NATIONSRENT INC - 10-K Annual Report

Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

------------------------

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________

Commission File Number: 001-14299

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 31-1570069
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification Number)
Organization)

450 EAST LAS OLAS BOULEVARD, SUITE 1400 33301
FORT LAUDERDALE, FLORIDA (Zip Code)
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (954) 760-6550

Securities Registered Pursuant To Section 12(b) of the Act:

NONE

Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of April 30, 2002, the registrant had 57,364,437 shares of common stock,
$.01 par value per share, outstanding and, at such date, the aggregate market
value of the shares of common stock held by non-affiliates of the registrant was
approximately $5.6 million.

DOCUMENTS INCORPORATED BY REFERENCE

None

INDEX
TO FORM 10-K

i

CERTAIN STATEMENTS AND INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K MAY
INCLUDE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, INCLUDING IN PARTICULAR THE STATEMENTS ABOUT OUR PLANS,
STRATEGIES AND PROSPECTS UNDER ITEM 1. -- "BUSINESS" AND ITEM
7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS." THESE STATEMENTS ARE BASED ON OUR CURRENT PLANS AND EXPECTATIONS
AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL FUTURE ACTIVITIES
AND RESULTS TO BE MATERIALLY DIFFERENCE FROM THOSE SET FORTH IN THESE
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM OUR FORWARD-LOOKING STATEMENTS ARE SET FORTH BELOW IN
ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- FACTORS THAT MAY AFFECT FUTURE RESULTS" AND ELSEWHERE
IN THIS ANNUAL REPORT ON FORM 10-K. WE MAKE NO COMMITMENT TO DISCLOSE ANY
REVISIONS TO FORWARD-LOOKING STATEMENTS, OR ANY FACT, EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF THAT MAY BEAR UPON FORWARD-LOOKING STATEMENTS.

PART I

ITEM 1. BUSINESS

INTRODUCTION

NationsRent, Inc., a Delaware corporation, together with its subsidiaries
(the "Company," "NationsRent," the "Registrant," or in connection with the
Chapter 11 Cases (as defined below) the "Debtors"), is a provider of rental
equipment in the United States with over 230 locations in 26 states. We offer a
comprehensive line of equipment for rent primarily to a broad range of
construction and industrial customers including general contractors,
subcontractors, highway contractors, manufacturing plants and distribution
centers. We also sell used and new equipment, spare parts and supplies, and
provide maintenance and repair services.

PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

On December 17, 2001 (the "Petition Date"), the Debtors filed voluntary
petitions for reorganization under chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). The chapter 11 cases pending for
the Debtors (the "Chapter 11 Cases") are being jointly administered for
procedural purposes.

In conjunction with the commencement of the Chapter 11 Cases, the Debtors
sought and obtained several orders from the Bankruptcy Court which were intended
to enable the Debtors to continue to operate in the normal course of business
during the Chapter 11 Cases, including orders to (i) permit the Debtors to
operate their consolidated cash management system during the Chapter 11 Cases in
substantially the same manner as it was operated prior to the commencement of
the Chapter 11 Cases, (ii) authorize payment of prepetition employee salaries,
wages, and benefits and reimbursement of prepetition employee business expenses,
(iii) authorize payment of prepetition sales, payroll, and use taxes owed by the
Debtors, (iv) authorize payment of certain prepetition obligations to customers,
(v) continue workers' compensation insurance programs and certain pre-petition
claims, premiums and related expenses, (vi) authorize payment of certain
mechanics' lien and freight charges, (vii) determine adequate assurance of
payment for future utility services, (viii) authorize payment of installments
under insurance premium finance agreements, (ix) authorize maintenance and
continuation of insurance programs and related relief, and (x) authorize payment
of certain other prepetition claims.

In January 2002, the United States trustee for the District of Delaware
appointed an Official Committee of Unsecured Creditors in accordance with the
provisions of the Bankruptcy Code. In March 2002, the Bankruptcy Court also
entered an order (the "DIP Financing Order") authorizing the Debtors to enter
into a $55.0 million debtor-in-possession financing facility, dated December 18,
2002, as amended as of January 31, 2002 (the "DIP Financing Facility"), with
Fleet National Bank as agent for a syndicate of financial institutions comprised
of certain of the Debtors' prepetition senior secured lenders, and to grant
first priority priming liens, mortgages, and security interests on substantially
all of the assets of the Debtors to secure the

DIP Financing Facility. See Item 7. -- "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" below for a further discussion regarding the DIP Financing Facility.

The Bankruptcy Code provides that the Debtors have the exclusive right for
certain specified periods during which only they may file and solicit
acceptances of a plan of reorganization. The exclusive period of the Debtors to
file a plan for reorganization was set to expire on April 15, 2002. In May 2002,
the Bankruptcy Court approved an initial extension of the exclusive period until
August 15, 2002 with the right to seek further extensions. If the Debtors fail
to file a plan of reorganization during this exclusive period or any extensions
thereof or, after such plan has been filed, if the Debtors fail to obtain
acceptance of such plan from the requisite impaired classes of creditors and
equity holders during the exclusive solicitation period, any party in interest,
including a creditor, an equity holder, a committee of creditors or equity
holders, or an indenture trustee, may file their own plan of reorganization for
the Debtors.

The confirmation of a plan of reorganization is one of our primary
objectives. After negotiations with various parties in interest, we expect to
file a plan of reorganization with the Bankruptcy Court to reorganize our
business and to restructure our obligations. After a plan of reorganization has
been filed with the Bankruptcy Court, the plan, along with a disclosure
statement approved by the Bankruptcy Court, will be sent to all creditors and
equity holders. Following the solicitation period, the Bankruptcy Court will
consider whether to confirm the plan. In order to confirm a plan of
reorganization, the Bankruptcy Court, among other things, is required to find
that (i) with respect to each impaired class of creditors and equity holders,
each holder in such class has accepted the plan or will, pursuant to the plan,
receive at least as much as such holder would receive in a liquidation, (ii)
each impaired class of creditors and equity holders has accepted the plan by the
requisite vote (except as described in the following sentence), and (iii)
confirmation of the plan is not likely to be followed by a liquidation or a need
for further financial reorganization of the Debtors or any successors to the
Debtors unless the plan proposes such liquidation or reorganization. If any
impaired class of creditors or equity holders does not accept the plan and,
assuming that all of the other requirements of the Bankruptcy Code are met, the
proponent of the plan may invoke the "cram down" provisions of the Bankruptcy
Code. Under these provisions, the Bankruptcy Court may confirm a plan
notwithstanding the non-acceptance of the plan by an impaired class of creditors
or equity holders if certain requirements of the Bankruptcy Code are met. These
requirements may, among other things, necessitate payment in full for senior
classes of creditors before payment to a junior class can be made. As a result
of the amount of our prepetition indebtedness, our financial performance and the
availability of the "cram down" provisions under the Bankruptcy Code, we believe
that the Company's equity holders will not receive any value or distribution for
their interests under a plan or plans of reorganization. See Item
7. -- "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Factors That May Affect Future Results."

Under bankruptcy law, actions by creditors to collect prepetition
indebtedness owed by the Debtors at the filing date, as well as most litigation
pending against us, are stayed and other prepetition contractual obligations may
not be enforced against the Debtors. In addition, the Debtors have the right,
subject to Bankruptcy Court approval and other conditions, to assume or reject
any prepetition executory contracts and unexpired leases. Parties affected by
these rejections may file prepetition damage claims with the Bankruptcy Court.
We have prepared and submitted the schedules setting forth the Debtors' assets
and liabilities as of the date of the petition as reflected in our accounting
records. The amounts of claims filed by creditors could be significantly
different from their recorded amounts. Due to material uncertainties, it is not
possible to predict the length of time we will operate under chapter 11
protection, the outcome of the proceedings in general, whether we will continue
to operate under our current organizational structure, or the effect of the
proceedings on our business or the recovery by creditors and our equity holders.

STRATEGIC INITIATIVES

In late 2000 and early 2001, we implemented a restructuring plan to address
a significant imbalance between our revenue and costs. This plan included
disposing of excess rental equipment, the closing of certain offices and
locations and certain other cost cutting measures. See Item 7. -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- 2000
Restructuring Plan." Notwithstanding
2

these efforts, as a result of continuing weakness in the construction industry
and heightened competition in the equipment rental industry, we continued to
experience a decline in our operating results causing significant constraints on
our liquidity. Under these circumstances, we determined that it was in the best
interests of our stakeholders to file the Chapter 11 Cases to allow us the
opportunity to restructure our financial obligations, focus on our operations
and develop and implement a new business model.

In connection with our Chapter 11 Cases, we have prepared and are
implementing a comprehensive strategic business plan which we believe will
address the issues and challenges we have faced in both our business and the
industry in general. The strategic initiatives set forth in the plan include:

- business stabilization and organization restructuring through the
establishment of the individual store as the basic organizational unit and
increasing efficiencies through consolidation of regions and reducing
overhead costs;

- fleet optimization through the restructuring or refinancing of
operating leases, better management of the aging, size and mix of the fleet
and enhancement of our preventative maintenance program;

- store rationalization through the closure of underperforming and
isolated locations; and

- revenue enhancement through the expansion of our NationsRent rental
centers at home improvement stores of Lowe's Companies, Inc. ("Lowe's") and
increasing our customer base.

We believe that the plan's focus on the individual store and improved fleet
utilization will allow us to better manage our existing asset base in the
context of our limited access to capital in a slow growth environment.

MANAGEMENT CHANGES

In connection with our reorganization efforts, we have made certain changes
to our senior management team. In December 2001, we entered into an Executive
Transition Agreement with James L. Kirk, who had been serving as our Chairman
and Chief Executive Officer. Mr. Kirk resigned in February 2002. Details of Mr.
Kirk's Executive Transition Agreement are contained in footnote (1) to the
Summary Compensation Table included elsewhere in this Annual Report.

Following Mr. Kirk's resignation, Philip V. Petrocelli was appointed
President and Chief Executive Officer on an interim basis until a permanent
President and Chief Executive officer could be identified. Our DIP Financing
Facility requires that we hire a President and Chief Executive Officer
acceptable to the lenders under the DIP Financing Facility by June 30, 2002.

BACKGROUND

NationsRent was founded in August 1997. Since inception, we have acquired
platform companies in target markets, opened or acquired additional convenient
locations concentrated around those businesses and expanded the selection and
availability of our rental fleet. As part of building a nationally branded
network of rental centers, we conform the physical appearance and product
offerings of our stores to a uniform format. Distinguishing characteristics of
this format include a full line of rental items from small tools to heavy
equipment, a wide variety of rental equipment, prominent use of the NationsRent
logo and colors, and attractive, well organized and clean store facilities. In
addition, our stores seek to offer a high level of customer service, which is
supported through employee training and information systems.

3

Our locations offer for rent a full range of rental equipment, including
the following:

- backhoes - aerial lifts and work platforms S forklifts
- bulldozers - compressors and generators - excavators
- pressure washers - specialized hand tools - wheel loaders
- skid steer loaders - trailers and storage containers - lawn and garden tools
- light towers - pumps

From August 1997 through April 2000, we acquired 58 equipment rental
businesses. Until late 2000, our operating strategy had been focused on building
a national platform in target markets, establishing the NationsRent brand and
creating a foundation for future internal growth. In late 2000, as a result of
adverse business conditions, we terminated our acquisition program and began
implementing an operational restructuring plan to cut costs and increase cash
flow, including the disposal of excess rental fleet, the closing of certain
offices and locations and other cost cutting measures. Our focus has now shifted
to internal operations and improved management of our existing asset base. In
the near term, internal growth will be limited to increasing the number of
NationsRent rental centers located in Lowe's home improvement stores, through
our strategic alliances with Lowe's. See "-- Lowe's Strategic Alliance."

INDUSTRY OVERVIEW

According to industry sources, the United States equipment rental industry
grew from an estimated $614.0 million in revenue in 1982 to nearly $25.0 billion
in 2001. Over the last 11 years the compounded annual growth rate of the
industry is approximately 13.0%. Construction and industrial companies primarily
have driven this growth by increasingly outsourcing their equipment needs to
reduce investment in non-core assets and convert cost from fixed to variable.
The growth rate in the rental industry slowed dramatically in 2001 to
approximately 3.0%, largely as a result of slowing construction activity in 2001
and the corresponding contraction in the construction equipment industry.

OPERATIONS

As of April 30, 2002 we operate over 230 locations in 26 states. Our
operations consist of:

- renting a full range of equipment to construction and industrial
customers;

- selling used equipment inventory;

- selling new equipment; and

- selling parts, supplies and merchandise and providing repair and
maintenance services to complement our equipment rentals and sales.

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 lifts and work platforms, air compressors,
backhoes, boom lifts, bulldozers, ditch equipment, forklifts, generators,
excavators, wheel loaders and skid loaders, pumps, light towers, storage
containers, lawn and garden tools, saws, scissor lifts and pressure washers. 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 periodic sales of
used equipment and conduct preventive maintenance. These practices are designed
to increase equipment utilization, enhance resale values and extend the service
life of equipment.

Used Equipment Sales. We periodically sell used equipment to adjust the
size and composition of our rental equipment inventory in response to changing
market conditions and to maintain the quality and low average age of our rental
equipment. We attempt to balance the revenue obtainable from used equipment
sales with the revenue obtainable from continued equipment rentals.

4

New Equipment Sales. We are a distributor of new equipment on behalf of
certain nationally known equipment manufacturers.

Merchandise, Parts, Supplies and Service. We sell merchandise, parts and
supplies to our customers in conjunction with our equipment rental and sales
business. We provide repair service to rental customers and offer maintenance
service to customers who own equipment.

LOWE'S STRATEGIC ALLIANCE

In October 2000, we entered into an exclusive multi-year strategic alliance
with Lowe's to operate NationsRent rental centers in select Lowe's home
improvement stores. This multi-year alliance followed a six-month, six-store
pilot program which commenced in April 2000. Operating as a store within a store
adjacent to the entrance of a Lowe's store, the NationsRent stores will offer
for rent our full line of construction tools and equipment. As with all other
NationsRent stores in a particular market, customers will have access through a
Lowe's rental center to all of the equipment, infrastructure and personnel
available in that market. The alliance is designed to offer professional
contractors one stop shopping with convenient access to both building supplies
and rental equipment from complementary brands focused on customer service.

Lowe's (NYSE: LOW) is one of the country's premier home improvement
retailers and has annual sales of more than $22.1 billion. Lowe's serves more
than four million do-it-yourself retail and commercial business customers
through more than 785 stores in 42 states.

As of April 30, 2002, we operated 47 rental centers in Lowe's home
improvement stores in 8 states. We expect to open an additional 23 of these
rental centers by the end of 2002. We believe that our strategic alliance with
Lowe's will offer us a number of competitive advantages, including continued low
cost penetration in our existing markets, an efficient low cost way to enter new
markets, access to a new customer segment, the do-it-yourselfer, which is
estimated to be approximately $135.0 billion in annual sales, and increased
brand awareness by virtue of Lowe's high customer traffic locations and
co-promotions with Lowe's.

In April 2002, the Bankruptcy Court approved the Company's assumption of
its strategic alliance agreement with Lowe's, together with all of the leases of
the Company's rental centers at Lowe's home improvement stores. Accordingly, we
are continuing to open NationsRent rental centers in select Lowe's home
improvement stores.

CUSTOMERS

We serve over 300,000 active accounts in the construction, industrial,
homeowner and other segments of the equipment rental industry. No single
customer accounted for more than 10.0% of our 2001 revenue. Our customers vary
in size from large Fortune 500 companies to small construction contractors,
subcontractors, machine operators and homeowners.

We do not provide purchase financing to customers. We rent equipment, sell
parts and provide repair services on account to customers who are screened
through a credit application process. Customers can arrange financing of
purchases of large equipment through a variety of sources including
manufacturers, banks, finance companies and other financial institutions. We
have entered into agreements with financing sources to provide financing to our
customers for the purchase of new and used equipment.

SALES AND MARKETING

We maintain a strong marketing and sales orientation throughout our
organization in order 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 analysis, competitive situations and selling strategies. Based on the
results of our analyses, we develop marketing and sales strategies.

