% will vest on the first anniversary of the date of the grant. If Mr. Suliman's employment is terminated "without cause" or "due to a change in control" he would be entitled to a severance payment equal to two times his annual base salary in effect at the time of termination.

           Thomas J. Hoyer, our Chief Financial Officer since June 2003, has a four-year employment agreement that provides for a minimum annual base salary of $275,000 per year and annual incentive compensation awards of up to 100% of base salary based on performance targets. Mr. Hoyer received 4,500 shares of restricted stock pursuant to the Company's Restricted Stock Plan. Such shares vest in equal annual installments (25%) over four years, beginning on the first anniversary of the date of the grant. If Mr. Hoyer's employment is terminated "without cause" or "due to a change in control" he would be entitled to a severance payment equal to two times his annual base salary in effect at the time of termination.

           Joseph H. Izhakoff, our Executive Vice President — Corporate Development, General Counsel and Secretary since June 2003, has a four-year employment agreement that provides for a minimum annual base salary of $300,000 per year and annual incentive compensation awards of up to 100% of base salary based on performance targets. Mr. Izhakoff received 2,250 shares of restricted stock pursuant to the Company's Restricted Stock Plan. Such shares vest in equal annual installments (25%) over four years, beginning on the first anniversary of the date of the grant. If Mr. Izhakoff's employment is terminated "without cause" or "due to a change in control" he would be entitled to a severance payment equal to two times his annual base salary. Upon any termination, Mr. Izhakoff also is entitled to an additional $225,000 cash payment in effect at the time of termination.

           John C. Scherer, our Vice President and Treasurer, has a four-year employment agreement that provides for a minimum annual base salary of $183,000 per year and annual incentive compensation awards of up to 100% of base salary based on performance targets. Mr. Scherer received 560 shares of restricted stock pursuant to the Company's Restricted Stock Plan. Such shares vest in equal annual installments (25%) over four years, beginning on the first anniversary of the date of the grant. If Mr. Scherer's employment is terminated "without cause" or "due to a change in control" he would be entitled to a severance payment equal to two times his annual base salary in effect at the time of termination.

           Robert W. Schiller, our Vice President and Controller, has a four-year employment agreement that currently provides for a minimum annual base salary of $182,000 per year and annual incentive compensation awards of up to 100% of base salary based on performance targets. If Mr. Schiller's employment is terminated "without cause" or "due to a change in control," he would be entitled to a severance payment equal to two times his annual base salary in effect at the time of termination.

Director Compensation

           Each non-employee member of the Company's board of directors receives compensation for his service as a director of the board in an annual amount equal to $35,000, payable quarterly in advance. We also made a one-time grant of 1,366 shares of restricted stock pursuant to the Company's Restricted Stock Plan to each of our non-employee directors, which shares vested immediately upon grant. Non-employee members of any committee of the Company's board receive additional compensation for their service on such committee equal to a per day meeting fee of $1,000, payable quarterly in arrears, up to a maximum of $6,000 per year. The chairperson of any committee receives an annual fee of $3,000 for his or her service, payable quarterly in advance. In addition, all non-employee directors of the Company are reimbursed for actual, reasonable out-of-pocket expenses incurred in connection with attending board or committee meetings in person. Although Thomas W. Blumenthal is a non-employee director, he has elected not to receive any compensation, other than expense reimbursements.

Indemnification of Directors and Officers

           Pursuant to our bylaws, we indemnify all of our directors and officers to the fullest extent permitted or required by the Delaware General Corporation Law. In addition, pursuant to our certificate of incorporation, to the extent not prohibited by law, we will indemnify any person who is or was made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, or a proceeding, by reason of the fact that such person, or a person of whom such person is the legal representative, is or was one of our directors or officers, or is or was serving as a director, officer, manager, member, employee or agent or in any other capacity at our request, for any other corporation, company, partnership, joint venture, trust, employee benefit plan or other enterprise (an "Other Entity") while serving as a director or officer of the Company, against judgments, fines, penalties, excise taxes, amounts paid in settlement and costs, charges and expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection with such proceeding, if such person acted in good faith and in a manner such person believed to be in or not opposed to our best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. We also may indemnify, to the extent described above, any person who is or was an employee or agent of the Company, or is or was serving as a director, officer, manager, member, employee or agent or in any other capacity at our request, for any Other Entity.

           We also have entered into an indemnification agreement with each of our directors, pursuant to which we will indemnify such director against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any such proceeding (or any claim, issue or matter therein), if the director acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his conduct was unlawful.

           Pursuant to the terms of their employment agreements described above, the persons covered by such agreements are indemnified and held harmless by the Company to the fullest extent permitted under the law of the State of Delaware. The Company is required to advance payment to such employee for costs and expenses and for all liability incurred by such employee to any third party as a result of the performance of its duties under the employment agreement, subject to the recoupment of such advances by the Company if it is ultimately determined that the employee was not entitled to such indemnification.

Restricted Stock Plan

           On the Effective Date, the Company adopted the 2003 Restricted Stock Plan, pursuant to which directors, officers, management and key employees of the Company are eligible to receive grants of restricted shares of our 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) shall determine. The Company has agreed to make "gross-up" payments in connection with restricted shares issued under the Restricted Stock Plan. Under the Restricted Stock Plan, the restricted shares held by an employee or director whose services have been terminated are subject to repurchase at the option of the Company for 180 days following such termination. Additionally, the holder of such restricted shares shall have the right to require the Company to repurchase such shares during the same 180-day period. The repurchase price for any such shares subject to such put or call shall be the net book value per share on the date of repurchase unless otherwise determined by the Company's board or committee thereof (if so delegated by the board), in their sole discretion, in accordance with the terms and conditions of the Restricted Stock Plan. If at the time of such repurchase, the Company's credit facilities do not allow such shares to be repurchased for cash, the Company may pay the repurchase price in the form of a five-year subordinated note.

Audit Committee Financial Expert

           The board of directors of the Company has determined that all members of the audit committee are financial experts as defined by the SEC rules and Mr. Hines is "independent," as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934.

Code of Ethics

           While we currently have in place a set of Business Practice Standards, as of the date of this report, we have not adopted a formal code of ethics that applies to our chief executive officer, chief financial officer, principal accounting officer or controller, or personnel performing similar functions to such senior officers. All of our employees, including such officers, must abide by our Business Practice Standards, which were adopted to help insure that all Company employees behave ethically and responsibly and comply with applicable law and regulations. Our Business Practice Standards cover matters relating to dishonesty, misappropriation and fraud, fair competition and treatment of confidential information, conflicts of interest, ethics violations and the Company's zero tolerance policy on harassment in the workplace. The standards also include procedures on how employees may report any concerns or potential violations of the Company's policies.

           We are currently in the process of reviewing a code of ethics with our experts and attorneys and expect to adopt the code of ethics upon completion of these discussions. The code of ethics will apply to all of our employees, including our chief executive officer, chief financial officer, principal accounting officer or controller, and persons performing similar functions and will supplement our Business Practice Standards.

Item 11.      Executive Compensation

           The following table sets forth certain information regarding compensation we paid to our Chief Executive Officer and to each of our four other most highly compensated executive officers at the end of fiscal 2004:

                                              Summary Compensation Table

                                                                                           Long Term
                                                                Annual Compensation      Compensation
                                                                -------------------      ------------
                                                                            Incentive      Restricted       All Other
Name and Principal Position                            Year      Salary       Awards     Stock Awards (1)  Compensation
- ---------------------------                            ----      ------       ------    -----------------  -------------
Thomas J. Putman

  President and Chief Executive Officer(2)..........   2004   $  578,780(3)  $ 297,900            --       $   62,322(4)
                                                       2003   $  266,710(3)         --  $  1,532,241(5)    $  974,817(6)
                                                       2002           --            --            --       $   43,365(7)

Bryan T. Rich

 Co-Chairman of the Board and Executive Director(2).   2004   $  409,237     $ 206,320            --              --
                                                       2003   $  209,230            --  $  2,996,554(8)   $1,077,618(9)

Douglas M. Suliman, Jr.

 Co-Chairman of the Board and Executive Director(2).   2004   $  409,237     $ 206,320            --              --
                                                       2003   $  209,231            --  $  2,996,554(10)  $1,370,263(11)

Joseph H. Izhakoff

 Executive Vice President-- Corporate Development,
  General Counsel and Secretary (12)................   2004   $  306,577     $ 154,500            --              --
                                                       2003   $  300,000     $  48,750  $    161,055(13)  $  617,375(14)
                                                       2002   $  285,854            --            --              --

Thomas J. Hoyer

 Executive Vice President and Chief Financial
  Officer (2).......................................   2004   $  304,771(15) $ 121,550            --              --
                                                       2003   $  139,171(15) $  81,000  $    322,110(16)  $  372,051(17)

__________

Compensation Committee Interlocks and Insider Participation

           There are no compensation committee interlocks (i.e., no executive officer of ours serves as a member of the board of directors or the compensation committee of another entity that has an executive officer serving on our board of directors). Thomas J. Putman, our President and Chief Executive Officer, serves on our compensation committee. He has and will continue to recuse himself from all discussions and decisions concerning his compensation.

Compensation Committee Report on Executive Officer Compensation

           The compensation committee ("Committee") was formed by the board of directors in July 2003 following the Effective Date. The Committee must consist of at least three members of the board of directors. The Committee currently consists of Greg A. Rosenbaum and Irving M. Levine, who are not employees of the Company, and Thomas J. Putman, who is our President and Chief Executive Officer. Mr. Putman is required to recuse himself when the Committee discusses his compensation. In 2004, the Committee met on four occasions and acted by written consent on one occasion.

Role of the Committee

           As it relates to executive compensation, the Committee's duties and responsibilities are to review and approve goals and objectives relevant to the compensation of the chief executive officer and other senior officers and, after a review of performance in light of such goals and objectives, to set the compensation of the chief executive officer and such senior officers. The Committee also is responsible for reviewing and making recommendations to the board of directors with respect to the general compensation, benefits and perquisites policies and practices of the Company, including the Company's incentive compensation and equity-based compensation plans. The Committee has the authority to conduct or authorize surveys or studies of matters within the scope of the Committee's responsibilities and, in that regard, the Committee may retain, at the Company's expense, independent counsel or other consultants as necessary to assist in any such surveys or studies.

Guiding Principles

          The goal of the Company's compensation system is to attract, reward, motivate and retain key executives who are capable of achieving the Company's objectives in a highly competitive industry. In discharging the Committee's duties and responsibilities, the Committee's guiding principles in the design and administration of the Company's executive compensation programs are:

Components

           The primary components of the Company's executive compensation program consist of base salaries, annual incentive compensation awards and long-term incentives. The Committee does not allocate a fixed percentage of compensation to each of these components, providing flexibility to help drive the Company's achievement of specific objectives.

           In June 2003, when the Company completed its reorganization, it assembled a new senior management team, which consisted of proven industry professionals from outside the Company together with certain highly regarded members of the existing senior management team. In order to attract, retain and integrate this new management team and to ensure their focus on the Company's new business strategy, the Company offered a four-year employment agreement to each member of its senior management team. The terms of these employment agreements are described in more detail in the section entitled "Directors and Executive Officers of the Registrant—Employment Agreements" (Item 10). These agreements established minimum base salaries, maximum annual incentive compensation awards and long-term incentives in the form of initial restricted stock awards. These agreements also contain non-competition and non-solicitation covenants, severance benefits and relocation benefits.

Base Salary

           The minimum annual base salary of each of the Company's key executives was established at the time each of their respective employment agreements were entered into. All of the employment agreements provide for the potential increase, but not a decrease, in annual salary, at the discretion of the board of directors or the Committee. The base salary of each key executive is reviewed annually by the Committee based on performance evaluations. The base salary program is designed to pay for individual performance within a structure that is internally equitable and externally competitive with comparable companies. Base salaries are a function of:

Incentive Compensation

           Incentive compensation awards are designed to support the Company's business strategy and to foster the creation of a culture, where eligible participants are rewarded for their contributions to the Company's success and teamwork among working units. The Committee aims to establish goals at the beginning of each fiscal year, identifying key performance measures that the Committee believes will help the Company achieve its stated business strategy. The Committee identified the following four criteria with which to determine cash incentive compensation awards for fiscal year 2004, with the relative weights allocated to each category: cash flow (60%), return on fleet (30%), strategy (10%) and safety (which has a multiplier effect on an individual's cash incentive compensation award). The Committee also established a target award of 50% of base salary for all executive participants.

           Participants may receive 100% of the target award if they achieve each of the performance measures established for such participant. Actual awards can range from zero to a maximum of 200% of the target award based on the achievement of personal goals. No amounts are awarded if less than 80% of the cash flow target is achieved. All awards paid are subject to the discretion of the Committee in accordance with the objectives and performance measures outlined above, which are modified from year to year.

Long Term Incentives

           The long-term component of this executive compensation program is a restricted stock plan which is designed to link the interests of senior management with stockholders and provide such management with an equity interest in the Company. The restricted shares are designed to encourage and enable the acquisition by each executive of a personal proprietary interest in the Company, thereby providing the executives with incentives to put forth maximum efforts for the development and financial success of the Company and strengthen their desire to remain with the Company. Restricted stock also rewards management for long-term strategic direction and enhancement of stockholder value and promotes recruitment and retention of key management personnel by providing meaningful incentives dependent upon successful corporate performance.

           The members of senior management to whom restricted stock awards are granted under the restricted stock plan, the number of shares with respect to which a restricted stock award is granted, and the vesting schedule of such shares is determined by the board of directors or the Committee, as the case may be, in its sole discretion.