5

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

We employ over 290 equipment rental 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
Equipment Data Reports, F.W. Dodge Reports, CMD Reports and PEC Reports
(Planning, Engineering and Construction), 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 which include the name
"NationsRent." Management views these service marks as material to NationsRent.

PURCHASING

We acquire equipment from vendors with reputations for product quality and
reliability. Our size and the quantity of equipment we acquire enable us to
purchase most 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 vendors to ensure
the timely delivery of new equipment. We believe that we have sufficient
alternative sources of supply for the equipment we purchase in each of our
principal product categories. We acquire our rental equipment inventory through
a combination of purchase and lease arrangements.

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 for
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 and value, and
convenience. We compete with independent third parties in all of the markets in
which we operate. As a result of industry consolidation in recent years, many of
our competitors also operate on a regional or national basis. We also compete
with equipment manufacturers which sell and rent equipment to customers,
directly and through their dealer networks. We also compete with national home
improvement retailers, such as Home Depot, with their small tool rental centers
within select Home Depot home improvement stores. Some of our competitors have
greater financial resources and name recognition than we do.

At times, industry-wide price pressures on certain classes of equipment
have adversely affected equipment rental companies, and we have, on such
occasions, priced our equipment 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.

ENVIRONMENTAL, SAFETY AND OTHER GOVERNMENTAL REGULATION

Our equipment, facilities and operations are subject to certain federal,
state and local laws and regulations relating to environmental protection and
occupational health and safety, including those governing wastewater discharges,
the use, treatment, storage and disposal of solid and hazardous wastes and
materials, air quality and the remediation of contamination associated with the
release of hazardous substances. For example, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, provides for,
among other things, the remediation of sites from which there is a release or
threatened release of a hazardous substance into the environment and may impose
liability for the costs of cleanup and for damages to natural

6

resources upon past and current owners and operators of such sites. In addition,
the Federal Water Pollution Control Act of 1972 regulates the discharge of
pollutants into streams, rivers and other waters and may require that we obtain
discharge permits. The Occupational Safety and Health Act of 1970 authorizes the
promulgation of occupational safety and health standards which apply to our
facilities and operations. In addition to federal environmental and safety
regulations, the states and certain localities in which we operate have their
own laws and regulations governing solid waste disposal, water pollution and, in
most cases, releases and cleanup of hazardous substances as well as liability
for such matters, which may be applicable to our facilities and operations.

Certain of our existing and former locations use and have used substances,
and currently generate or have generated or disposed of wastes, which are or may
be considered hazardous or otherwise are subject to applicable environmental
requirements. In particular, we store and dispense, or in the past we or the
prior owners or operators have stored or dispensed, petroleum products from
above-ground storage tanks and, in certain cases, underground storage tanks. We
also operate locations which in the past used hazardous materials, including
solvents, to clean and maintain equipment, and generate and dispose of solid and
hazardous wastes, including batteries, used motor oil, radiator fluid and
solvents. In connection with such activities, we have incurred certain capital
expenditures and other compliance costs which are expensed on a current basis
and which, to date, have not been material to our financial condition or results
of operations.

Additionally, in connection with our previous acquisitions of equipment
rental businesses, we have undertaken environmental assessments of substantially
all locations that we will continue to operate following acquisition. We also
undertake environmental assessments at all facilities prior to leasing them for
new locations. We do not currently maintain comprehensive insurance covering
environmental liabilities at our sites. However, the sellers of each of the
equipment rental businesses which we have acquired and the landlords of
facilities we have leased have indemnified us with respect to pre-existing
environmental liabilities associated with such businesses or facilities. Based
on currently available information, we believe that it is unlikely that we will
have to incur material capital expenditures or other material compliance or
remediation costs for environmental and safety matters in the foreseeable
future. We cannot assure you, however, that federal, state or local
environmental and safety requirements will not become more stringent or be
interpreted and applied more stringently in the future. We also cannot assure
you that in connection with leasing new facilities we will identify all existing
adverse environmental conditions or that indemnification from landlords will be
enforceable or sufficient to cover such conditions. Such future changes or
interpretations, or the identification of adverse environmental conditions
following the time we begin operating a site, could result in additional
environmental compliance or remediation costs which we do not currently
anticipate, which could be material to our financial condition or results of
operations.

In addition to environmental and safety regulations, we may also be subject
to Department of Transportation regulations regarding the operation of motor
vehicles and consumer protection laws affecting our operations.

EMPLOYEES

As of April 30, 2002, we employed approximately 3,146 persons,
approximately 148 of which were covered by a collective bargaining agreement. We
believe our relations with our employees are good. For a description of certain
work force reduction initiatives, see Item 7. -- "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- 2000 Restructuring
Plan."

ITEM 2. PROPERTIES

Our corporate headquarters are located in Fort Lauderdale, Florida, in
leased premises. Substantially all of our properties and equipment are subject
to liens securing payment of portions of our indebtedness. As of April 30, 2002,
we operated over 230 rental locations located in 26 states: Alabama, Arizona,
California, Colorado, Connecticut, Florida, Georgia, Indiana, Kentucky,
Louisiana, Maine, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey,
New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Texas, Utah, and West Virginia. We lease the real estate for all but
two of our locations

7

and also lease certain of our equipment. We believe that all of our facilities
are sufficient for our current needs. For a description of certain facility
closure and consolidation activities, see Item 7. -- "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- 2000
Restructuring Plan."

ITEM 3. LEGAL PROCEEDINGS

On December 17, 2001, NationsRent and all of its subsidiaries filed the
Chapter 11 Cases in the United States Bankruptcy Court for the District of
Delaware in Wilmington, Delaware. The cases were consolidated for procedural
purposes and designated as Case No. 01-11628 (PJW). On May 20, 2002, the
Bankruptcy Court approved the Debtors' motion to establish a bar date for filing
proofs of claim. As a result, the Debtors selected August 5, 2002 as the bar
date (the "Bar Date"). In connection with the Chapter 11 Cases, proofs of claim
have been and will be filed against the Debtors with the Bankruptcy Court or
with the Debtors' claims and noticing agent, Logan & Company, Inc. The Debtors
will then be required to resolve proofs of claim that differ in nature,
classification or amount from the Debtors' books and records through
negotiations with the applicable claimants and the filing and prosecution of
objections to such claims.

The Debtors were party to various legal proceedings arising in the ordinary
course of their business prior to the filing of the Chapter 11 Cases, none of
which were material to the Debtors' financial condition or results of
operations. All such proceedings have been stayed as of the Petition Date,
unless the stay has been or will be lifted by the Bankruptcy Court, and any
liabilities related to such claims are subject to compromise pursuant to a plan
of reorganization in the Chapter 11 Cases.

We have also become party to legal proceedings arising in the ordinary
course of business after the Petition Date, none of which are material to our
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to our stockholders during the fourth quarter of
2001.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock, $.01 par value per share, was traded on the New York
Stock Exchange (the "NYSE") under the symbol "NRI" until the NYSE suspended
trading in our common stock on November 23, 2001. The following table sets
forth, for the periods indicated, the range of the high and low sales prices per
share for the common stock on the NYSE.

Our common stock was delisted from the NYSE in December 2001. After the
NYSE suspended trading in our common stock, it began trading on the
over-the-counter electronic bulletin board, commonly known as the pink sheets
(the "OTCBB"), under the symbol "NRNQE." During the period from the time trading

8

commenced on the OTCBB to the last day of the Company's fiscal year 2001, the
reported bid price for the common stock on the OTCBB ranged from a high of $0.13
to a low of $0.02. The quotations reflect interdealer prices without retail
mark-up, mark-down or commission and may not represent actual transactions. As
of April 30, 2002, there were approximately 167 holders of record of our common
stock.

A liquid public market for our common stock does not exist, which may make
it difficult for you to sell our common stock. While our common stock is
currently traded on the OTCBB, there may be very limited demand for our common
stock. As a result of our late filings of required reports under the Securities
Exchange Act of 1934, our stock will not be eligible for trading on the OTCBB
beginning June 1, 2002, unless all such required reports are filed prior to that
date.

NationsRent cautions investors that an investment in any of its securities
is highly speculative. NationsRent believes the existing equity securities of
NationsRent, including its preferred and common stock, has and will have no
value and that any chapter 11 reorganization plan approved by the Bankruptcy
Court will not provide NationsRent's existing equity holders with any
distributions, including any interest in the reorganized debtor.

We have not paid any dividends in the past and presently anticipate that
earnings, if any, will be retained for the development of our business and that
we will not declare dividends on the common stock in the foreseeable future. In
addition, our ability to declare or pay dividends is restricted by the terms of
our credit facilities as well as the terms of the indenture governing our
10 3/8% senior subordinated notes due 2008. See Item 7. -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction
with our Consolidated Financial Statements and notes thereto contained in Part
II, Item 8 of this Annual Report on Form 10-K. The following selected
consolidated financial information summarizes (i) the statement of operations
data for Sam's Equipment Rental, Inc. and Gabriel Trailer Manufacturing Company,
Inc. (collectively, the "Predecessor") for the fiscal years ended March 31, 1997
and the five months ended August 31, 1997 and the selected balance sheet data as
of March 31, 1997 and August 31, 1997, which have been derived from audited
consolidated financial statements not included herein, and (ii) the statement of
operations data of NationsRent for the period from August 14, 1997 (inception)
through December 31, 1997 and for the years ended December 31, 1998, 1999, 2000
and 2001 and selected balance sheet data as of December 31, 1997, 1998, 1999,
2000 and 2001 which have been derived from the audited consolidated financial
statements of NationsRent included herein except for 1997, 1998 and certain 1999
information not included herein. The other data has been derived from the
consolidated financial statements referred to above for the applicable periods.
See also Item 7. -- "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

9

- ---------------

(1) All of our acquisitions to date have been accounted for as purchases and,
accordingly, the operations of the acquired businesses are included in the
statement of operations data and other data from the effective date of
acquisition.
(2) The amortization period for rental equipment depreciation ranges from 36 to
96 months. The amortization period for goodwill was 40 years through
December 31, 2001.
(3) See Item 7. -- "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- 2000 Restructuring Plan."
(4) See Item 8. -- "Financial Statements and Supplementary Data -- Note
3 -- Accounting Policies -- Intangible Assets Related to Acquired
Businesses."
(5) Represents the unreimbursed portion of expenses incurred related to the
proposed merger with Rental Service Corporation ("RSC") that was abandoned
in May 1999. The Company received $6.0 million from RSC as reimbursement for
expenses incurred by the Company in connection with the abandoned merger.
(6) See Item 8. -- "Financial Statements and Supplementary Data -- Note
6 -- Reorganization Items."
(7) Earnings per share data is not included for the Predecessor as such
information would not be representative of the capital structure of the
Company.

10

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis of our consolidated results of
operations and financial condition should be read in conjunction with the
consolidated financial statements and the related notes included elsewhere in
this Annual Report on Form 10-K. Unless otherwise indicated, all information
contained in this Item 7 is as of December 31, 2001.

GENERAL

NationsRent is a leading provider of rental equipment in the United States.
We offer a comprehensive line of equipment for rent primarily to a broad range
of construction and industrial customers including general contractors,
subcontractors, highway contractors, manufacturing plants and distribution
centers. We also sell used and new equipment, spare parts and supplies. As of
April 30, 2002, we operated over 230 equipment rental locations in 26 states. We
have become a leading provider of rental equipment as a result of a combination
of having acquired platform companies in target markets, opened or acquired
additional locations concentrated around those businesses and expanded the
selection and availability of our rental fleet.

We derive our revenue from equipment rentals, sales of new and used
equipment, merchandise, parts, supplies, maintenance and repair services. Rental
revenue is dependent on several factors including demand for rental equipment,
the amount and quality of equipment available for rent, rental rates, weather
conditions and general economic conditions. Revenue generated from the sale of
used equipment is affected by price, general economic conditions and the
condition and age of the equipment. Revenue from the sale of new equipment is
affected by price and general economic conditions. Revenue from the sale of
merchandise, parts and supplies as well as maintenance and repair services is
primarily affected by equipment rental and sales volume.

The principal components of our cost of revenue include equipment
depreciation and lease expense, costs of new and used equipment sold, personnel
costs, occupancy costs, repair and maintenance costs and vehicle operations.
Rental equipment depreciation is calculated using the straight-line method over
the estimated useful life of such equipment. Effective July 1, 2000, we revised
the estimated service lives and residual values for certain of our rental assets
to better allocate the expense over the time that such assets are in our rental
fleet. This change decreased the estimated service lives and increased the
residual values for certain rental assets. The change in estimate resulted in a
decrease of rental equipment depreciation expense of approximately $9.8 million
and a decrease in net loss of approximately $6.0 million or $0.10 per share for
the year ended December 31, 2000. In order to more clearly reflect the cost of
our rental fleet, we have combined operating lease expense related to our rental
fleet with rental equipment depreciation and reported these amounts on a
separate line in our statements of operations.

Selling, general and administrative expenses include management salaries,
advertising and marketing, travel, administrative and clerical salaries, data
processing and bad debt expense.

Non-rental equipment depreciation and amortization includes the
depreciation of fixed assets that are not offered for rent, amortization of
leasehold improvements and amortization of intangible assets related to the
acquired businesses.

PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

On December 17, 2001, NationsRent and all of its subsidiaries filed
voluntary petitions in the Bankruptcy Court for reorganization under chapter 11
of the Bankruptcy Code. For further discussion of the Chapter 11 Cases, see Item
1. -- "Business -- Proceedings Under Chapter 11 of the Bankruptcy Code" above
and notes to consolidated financial statements included elsewhere in this Annual
Report.

The Debtors are currently operating their business as debtors-in-possession
pursuant to applicable provisions of the Bankruptcy Code. Since the Petition
Date, the Debtors have continued to conduct business in the ordinary course.
Management is in the process of stabilizing the business of the Debtors and
evaluating their operations in connection with the development of a plan of
reorganization. After developing a plan of reorganization, the Debtors will seek
the requisite acceptance of the plan by impaired creditors and equity
11

holders and confirmation of the plan by the Bankruptcy Court, all in accordance
with the applicable provisions of the Bankruptcy Code.

During the pendency of the Chapter 11 Cases, the Debtors may, with
Bankruptcy Court approval, sell assets and settle liabilities outside the
ordinary course of business, including for amounts other than those reflected on
the Debtors' financial statements. The Debtors are in the process of reviewing
their operations and identifying assets for disposition.

The administrative and reorganization expenses resulting from the Chapter
11 Cases will unfavorably affect the Debtors' results of operations. Future
results of operations may also be affected by other factors related to the
Chapter 11 Cases. See "-- Factors That May Affect Future Results."

The confirmation of a plan of reorganization is one of our primary
objectives. After negotiations with various parties in interest, we expect to
present a plan of reorganization to the Bankruptcy Court to reorganize our
business and to restructure our obligations.

The plan of reorganization, when filed, will set forth the means for
treating claims, including liabilities subject to compromise and interests in
our Company. Such means may take a number of different forms. A plan of
reorganization may result in, among other things, significant dilution or
elimination of certain classes of existing interests as a result of the issuance
of equity securities to creditors or new investors. The confirmation of any plan
of reorganization will require creditor acceptance as required under the
Bankruptcy Code and approval of the Bankruptcy Court.

Under the Bankruptcy Code, postpetition liabilities and prepetition
liabilities subject to compromise must be satisfied before equity holders can
receive any distribution. The ultimate recovery to equity holders, if any, will
not be determined until the end of the case when the fair value of our assets is
compared to the liabilities and claims against us. As a result of the amount of
our prepetition indebtedness, our financial performance and the provisions of
the Bankruptcy Code, we believe that the Company's equity holders will not
receive any value or distribution for their interests under a plan or plans of
reorganization.

Under bankruptcy law, actions by creditors to collect prepetition
indebtedness owed by the Debtors at the filing date, as well as most litigation
pending against us, are stayed and other prepetition contractual obligations may
not be enforced against the Debtors. In addition, the Debtors have the right,
subject to Bankruptcy Court approval and other conditions, to assume or reject
any prepetition executory contracts and unexpired leases. Parties affected by
these rejections may file prepetition damage claims with the Bankruptcy Court.
We have prepared and submitted the schedules setting forth the Debtors' assets
and liabilities as of the date of the petition as reflected in our accounting
records. The amounts of claims filed by creditors could be significantly
different from their recorded amounts. Due to material uncertainties, it is not
possible to predict the length of time we will operate under chapter 11
protection, the outcome of the proceedings in general, whether we will continue
to operate under our current organizational structure, or the effect of the
proceedings on our business or the recovery by creditors and our equity holders.

BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets, and payment of liabilities in the ordinary course of business, and do
not reflect adjustments that might result if the Debtors are unable to continue
as a going concern. The Debtors' history of significant losses, their
stockholder deficit and their Chapter 11 Cases raise substantial doubt regarding
the Company's ability to continue as a going concern. The Debtors intend to file
a plan or plans of reorganization with the Bankruptcy Court. Continuing as a
going concern is dependent upon, among other things, the Debtors' formulation of
a plan or plans of reorganization acceptable to the Bankruptcy Court and
creditors, the success of future business operations, and the generation of
sufficient cash from operations and financing sources to meet the Company's
obligations. The consolidated financial statements do not reflect: (i) the
realizable value of assets on a liquidation basis or their availability to
satisfy liabilities; (ii) aggregate prepetition liability amounts that may be
allowed for unrecorded claims or contingencies, or their status or priority;
(iii) the effect of any changes to the Debtors' capital structure or in the
Debtors'

12

business operations as the result of an approved plan or plans of
reorganization; or (iv) adjustments to the carrying value of assets or liability
amounts that may be necessary as a result of actions by the Bankruptcy Court.
Adjustments necessitated by a plan of reorganization could materially change the
amounts reported in the consolidated financial statements included elsewhere
herein.

LIQUIDITY AND CAPITAL RESOURCES

Prepetition Capital Resources

Historically, we funded our cash requirements with borrowings under our
senior credit facility, proceeds from the issuance of debt and equity securities
and cash from operations. As of the petition date, our senior credit facility
consisted of a $395.4 million term loan and a revolving credit facility with an
outstanding balance of $355.9 million. The senior credit facility is secured by
substantially all of our assets.

As a result of our reliance on debt-based financing facilities, we became
highly leveraged. Our ability to meet our financial obligations under these
financing arrangements was dependent on, among other things, our results of
operations and our ability to maintain compliance with our debt covenants.
Beginning in 2000, we experienced increased financial stress and liquidity
issues, as well as significant losses from operations. At December 31, 2001, our
accumulated deficit reached approximately $970.5 million.

Despite our restructuring efforts described below, in December 2001, we
failed to make a principal payment due on the term loan portion of our senior
credit facility, an interest payment due on our 10.375% Senior Subordinated
Notes due 2008 (the "Subordinated Notes"), principal and interest payments on
certain subordinated notes issued in connection with acquisitions (the
"Acquisition Notes") and certain other scheduled payments.

Under the terms of our senior credit facility, upon an event of default,
including the failure to make a required interest payment, the senior lenders
have several rights and remedies available to them, including declaring all
amounts outstanding, together with accrued interest, to be immediately due and
payable. The senior lenders had the right to proceed against the collateral
securing the facility, which includes substantially all of our assets.
Similarly, as a result of our failure to make interest and/or principal payments
under the Acquisition Notes and the Subordinated Notes, subject to the
subordination provisions of such instruments, the trustee or holders of those
notes were also permitted to declare those notes and accrued interest
immediately due and payable. Our other debt and lease arrangements also contain
cross-default provisions, which gave the parties thereto various remedies,
including acceleration of all amounts outstanding, foreclosure on collateral
securing such obligations and termination rights.

Our deteriorating financial condition, combined with continuing economic
weakness, heightened competition in the construction and rental equipment
industries contributed to significant strain on our liquidity and compounded our
substantial earnings and cash flow pressures. Under these circumstances, we
determined that it was in the best interests of our stakeholders to file Chapter
11 Cases to allow us the opportunity to restructure our financial obligations,
focus on our operations and develop and implement a new business model.

As a result of filing the Chapter 11 Cases, our lenders and parties to
various contracts and agreements were prohibited from exercising the remedies
that would have been available to them upon our default.

Pursuant to the Bankruptcy Code, our prepetition obligations, including
obligations under debt instruments, generally may not be enforced against the
Debtors, and any actions to collect prepetition indebtedness are automatically
stayed, unless the stay is lifted by order of the Bankruptcy Court. In addition,
as debtors-in-possession, the Debtors have the right, subject to Bankruptcy
Court approval and certain other limitations, to assume or reject executory
contracts and unexpired leases. In this context, "assumption" means that the
Debtors agree to perform their obligations and cure all existing defaults under
the contract or lease, and "rejection" means that the Debtors are relieved from
their obligations to perform further under the contract or lease, but are
subject to a prepetition claim for damages for the breach thereof. Any damages
resulting from rejection of executory contracts and unexpired leases will be
treated as general unsecured claims in the Chapter 11 Cases unless such claims
had been secured on a prepetition basis prior to the Petition Date. To

13

date, the Debtors have rejected certain executory contracts and unexpired leases
of nonresidential real property and the Debtors continue to review their
remaining executory contracts and unexpired leases to determine which, if any,
they will reject in the future. The Debtors cannot presently determine or
reasonably estimate the ultimate liability that may result from rejecting
contracts or leases or from the filing of claims for any rejected contracts or
leases, and no provisions have yet been made for the final resolution of these
items.

Adequacy of Capital Resources

The Debtors are now operating their businesses as debtors-in-possession
under chapter 11 of the Bankruptcy Code. In addition to the cash requirements
necessary to fund ongoing operations, the Company anticipates that it will incur
significant professional fees and other restructuring costs in connection with
the Chapter 11 Cases and the restructuring of its business operations. As a
result of the uncertainty surrounding NationsRent's current circumstances, it is
difficult to predict the Company's actual liquidity needs at this time. However,
based on current and anticipated levels of operations, and efforts to reduce
accounts receivable, the Company anticipates that its cash flow from operations,
together with amounts available under the DIP Financing Facility, will be
adequate to meet its anticipated cash requirements through the end of December
2002. In the event that cash flows and available borrowings under the DIP
Financing Facility are not sufficient to meet future cash requirements, the
Company may be required to reduce planned capital expenditures or seek
additional financing. The Company can provide no assurances that reductions in
planned capital expenditures would be sufficient to cover shortfalls in
available cash or that additional financing would be available or, if available,
offered on acceptable terms. As a result of the Chapter 11 Cases and the
circumstances leading to the filing thereof, NationsRent's access to additional
financing is, and for the foreseeable future will likely continue to be, very
limited. The Company's long-term liquidity requirements and the adequacy of the
Company's capital resources are difficult to predict at this time, and
ultimately cannot be determined until a plan of reorganization has been
developed and confirmed by the Bankruptcy Court in connection with the Chapter
11 Cases.

DIP Financing Facility

On March 6, 2002, the Bankruptcy Court entered the DIP Financing Order
authorizing the Debtors to enter into the $55.0 million DIP Financing Facility
and to grant first priority primary liens, mortgages, security interests, liens
(including priming liens), and superiority claims on substantially all of the
assets of the Debtors to secure the DIP Financing Facility.

Under the terms of the DIP Financing Facility, a revolving credit facility
of up to $55.0 million, including up to $20.0 million for postpetition letters
of credit, is available to the Company until the earliest of (i) December 18,
2002, (ii) the date on which the plan of reorganization becomes effective, (iii)
any material non-compliance with any of the terms of the DIP Financing Order,
(iv) any event of default that shall have occurred under the DIP Financing
Facility, or (v) consummation of a sale of substantially all of the assets of
the Company pursuant to an order of the Bankruptcy Court shall have occurred.
The terms of the DIP Financing Facility provided for an initial facility of
$20.0 million, which increased to $30.0 million upon satisfaction of certain
conditions. In addition, the DIP Financing Facility will increase to $55.0
million upon satisfaction of certain additional conditions, including the
earlier of (i) the agents' acceptance of our business plan which addresses the
restructuring of the Company's business operations and (ii) the hiring of a
permanent president and chief executive officer (acceptable to the agents) and
commencement of his/her duties, which person the Debtors agreed to hire by no
later than June 30, 2002. In any event, the availability under the DIP Financing
Facility will be reduced by $5.0 million on November 30, 2002. Availability
under the DIP Financing Facility is also subject to a borrowing base based upon
trade accounts receivable. Amounts borrowed under the DIP Financing Facility
bear interest per annum equal to the prime rate plus 2.50%. In addition to a
facility fee and an underwriting fee of 0.50% each, there is an unused
commitment fee of 0.50%, a letter of credit fee of 3.25%, and a letter of credit
fronting fee of 0.125%. The DIP Financing Facility is secured by super-priority
claims and liens on the real and personal assets of the Company that also secure
the prepetition senior credit facility. The DIP Financing Facility contains
financial covenants requiring maintenance of an asset coverage ratio and a
minimum operating cash flow, as well as other covenants that limit,

14

among other things, indebtedness, liens, sales of assets, capital expenditures,
investments, and prohibit dividend payments. We are currently in the process of
renegotiating the financial covenants in the DIP Financing Facility to reflect
the financial performance set forth in our strategic business plan submitted to
the agents in March 2002. In addition to containing defaults customary for
similar DIP facilities, a default is also triggered upon the following events:
(i) the Company's permanent president and chief executive officer ceases to
serve for any reason, unless a replacement acceptable to the agents has been
appointed and is serving within 30 days; (ii) the failure of the Company to
submit to the agents, banks, prepetition agents, and prepetition lenders the
Company's capital restructuring plan by May 31, 2002; and (iii) the failure to
file a plan of reorganization and disclosure statement in connection with our
Chapter 11 Cases by June 30, 2002. The DIP Financing Facility also provides that
the net proceeds of any asset sales in the ordinary course of business will
reduce prepetition indebtedness under the senior credit facility.

In connection with the DIP Financing Facility, our prepetition senior
credit facility was amended to provide for subordination of the liens (to the
liens under the DIP Financing Facility) and use of cash collateral in return for
payment of interest on the prepetition senior credit facility.

As of April 30, 2002, the Company had $9.2 million in letters of credit
outstanding under the DIP Financing Facility. Remaining availability under the
DIP Financing Facility as of April 30, 2002, was $10.8 million. At April 30,
2002, we had approximately $27.8 million of cash and cash equivalents.

Liquidity Requirements

Our net cash used in operations was $60.7 million for the twelve months
ended December 31, 2001 compared to net cash provided by operations of $56.1
million for the same period in 2000. The decrease in cash provided by operations
was primarily due to a use of cash related to payments of accounts payable
related to prior year purchases of rental fleet and to lower operating cash
flows generated from store operations. Net cash provided by investing activities
was $44.9 million for the twelve months ended December 31, 2001, primarily
reflecting $17.4 million for purchases of rental equipment, $11.4 million for
purchases of and improvements to property and equipment and $70.8 million of
proceeds from the sale of both rental and non-rental equipment. Cash used in
financing activities was $28.3 million for the twelve months ended December 31,
2001 and was primarily a result of repayments of our senior credit facility.

Our net cash provided by operations was $56.1 million for the year ended
December 31, 2000 compared to $8.5 million for the year ended December 31, 1999.
The increase in cash provided by operations was due primarily to lower working
capital requirements related to our slower growth and to the negotiation of more
favorable payment terms with suppliers for the purchase of equipment during the
year ended December 31, 2000 compared to the year ended December 31, 1999. Net
cash used in investing activities was $150.3 million for the year ended December
31, 2000, primarily reflecting $138.3 million for purchases of rental equipment,
$56.9 million for purchases of and improvements to property and equipment and
net cash consideration of $21.0 million for the acquisition of businesses. Cash
provided by financing activities was $156.7 million for the year ended December
31, 2000 and was primarily a result of net borrowings under our senior credit
facility and the sale of perpetual convertible preferred stock.

Historically, our primary uses of cash have been the funding of
acquisitions and capital expenditures. Through the Petition Date, we have funded
our cash requirements primarily with borrowings under our senior credit
facility, proceeds from the issuance of debt and equity securities, equity
contributions from our founding stockholders and cash provided by operations.

During 2001 and 2000, we added $5.5 million and $139.9 million,
respectively, of new equipment to our rental equipment fleet using operating
leases. These operating leases have terms expiring over the next seven years.

Our short-term cash requirements for our existing operations consist
primarily of expenditures to repair and maintain our rental equipment fleet,
working capital requirements and purchase of merchandise inventory and other
operating activities. In addition, a substantial portion of our cash generated
will be used to make adequate protection payments on our secured debt and to
meet postpetition operating lease obligations.

15

We estimate that equipment expenditures over the next 12 months for our
existing locations and for new store openings will be in the range of $25.0
million to $35.0 million and proceeds from sales from used equipment will be in
the range of $5.0 million to $10.0 million. Approximately two-thirds of the
estimated capital expenditures is to replace existing rental equipment.

During the fiscal year ended December 31, 2001, we opened 30 NationsRent
stores within Lowe's stores. By the end of 2001, we had opened a total of 40
such stores within Lowe's stores, and expect to open 30 additional stores in
2002. We estimate that the average capital costs associated with opening a
Lowe's location to be in the range of $0.3 million to $0.5 million.

We believe cash generated from operations and borrowings under our DIP
Financing Facility will be sufficient to fund our cash requirements for existing
operations, equipment capital expenditures and new store openings through
December 2002.

2000 RESTRUCTURING PLAN

During the fourth quarter of 2000, we implemented a plan to restructure
certain of our operations to address a significant imbalance between our revenue
and costs. During 2001, we implemented additional actions to restructure certain
of our operations pursuant to our 2000 restructuring plan. The restructuring
plan was comprised of the following major components:

- the sale of excess rental equipment, which primarily relates to a portion
of our heavy earthmoving equipment that has the highest unit cost,
requires the most expensive support infrastructure and has the lowest
return on investment;

- the abandonment of certain information system projects that were under
development;

- the elimination of jobs company-wide and the consolidation of various
departments within our organization; and

- the closure of certain rental and office locations.

Pursuant to our restructuring plan, during the fourth quarter of 2000, we
recorded a pre-tax restructuring charge of approximately $72.0 million and
during 2001, we recorded an additional pre-tax restructuring charge of
approximately $9.7 million. The components of these charges, along with the
activity for 2000 (of which $21.8 million was non-cash) and 2001 related to
these charges, are presented in the following table (in thousands):

The charge for rental fleet disposition represented estimated losses on
owned and leased assets identified for sale under the restructuring plan. As of
December 31, 2001, all of the rental equipment that was identified for sale
under the restructuring plan had been sold.

The restructuring plan included the termination and payment of related
severance benefits under our existing severance plan and agreements for
approximately 450 employees, all of whom had been terminated as of December 31,
2001. Payments are expected to be paid through the third quarter of 2003.

During 2001, we modified our restructuring plan related to facility
closures, primarily as a result of changes to our planned openings of
NationsRent rental centers within select Lowe's home improvement stores (see
" -- New Stores"). As a result of the changes to the restructuring plan, three
of the rental facilities originally identified for closure will remain open and
one additional rental facility was identified for closure.

16

The impact of such changes was not material to the original restructuring charge
recorded for store closures. All 16 stores that have been identified for closure
under the restructuring plan, as modified, have been closed as of December 31,
2001. Lease payments for the facility closures extend into 2009 pursuant to the
terms of the facility lease agreements. However, during the first quarter of
2002, we received approval from the Bankruptcy Court to reject the facility
lease agreements. As such, the remaining reserve for such future lease payments
was credited to income, which resulted in a $0.8 million reduction of the
previously recorded charge. The remaining reserve balance at December 31, 2001
for office closures relates to certain office equipment leases that we have not
yet received Bankruptcy Court approval to reject. Such approval is expected to
occur in the second quarter of 2002.