Chief Executive Officer Compensation for 2004

           Mr. Putman's annual salary and incentive compensation award was determined by the Committee based on the same criteria as summarized in the preceding paragraphs relative to all executive officers. Mr. Putman's salary for 2004 was increased by 3.16% in March 2004 due to his personal achievement of those goals established by the Committee for the chief executive officer, taking into account criteria such as the effectiveness and quality of his leadership of the Company, his role in management, his contribution to the Company's business and growth strategy and his support of the Company's safety policy. In addition, Mr. Putman received an incentive compensation award of $297,900 for 2004, which was based on the Company's achievement of the financial and safety goals described above and Mr. Putman's achievement of the personal goals associated with his position in the Company.

The Compensation Committee:
          Irving M. Levine
          Thomas J. Putman
          Greg A. Rosenbaum

Other Employee Benefits

Retirement Savings Plan

           The Company's 401(k) Retirement Savings Plan (the "401(k) Plan") provides retirement and other benefits to its employees and permits employees a means to save for their retirement. The Company may, at its discretion, make matching contributions under the 401(k) Plan. The 401(k) Plan is intended to be a tax-qualified plan under Section 401(a) of the Internal Revenue Code. The Company also provides welfare benefits to its employees, including health, life and disability. The Company's executive officers participate in these plans, however, the benefits do not exceed 10.0% of their respective salaries. The Company did not make any matching contributions under the 401(k) Plan for the year ended December 31, 2004.

Item 12.      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

           The following table sets forth information with respect to the beneficial ownership of NationsRent Companies, Inc. as of March 15, 2005 by:

           Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge, each of the holders of shares of common stock listed below has sole voting and investment power as to such shares unless otherwise noted.

                                                                        Number of         Percentage of Total
Name and Address of Beneficial Owner (1)                              Common Shares        Common Shares (2)
- ----------------------------------------                             ---------------      ------------------

Stockholders of Five Percent or More
AG Rental, L.L.C....................................................      89,560(3)                53%
Phoenix Rental Partners, LLC........................................     244,491(4)                14.5%
The Baupost Group, L.L.C............................................     969,769(5)                55.4%
Executive Officers and Directors
Thomas J. Putman....................................................      21,406(6)                 1.3%
Bryan T. Rich.......................................................     286,353(7)                17.0%
Douglas M. Suliman, Jr..............................................     286,354(8)                17.0%
Joseph H. Izhakoff..................................................       2,250(9)                  **
Thomas J. Hoyer.....................................................       4,500(9)                  **
Thomas W. Blumenthal................................................          --(10)                 --
Andrew P. Hines.....................................................       1,366(11)                 **
Irving M. Levine....................................................       1,366(11)                 **
Greg A. Rosenbaum...................................................       1,366(11)                 **
All directors and executive officers as a group (11 persons)........     361,030(12)               21.5%

                                                                              Number of
                                                                             Common Shares
                                                                               Underlying
                                                          Number of             Convertible      Percentage of Total
         Record Holder                                   Common Shares     Subordinated Notes      Common Shares
         -------------                                 ----------------    ------------------      -------------

         Baupost Private Investments A-1, L.L.C......       106,235               9,295                 6.9%
         Baupost Private Investments C-1, L.L.C......       274,279              24,012                17.6%
         Baupost Private Investments H-1, L.L.C......       127,729              11,197                 8.3%

Equity Compensation Plan Information

           The following presents equity compensation plan information as of December 31, 2004. For the year ended December 31, 2004, 3,292 shares were issued under the Restricted Stock Plan in February, March and October 2004. Of the 3,292 shares issued, 2,732 shares vested on the date of the grant and 560 shares vest in equal installments over four years beginning on the first anniversary of the date of the grant.

                                                                                                   Number of securities
                                                                                                 remaining available for
                                                                                                  future issuance under
                                    Number of securities to           Weighted-average             equity compensation
                                    be issued upon exercise           exercise price of              plans (excluding
                                    of outstanding options,         outstanding options,           securities reflected
Plan Category                         warrants and rights            warrants and rights              in column (a))
- -------------                         -------------------            -------------------              --------------
                                              (a)                            (b)                           (c)
Equity compensation plans
approved by security holders:                 n/a                            n/a                           n/a

Equity compensation plans not
approved by security holders:

Restricted Stock Plan............             n/a                            n/a                           12,091
                                           --------                       ---------                   -----------
    Total........................                                                                          12,091

           For a description of the plan described above see the section entitled "Directors and Officers of the Registrant—Restricted Stock Plan" (Item 10) and Note 14 to the Consolidated Financial Statements.

Item 13.      Certain Relationships and Related Transactions

          With respect to transactions discussed in this section, no independent determination has been made as to the fairness or reasonableness of the terms thereof. We believe however based on our prior experience, that the terms of each transaction were as favorable to us as we could have obtained from an unaffiliated party.

Real Estate Leases

          TREC, LLC, an entity affiliated with Bryan Rich, one of our Co-Chairmen, and certain affiliates of TREC, LLC are currently leasing three locations to the Company, with payments of approximately $694,000 in the aggregate for the year ended December 31, 2004. In addition, certain immediate family members of Bryan Rich currently lease an additional three locations to the Company, with payments of approximately $404,000 in the aggregate for the year ended December 31, 2004. We assumed these leases on the Effective Date. In March 2004, TREC, LLC and the Company agreed to enter into an amendment on one of such leases with the following terms: (i) TREC, LLC will not increase the annual lease payments by $176,875 (as contemplated by the original lease) and instead keep such annual lease payments fixed (subject to an upward adjustment after the initial five-year period, but only if, and to the extent, finance costs under the lease rise more than eight percent), (ii) TREC, LLC will not be required to pay $1.6 million to the Company under the terms of the original lease and (iii) the Company will assume responsibility for all structural repairs to the facility.

Stockholders' Agreement

          Certain of the Company's officers and directors are affiliated with interested stockholders of the Company. Thomas W. Blumenthal, a Company director, is a Managing Director of Baupost. In addition, the Executive Directors and Co-Chairmen of the Board of Directors of the Company, Bryan T. Rich and Douglas M. Suliman, Jr., are co-founders and Managing Members of Phoenix and were Managing Directors of Boston Rental. Pursuant to the terms of a Stockholders' Agreement (the "Stockholders' Agreement") among the Company and the holders of its common stock, preferred stock and convertible subordinated notes, the number of directors of the board of directors of the Company is fixed at nine. Under the Stockholders' Agreement, two of the nine directors are designated by the Phoenix Group for so long as the Phoenix Group holds 5% of the outstanding common stock. If the Phoenix Group holds between 1% and 5% of the outstanding common stock, it designates one director. The Baupost Group and its affiliates are entitled to designate: (i) four of the nine directors for so long as the Baupost Group holds 20% of the outstanding common stock; (ii) three directors if the Baupost Group holds between 15% and 20% of the outstanding common stock; (iii) two directors if the Baupost Group holds between 5% and 15% of the outstanding common stock; or (iv) one director if the Baupost Group holds between 1% and 5% of the outstanding common stock. Notwithstanding the foregoing, the Baupost Group has the right to designate four directors if the Baupost Group holds more shares of common stock than any other holder of common stock and Phoenix Group has the right to designate two directors if Phoenix Group holds more shares of common stock than any other holder of common stock (not including the Baupost Group). The Baupost Group has designated Messrs. Blumenthal and Rosenbaum to serve as directors, and Phoenix Group has designated Messrs. Suliman and Rich to serve as directors. The Company's board of directors currently has seven members and two vacancies. The vacancies are a result of the Baupost Group having designated only two of the four directors it is entitled to select.