NEW STORES

In October 2000, we entered into an exclusive multi-year strategic alliance
with Lowe's, the world's second largest home improvement retailer, to operate
NationsRent rental centers within select Lowe's home improvement stores.
Operating as a store within a store adjacent to the entrance of a Lowe's store,
the NationsRent stores will rent our full line of construction tools and
equipment to Lowe's customers. We will lease these rental centers from Lowe's
for terms initially expiring in 2008 with two five-year renewal options. The
Lowe's strategic alliance has and will require us to accelerate investments in
systems, training, brand support and other store start-up costs. As of December
2001, we operated 40 NationsRent rental centers at Lowe's locations. In April
2002, the Debtors obtained approval from the Bankruptcy Court to continue the
scheduled opening of NationsRent rental centers within select Lowe's home
improvement stores. Our new store growth during the next several years will
concentrate on our strategic alliance with Lowe's to open and operate
NationsRent rental centers in select Lowe's locations. However, given our recent
financial performance, there can be no assurance that our relationship with
Lowe's will not be impaired.

HISTORICAL RESULTS OF OPERATIONS

Year Ended December 31, 2001 as Compared to Year Ended December 31, 2000

Revenue. Total revenue decreased $74.4 million, or 11.1%, for the year
ended December 31, 2001 when compared to the prior year. Rental revenue
decreased $47.4 million, or 8.7%, for the year ended December 31, 2001 when
compared to the prior year. As discussed above, during the fourth quarter of
2000, we implemented a plan to significantly restructure our operations. The
2000 restructuring plan resulted in the disposal of approximately 12.0% of our
rental fleet and the repositioning of approximately 27.0% of our remaining
rental fleet amongst the markets we serve. In addition, we terminated
approximately 13.0% of our employees and closed approximately 8.0% of our
locations. The restructuring of our operations caused a significant amount of
internal disruptions as we disposed of and repositioned our fleet, with certain
markets being severely impacted by the shift in rental fleet mix from heavy
earth moving equipment to general rental equipment. These factors, coupled with
the continuing weakness in the construction industry, heightened competition in
the equipment rental industry and adverse weather in certain of our markets have
contributed to the decrease in our revenue from the prior year. In addition,
during 2000 and 2001 we divested certain non-core businesses.

Sales of equipment, merchandise, service, parts and supplies during the
twelve months ended December 31, 2001 include revenue of $41.3 million from the
sale of rental fleet pursuant to our restructuring plan discussed above. Such
revenue was recorded at no gross profit.

Gross Profit. Gross profit decreased $120.1 million for the year ended
December 31, 2001 when compared to the prior year. Gross profit as a percentage
of total revenue was 18.7% for the year ended December 31, 2001, compared to
34.6% for the prior year.

Gross profit for the year ended December 31, 2001 was negatively impacted
when compared to the prior year by: (i) the decrease in revenue discussed above,
(ii) an increase in costs associated with new stores opened in 2000 and 2001,
(iii) a $16.2 million decrease in gross profit on sales of used equipment due to
the sales of used equipment pursuant to our 2000 restructuring plan and losses
on sales of non-restructuring used equipment as we continued to liquidate excess
rental fleet in the fourth quarter of 2001, (iv) a $15.5 million increase in
repairs and maintenance expense over the prior year, primarily incurred in the
second half of 2001

17

as a result of an increase in the average age of our fleet due to our capital
constraints discussed above, (v) a $13.6 million provision for rental fleet and
inventory shrinkage and obsolescence recorded in the fourth quarter of 2001 as a
result of physical inventory counts and cost revaluations, and (vi) an increase
in equipment lease expense as a result of leases entered into during the prior
year, offset by a decrease in depreciation expense as a result of the sale of
excess rental fleet in 2001 and the change in the estimated service lives and
salvage values made in July 2000. Gross profit for the year ended December 31,
2001 was positively impacted by cost reductions made pursuant to our 2000
restructuring plan discussed above.

Operating Expenses. Selling, general and administrative expenses decreased
$5.8 million for the year ended December 31, 2001 when compared to the prior
year. Selling, general and administrative expenses were positively impacted by
cost reductions made pursuant to our 2000 restructuring plan discussed above,
offset by approximately $1.4 million of charges related to the renegotiation of
certain contracts and professional fees and an $12.3 million increase in the
allowance for doubtful accounts primarily due to the impact of the 2001 economic
recession on our customer base and competitive conditions within our industry.
Selling, general and administrative expenses as a percentage of total revenue
was 20.9% for the year ended December 31, 2001, compared to 19.5% for the prior
year.

Also included in operating expenses for the twelve months ended December
31, 2001 and 2000 are charges of $9.7 million and $72.0 million, respectively,
related to the 2000 restructuring plan and a $770.8 million charge for
impairment of intangible assets recorded in the fourth quarter of 2001. See Item
8. -- "Financial Statements and Supplementary Data -- Note 3 -- Accounting
Policies -- Intangible Assets Related to Acquired Businesses."

Operating Income. Operating income decreased $119.0 million, excluding the
charges for restructuring and the impairment of intangible assets, for the year
ended December 31, 2001, when compared to the prior year. The decrease in
operating income was primarily a result of the factors discussed above.

Other Income and Expense. Interest expense increased $11.1 million for the
year ended December 31, 2001, when compared to the prior year. The increase was
due primarily to a $3.6 million charge for the write-off of deferred financing
costs in connection with the amendment to our senior credit facility entered
into in March 2001 and an increase in the interest rates charged on the variable
portion of our bank debt pursuant to such amendment. Interest expense is
primarily attributable to borrowings under our senior credit facility, notes
issued to finance the purchase of equipment, subordinated convertible notes
issued to sellers of businesses we acquired and our senior subordinated notes.

Reorganization Items, Net. For the year ended December 31, 2001, we
incurred $11.3 million of expenses resulting from the reorganization of our
business as a result of our chapter 11 filing. Such expenses consisted of: (i)
$5.2 million of non-cash costs related to the write-off of fixed assets,
primarily leasehold improvements, of 14 stores identified for closure, (ii) $4.1
million of professional fees, and (iii) $2.0 million of severance expense
related to an executive transition agreement with our former Chief Executive
Officer. See Item 8. -- "Financial Statements and Supplementary Data -- Note
16 -- Related Party Transactions."

Income Taxes. Our effective income tax rate was 1.1% and 25.2% for the
years ended December 31, 2001 and 2000, respectively. For the year ended
December 31, 2001, we recognized a tax benefit only to the extent that we can
utilize the benefit to offset deferred income tax liabilities recorded on our
balance sheet at December 31, 2000. See Item 8. -- "Financial Statements and
Supplementary Data -- Note 11 -- Income Taxes" for a reconciliation of the
statutory federal income tax rate to the effective income tax rate.

Cumulative Effect of Change in Accounting Principle. Effective January 1,
2001, we adopted Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended . The
adoption of SFAS No. 133 resulted in an after tax charge of $1.4 million as a
cumulative effect of change in accounting principle for the year ended December
31, 2001. See Item 8. -- "Financial Statements and Supplementary Data -- Note
10 -- Derivative Financial Instruments."

Net Income. Excluding the charges for restructuring, the impairment of
intangible assets, reorganization and cumulative effect of change in accounting
principle, net loss totaled $144.9 million, for the year ended

18

December 31, 2001 compared to $1.7 million in the prior year. The increase in
net loss was primarily a result of the factors discussed above.

Year Ended December 31, 2000 as Compared to Year Ended December 31, 1999

Revenue. Total revenue increased $110.6 million, or 19.8%, for the year
ended December 31, 2000 when compared to the prior year. Rental revenue
increased $130.8 million, or 31.5%, for the year ended December 31, 2000 when
compared to the prior year. The increase in rental revenue for the year ended
December 31, 2000 when compared to the prior year, was comprised of 15.9% from
internal growth and 15.6% from the inclusion of rental revenue from businesses
acquired during 1999 and 2000. Rental revenue was negatively impacted for the
year ended December 31, 2000 by competitive market conditions during the peak
rental season, the slowing economy and adverse weather during the fourth
quarter. The internal growth in rental revenue was primarily a result of the
expansion of our rental fleet at existing locations and the opening of 19 new
locations in 2000. Equipment rental revenue as a percentage of total revenue was
81.7% for the year ended December 31, 2000 up from 74.4% for the prior year.

Gross Profit. Gross profit decreased $18.1 million for the year ended
December 31, 2000 when compared to the prior year. Gross profit as a percentage
of total revenue was 34.6% for the year ended December 31, 2000, compared to
44.7% for the prior year.

The decrease in gross profit for the year ended December 31, 2000 when
compared to the prior year, was due primarily to the imbalance in our cost
structure relative to our rental revenue discussed above and provisions made for
inventory shrinkage and obsolescence. Gross profit was positively impacted by
the change in rental equipment depreciation estimates discussed above.

Operating Expenses. Selling, general and administrative expenses increased
$28.3 million for the year ended December 31, 2000 when compared to the prior
year. This increase was due primarily to the inclusion of such costs from
businesses acquired during 1999 and 2000, additional corporate expenses and
charges aggregating $9.6 million primarily related to an increase in our bad
debt reserves and costs related to acquisitions that we abandoned. Selling,
general and administrative expenses as a percentage of total revenue were 19.5%
and 18.2% for the years ended December 31, 2000 and 1999, respectively.

Also included in operating expenses is $72.0 million for restructuring and
related charges for the year ended December 31, 2000 and $3.9 million of
unreimbursed expenses incurred in connection with the abandoned merger with RSC
for the year ended December 31, 1999.

Non-rental equipment depreciation and amortization increased $5.7 million
for the year ended December 31, 2000 when compared to the prior year. This
increase was due primarily to additional goodwill amortization incurred in
connection with acquisitions completed during 1999 and 2000 and increased
depreciation related to improvements made to our rental locations.

Operating Income. Operating income decreased $120.2 million for the year
ended December 31, 2000 when compared to the prior year. The reduction in
operating income was primarily related to the factors discussed above. Operating
income as a percentage of total revenue was 0.2% and 21.8% for the years ended
December 31, 2000 and 1999, respectively.

Other Income and Expense. Interest expense increased $29.9 million for the
year ended December 31, 2000 when compared to the prior year. This increase was
due primarily to the increase in debt incurred to finance acquisitions, new
store openings and the expansion of our rental fleet during 1999 and 2000, as
well as an increase in the interest rates charged on the variable portion of our
bank debt. Interest expense is primarily attributable to borrowings under our
senior credit facility, notes issued to finance the purchase of equipment,
subordinated convertible notes issued to sellers of businesses we acquired and
our senior subordinated notes.

Other income for the year ended December 31, 1999 included a pre-tax gain
of approximately $1.8 million from the sale in January 1999 of a lift truck
dealership.

19

Income Taxes. Our effective income tax rate was 25.2% and 41.5% for the
years ended December 31, 2000 and 1999, respectively. See Item 8. -- "Financial
Statements and Supplemental Data -- Note 11 -- Income Taxes" for a
reconciliation of the statutory federal income tax rate to the effective income
tax rate.

Net Income (Loss). Net income decreased $105.6 million for the year ended
December 31, 2000 when compared to the prior year. The decrease in net income
was primarily a result of the factors discussed above.

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. See Item 8. -- "Financial Statements and
Supplementary Data -- Note 3 -- Accounting Policies" for a summary of our
significant accounting policies. These assumptions and estimates are often
subjective and may change based on changing circumstances or changes in our
analysis. Material changes in these assumptions and estimates 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.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts. This allowance reflects our
estimate of the amount of our receivables that we will be unable to collect and
is based on current trends and 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 be required to increase or decrease our allowance.

Service Lives and Residual Value of Rental Equipment

We depreciate rental equipment using the straight-line method over its
estimated service life, using an estimated residual value of zero to 69.0%. The
service life of an asset is determined based on our estimate of the period the
asset will generate revenue, and the residual value is determined based on our
estimate of the minimum value we could realize from the asset after such period.
We may be required to adjust these estimates based on changes in our industry or
other changing circumstances. If these estimates change in the future, we may be
required to recognize increased or decreased depreciation expense for these
assets.

Useful Lives and Residual Value of Property and Equipment

We depreciate property and equipment using the straight-line method over
its estimated service life, using an estimated residual value of zero to 10.0%.
The useful life of an asset is determined based on our estimate of the period
the asset will generate revenue, and the residual value is determined based on
our estimate of the minimum value we could realize from the asset after such
period. We may be required to adjust these estimates based on changes in our
industry or other changing circumstances. If these estimates change in the
future, we may be required to recognize increased or decreased depreciation
expense for these assets.

Impairment of Intangible Assets Related to Acquired Businesses

We continually evaluate whether events and changes in circumstances warrant
revised estimates of useful lives or recognition of an impairment loss of
unamortized intangible assets related to acquired businesses. The conditions
that would trigger an impairment assessment of unamortized intangible assets
related to acquired businesses include a significant negative trend in our
operating results or cash flows, a decrease in demand for our services, changes
in the competitive environment and other industry and economic factors. We
measure impairment of unamortized intangible assets related to acquired
businesses utilizing the undiscounted cash flow method. The estimated cash flow
is then compared to the carrying value of our net assets. If the carrying value
of the net assets exceed the cash flows, the excess of the unamortized
intangible assets related to acquired businesses is written off.

20

Despite our 2000 restructuring efforts, we have suffered significant
adverse trends in operating results and cash flows and are currently in default
under our senior credit facility and other obligations. As a result of the
significant historical and projected cash flow losses and the uncertainty
surrounding our ability to restructure our capital structure in a satisfactory
manner under the Chapter 11 Cases, we determined that the carrying value of our
net assets exceeded the projected future undiscounted cash flows and,
accordingly, we recognized an operating charge for the permanent impairment of
the entire unamortized balance of intangible assets related to acquired
businesses of approximately $770.8 million in the quarter ended December 31,
2001. See "-- Impact of Recently Issued Accounting Standards" for a discussion
of the new accounting standards for goodwill and other intangible assets.

Restructuring

During the fourth quarter of 2000 and during 2001, we recorded reserves in
connection with the 2000 restructuring plan. These charges include estimates
pertaining to rental fleet disposition, information systems abandonment,
employee termination severance costs, facility closures and related settlements
of contractual obligations. Although we do not anticipate significant changes,
the actual costs may differ from these estimates and we may be required to
adjust the accruals.

Valuation Allowance Related to Deferred Tax Assets

As part of the process of preparing our consolidated financial statements
we are required to estimate our income taxes in each of the jurisdictions in
which we operate. This process involves us 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 must 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 must establish a valuation allowance. To the extent we establish
a valuation allowance or increase this allowance in a period, we must include an
expense within the tax provision in the 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. We have recorded a
valuation allowance of $263.0 million as of December 31, 2001 due to
uncertainties related to our ability to utilize some of our deferred tax assets,
primarily consisting of net operating losses carried forward and tax basis in
intangible assets. The valuation allowance is based on our estimates of taxable
income and the period over which our deferred tax assets will be recoverable. In
the event that actual results differ from these estimates or we adjust these
estimates in future periods we may need to establish an additional valuation
allowance which could impact our financial position and results of operations.

SEASONALITY AND FLUCTUATIONS IN OPERATING RESULTS

Our revenue and income are dependent upon activity in the construction
industry in the markets we serve. Construction activity is dependent upon
weather and other seasonal factors affecting construction in the geographic
areas where we have operations. Because of this variability in demand, our
quarterly revenue and income may fluctuate. Accordingly, quarterly or other
interim results should not be considered indicative of results to be expected
for any other quarter or for a full year.

Operating results may fluctuate due to other factors including, but not
limited to:

- the impact of the Chapter 11 Cases;

- changes in general economic conditions including changes in national,
regional or local construction or industrial activities;

- the timing of opening new rental centers at Lowe's locations;

- the timing of expenditures for new rental equipment and the disposition
of used equipment;

21

- competitive pricing pressures; and

- changes in interest rates.