Phantom Equipment Rental Corp.

           During the second quarter of 2004, we acquired 239 units of rental equipment from Phantom Equipment Rental Corp. ("Phantom"), which is an entity affiliated with Bryan Rich, for $6.0 million. As part of such acquisition, Phantom agreed to reimburse us for returning the acquired units to a rent-ready condition, and for the cost of an annual inspection on each unit. Phantom has reimbursed us approximately $136,000 for costs incurred by us through December 2004. In addition, Phantom has paid us approximately $13,400 for rental of equipment and shipping.

Convertible Subordinated Notes

           The Baupost Group owns $17.4 million principal amount of the Company's convertible subordinated notes. Phoenix Group owns $2.8 million principal amount of the Company's convertible subordinated notes. For a description of the convertible subordinated notes see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations – Debt and Other Obligations" (Item 7).

Key Employee Housing Assistance Program

           In November 2003, the Company created a limited housing assistance program to attract and retain certain specified individuals to the Company's corporate headquarters in Fort Lauderdale, Florida, and to assist such persons who moved from a materially lower cost of living city with the transition/relocation expenses associated with moving to Fort Lauderdale. The Company's limited housing assistance program consists of two non-interest bearing loans: one is a short-term bridge loan (one year), the other a long- term loan (ten years); neither loan is forgivable and must be repaid in full. Any short-term loan made under the program is no more than the appraised equity value of the employee's existing residence, is secured by such residence and is subject to repayment upon the sale of such residence. Any long-term loan made under the program is limited to 50% of the purchase price of the employee's new South Florida principal residence and is secured by such residence. The sum of the employee's first mortgage and the long-term loan cannot exceed 90% of the purchase price of the employee's new residence. The employee is required to transfer all equity in its existing residence to its new residence in South Florida. If during the term of the long-term loan, the employee is awarded an incentive compensation award, the Company shall withhold 30-40% of the gross amount of such award and apply it to reduce the outstanding amount of the long-term loan. Notwithstanding such application, the employee shall still be taxed on the gross amount of any such award. The Company made available such housing assistance program to certain of its non-executive officers. No executive officers are permitted to participate in this program. As of December 31, 2004, the Company had outstanding three long-term loans in an aggregate amount of approximately $2.5 million and one short-term bridge loan in an aggregate amount of approximately $225,000.

Item 14.      Principal Accountant Fees and Services

          The following table presents the aggregate fees for professional audit services rendered by Ernst & Young LLP for the audit of the Company's annual financial statements for the years ended December 31, 2004 and 2003 and fees billed for other services rendered by Ernst & Young LLP.

                                                              2004            2003
                                                          ------------     -----------

         Audit fees (1)...............................    $  2,635,836     $ 1,383,810
         Audit related fees (2).......................         371,037         159,775
                                                          ------------     -----------
         Total audit and audit related fees...........       3,006,873       1,543,585

         Tax fees (3)..................................         83,064         240,791
         All other fees (4)............................           --             --
                                                          ------------     -----------
         Total fees....................................   $  3,089,937     $ 1,784,376
                                                          ============     ===========

_________________________

          Audit Committee Pre-Approval Policies and Procedures. In accordance with the Company's pre-approval policy, which was adopted in October 2004, the Audit Committee must pre-approve all audit and non-audit engagement services and fees with the independent auditor. In 2004, the Audit Committee provided general pre-approval for the services described above and established pre-approved fee levels for all services to be provided by the independent auditor. Services that do not receive the Audit Committee's general pre-approval or that exceed pre-approved fee levels require specific pre-approval by the Audit Committee. Pre-approvals remain effective for 12 months unless the Audit Committee specifically provides otherwise. The Audit Committee may delegate its pre-approval authority to one or more of its members, but not to management, and it may not pre-approve non-audit services expressly prohibited by the SEC's rules and relevant guidance. The Audit Committee pre-approved all of the non-audit services provided by the Company's independent auditor.

PART IV

Item 15.      Exhibits and Financial Statement Schedules

(a)(1) FINANCIAL STATEMENTS

           The following consolidated financial statements of the Company are included in a separate section of this report following the signature page:

(a)(2) FINANCIAL STATEMENT SCHEDULES

          The following information is included in a separate section of this report following the signature page:

           Schedule II: Valuation and Qualifying Accounts

(a)(3) EXHIBITS

Exhibit Index

__________

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

         Signatures                                 Title                                  Date
         ----------                                 -----                                  ----

                                        President and Chief Executive
    /s/ Thomas J. Putman            Officer (Principal Executive Officer)             March 31, 2005
- -----------------------------
      Thomas J. Putman

                                     Executive Vice President and Chief
                                        Financial Officer (Principal
    /s/ Thomas J. Hoyer                      Financial Officer)                       March 31, 2005
- -----------------------------
      Thomas J. Hoyer

                                        Vice President and Controller
   /s/ Robert W. Schiller              (Principal Accounting Officer)                 March 31, 2005
- -----------------------------
     Robert W. Schiller

     /s/ Bryan T. Rich                            Director                            March 31, 2005
- -----------------------------
       Bryan T. Rich

/s/ Douglas M. Suliman, Jr.                       Director                            March 31, 2005
- -----------------------------
  Douglas M. Suliman, Jr.

  /s/ Thomas W. Blumenthal                        Director                            March 31, 2005
- -----------------------------
    Thomas W. Blumenthal

    /s/ Andrew P. Hines                           Director                            March 30, 2005
- -----------------------------
      Andrew P. Hines

    /s/ Irving M. Levine                          Director                            March 29, 2005
- -----------------------------
      Irving M. Levine

   /s/ Greg A. Rosenbaum                          Director                            March 31, 2005
- -----------------------------
     Greg A. Rosenbaum

EXHIBIT INDEX

__________

INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
NationsRent Companies, Inc.

We have audited the accompanying consolidated balance sheets of NationsRent Companies, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year ended December 31, 2004, the seven months ended December 31, 2003, the five months ended May 31, 2003 and the year ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements ar ebased on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NationsRent Companies, Inc. at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for the year ended December 31, 2004, the seven months ended December 31, 2003, the five months ended May 31, 2003 and the year ended December 31, 2002, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/Ernst & Young LLP
Certified Public Accountants

Ft. Lauderdale, Florida
March 30, 2005

NATIONSRENT COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

                                                                                                Successor Company
                                                                                      ----------------------------------
                                                                                      December 31,          December 31,
                                                                                         2004                   2003
                                                                                      ------------          ------------

                                    ASSETS

Cash and cash equivalents..........................................................  $     40,625           $    48,644
Accounts receivable, net of allowance for doubtful accounts of $8,309 and                  79,974
  $10,960 at December 31, 2004 and 2003, respectively..............................                              72,926
Inventories........................................................................        36,682                21,802
Prepaid expenses and other assets (Note 18)........................................        12,885                11,605
Debt issuance costs, net...........................................................         6,764                 7,155
Rental equipment, net..............................................................       368,176               347,076
Property and equipment, net........................................................        61,992                62,076
Intangible assets, net.............................................................         8,263                 8,479
                                                                                     ------------           -----------
   Total assets....................................................................  $    615,361           $   579,763
                                                                                     ============           ===========
                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable...................................................................  $     81,087           $    56,319
Accrued compensation and related taxes.............................................        15,742                 9,297
Accrued expenses and other liabilities.............................................        28,931                29,174
Accrued insurance claims...........................................................        16,001                14,500
Debt (Note 18).....................................................................       288,881               288,286
Income taxes payable...............................................................            --                   504
                                                                                     ------------           -----------
   Total liabilities...............................................................       430,642               398,080
                                                                                     ============           ===========
Commitments and contingencies
Stockholders' equity:
  Preferred stock-- $0.01 par value, 1,000,000 shares authorized,
    Series A, $72,002 liquidation preference, 72,002 shares issued and
    outstanding at December 31, 2004 and 2003......................................             1                     1
  Common stock-- $0.01 par value, 3,000,000 shares authorized,
    1,669,588 shares and 1,666,296 shares issued and outstanding at
    December 31, 2004 and 2003,
    respectively......................................... .........................            17                    17
Additional paid-in capital.........................................................       200,960               200,724
Deferred stock compensation, net...................................................        (1,164)               (4,560)
Accumulated deficit................................................................       (15,095)              (14,499)
                                                                                     ------------           -----------
  Total stockholders' equity ......................................................       184,719               181,683
                                                                                     ------------           -----------
  Total liabilities and stockholders' equity ......................................   $   615,361           $   579,763
                                                                                     ============           ===========

The accompanying notes to consolidated financial statements are an integral part of these statements.

NATIONSRENT COMPANIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

                                                     Successor Company                          Predecessor Company
                                          ---------------------------------------     -----------------------------------------
                                             Year Ended        Seven Months Ended     Five Months Ended         Year Ended
                                          December 31, 2004     December 31, 2003        May 31, 2003       December 31, 2002
                                          -----------------    ------------------     -----------------     -----------------

Revenue:
Equipment rentals revenue.............  $     460,901        $     268,704            $   155,567           $     419,057
Sales of equipment, merchandise,
   service, parts and supplies........        128,759               41,833                 20,499                  43,082
                                        -------------        -------------            -----------           -------------
Total revenue.........................        589,660              310,537                176,066                 462,139
                                        -------------        -------------            -----------           -------------
Cost of revenue:
Cost of equipment rentals.............        250,365              147,099                103,367                 240,324
Rental equipment depreciation and
   lease expense, and vehicle
   depreciation.......................        117,463               62,435                 57,801                 152,764
Cost of sales of equipment,
   merchandise, service, parts and
   supplies...........................         77,192               30,657                 18,764                  38,056
Impairment of rental equipment........             --                   --                     --                  16,923
                                        -------------        -------------            -----------           -------------
Total cost of revenue.................        445,020              240,191                179,932                 448,067
                                        -------------        -------------            -----------           -------------
Gross profit (loss)...................        144,640               70,346                 (3,866)                 14,072
Operating expenses:
Selling, general and administrative
   expenses...........................        110,050               66,397                 37,173                  95,998
Non-rental equipment depreciation and
   amortization.......................          7,159                4,787                  5,451                  12,577
                                        -------------        -------------            -----------           -------------
Operating income (loss)...............         27,431                 (838)               (46,490)                (94,503)
                                        -------------        -------------            -----------           -------------
Other (income) expense:
Interest expense (Note 18)............         30,809               15,790                  3,164                  34,389
Interest income (Note 18).............           (463)                 (88)                    --                      --
Reversal of pre-petition tax
   liabilities........................           (926)                  --                     --                      --
Other, net............................           (401)              (2,041)                   (90)                   (324)
                                        -------------        -------------            -----------           -------------
                                               29,019               13,661                  3,074                  34,065
                                        -------------        -------------            -----------           -------------
Loss before reorganization items and
   provision for income taxes.........         (1,588)             (14,499)               (49,564)               (128,568)
Reorganization items, net.............         (1,005)                  --             (1,401,121)                 32,061
                                        -------------        -------------            -----------           -------------
Loss before provision for
   income taxes.......................           (583)             (14,449)            (1,351,557)               (160,279)

Provision for income taxes............             13                   --                     --                      --
                                        -------------        -------------            -----------           -------------
Net income (loss).....................  $        (596)       $     (14,499)           $ 1,351,557           $    (160,629)
                                        =============        =============            ===========           =============
Net income (loss) per share:

Basic.................................                                                $     23.56           $       (2.80)
                                                                                      ===========           =============
Diluted...............................                                                $     23.56           $       (2.80)
                                                                                      ===========           =============
Weighted average common shares
    outstanding:
Basic.................................                                                     57,364                  57,364
                                                                                      ===========           =============
Diluted...............................                                                     57,364                  57,364
                                                                                      ===========           =============

The accompanying notes to consolidated financial statements are an integral part of these statements.

NATIONSRENT COMPANIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)

                                                                                                       Common Stock in
                       Preferred Stock       Common Stock                                                 Treasury
                       ---------------       ------------                                              ---------------
                                                                          Deferred      Retained
                                                             Additional    Stock        Earnings
                      Number of           Number of           Paid-In   Compensation, (Accumulated  Number of
                       Shares    Amount    Shares    Amount   Capital       net         Deficit)      Shares    Amount     Total
                      ---------  ------   ---------  ------  ---------  -----------  ------------- ---------- ---------  ---------
Predecessor Company
Balance, December 31,
 2001.................  200,000  $   2    58,429,637 $ 584   $ 471,172   $       --   $ (970,509) (1,065,200) $  (2,880) $(501,631)
Net loss                     --     --            --    --          --           --           --    (160,629)       --    (160,629)
                        -------  -----    ---------- -----   ---------   ----------   ----------  -----------  ---------  ---------
Balance, December 31,
 2002.................  200,000      2    58,429,637   584     471,172           --   (1,131,138) (1,065,200)    (2,880)  (662,260)
Net income including
 gain on extinguishment
 of debt..............      --      --           --     --          --           --    1,351,557          --         --  1,351,557
                        -------  -----    ---------- -----   ---------   ----------   ----------  -----------  --------- ---------

Balance, May 31, 2003. (200,000)     2    58,429,637   584     471,172           --      220,419  (1,065,200)    (2,880)   689,297
                       --------- -----    ---------- -----   ---------   ----------   ----------  -----------  --------- ---------