We will 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 approximately three to 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 new equipment to expand our current rental
equipment inventory 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.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations." This pronouncement addresses financial accounting and reporting
for business combinations and supercedes Accounting Principles Board Opinion
("APB") No. 16, "Business Combinations" and SFAS No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." All business
combinations within the scope of SFAS No. 141 are to be accounted for under the
purchase method. SFAS No. 141 is effective for business combinations occurring
after June 30, 2001. We adopted the provisions of SFAS No. 141 as of the
effective date. Adoption of the provisions of this pronouncement had no impact
on our consolidated financial statements.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." This pronouncement addresses financial accounting and reporting for
intangible assets acquired individually or with a group of other assets. SFAS
No. 142 also addresses financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. With the adoption of SFAS No.
142, goodwill and certain other intangible assets are no longer subject to
amortization. Instead, goodwill will be subject to at least an annual assessment
for impairment in value by applying a fair value based test. Any applicable
impairment loss is the amount, if any, by which the implied fair value of
goodwill is less than the carrying or book value. SFAS No. 142 is effective for
fiscal years beginning after December 15, 2001. An impairment loss for goodwill
arising from the initial application of SFAS No. 142 is to be reported as a
cumulative effect of a change in accounting principle. We will adopt the
provisions of SFAS No. 142, as appropriate. We do not believe the adoption will
have a material impact on our consolidated financial statements as our entire
goodwill balance was written off as of December 31, 2001 as a result of our
significant historical and projected cash flow losses and the uncertainty
surrounding the Company's ability to restructure its capital structure in a
satisfactory manner under the chapter 11 proceedings.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This pronouncement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. This pronouncement supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that Opinion). SFAS No. 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001, and interim periods
within those fiscal years, with early application encouraged. The adoption of
SFAS No. 144 did not have a material impact on our consolidated financial
statements.

22

FACTORS THAT MAY AFFECT FUTURE RESULTS

Certain statements and information in this Annual Report on Form 10-K may
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including in particular the statements about our plans,
strategies and prospects under the headings "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." These
statements are based on our current plans and expectations and involve risks and
uncertainties that could cause actual future activities and results to be
materially different from those set forth in these forward-looking statements.
Important factors that could cause actual results to differ materially from our
forward-looking statements are set forth below and elsewhere in this Annual
Report on Form 10-K. We make no commitment to disclose any revisions to
forward-looking statements, or any fact, events or circumstances after the date
hereof that may bear upon forward-looking statements.

There are significant uncertainties relating to our bankruptcy proceedings

Our future results are dependent upon the successful confirmation and
implementation of a plan or plans of reorganization. We have not yet submitted
such a plan or plans to the Bankruptcy Court for approval and cannot make any
assurances that we will be able to obtain any such approval in a timely manner.
When proposed, our plan or plans of reorganization may not receive the requisite
acceptance by creditors and other parties in interest and may not be confirmed
by the Bankruptcy Court. In addition, due to the nature of the reorganization
process, actions may be taken by creditors or other parties in interest that may
have the effect of preventing or unduly delaying confirmation of a plan or plans
of reorganization in connection with the Chapter 11 Cases. Our ability to obtain
financing to fund our operations and our relations with our customers and
suppliers may be harmed by protracted bankruptcy proceedings. Further, we cannot
predict the ultimate amount of our liabilities that will be subject to a plan of
reorganization.

Other negative consequences that could arise as a result of the bankruptcy
proceedings include:

- making us more vulnerable to a continued downturn in our industry or a
downturn in the economy in general;

- limiting our flexibility in planning for, or reacting to, changes in our
business and our industry;

- the incurrence of significant costs associated with our reorganization;

- impacts on our relationship with suppliers and customers, including loss
of confidence in our ability to fulfill contractual obligations due to
financial uncertainty;

- placing us at a competitive disadvantage compared to our competitors;

- limiting our ability to borrow additional funds; and

- negatively impacting our ability to attract, retain and compensate key
employees.

Once a plan of reorganization is finalized, approved and implemented, our
operating results may be adversely affected by the possible reluctance of
prospective lenders, customers and suppliers to do business with a company that
recently emerged from bankruptcy proceedings.

We face uncertainty with respect to treatment of our liabilities

As of the filing of the Chapter 11 Cases, in general all pending litigation
against us has been stayed and no party may take any action to realize on our
prepetition claims except pursuant to further order of the Bankruptcy Court. In
addition, we may reject prepetition executory contracts and unexpired lease
obligations, and parties affected by these rejections may file claims with the
Bankruptcy Court. While we anticipate substantially all liabilities as of the
petition date will be dealt with in accordance with a plan or plans of
reorganization which will be proposed and voted on in accordance with the
provisions of the Bankruptcy Code, there can be no assurance that all the
liabilities will be handled in this manner. In addition, additional liabilities
subject to the bankruptcy proceedings may arise in the future as a result of the
rejection of executory contracts and/or unexpired leases, and from the
determination of the Bankruptcy Court (or agreement by

23

parties in interest) of allowed claims for contingencies and other disputed
amounts. Conversely, the assumption of executory contracts and unexpired leases
may convert liabilities shown as subject to compromise to postpetition
liabilities. Due to the uncertain nature of many of the potential claims, we are
unable to project the magnitude of such claims with any degree of certainty.

Our status as a debtor-in-possession under chapter 11 of the Bankruptcy Code
raises "going concern" questions

The commencement of the Chapter 11 Cases in the Bankruptcy Court, and other
factors such as our recurring losses, raise substantial doubt as to our ability
to continue as a going-concern. The financial statements contained herein have
been prepared assuming that we will continue as a going-concern with the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. However, as a result of the Chapter 11 Cases and
circumstances relating to this event, including our leveraged financial
structure and losses from operations, such realization of assets and liquidation
of liabilities and the ability to continue to operate as a going-concern is
subject to significant uncertainty. While in chapter 11, we may sell or
otherwise dispose of assets (subject to Bankruptcy Court approval), and
liquidate or settle liabilities for amounts other than those reflected in the
financial statements. Further, a plan or plans of reorganization could
materially change the amounts reported in the financial statements.
Additionally, a deadline has been established for the assertion of prepetition
claims against the Company (commonly referred to as a bar date), including
contingent, unliquidated or disputed claims, which claims could result in
greater liabilities than reported in the financial statements. Our ability to
continue as a going-concern is contingent upon, among other things, confirmation
of a plan or plans of reorganization, future profitable operations and the
ability to generate sufficient cash flow from operations and financing
arrangements to meet ongoing obligations.

We have substantial debt and are highly leveraged

We have a substantial amount of debt outstanding which could adversely
affect our financial health. As of December 31, 2001, we had approximately $1.1
billion of debt outstanding. The Debtors' filing for chapter 11 represented an
Event of Default under each of our financing facilities. Under bankruptcy law,
the Debtors are not permitted to make scheduled principal and interest payments
with respect to prepetition debt unless specifically ordered by the Bankruptcy
Court.

Depending on the resolution of our bankruptcy proceedings, we could emerge
from bankruptcy highly leveraged with substantial debt service obligations. This
leveraged position could have adverse consequences to the Company, including:

- limiting our ability to obtain additional financing, if needed, for
working capital, capital expenditures, debt service requirements or other
purposes;

- increasing our vulnerability to adverse economic and industry conditions;

- requiring us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing funds available for
operations, future business opportunities or other purposes;

- limiting our flexibility in planning for, or reacting to, changes in our
business and our industry; and

- placing us at a competitive disadvantage compared to our competitors that
have less leverage.

We have and, following our bankruptcy proceedings, expect to have liens on
all of our assets, which will limit our ability to raise additional incremental
senior secured financing in the future.

We have experienced losses which may continue in future periods

We have experienced net losses of $942.4 million for the year ended
December 31, 2001 and $73.7 million for the year ended December 31, 2000. In
addition, for the first quarter of 2002, we anticipate that our net loss will
approximate $31.0 million. We can not assure you that we will be able to
generate net income in the future. Continued losses, and the resulting impact on
operating cash flow, could adversely affect our financial condition and our
ability to obtain financing in the future.

24

We face uncertainty regarding the adequacy of our capital resources and have
limited access to additional financing

In addition to the cash requirements necessary to fund ongoing operations,
we anticipate that we will incur significant professional fees and other
restructuring costs in connection with the Chapter 11 Cases and the
restructuring of our business operations. However, as a result of the
uncertainty surrounding our current circumstances, it is difficult to predict
our actual liquidity needs at this time. Although, based on current and
anticipated levels of operations, we believe that cash flows from operations,
together with amounts available under the DIP Financing Facility, will be
adequate to meet its anticipated cash requirements through the end of December
2002, ultimately such amounts may not be sufficient to fund operations until
such time as we are able to propose a plan or plans of reorganization that will
receive the requisite acceptance by creditors and equity holders and be
confirmed by the Bankruptcy Court. In the event that cash flows and available
borrowings under the DIP Financing Facility are not sufficient to meet future
cash requirements, we may be required to reduce planned capital expenditures or
seek additional financing. We can provide no assurance that reductions in
planned capital expenditures would be sufficient to cover shortfalls or that
additional financing would be available or, if available, offered on acceptable
terms. As a result of the Chapter 11 Cases and the circumstances leading to the
filing thereof, our access to additional financing is, and for the foreseeable
future will likely continue to be, very limited. If cash from operations,
borrowings under the DIP Financing Facility and reductions in capital
expenditures are not sufficient to meet our cash requirements, and additional
financing is not available, such a shortfall could have a material adverse
effect on our operations and our ability to attract and retain key employees,
open new NationsRent facilities at Lowe's stores and otherwise meet the
objectives of its business plan. Our long-term liquidity requirements and the
adequacy of our capital resources are difficult to predict at this time, and
ultimately cannot be determined until a plan of reorganization has been
developed and is confirmed by the Bankruptcy Court in the Chapter 11 Cases.

We are subject to restrictions on the conduct of our business

We are operating our business as debtors-in-possession pursuant to the
Bankruptcy Code. Under applicable bankruptcy law, during the pendency of the
Chapter 11 Cases, we will be required to obtain the approval of the Bankruptcy
Court prior to engaging in any transaction outside the ordinary course of
business. In connection with any such approval, creditors and other parties in
interest may raise objections to such approval and may appear and be heard at
any hearing with respect to any such approval. Accordingly, although we may
engage in activities outside the ordinary course of business with the approval
of the Bankruptcy Court, there can be no assurance that the Bankruptcy Court
will approve any such transactions. The Bankruptcy Court also has the authority
to oversee and exert control over our ordinary course operations.

In addition, the DIP Financing Facility contains financial covenants
requiring maintenance of an asset coverage ratio and a minimum operating cash
flow, as well as other covenants that limit, among other things, indebtedness,
liens, sales of assets, capital expenditures, and investments and prohibit,
among other things, dividend payments. The DIP Financing Facility provides that
the net proceeds of asset sales outside the ordinary course of business will be
applied to reduce prepetition indebtedness under our senior secured credit
facilities.

As a result of the restrictions described above, our ability to respond to
changing business and economic conditions may be significantly restricted and we
may be prevented from engaging in transactions that might otherwise be
considered beneficial to us.

We believe our equity holders will not receive any value or distribution for
their interests under a plan or plans of reorganization

The value of our capital stock is highly speculative and any investment in
such capital stock would pose a high degree of risk. Our common stock was
delisted from the NYSE in November 2001. As a result, a liquid public market for
our common stock does not exist, which may make it difficult for you to sell our
common stock. Our common stock is currently traded on the OTCBB. There may be
very limited demand for our common stock. As a result of our late filings of
required reports under the Securities Exchange Act of 1934, our stock will not
be eligible for trading on the OTCBB beginning June 1, 2002, unless all such
required
25

reports are filed prior to that date. As a result of the amount of our
prepetition indebtedness, our financial performance and the availability of the
"cram down" provisions of the Bankruptcy Code described elsewhere in this Annual
Report, we believe that our equity holders will not receive any value or
distribution for their interests under a plan or plans of reorganization.

Our rental fleet is subject to residual value risk upon disposition

The market value for any given piece of our rental fleet could be less than
its depreciated value at the time it is sold. The market value of rental
equipment is dependent upon several factors, including: (i) the market price for
new equipment of a like kind, (ii) wear and tear on the equipment relative to
its age, (iii) the time of year that it is sold (generally prices are higher
during the construction season for the market), (iv) worldwide and domestic
demand for used equipment, and (v) general economic conditions.

Our reorganization will require substantial effort by management

Our senior management may be required to expend a substantial amount of
time and effort structuring a plan or plans of reorganization, which could have
a disruptive impact on management's ability to focus on the operation of our
business.

Our business is dependent on changes in construction and industrial activities

Our equipment is primarily used in construction and industrial activities.
The growth rate in the rental industry slowed dramatically in 2000 to
approximately 3.0%, largely as a result of slowing construction activity in 2000
and the corresponding contraction in the construction equipment industry.
Combined with the general weak United States economy, this contraction led to
decreased demand or prices for our equipment, which has had a material adverse
effect on our business, financial condition or results of operations. It is
likely that if industry contraction does not improve, or further declines, our
operations and our ability to fulfill our reorganization plan would be
materially adversely affected.

We may not be able to execute our business strategy

A principal component of our business strategy is to expand through the
opening of NationsRent facilities at Lowe's locations through our strategic
alliance with Lowe's. We expect our business strategy will affect short-term
cash flow and net income as we increase our indebtedness and incur expenses to
open new locations and expand our rental fleet. As a result, revenue and
operating results may fluctuate.

We cannot assure you that we will successfully expand or that any expansion
will result in profitability. The failure to effectively identify, evaluate and
integrate newly opened locations could adversely affect our growth prospects. We
also cannot assure success in entering new geographic markets, which may have
different competitive conditions, seasonality and demographic characteristics
than our current markets.

As we expand through the opening of new locations, we expect to increase
the number of our employees, the scope of our operating and financial systems
and the geographic area of our operations. This growth will increase the
complexity of operations and the level of responsibility for both existing and
new management personnel. We may not be able to attract and retain qualified
management and employees and our current operating and financial systems and
controls may not be adequate to support our expected growth.

We may not be able to recover the start-up costs of our strategic alliance
with Lowe's

Our strategic alliance with Lowe's has and will require us to accelerate
investments in systems, training, branch support and other store start-up costs.
We cannot assure you that the strategic alliance with Lowe's will be successful
or that we will recover these start-up costs. If our rental stores located in
Lowe's stores do not generate sufficient revenue and net income or if Lowe's
does not permit us to open our rental centers in quantities or locations that
are desirable to us, we may not recover our start-up costs and we may not grow
as quickly as expected, which could have a material adverse effect on our
business, financial condition or results of operations. In addition, the
availability of additional capital for growth may restrict our ability to
fulfill our

26

commitment under the Lowe's strategic alliance agreement, which could have a
material adverse effect on our business, financial condition or results of
operations.

The equipment rental industry is highly competitive

Our competitors include large national companies, equipment manufacturers,
regional corporations, smaller independent businesses and equipment vendors and
dealers who both sell and rent equipment to customers. Some of our competitors
have greater financial resources, are more geographically diverse and have
greater name recognition than we have. We may encounter increased competition
from existing competitors or new market entrants, such as equipment
manufacturers, that may be significantly larger and have greater financial and
marketing resources than we have.

We believe that price is one of the primary competitive factors in the
equipment rental industry. From time to time, we or our competitors, some of
which have greater financial resources, 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. Conversely, if we do not match competitors' rate reductions, we may
lose market share, resulting in decreased revenue and cash flow.

Our revenue and operating results are likely to continue to fluctuate

Our revenue and operating results have varied from quarter to quarter and
we expect that they will continue to fluctuate in the future due to:

- general economic conditions in our markets;

- adverse weather conditions;

- the timing and cost of opening new locations;

- the effectiveness of integrating acquired businesses and new locations;

- the timing of fleet expansion capital expenditures;

- the realization of targeted equipment utilization rates;

- seasonal rental and purchasing patterns of our customers; and

- price changes in response to competitive factors.

We will incur various costs in establishing newly opened locations, and the
profitability of a new location is generally expected to be lower in the initial
period of its operation.

We must comply with various safety and environmental regulations that may
increase expenses and liabilities

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 such 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 such substances and currently generate or
have generated or disposed of wastes, which are or may be considered hazardous
or otherwise are subject to applicable environmental requirements. We use
hazardous materials such as solvents to clean and maintain our rental fleets. 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 locations that we own or
operate. We incur ongoing expenses associated with the removal of older
underground storage tanks and other activities in order to comply with
environmental laws and we also perform remediation at certain of our locations.
We cannot assure you that environmental and safety requirements will not become
more stringent or be interpreted and applied more stringently in the future, or
that we will not indemnify other parties for
27

adverse environmental conditions that are currently known to us. Such future
changes or interpretations, or the indemnification for such adverse
environmental conditions, could result in additional environmental compliance or
remediation costs not currently anticipated by us, which could have a material
adverse effect on our business, financial condition or results of operations.

Some of our liabilities may not be covered by insurance

Our business exposes us to possible claims for personal injury or death
resulting from the use of equipment we rent or sell and from injuries caused in
motor vehicle accidents in which delivery or service personnel are involved. We
carry comprehensive insurance subject to a deductible. We cannot assure that
existing or future claims will not exceed the level of our insurance, or that
our insurance will continue to be available on economically reasonable terms, if
at all.

Our operations are dependent on information systems

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is limited primarily to the fluctuating
interest rates associated with our variable rate indebtedness. Our variable
interest rates are subject to interest rate changes in the United States and the
Eurodollar market. At December 31, 2001, we had $787.6 million of variable rate
indebtedness, representing approximately 71.7% of our total debt outstanding, at
an average interest rate of 7.30%. In January 2000, we entered into a two-year
modified interest rate swap contract to hedge the impact of interest rate
fluctuations on certain variable rate debt. In September 2000, we entered into
two additional two-year modified interest rate swap contracts. We do not hold or
issue derivative financial instruments for trading or speculative purposes. The
January 2000 interest rate swap fixes the Eurodollar interest rate at 6.80% on
$165.0 million of variable rate debt through February 2, 2002. The September
2000 interest rate swaps fix the Eurodollar interest rate at 6.5915% and 6.582%
each on $15.0 million of variable rate debt, respectively, through October 3,
2002. The interest differential is paid or received on a monthly basis and
recognized as a component of interest expense. During 2001, the Company incurred
interest expense, net of $0.4 million related to the swap. As of April 30, 2002,
all of these interest rate swap agreements had terminated or expired.

28

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

29

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To NationsRent, Inc.:

We have audited the accompanying consolidated balance sheets of
NationsRent, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NationsRent, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.

The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has experienced
significant losses over the last two years and has a stockholders' deficit of
approximately $501.6 million as of December 31, 2001. In addition, as discussed
in Note 2 to the accompanying financial statements, on December 17, 2001, the
Company and its subsidiaries filed voluntary petitions for reorganization under
chapter 11 of the United States Bankruptcy Code. These matters, among others,
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters, including its intent to
file a plan of reorganization that will be acceptable to the Bankruptcy Court
and the Company's creditors, are also described in Note 2. In the event a plan
of reorganization is accepted, continuation of the business thereafter is
dependent on the Company's ability to achieve successful future operations. The
accompanying financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

As explained in Note 10 to the consolidated financial statements, effective
January 1, 2001, the Company changed its method of accounting for derivative
financial instruments.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
May 21, 2002.

30

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

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

31

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

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

32

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)

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

33

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

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

34

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. DESCRIPTION OF THE BUSINESS

NationsRent, Inc. together with its subsidiaries (the "Company" or the
"Debtors") was incorporated in the state of Delaware on August 14, 1997 for the
purpose of creating a nationally branded network of equipment rental locations
offering a broad selection of equipment primarily to the construction and
industrial segments of the equipment rental industry in the United States. The
Company also sells used and new equipment, parts, merchandise and supplies, and
provides maintenance and repair services.

2. PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

On December 17, 2001 (the "Petition Date"), the Debtors filed voluntary
petitions for reorganization under chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). The chapter 11 cases pending for
the Debtors (the "Chapter 11 Cases") are being jointly administered for
procedural purposes.

In conjunction with the commencement of the Chapter 11 Cases, the Debtors
sought and obtained several orders from the Bankruptcy Court which were intended
to enable the Debtors to continue to operate in the normal course of business
during the Chapter 11 Cases, including orders to (i) permit the Debtors to
operate their consolidated cash management system during the Chapter 11 Cases in
substantially the same manner as it was operated prior to the commencement of
the Chapter 11 Cases, (ii) authorize payment of prepetition employee salaries,
wages, and benefits and reimbursement of prepetition employee business expenses,
(iii) authorize payment of prepetition sales, payroll, and use taxes owed by the
Debtors, (iv) authorize payment of certain prepetition obligations to customers,
(v) continue workers' compensation insurance programs and certain prepetition
claims, premiums and related expenses, (vi) authorize payment of certain
mechanics' lien and freight charges, (vii) determine adequate assurance of
payment for future utility services, (viii) authorize payment of installments
under insurance premium finance agreements, (ix) authorize maintenance and
continuation of insurance programs and related relief, and (x) authorize payment
of certain other prepetition claims.

The Bankruptcy Code provides that the Debtors have the exclusive right for
certain specified periods during which only they may file and solicit
acceptances of a plan of reorganization. The exclusive period of the Debtors to
file a plan for reorganization, as extended, is set to expire in August 2002. If
the Debtors fail to file a plan of reorganization during this exclusive period
or any extensions thereof or, after such plan has been filed, if the Debtors
fail to obtain acceptance of such plan from the requisite impaired classes of
creditors and equity holders during the exclusive solicitation period, any party
in interest, including a creditor, an equity holder, a committee of creditors or
equity holders, or an indenture trustee, may file their own plan of
reorganization for the Debtors.

The confirmation of a plan of reorganization is one of the Company's
primary objectives. After negotiations with various parties in interest, the
Company expects to file a plan of reorganization with the Bankruptcy Court to
reorganize the Company and to restructure its obligations. After a plan of
reorganization has been filed with the Bankruptcy Court, the plan, along with a
disclosure statement approved by the Bankruptcy Court, will be sent to all
creditors and equity holders. Following the solicitation period, the Bankruptcy
Court will consider whether to confirm the plan. In order to confirm a plan of
reorganization, the Bankruptcy Court, among other things, is required to find
that (i) with respect to each impaired class of creditors and equity holders,
each holder in such class has accepted the plan or will, pursuant to the plan,
receive at least as much as such holder would receive in a liquidation, (ii)
each impaired class of creditors and equity holders has accepted the plan by the
requisite vote (except as described in the following sentence), and (iii)
confirmation of the plan is not likely to be followed by a liquidation or a need
for further financial reorganization of the Debtors or any successors to the
Debtors unless the plan proposes such liquidation or
35

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reorganization. If any impaired class of creditors or equity holders does not
accept the plan and, assuming that all of the other requirements of the
Bankruptcy Code are met, the proponent of the plan may invoke the "cram down"
provisions of the Bankruptcy Code. Under these provisions, the Bankruptcy Court
may confirm a plan notwithstanding the non-acceptance of the plan by an impaired
class of creditors or equity holders if certain requirements of the Bankruptcy
Code are met. These requirements may, among other things, necessitate payment in
full for senior classes of creditors before payment to a junior class can be
made. As a result of the amount of the Company's prepetition indebtedness,
financial performance and the availability of the "cram down" provisions under
the Bankruptcy Code, management believes that the Company's equity holders will
not receive any value or distribution for their interests under a plan or plans
of reorganization.

Under bankruptcy law, actions by creditors to collect prepetition
indebtedness owed by the Debtors at the filing date, as well as most litigation
pending against us, are stayed and other prepetition contractual obligations may
not be enforced against the Debtors. In addition, the Debtors have the right,
subject to Bankruptcy Court approval and other conditions, to assume or reject
any prepetition executory contracts and unexpired leases. Parties affected by
these rejections may file prepetition damage claims with the Bankruptcy Court.
The Company has prepared and submitted the schedules setting forth the Debtors'
assets and liabilities as of the date of the petition as reflected in the
Company's accounting records. The amounts of claims filed by creditors could be
significantly different from their recorded amounts. Due to material
uncertainties, it is not possible to predict the length of time the Company will
operate under chapter 11 protection, the outcome of the proceedings in general,
whether the Company will continue to operate under the current organizational
structure, or the effect of the proceedings on the Company's business or the
recovery by creditors and equity holders.

3. ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Company operates in one industry segment consisting of the rental and
sales of equipment and related merchandise and parts. The Company's operations
are managed as one segment, or strategic unit, because it offers similar
products and services in similar markets and the factors underlying strategic
decisions are comparable for all products and services.

The nature of the Company's business is such that short-term obligations
are typically met by cash flow generated from long-term assets. Consequently,
consistent with industry practice, the accompanying consolidated balance sheets
are presented on an unclassified basis.

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets, and payment of liabilities in the ordinary course of business, and do
not reflect adjustments that might result if the Debtors are unable to continue
as a going concern. The Debtors' history of significant losses, the
stockholders' deficit of approximately $501,631,000 as of December 31, 2001 and
their Chapter 11 Cases raise substantial doubt about the Debtors' ability to
continue as a going concern. The Debtors intend to file a plan or plans of
reorganization with the Bankruptcy Court. Continuing as a going concern is
dependent upon, among other things, the Debtors' formulation of a plan or plans
of reorganization acceptable to the Bankruptcy Court and creditors, the success
of future business operations, and the generation of sufficient cash from
operations and financing sources to meet the Company's obligations. The
consolidated financial statements do not reflect: (i) the realizable value of
assets on a liquidation basis or their availability to satisfy liabilities; (ii)
aggregate prepetition liability amounts that may be allowed for unrecorded
claims or contingencies, or their status or priority; (iii) the effect of any

36

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

changes to the Debtors' capital structure or in the Debtors' business operations
as the result of an approved plan or plans of reorganization; or (iv)
adjustments to the carrying value of assets or liability amounts that may be
necessary as a result of actions by the Bankruptcy Court. Adjustments
necessitated by a plan of reorganization could materially change the amounts
reported in the accompanying consolidated financial statements.

These statements have been prepared 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." Pursuant to SOP 90-7, revenues and expenses, realized gains
and losses and provisions for losses resulting from the reorganization of the
business are to be reported in the consolidated statements of operations
separately as reorganization items. Professional fees are expensed as incurred.
Interest expense is reported only to the extent that it will be paid during the
Chapter 11 Cases or that it is probable that it will be an allowed claim.
Reorganization items, if material, are reported separately within the operating,
investing and financing categories of the consolidated statements of cash flows.

CASH EQUIVALENTS

The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company had
$22,945,000 and $43,827,000 cash equivalents at December 31, 2001 and 2000,
respectively.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Significant estimates include the service lives and residual value of
rental equipment, the accruals related to the Company's restructuring plan, the
allowance for doubtful accounts, the valuation allowance related to the
Company's deferred tax assets, the allocation of purchase price of acquired
businesses and the valuation of intangible assets related to acquired
businesses.

INVENTORIES

Inventories, which consist of equipment, tools, parts and related
merchandise supply items, are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Provision is made to reduce
excess or obsolete inventories to their estimated net realizable value.

DEFERRED FINANCING COSTS

Costs relating to borrowings are deferred and amortized to interest expense
using the effective interest method over the terms of the related borrowings. As
of December 31, 2001 and 2000, deferred financing costs of $15,696,000 and
$17,221,000 were recorded, net of accumulated amortization of $6,988,000 and
$4,724,000, respectively. The amortization of deferred financing and debt
issuance costs was $3,254,000, $2,296,000 and $1,977,000 for the years ended
December 31, 2001, 2000 and 1999, respectively. During the first quarter of
2001, the Company recorded an approximate $3,600,000 charge to income related to
the deferred financing costs related to its senior credit facility. Such charge
was the result of an amendment to the senior credit facility that reduced the
capacity from $925,000,000 to $850,000,0000.

37

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RENTAL EQUIPMENT

Rental equipment purchased by the Company is recorded at cost and
depreciated over its estimated service life using the straight-line method. The
range of service lives estimated by management for rental equipment is 36 to 96
months. Rental equipment is depreciated to a residual value ranging from zero to
69.0% of cost. Accumulated depreciation on rental equipment was $154,586,000 and
$104,000,000 at December 31, 2001 and 2000, respectively. Depreciation expense
of rental equipment was $66,499,000, $74,144,000, and $46,713,000 for the years
ended December 31, 2001, 2000 and 1999, respectively. Ordinary maintenance and
repair costs are charged to operations as incurred. Expenditures that extend the
useful life or increase the capacity, efficiency or safety of rental equipment
are capitalized.

Effective as of July 1, 2000, the Company revised the estimated service
lives and residual values for certain of its rental assets to better allocate
depreciation expense over the time such assets are in its rental fleet. This
change decreased the estimated service lives and increased the residual values
for certain rental assets. The change in estimate resulted in a decrease in
rental equipment depreciation expense of approximately $9,800,000 and a decrease
in net loss of approximately $6,000,000 or $0.10 per diluted share for the
twelve months ended December 31, 2000.

PROPERTY AND EQUIPMENT

Property and equipment purchased in the ordinary course of business by the
Company is recorded at cost. Property and equipment obtained through the
acquisition of a business is recorded at the estimated fair market value at the
time of acquisition. Depreciation and amortization are recorded on a
straight-line basis using an estimated residual value of zero to 10.0% over the
following estimated useful lives:

Buildings and improvements...................... 10-39 years, not to exceed lease term
Furniture, fixtures and office equipment........ 3-7 years
Vehicles, delivery and shop equipment........... 5-10 years

Depreciation expense of property and equipment was $16,816,000, $7,405,000
and $6,894,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. Ordinary maintenance and repair costs are charged to expense as
incurred.

LONG-LIVED ASSETS

The carrying value and estimated lives of long-lived assets are reviewed if
the facts and circumstances suggest that the carrying value may be impaired or
the useful lives may require revision. If this review indicates that the
carrying value of long-lived assets will not be recoverable, as determined based
on the undiscounted cash flows of the long-lived assets over the remaining
amortization period, the Company's carrying value of the long-lived assets will
be reduced by the amount by which carrying value exceeds fair value. Management
has reviewed the carrying value of the Company's long-lived assets to be held
and used in the Company's operations (other than goodwill) and has determined
there has been no impairment of the carrying value for any periods presented.

CAPITALIZED INTEREST

Interest cost incurred on capital expenditures for assets constructed by
the Company is capitalized and included in the cost of such assets. Total
interest cost incurred by the Company was $110,467,000, $101,427,000 and
$70,412,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
Total interest capitalized was zero, $2,034,000 and $933,000 for the years ended
December 31, 2001, 2000 and 1999, respectively.

38

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTANGIBLE ASSETS RELATED TO ACQUIRED BUSINESSES

Intangible assets are recorded at cost and are amortized using the
straight-line method over their estimated useful lives of five years for
covenants not to compete and 40 years for goodwill.

The Company continually evaluates whether events and changes in
circumstances warrant revised estimates of useful lives or recognition of an
impairment loss of unamortized intangible assets related to acquired businesses.
The conditions that would trigger an impairment assessment of unamortized
intangible assets related to acquired businesses include a significant negative
trend in the Company's operating results or cash flows, a decrease in demand for
the Company's services, change in the competitive environment and other industry
and economic factors. The Company measures impairment of unamortized intangible
assets related to acquired businesses utilizing the undiscounted cash flow
method. The estimated cash flow is then compared to the carrying value of the
Company's net assets. If the carrying value of the net assets exceed the cash
flows, the excess of the unamortized intangible assets related to acquired
businesses is written off.

Despite the Company's restructuring efforts described in Note 9, the
Company has suffered significant adverse trends in operating results and cash
flows and the Company is currently in default with its senior credit facility
agreement and other debt obligations. As a result of the significant historical
and projected cash flow losses and the uncertainty surrounding the Company's
ability to restructure its capital structure in a satisfactory manner under the
Chapter 11 Cases, the Company determined that the carrying value of its net
assets exceeded the projected future undiscounted cash flows and, accordingly,
the Company recognized an operating charge for the permanent impairment of the
entire unamortized balance of intangible assets related to acquired businesses
of approximately $770,833,000 in the quarter ended December 31, 2001.