Fresh-start adjustments(200,000)    (2)  (58,429,637) (584)   (471,172)          --     (220,419)  1,065,200      2,880   (689,297)
Distribution of
Successor Company
 preferred stock......   47,777      1            --    --      47,776           --           --          --         --     47,777
Distribution of
 Successor Company
 common stock.........       --      --    1,000,000    10       79,990          --           --          --         --     80,000
                        -------  -----    ---------- -----   ---------   ----------   ----------  -----------  --------- ---------
Successor Company
Balance, June 1, 2003.   47,777       1    1,000,000    10      127,766          --           --          --         --    127,777
Baupost Investment
 in preferred
 stock, net...........   24,225      --           --    --       23,745          --           --          --         --     23,745
Baupost Investment
 in common stock......       --      --      540,679     5       40,222          --           --          --         --     40,227
Restricted stock awards      --      --      125,617     2        8,991      (8,991)          --          --         --          2
Amortization of
 deferred compensation       --      --           --    --           --       4,431           --           --        --      4,431
Net loss ...........         --      --           --    --           --          --       (14,499)         --        --    (14,499)
                         -------  -----    ---------- -----   ---------   ----------   ----------  -----------  --------- ---------
Balance, December 31,
 2003 ................   72,002       1    1,666,296    17      200,724      (4,560)      (14,499)         --        --    181,683
Restricted stock awards      --      --        3,292    --          236        (236)           --          --        --         --
Amortization of
 deferred compensation       --      --           --    --           --       3,632            --          --        --      3,632
Net loss............         --      --           --    --           --          --          (596)         --        --       (596)
                         -------  -----    ---------- -----   ---------   ----------   ----------  -----------  --------- ---------
Balance, December 31,
 2004.................   72,002  $    1   $1,669,588 $  17   $  200,960  $   (1,164)  $   (15,095)$        --  $     --  $ 184,719
                        ======== ======   ========== =====   ==========  ==========   =========== ===========  ========= =========

The accompanying notes to consolidated financial statements are an integral part of these statements.

                                                                Successor Company                 Predecessor Company
                                                                -----------------                 ---------------------
                                                                           Seven Months
                                                          Year Ended          Ended           Five Months       Year Ended
                                                         December 31,      December 31,         Ended          December 31,
                                                             2004              2003          May 31, 2003          2002
                                                         ------------      -------------     ------------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $    (596)         $ (14,499)         $  1,351,557    $ (160,629)
 Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
Depreciation and amortization..........................    124,573             63,961                43,886        94,053
Provision for doubtful accounts........................      4,889              5,392                 3,211        11,645
Amortization of deferred stock compensation............      3,632              4,431                    --            --
Non-cash reorganization items..........................         --                 --            (1,424,231)        2,019
Gain on extinguishment of debt.........................         --             (2,427)                   --            --
Amortization of deferred issuance
 costs and debt discount...............................      2,918              4,180                    --            --
Provision for impairment of rental equipment...........         --                 --                    --        16,923
Loss on disposal of non-rental equipment...............      2,208                559                    35             2
Loss (gain) on disposal of rental equipment............    (36,563)            (5,713)                1,093         2,186
Changes in operating assets and liabilities:
Accounts receivable....................................    (11,937)            (6,876)               (4,771)       12,563
Inventories............................................    (14,880)               135                (1,569)        6,279
Prepaid expenses and other assets......................     (1,005)              (421)                8,418         1,521
Accounts payable.......................................     24,768             17,169                10,557        15,868
Accrued expenses and other liabilities.................      7,703               (333)               17,919        22,847
Liabilities subject to compromise......................        --                 --                 (1,960)       (7,708)
Income taxes payable...................................       (504)               (59)                   (3)          (34)
                                                         ------------      ----------            ----------    ----------
Net cash provided by operating activities..............    105,206             65,499                 4,142        17,535
                                                         ============      ==========            ==========    ==========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of rental equipment..........................   (167,235)          (139,031)              (15,793)      (39,005)
Purchases of property and equipment....................    (18,738)           (13,438)               (4,953)       (6,380)
Proceeds from disposal of rental equipment and              75,423
  vehicles.............................................         --             20,009                 8,855        10,780
Proceeds from disposal of non-rental equipment.........         --                107                    12            10
                                                         ------------      ----------            ----------    ----------
Net cash used in investing activities..................   (110,550)          (132,353)              (11,879)      (34,595)
                                                         ------------      ----------            ----------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debtor-in-possession financing facility..         --                 --                24,608       172,300
Proceeds from debt.....................................         --            399,711                    --            --
Proceeds from issuance of common stock to
 Baupost, net..........................................         --             40,227                    --            --
Proceeds from issuance of preferred stock to
 Baupost, net..........................................         --             23,745                    --            --
Payment of debt issuance costs.........................     (1,332)           (19,610)                   --            --
Repayments of debt.....................................     (1,343)          (305,168)               (8,449)         (216)
Repayments of debt subject to compromise...............         --                 --                (1,909)      (11,823)
Repayments of debtor-in-possession financing facility..         --            (36,860)                   --      (160,048)
                                                         ------------      ----------            ----------    ----------
Net cash (used in)/ provided by financing activities...     (2,675)           102,045                14,250           213
                                                         ------------      ----------            ----------    ----------
Net (decrease)/increase in cash and cash equivalents...     (8,019)            35,191                 6,513       (16,847)
Cash and cash equivalents, beginning of period.........     48,644             13,453                 6,940        23,787
                                                         ------------      ----------            ----------    ----------
Cash and cash equivalents, end of period...............  $  40,625          $  48,644            $   13,453    $    6,940
                                                         ============      ==========            ==========    ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................  $  24,551          $   6,294            $    1,740    $   38,701
                                                         ============      ==========            ==========    ==========
Cash paid for income taxes.............................  $     201          $      23            $        3    $       34
                                                         ============      ==========            ==========    ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Fixed assets acquired under financial obligations......  $   1,556          $  68,084            $   73,165            --
                                                         ============      ==========            ==========    ==========
Restricted stock awards................................  $     236          $   8,993            $       --    $       --
                                                         ============      ==========            ==========    ==========

                                                     Successor Company                       Predecessor Company
                                           --------------------------------------     -----------------------------------
                                                                   Seven Months        Five Months
                                               Year Ended             Ended               Ended            Year Ended
                                           December 31, 2004    December 31, 2003     May 31, 2003      December 31, 2002
                                           -----------------    -----------------     --------------    -----------------
                                                                           (in thousands)

Expensed..................................    $   83,269              $   48,159         $ 28,825           $  73,984
Capitalized...............................        15,039                   5,794            1,803               5,034

Buildings and improvements...................................... 5-39 years
Furniture, fixtures and office equipment........................ 3-7 years
Vehicles, delivery and shop equipment........................... 5-10 years