The accumulated amortization of intangible assets related to acquired
businesses was zero, $40,927,000 and $20,579,000 at December 31, 2001, 2000 and
1999, respectively. Amortization expense of intangible assets was $19,903,000,
$20,348,000 and $15,242,000 for the years ended December 31, 2001, 2000 and
1999, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents, accounts receivable and accounts payable
approximate fair value due to the short-term nature of these accounts. The fair
value of long-term debt as of December 31, 2000 was determined using current
applicable interest rates as of the balance sheet date and approximated the
carrying value of such debt because the underlying instruments were at variable
rates that were repriced frequently. The fair value of long-term debt as of
December 31, 2001 is not determinable, due to the uncertainties surrounding the
repayment terms of this debt as a result of the Chapter 11 proceedings.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis as earned during the
rental contract period. Equipment rentals in the consolidated statements of
operations include revenue earned on equipment rentals, rental equipment
delivery and pick-up fees and fuel sales. Revenue from the sales of equipment,
parts and supplies and retail merchandise is recognized at the time of delivery
to, or pick-up by, the customer. When used rental equipment is sold, the related
cost and accumulated depreciation are removed from the respective accounts.
Proceeds from the sale and the related book value of the equipment sold are
reported as revenue from sales of equipment, merchandise, service, parts and
supplies and cost of sales of equipment, merchandise, service, parts and
supplies, respectively, in the accompanying consolidated statements of
operations.

39

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ADVERTISING

Advertising costs are charged to expense as incurred. The Company incurred
advertising costs of $10,462,000, $9,824,000 and $15,319,000 for the years ended
December 31, 2001, 2000 and 1999, respectively.

INCOME TAXES

The Company accounts for income taxes under the liability method pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under the liability method, deferred tax assets and liabilities
are determined based on differences between the financial reporting and tax
bases of assets and liabilities using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Recognition of
deferred tax assets is limited to amounts considered by management to be more
likely than not with respect to realization of those assets in future periods.
The Company and its wholly-owned subsidiaries file a consolidated federal income
tax return.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company maintains cash and cash equivalents with high
quality financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited because a large number of diverse customers make
up the Company's customer base. No single customer represents greater than 10.0%
of total accounts receivable. The Company mitigates customer credit risk through
credit approvals, credit limits, and monitoring procedures.

STOCK-BASED COMPENSATION

The Company accounts for stock compensation arrangements in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB No. 25") and related interpretations and accordingly,
recognizes no compensation expense for the stock compensation arrangements with
employees or directors since the stock options are granted at exercise prices at
or greater than the fair market value of the shares at the date of grant.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
year presentation.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations." This pronouncement addresses financial
accounting and reporting for business combinations and supercedes Accounting
Principles Board Opinion ("APB") No. 16, "Business Combinations" and SFAS No.
38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." All
business combinations within the scope of SFAS No. 141 are to be accounted for
under the purchase method. SFAS No. 141 is effective for business combinations
occurring after June 30, 2001. The Company adopted the provisions of SFAS No.
141 as of the effective date. Adoption of the provisions of this pronouncement
had no impact on the accompanying consolidated financial statements of the
Company.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." This pronouncement addresses financial accounting and reporting for
intangible assets acquired individually or with a group of other assets. SFAS
No. 142 also addresses financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. With the adoption of SFAS No.
142, goodwill and certain other intangible assets are no longer subject to
amortization. Instead, goodwill will be subject to at least an
40

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

annual assessment for impairment in value by applying a fair value based test.
Any applicable impairment loss is the amount, if any, by which the implied fair
value of goodwill is less than the carrying or book value. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. An impairment loss
for goodwill arising from the initial application of SFAS No. 142 is to be
reported as a cumulative effect of a change in accounting principle. The Company
will adopt the provisions of SFAS No. 142, as appropriate. The Company does not
believe the adoption will have a material impact on its consolidated financial
statements as the Company's entire goodwill balance was written-off as of
December 31, 2001 as a result of the Company's significant historical and
projected cash flow losses and the uncertainty surrounding the Company's ability
to restructure its capital structure in a satisfactory manner under the Chapter
11 Cases.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This pronouncement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. This pronouncement supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of business (as previously defined
in that Opinion). SFAS No. 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. The adoption of SFAS No. 144
did not have a material impact on the consolidated financial statements of the
Company.

41

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. DEBT

Debt, all of which is subject to compromise with the exception of the
debtor-in-possession financing facility (the "DIP Financing Facility"), consists
of the following:

DIP Financing Facility

Under the terms of the DIP Financing Facility, a revolving credit facility
of up to $55,000,000, including up to $20,000,000 for postpetition letters of
credit, is available to the Company until the earliest of (i) December 18, 2002,
(ii) the date on which the plan of reorganization becomes effective, (iii) any
material non-compliance with any of the terms of the order entered by the
Bankruptcy Court authorizing the Debtors to enter into the DIP Financing
Facility (the "DIP Financing Order"), (iv) any event of default that shall have
occurred under the DIP Financing Facility, or (v) consummation of a sale of
substantially all of the assets of the Company pursuant to an order of the
Bankruptcy Court shall have occurred. The terms of the DIP Financing Facility
provided for an initial facility of $20,000,000, which increased to $30,000,000
upon satisfaction of certain conditions. In addition, the DIP Financing Facility
will increase to $55,000,000 upon satisfaction of certain additional conditions,
including the earlier of (i) the agents' acceptance of our business

42

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

plan which addresses the restructuring of the Company's business operations and
(ii) the hiring of a permanent president and chief executive officer (acceptable
to the agents) and commencement of his/her duties, which person the Debtors
agreed to hire by no later than June 30, 2002. In any event, the availability
under the DIP Financing Facility will be reduced by $5,000,000 on November 30,
2002. Availability under the DIP Financing Facility is also subject to a
borrowing base based upon trade accounts receivable. Amounts borrowed under the
DIP Financing Facility bear interest per annum equal to the prime rate plus
2.50%. In addition to a facility fee and an underwriting fee of 0.50% each,
there is an unused commitment fee of 0.50%, a letter of credit fee of 3.25%, and
a letter of credit fronting fee of .125%. The DIP Financing Facility is secured
by super-priority claims and liens on the real and personal assets of the
Company that also secure the prepetition senior credit facility. The DIP
Financing Facility contains financial covenants requiring maintenance of an
asset coverage ratio and a minimum operating cash flow, as well as other
covenants that limit, among other things, indebtedness, liens, sales of assets,
capital expenditures, investments, and prohibit dividend payments. The Company
is currently in the process of renegotiating the financial covenants in the DIP
Financing Facility to reflect the financial performance set forth in the
Company's strategic business plan submitted to the agents in March 2002. In
addition to containing defaults customary for similar DIP facilities, a default
is also triggered upon the following events: (i) the Company's permanent
president and chief executive officer ceases to serve for any reason, unless a
replacement acceptable to the agents has been appointed and is serving within 30
days; (ii) the failure of the Company to submit to the agents, banks,
prepetitions agents, and prepetition lenders the Company's capital restructuring
plan by May 31, 2002; and (iii) the failure to file a plan of reorganization and
disclosure statement in connection with our Chapter 11 Cases by June 30, 2002.
The DIP Financing Facility also provides that the net proceeds of any asset
sales in the ordinary course of business will reduce prepetition indebtedness
under the senior credit facility. See "-- Note 21 -- Subsequent Events."

In connection with the DIP Financing Facility, the Company's prepetition
senior credit facility was amended to provide for subordination of the liens (to
the liens under the DIP Financing Facility) and use of cash collateral in return
for payment of interest on the prepetition senior credit facility.

The Company is currently in default on substantially all of its debt other
than the DIP Financing Facility. Despite the Company's restructuring efforts
described below, in December 2001, the Company failed to make a principal
payment due on the term loan portion of its senior credit facility, an interest
payment due on its 10.375% Senior Subordinated Notes due 2008 (the "Subordinated
Notes"), principal and interest payments on certain subordinated notes issued in
connection with acquisitions (the "Acquisition Notes") and certain other
scheduled payments.

Under the terms of the Company's senior credit facility, upon an event of
default, including the failure to make a required interest payment, the senior
lenders have several rights and remedies available to them, including declaring
all amounts outstanding, together with accrued interest, to be immediately due
and payable. The senior lenders had the right to proceed against the collateral
securing the facility, which includes substantially all of the Company's assets.
Similarly, as a result of the Company's failure to make interest and/or
principal payments under the Acquisition Notes and the Subordinated Notes,
subject to the subordination provisions of such instruments, the trustee or
holders of those notes were also permitted to declare those notes and accrued
interest immediately due and payable. The Company's other debt and lease
arrangements also contain cross-default provisions, which gave the parties
thereto various remedies, including acceleration of all amounts outstanding,
foreclosure on collateral securing such obligations and termination rights. As a
result of filing the Chapter 11 Cases, the Company's lenders and parties to
various contracts and agreements were prohibited from exercising the remedies
that would have been available to them upon the Company's default.

43

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate contractually stated maturities of debt, including the
principal portion of rental equipment financing obligations, is $109,445,000,
$73,013,000, $392,777,000, $17,022,000 and $331,295,000 for the five years
ending December 31, 2002, 2003, 2004, 2005 and 2006, respectively, and
$175,000,000 thereafter.

Rental equipment financing obligations consist of leases which meet the
criteria for treatment as capital leases under accounting principles generally
accepted in the United States. The total amount of assets recorded under these
leases is $33,771,000 and $44,032,000 and the accumulated depreciation related
to these assets is $6,180,000 and $6,781,000 at December 31, 2001 and 2000,
respectively. Contractually stated future minimum lease payments under capital
leases at December 31, 2001 total $8,935,000, $5,663,000, $8,283,000, $2,461,000
and $544,000 for the years ending December 31, 2002, 2003, 2004, 2005 and 2006,
respectively. There are no payments under capital leases subsequent to the year
ending December 31, 2006. The amount representing interest relating to these
lease payments is $4,095,000. Amortization relating to these assets is included
in rental equipment depreciation.

5. LIABILITIES SUBJECT TO COMPROMISE

The principal categories of claims classified as liabilities subject to
compromise under the Chapter 11 Cases are identified below. All amounts below
may be subject to adjustment depending on Bankruptcy court action, further
developments with respect to disputed claims, or other events, including the
reconciliation of claims filed with the Bankruptcy Court to amounts included in
the Company's records. Additional prepetition claims may arise from a rejection
of additional executory contracts or unexpired leases by the Debtors. Under a
confirmed plan or plans of reorganization, all prepetition claims may be paid
and discharged at amounts substantially less than their allowed amounts.

As a result of the Chapter 11 Cases, no principal or interest payments will
be made on unsecured prepetition debt without Bankruptcy Court approval or until
a plan or plans of reorganization providing for the repayment terms has been
confirmed by the Bankruptcy Court and becomes effective. Therefore, interest on
prepetition unsecured obligations has not been accrued after the Petition Date.

Liabilities subject to compromise consists of the following:

44

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. REORGANIZATION ITEMS

Expenses directly incurred as a result of the Chapter 11 Cases have been
segregated from normal operations and are disclosed separately. The major
components are as follows:

Facility closure costs relate to the write-off of fixed assets, primarily
leasehold improvements, of 14 stores identified for closure in the
reorganization. Such costs were of a non-cash nature.

Professional fees consist of legal, accounting and other professional
costs.

Severance relates to an executive transition agreement with the Company's
former Chairman and Chief Executive Officer ("former CEO"). See "-- Note 16 --
Related Party Transactions."

7. STOCKHOLDERS' EQUITY

PREFERRED STOCK

The Company has authorized 5,000,000 shares of $0.01 par value preferred
stock. In July and August 1999, pursuant to a Preferred Stock Purchase
Agreement, the Company sold an aggregate of 100,000 shares of Series A
Convertible Preferred Stock ("Preferred Stock") to NR Holdings Limited and NR
Investments Limited, affiliates of Investcorp, S.A., for an aggregate price of
$100,000,000. The net proceeds of the sale of the Preferred Stock were used to
pay down amounts outstanding under the prepetition senior credit facility. The
100,000 shares of Preferred Stock are convertible into 14,285,714 shares of
Common Stock, based on a liquidation preference of $1,000 per share of Preferred
Stock and a conversion price of $7.00 per share of Common Stock. The holders of
the Preferred Stock were granted certain demand and piggy-back registration
rights with respect to the shares of the Company's Common Stock issuable upon
conversion of the Preferred Stock, pursuant to a Registration Rights Agreement
among the Company, NR Holdings Limited, NR Investments Limited and certain of
the Company's stockholders. Upon certain changes of control of the Company
(approved by the Company's Board of Directors), the Company will be required to
offer to purchase shares of Preferred Stock for a purchase price per share equal
to the liquidation preference plus 8% compounded annually from the date of
issuance. The terms of the Preferred Stock are set forth in the Preferred Stock
Certificate of Designation filed as an exhibit to the 1999 Annual Report on Form
10-K along with the Preferred Stock Purchase Agreement and the Registration
Rights Agreement.

In August and September 2000, pursuant to a Preferred Stock Purchase
Agreement, the Company sold an aggregate of 100,000 shares of Series B
Convertible Preferred Stock (the "Series B Preferred Stock"), to NR2 Holdings
Limited, DB Capital Investors, L.P., J.P. Morgan Capital Corporation and Sixty
Wall Street Fund, L.P. for an aggregate price of $100,000,000. The net proceeds
of the sale of the Series B Preferred Stock were used to pay down amounts
outstanding under the prepetition senior credit facility. The 100,000 shares of
Series B Preferred Stock are convertible into 22,222,222 shares of Common Stock,
based on a liquidation preference of $1,000 per share of Series B Preferred
Stock and a conversion price of $4.50 per share of Common Stock. The holders of
the Series B Preferred Stock were granted certain demand and piggy-back
registration rights with respect to the shares of the Company's Common Stock
issuable upon conversion of the

45

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Series B Preferred Stock, pursuant to a Registration Rights Agreement among the
Company, such holders and certain of the Company's stockholders. Upon certain
changes of control of the Company (approved by the Company's Board of
Directors), the Company will be required to offer to purchase shares of Series B
Preferred Stock for a purchase price per share equal to the liquidation
preference plus 8% compounded annually from the date of issuance. The terms of
the Series B Preferred Stock are set forth in the Series B Preferred Stock
Certificate of Designation filed as an exhibit to the 2000 Annual Report on Form
10-K along with the Preferred Stock Purchase Agreement and the Registration
Rights Agreement.

COMMON STOCK

During 1999, the Company converted $4,070,000 and $500,000 of unsecured
subordinated convertible promissory notes issued in connection with four
acquisitions into 678,332 and 62,500 shares of Common Stock at a price of $6.00
and $8.00 per share, respectively.

In May 2000, the Board of Directors of the Company approved the repurchase
from time to time of up to $5,000,000 of the Company's Common Stock. As of
December 31, 2000, the Company repurchased 919,000 shares of its Common Stock in
the open market for a cost of approximately $2,675,000. In January 2001, the
Company purchased 146,200 additional shares of its Common Stock in the open
market for a cost of approximately $205,000. Through January 2001, an aggregate
of 1,065,200 shares of Common Stock have been acquired under this program for an
aggregate purchase price of approximately $2,880,000. These shares have been
recorded as treasury stock in the accompanying consolidated financial
statements. Since January 2001, no additional shares have been purchased.

In June 2001, the New York Stock Exchange (the "NYSE") notified the Company
that the Company's stock price had been below the NYSE's continued listing
criteria for minimum share price of $1.00 over a 30 day trading period. In
addition, in November 2001, the NYSE notified the Company that the Company's
market capitalization had been below the NYSE's continued listing criteria for
minimum market capitalization of $15,000,000 over a 30 day trading period.

In November 2001, the NYSE advised the Company that the they would suspend
the Company's common stock from trading on the NYSE prior to the opening of
business on November 2001, and seek to delist the stock from the NYSE. In
December 2001, the NYSE delisted the common stock from the NYSE. The Company's
stock began trading on the over-the-counter electronic bulletin board, commonly
known as the pink sheets (the "OTCBB") during November 2001. See "-- Note 21 --
Subsequent Events."

8. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases rental equipment, real estate and certain office
equipment under operating leases. Certain real estate leases require the Company
to pay maintenance, insurance, taxes and certain other expenses in addition to
the stated rentals. Contractually stated future minimum lease payments under
noncancelable operating leases (excluding rejected leases) at December 31, 2001
total $110,581,000, $105,394,000, $80,697,000, $39,178,000 and $14,454,000 for
the years ending December 31, 2002, 2003, 2004, 2005 and 2006, respectively and
$41,870,000, thereafter. Lease expense under noncancelable operating leases was
$117,746,000, $96,766,000 and $60,248,000 for the years ended December 31, 2001,
2000 and 1999, respectively. As part of the Chapter 11 Cases, the Company is
reviewing the legal status of its equipment leases (and other leases), including
the issue of whether such leases should be recharacterized as financing
arrangements for legal purposes in the Chapter 11 Cases.