                                                                     Successor Company
                                            ------------------------------------------------------------------------
                                                     December 31, 2004                      December 31, 2003
                                            ------------------------------       -----------------------------------
                                              Carrying             Fair              Carrying              Fair
                                               Amount             Value               Amount              Value
                                            ------------      ------------       -------------     -----------------
Liabilities:
  Senior secured notes payable,
   net of unamortized debt
   issuance costs of  $7,080 at
   December 31, 2004 and
   $8,275 at December 31, 2003......       $  242,920         $  280,000(a)      $  241,725          $260,000(a)
  Convertible subordinated notes
   payable..........................       $   45,211         $   45,211(b)      $   45,211          $ 45,211(b)

                                                                                   Predecessor Company
                                                                         ---------------------------------------
                                                                           Five Months
                                                                              Ended                  Year Ended
                                                                           May 31, 2003          December 31, 2002
                                                                         -----------------     -------------------
                                                                         (in thousands, except per share data)

Reported net income (loss)......................................         $     1,351,557           $     (160,629)
  Less: Stock-based compensation expense
  determined using the fair value method, net of tax............                    (608)                  (2,486)
                                                                         ----------------          ---------------
Pro forma net income (loss).....................................         $     1,350,949           $     (163,115)
Basic and diluted income (loss) per share:                               ================          ===============
As reported.....................................................         $         23.56                    (2.80)
                                                                         ================          ===============
Pro forma.......................................................         $         23.55           $        (2.84)
                                                                         ================          ===============

Total face value of pre-petition debt........................   $   751,318
Average trading value........................................            21%
                                                                ------------
Reorganization value.........................................   $   157,777
                                                                ============

                                                         Predecessor                           Fresh-Start            Successor
                                                           Company        Reorganization       Adjustments             Company
                                                        ------------     ----------------    ----------------     ----------------
ASSETS:
Cash and cash equivalents..........................     $     13,453     $    78,400(a)      $       --           $     91,853
Accounts receivable, net...........................           70,936              --                 --                 70,936
Inventories........................................           21,590              --                 --                 21,590
Prepaid expenses and other assets..................           27,709         (14,756)(b)           (480)(i)             12,473
Rental equipment, net..............................          394,909              --           (169,528)(j)            225,381
Property and equipment, net........................           78,146              --            (34,940)(j)             43,206
Intangible assets, net.............................               --              --              8,604 (i)              8,604
                                                        ------------     ----------------    ----------------     ----------------
   Total assets....................................     $    606,743     $    63,644         $ (196,344)          $    474,043
                                                        ============     ================    ================     ================
LIABILITIES AND STOCKHOLDERS' EQUITY:

Liabilities not subject to compromise:
  Accounts payable.................................     $     39,386     $        --         $       --           $     39,386
  Accrued compensation and related taxes...........            5,068              --                 --                  5,068
  Accrued expenses and other liabilities...........           51,172          (1,431)(c)         (1,795)(k)             47,946
  Debt.............................................          144,120          45,211(d)              --                189,331
  Income taxes payable.............................               63             500(e)              --                    563
                                                        ------------     ----------------    ----------------     ----------------
   Total liabilities not subject to compromise.....          239,809          44,280             (1,795)               282,294
Liabilities subject to compromise..................        1,103,269      (1,103,269)(f)             --                     --
                                                        ------------     ----------------    ----------------     ----------------
   Total liabilities...............................        1,343,078      (1,058,989)            (1,795)               282,294
                                                        ------------     ----------------    ----------------     ----------------
Stockholders' equity (deficit)
  Preferred stock..................................                2               1 (g)             (2)(l)                  1
  Common stock.....................................              584              15 (g)           (584)(l)                 15
  Additional paid-in-capital.......................          471,172         191,733 (g)       (471,172)(l)            191,733
  Retained earnings (deficit)......................       (1,205,213)        930,884 (h)        274,329 (m)(n)             --
Treasury stock.....................................           (2,880)             --            2,880 (l)                  --
                                                        ------------     ----------------    ----------------     ----------------
   Total stockholders' equity (deficit)............         (736,335)      1,122,633           (194,549)               191,749
                                                        ------------     ----------------    ----------------     ----------------
   Total liabilities and stockholders'
    equity (deficit)...............................     $    606,743     $    63,644         $ (196,344)          $    474,043
                                                        ============     ================    ================     ================

Prepetition senior credit facility and term loan..............  $   749,279
Prepetition unsecured notes...................................      274,423
Prepetition secured notes.....................................       20,759
Accrued interest..............................................       11,007
Priority tax claims...........................................        4,946
Accounts payable..............................................       16,500
Accrued expenses..............................................       26,355
                                                                -----------
  Total liabilities subject to compromise.....................  $ 1,103,269
                                                                ===========

                                                                                                   Successor Company
                                                                                             ---------------------------
                                                                                                      December 31,
                                                                                             ---------------------------
                                                                                                2004           2003
                                                                                             ----------      ----------
Senior secured notes payable, net of unamortized debt discount
   of $7,080 at December 31 ,2004  and $8,275 at December 31, 2003,
   bearing interest at 9.5%, interest payable semi-annually and
   principal payable in October 2010.................................................     $   242,920        $  241,725
Postpetition notes payable, bearing interest at prime, interest and principal
  payable on or before January 2007..................................................             261             1,350
Capital lease obligations payable in monthly installments through April 2005.........             489                --
Convertible subordinated notes payable, bearing interest at 6.5%, interest
   payable quarterly (deferred until maturity) and principal payable
   in June 2008......................................................................          45,211            45,211
                                                                                          -------------     ------------
  Total debt ........................................................................     $   288,881        $  288,286
                                                                                          =============     ============

                                                      Successor Company                   Predecessor Company
                                                    ---------------------     ----------------------------------------
                                                                                 Five Months              Year Ended
                                                         Year Ended             Ended May 31,            December 31,
                                                     December 31, 2004               2003                    2002
                                                     --------------------   -------------------      -----------------
                                                                              (in thousands)
Gain on extinguishment of debt..................     $        (361)         $    (930,884)            $       --
Fresh-start valuation adjustments...............                --               (494,748)                    --
Professional fees...............................              (644)                15,207                 23,230
Employee expenses...............................                --                  7,212                  5,229
Facility closures...............................                --                    114                  2,095
Interest income.................................                --                    (5)                  (240)
Other...........................................                --                  1,983                  1,747
                                                     --------------------   -------------------      -----------------
  Total reorganization items, net...............     $      (1,005)         $  (1,401,121)            $    32,061
                                                     ====================   ===================      =================

                                                          Successor Company
                                                     -------------------------
                                                            December 31,
                                                     -------------------------
                                                          2004         2003
                                                     ------------   ----------
Brand-- indefinite-lived........................     $   5,378      $   5,378
Customer relationships..........................         3,226          3,226
Less: accumulated amortization..................          (341)          (125)
                                                     ------------   ----------
Intangible assets, net..........................     $   8,263      $   8,479
                                                     ============   ==========

                                                              Successor Company              Predecessor Company
                                                      --------------------------------   --------------------------
                                                                         Seven Months    Five Months
                                                         Year Ended         Ended           Ended        Year Ended
                                                        December 31,     December 31,      May 31,      December 31,
                                                            2004             2003           2003            2002
                                                       -------------   ----------------   ------------  ------------
Current....................................            $          13   $           100    $         --   $        100
Deferred...................................                       --              (100)             --           (100)
                                                       -------------   ----------------   ------------   ------------
                                                       $          13   $            --    $         --   $         --
                                                       =============   ================   ============   ============
Federal....................................            $          --   $            --    $         --   $         --
State......................................                       13                --              --             --
                                                       -------------     --------------   ------------   ------------
                                                       $          13   $            --    $         --   $         --
                                                       =============   ================   ============   ============

                                                              Successor Company              Predecessor Company
                                                      --------------------------------   --------------------------
                                                                         Seven Months    Five Months
                                                         Year Ended         Ended           Ended        Year Ended
                                                        December 31,     December 31,      May 31,      December 31,
                                                            2004             2003           2003            2002
                                                       -------------   ---------------   ------------  ------------
Federal statutory income tax rate.................           35.0 %         35.0%            35.0%          35.0%
Non-taxable reorganization gain...................             --             --            (36.9)            --
Federal and state effect of reorganization........             --             --             25.4             --
Non-deductible meals and entertainment............          (59.3)          (1.3)              --           (0.2)
Non-deductible penalties..........................          (11.4)          (0.1)              --             --
Non-deductible reorganization costs...............             --             --              0.3           (3.6)
State income taxes, net of federal tax benefit....          224.9            9.5             (0.2)           3.6
Change in valuation allowance.....................         (189.7)         (43.1)           (23.6)         (34.8)
Other, net........................................           (1.7)            --               --             --
                                                       -------------     -------------   ------------   ------------
                                                             (2.2)%           --%              --%            --%
                                                       =============   ===============   ============   ============

                                                                   Successor Company
                                                             ---------------------------
                                                                       December 31,
                                                             ---------------------------
                                                                2004                2003
                                                              ----------         ---------
                                                                      (in thousands)
Deferred income tax assets, net:
Accrued liabilities and other reserves...............        $   9,112          $  7,346
Allowance for doubtful accounts......................            3,240             2,103
Net operating loss carryforwards.....................           52,226            12,550
Alternative minimum tax and other credits............               48                --
Other................................................               --               221
Valuation allowance..................................           (7,335)           (6,226)
                                                             ------------       ----------
                                                                57,291            15,994
Deferred income tax liabilities:
Depreciable and amoritizable assets..................          (54,758)          (15,994)
Prepaid assets and other.............................           (2,533)               --
                                                             ------------       ----------
Net deferred income taxes............................        $      --          $     --
                                                             ============       ==========

                                                          Outstanding       Weighted Average
                                                             Options        Exercise Price
                                                          -------------    -----------------
Balance at December 31, 2001..........................      8,888,488      $            3.31
  Granted.............................................             --                     --
  Canceled............................................     (3,744,548)                  3.24
  Exercised...........................................             --                     --
                                                          -------------    -----------------
Balance at December 31, 2002..........................      5,143,940                   3.36
  Granted.............................................             --                     --
  Canceled............................................     (5,143,940)                  3.36
  Exercised...........................................             --                     --
                                                          -------------    -----------------
Balance at May 31, 2003...............................             --      $              --
                                                          =============    ==================

                                                                Successor Company
                                                          ---------------------------
                                                                    December 31,
                                                          ---------------------------
                                                               2004             2003
                                                          -------------   -----------
                                                                   (in thousands)

Rental equipment......................................   $    508,664      $  396,009
Less: accumulated depreciation........................       (140,488)        (48,933)
                                                         --------------    -----------
Rental equipment, net.................................   $    368,176      $  347,076
                                                         ==============    ===========

                                                                Successor Company
                                                          ---------------------------
                                                                    December 31,
                                                          ---------------------------
                                                               2004             2003
                                                          -------------   -----------
                                                                   (in thousands)

Buildings and improvements............................   $     42,015      $   38,576
Furniture, fixtures and office equipment..............         10,012           6,293
Vehicles, delivery and shop equipment.................         36,898          30,263
Construction in progress..............................          2,350             342
                                                         --------------    -----------
                                                               91,275          75,474
Less: accumulated depreciation and amortization.......        (29,283)        (13,398)
                                                         --------------    -----------
Property and equipment, net...........................   $     61,992      $   62,076
                                                         ==============    ===========

                                                                                     Successor Company
                                                                -------------------------------------------------------
                                                                    First         Second          Third          Fourth
                                                                   Quarter        Quarter        Quarter        Quarter
                                                                -------------------------------------------------------
                                                                           (in thousands, except per share data)
2004
Revenue...................................................      $  120,023     $  144,142     $  165,843     $  159,652
Gross profit..............................................          14,078         39,091         51,322         40,149
Operating income (loss)...................................         (12,781)         8,882         20,744         10,586
Net income (loss).........................................      $  (20,287)    $    1,207     $   14,091     $    4,393
                                                                ============   ==========     ===========    ==========

                                                               Predecessor Company               Successor Company
                                                         -----------------------------   -----------------------------------
                                                                                 Second Quarter
                                                                          -------------------------
                                                            First      First Two           Last       Third        Fourth
                                                           Quarter      Months            Month      Quarter       Quarter
                                                        ----------  -------------     ------------- ----------- ------------
                                                                    (in thousands, except per share data)
2003
Revenue..........................................       $  92,568   $    83,498       $    41,926    $ 135,426  $   133,185
Gross profit (loss)..............................          (4,495)          629             8,974       35,414       25,958
Operating income (loss)..........................         (28,299)      (18,191)              291        9,718      (10,847)
Net income (loss)................................       $ (22,467)  $ 1,374,024       $      (832)  $    6,008  $   (19,675)
                                                        ==========  =============     ============= =========== ============
Basic net income (loss) per share................       $   (0.39)  $     23.95
                                                        ==========  =============
Diluted net income (loss) per share..............       $   (0.39)  $     23.95
                                                        ==========  =============

                                                      Balance at                                              Balance
                                                       Beginning   Charged to                                    at
                                                          of        Costs and                                  End of
Descriptions                                            Period      Expenses      Deductions       Other       Period
- ------------                                         ------------  -----------  --------------    ---------- ----------
Allowances for Doubtful Accounts:
  For the year ended December 31, 2004
   --Successor Company............................     $  10,960    $   4,889    $  (7,540) (a)   $     --    $   8,309
  For the seven months ended
   December 31, 2003-- Successor Company..........        17,947        5,392      (12,379) (a)         --       10,960
  For the five months ended May 31, 2003
   -- Predecessor Company.........................        16,826        3,211       (2,090) (a)         --       17,947
  For the year ended December 31, 2002
   -- Predecessor Company.........................        26,109       11,645      (20,928) (a)         --       16,826
Restructuring Reserves:
  For the five months ended May 31, 2003
   -- Predecessor Company.........................         2,139           --           --          (2,139)(b)       --
  For the year ended December 31, 2002
   -- Predecessor Company.........................     $   2,139    $      --    $      --        $     --    $   2,139