46

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INSURANCE

In addition to group medical coverage, effective September 1, 2000, the
Company's primary auto liability, commercial general liability, and, in most
states, its workers' compensation liability insurance coverages were issued
under an arrangement with an insurance carrier pursuant to which the Company
effectively self-insures such primary coverage. Above the respective primary
policy limits, the Company has obtained commercial excess/umbrella and excess
workers' compensation liability stop loss coverages on a fully insured basis.
Insured losses for the primary coverages are accrued based upon the aggregate
liability for reported claims incurred and an estimate for claims incurred but
not reported. These liabilities are not discounted.

LEGAL MATTERS

On December 17, 2001, the Debtors filed the Chapter 11 Cases in the
Bankruptcy Court. The cases were consolidated for procedural purposes and
designated as Case No. 01-11628 (PJW). In connection with the Chapter 11 Cases,
proofs of claim have been and will be filed against the Debtors with the
Bankruptcy Court or with the Debtors' claims and noticing agent. The Debtors
will then be required to resolve proofs of claim that differ in nature,
classification or amount from the Debtors' books and records through
negotiations with the applicable claimants and the filing and prosecution of
objections to such claims. See "-- Note 21 -- Subsequent Events."

The Debtors were party to various legal proceedings arising in the ordinary
course of their business prior to the filing of the Chapter 11 Cases, none of
which were material to the Debtors' financial condition or results of
operations. All such proceedings have been stayed as of the Petition Date,
unless the stay has been or will be lifted by the Bankruptcy Court, and any
liabilities related to such claims are subject to compromise pursuant to a plan
of reorganization in the Chapter 11 Cases.

The Debtors have also become party to legal proceedings arising in the
ordinary course of business after the Petition Date, none of which are material
to its financial condition or results of operations.

ENVIRONMENTAL MATTERS

The Company and its operations are subject to various laws and related
regulations governing environmental matters. Under such laws, an owner or
operator of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances located on or in, or emanating from, such
property, as well as investigation of property damage. As part of the Company's
acquisition due diligence and prior to leasing any new facilities, the Company
performs extensive environmental analyses on the sites to be operated by the
Company. Any required remediation has typically been the responsibility of the
prior owner or landlord. The Company does not believe there are currently any
environmental liabilities which should be recorded or disclosed in the
accompanying consolidated financial statements. The Company believes the
possibility is remote that its compliance with various laws and regulations
relating to the protection of the environment will have a material effect on its
capital expenditures, future earnings or financial position.

9. 2000 RESTRUCTURING PLAN

During the fourth quarter of 2000, the Company's management implemented a
plan to restructure certain of its operations to address a significant imbalance
between the Company's revenue and costs. During 2001, the Company implemented
additional actions to restructure certain of its operations pursuant to the 2000
restructuring plan.

47

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The restructuring plan was comprised of the following major components:

- the sale of excess rental equipment, which primarily relates to a portion
of the Company's heavy earthmoving equipment that has the highest unit
cost, requires the most expensive support infrastructure and has the
lowest return on investment;

- the abandonment of certain information system projects that were under
development;

- the elimination of jobs company-wide and the consolidation of various
departments within the organization; and

- the closure of certain rental and office locations.

Pursuant to the restructuring plan, during the fourth quarter of 2000, the
Company recorded a pre-tax restructuring charge of approximately $72,005,000 and
during 2001, the Company recorded an additional net pre-tax restructuring charge
of approximately $9,653,000. The components of these charges, along with the
activity for 2000 (of which $21,807,000 was non-cash) and 2001 related to these
charges, are presented in the following table (in thousands).

The charge for rental fleet disposition represents estimated losses on
assets identified for sale under the restructuring plan. As of December 31,
2001, all of the rental equipment that was identified for sale under the
restructuring plan had been sold.

The restructuring plan includes the termination and payment of related
severance benefits under the Company's existing severance plan and agreements
for approximately 450 employees, all of whom had been terminated as of December
31, 2001. Payments are expected to be paid through the third quarter of 2003.

During 2001, the Company modified its restructuring plan related to
facility closures, primarily as a result of changes to its planned openings of
NationsRent rental centers within select Lowe's home improvement stores. As a
result of the changes to the restructuring plan, three of the rental facilities
originally identified for closure will remain open and one additional rental
facility was identified for closure. The impact of such changes was not material
to the original restructuring charge recorded for store closures. All 16 stores
that have been identified for closure under the restructuring plan, as modified,
have been closed as of December 31, 2001. Lease payments for the facility
closures extend into 2009 pursuant to the terms of the facility lease
agreements. However, during the first quarter of 2002, the Company received
approval from the Bankruptcy Court to reject the facility lease agreements. As
such, the remaining reserve for such future lease payments was reversed to
income, which resulted in a $794,000 reduction of the previously recorded
charge. The remaining reserve balance at December 31, 2001 for facility closures
relates to certain office equipment leases that the Company has not yet received
Bankruptcy Court approval to reject. Such approval is expected to occur in the
second quarter of 2002.

10. DERIVATIVE FINANCIAL INSTRUMENTS

Effective January 1, 2001 the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended. This statement
establishes accounting and reporting standards for

48

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

derivative instruments and hedging activities. This standard requires that all
derivative instruments be recorded in the balance sheet as either an asset or
liability measured at its fair value. The provisions of SFAS No. 133 require
that changes in a derivative's fair value be recognized immediately in earnings
unless specific hedge accounting criteria are met.

The Company limits its exposure to and benefits from interest rate
fluctuations on variable rate debt to within a certain range of rates through
the use of swaps. Derivative financial instruments are not used for trading or
speculative purposes. As of December 31, 2001, the amount covered by swaps was
$195,000,000, with effective interest rates between 6.58% and 6.80%. The swap
agreements for $165,000,000 and $30,000,000 of debt expire in February and
October of 2002, respectively. The Company recognizes its derivatives in the
balance sheet at fair value, representing a liability of approximately
$2,697,000 as of December 31, 2001 which is included in other accrued
liabilities in the accompanying consolidated balance sheet. The Company has
determined the interest rate swaps to be ineffective cash flow hedges, as
defined by SFAS No. 133. In accordance with the transition provisions of SFAS
No. 133, the Company recorded a $1,359,000 charge net of $968,000 of income tax
benefits, or $0.02 per share, which is recorded in the consolidated statement of
operations for the year ended December 31, 2001 as a cumulative effect of change
in accounting principle. The impact of the change in value of the Company's
swaps for the year ended December 31, 2001 resulted in a net charge to interest
expense of $369,000. See "-- Note 21 -- Subsequent Events."

11. INCOME TAXES

The components of the provision (benefit) for federal and state income
taxes are summarized as follows:

A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:

The provision for income taxes was $(10,783,000) of which, $(968,000) is
included in the cumulative effect of change in accounting principle, net of
income tax benefit for the year ended December 31, 2001.

49

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes reflect the tax effects of temporary differences
between the carrying value of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of deferred income tax assets and liabilities are as follows:

At December 31, 2001, the Company had Net Operating Loss ("NOL")
carryforwards for federal and state income tax purposes of $434,614,000, that
expire in the years 2006 through 2021. At December 31, 2001, the Company had
alternative minimum tax credit and general business credit carryforwards of
$1,714,000. These credits are available to offset future regular income tax that
is in excess of the alternative minimum tax in such year.

During 2001, a large number of shares of common stock of the Company were
exchanged on the open market. If it is determined that these transactions result
in an "ownership change" as defined under Internal Revenue Code ("IRC") sec.382,
the Company's ability to utilize its NOL carryforwards and other tax attributes
including tax credit carryforwards may be limited in accordance with the IRC
sec.382.

The Company has recorded a valuation allowance for deferred tax assets of
$262,982,000 and $15,214,000 at December 31, 2001 and 2000, respectively, as
management believes it is likely that those deferred tax assets will not be
realized.

50

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share data):

Options and warrants to purchase 9,153,792, 9,688,167 and 1,667,501 shares
of Common Stock were outstanding at December 31, 2001, 2000 and 1999,
respectively, but were not included in the computation of diluted earnings per
share because the exercise prices of such options and warrants were greater than
the average fair value of the common shares and, therefore, the effect would be
antidilutive.

Weighted average shares of preferred stock and subordinated debt
convertible into 36,507,937 and 10,948,231 shares of Common Stock, respectively,
were outstanding at December 31, 2001 but were not included in the computation
of diluted earnings per share since their effect would be antidilutive.

Weighted average shares of preferred stock and subordinated debt
convertible into 22,375,574 and 11,185,836 shares of Common Stock, respectively,
were outstanding at December 31, 2000 but were not included in the computation
of diluted earnings per share since their effect would be antidilutive.

13. STOCK OPTIONS

In August 1998, the Board of Directors and stockholders of the Company
approved the NationsRent 1998 Stock Option Plan (the "1998 Plan"), which
authorized the grant of options to directors (employee and non-employee) and
employees of the Company for up to 5,000,000 shares of Common Stock. In July
1999, the Board of Directors and stockholders of the Company authorized an
increase of the shares available for grant under the 1998 Plan to 7,000,000
shares. In May 2000, the Board of Directors and stockholders of the Company
authorized an increase of the shares available for grant under the 1998 Plan to
10,000,000 shares. In May 2001, the Board of Directors and the stockholders of
the Company authorized an increase of the shares available for grant under the
1998 plan to 12,000,000. In addition, the Company has granted to certain
employees 1,087,571 options to purchase shares of Common Stock prior to the
adoption of the 1998 Plan (the "Pre-Plan Options"). The exercise price per share
for all options granted was based on the estimated fair value of the Company's
common stock at the time of the grant. As such, no compensation cost has been
recognized for these stock options. During 2001, 2000 and 1999, a total of
3,030,000, 5,027,500 and 2,415,219 stock options were granted with exercise
prices ranging from $0.16 to $2.00, $1.69 to $5.63 and $5.56 to $7.38 per share,
respectively.

51

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the acquisition of Logan Equipment Corporation
("Logan"), the Company assumed outstanding options to purchase shares of stock
in Logan, which were granted under the Logan 1998 Stock Option Plan, and
converted them into options to purchase 196,293 shares of Common Stock with an
exercise price of $0.86 per share. In December 1999, pursuant to the acquisition
agreement with Logan, these options were automatically converted into options to
purchase 291,347 shares of Common Stock with an exercise price of $0.58 per
share as a result of certain market performance criteria relating to the Common
Stock.

Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS No. 123, "Accounting for Stock Based Compensation," as
if the Company had accounted for its granted employee stock options under the
fair value method of SFAS No. 123. The Company's pro forma net income (loss),
pro forma earnings (loss) per share and pro forma weighted average fair value of
options granted (with related assumptions) would have been as follows:

As of December 31, 2001, a total of 11,126,103 shares of Common Stock have
been reserved for issuance of options to purchase shares of Common Stock with
2,072,311 remaining available for grant. A summary of the Company's outstanding
stock option activity, and related information, for the years ended December 31,
1999, 2000 and 2001 is as follows:

Generally, options granted have ten year terms and vest in equal increments
over a three or four year period commencing on the first anniversary of the date
of grant, except for options granted to non-employee directors of the Company
which are fully exercisable at the time of grant. At December 31, 2001, 700,000
options had been granted to non-employee directors of the Company. Options
granted under the 1998 Plan

52

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and Pre-Plan Options expire upon termination of employment or service on the
board. The following table summarizes information concerning outstanding and
exercisable options as of December 31, 2001:

14. PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

15. ACQUISITIONS

The Company did not make any acquisitions in 2001. The Company acquired
four and 17 equipment rental businesses during the years ended December 31, 2000
and 1999, respectively. The acquisitions have been accounted for using the
purchase method and, accordingly, the acquired assets and assumed liabilities
have been recorded at their estimated fair values as of the date of acquisition.
The operations of the acquired businesses have been included in the Company's
consolidated statements of operations since the effective date of each
respective acquisition.

The aggregate consideration paid for the businesses acquired during 2000
was $25,826,000 and consisted of (i) $21,150,000 of cash, (ii) $3,475,000 of
convertible subordinated debt and (iii) $1,200,000 of future contractual cash
payments. The cash portion of the consideration was funded through borrowings
under the Company's credit facility. The Company repaid or assumed outstanding
indebtedness of the acquired companies in the aggregate amount of $9,793,000.

As a part of the purchase of a certain business during 1999, the Company
acquired an equipment dealership, which the Company intended to dispose of and
accounted for as an asset held for sale pursuant to EITF No. 87-11 "Allocation
of Purchase Price to Assets to be Sold." In May 2000, the Company decided to
close the locations that comprised the dealership portion of the acquisition
after it was unable to obtain the manufacturer's approval for the sale of the
dealership to a third party. As such, the Company liquidated the assets of the
acquired dealership. The results of operations related to the dealership through
the date of

53

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

disposal, which aggregated $4,645,000 of losses and $525,000 of interest
expense, have been excluded from the Company's 2000 consolidated statements of
operations.

The aggregate consideration for the businesses acquired during 1999 was
$194,545,000 and consisted of (i) $156,175,000 of cash, (ii) $25,134,000 of
convertible subordinated debt, (iii)$5,750,000 of subordinated debt, (iv)
$4,503,000 of future contractual cash payments and (v) 390,634 shares of Common
Stock. In addition, the Company repaid or assumed outstanding indebtedness of
the acquired companies in the aggregate amount of $64,720,000.

In connection with two of the acquisitions, the Company agreed to make
future payments up to an aggregate of $12,898,000 in cash or Common Stock to the
former owners based on the achievement of certain future operating results of
the acquired companies or market performance of the Common Stock. These
contractual obligations were to be paid at various times through December 2001.
These payments were not made as of December 31, 2001.

During 2000, the Company paid consideration of $11,750,000 of cash,
$2,450,000 of subordinated convertible debt and 1,728,742 shares of Common Stock
to the former owners of previously acquired businesses related to the
achievement of certain operating results. The Company records amounts paid for
contingent consideration as additional purchase price once they are incurred
since the consideration is required regardless of the former owner's continued
association with the Company.

The following table sets forth the estimated fair value of the assets
acquired and liabilities assumed for the aforementioned acquisitions completed
in 2000:

The following table sets forth the unaudited pro forma consolidated results
of operations for the year ended December 31, 2000 giving effect to the
aforementioned acquisitions completed during 2000 as if such acquisitions had
occurred on January 1, 1999 (in thousands, except per share data):

The above unaudited pro forma consolidated results of operations are based
upon certain assumptions and estimates which the Company believes are
reasonable. The unaudited pro forma consolidated results of operations may not
be indicative of the operating results that actually would have been reported
had the acquisitions been consummated on January 1, 2000, nor are they
necessarily indicative of results which will be reported in the future.

16. RELATED PARTY TRANSACTIONS

The Company entered into an Executive Transition Agreement in December 2001
with its former CEO. Pursuant to the agreement, the former CEO agreed to resign
all of his director and officer positions with the Company and its subsidiaries
the earlier of (i) 60 days following the date of the agreement or (ii) the date
the

54

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company appoints a new or interim chief executive officer. The agreement
provided a severance payment to the former CEO of $2,000,000, of which
$1,000,000 was paid in cash and $1,000,000 was paid in the form a promissory
note (backed by a letter of credit) that was to be due and payable upon the
former CEO's resignation. In addition, the Company deposited a retainer of
$175,000 with the former CEO's counsel to cover expenses related to the
negotiation, documentation and defense of the Executive Transition Agreement.
The former CEO resigned in February 2002.

The Company leases certain properties from TTG Properties, a general
partnership controlled by one of the former directors of the Company. Rental
expense for such properties totaled $1,093,000, $1,061,000 and $907,000 for the
years ended December 31, 2001, 2000 and 1999, respectively.

The Company leased certain office space from AutoNation, Inc.
("AutoNation"). Lease payments for such space totalled $687,000, $527,000 and
$85,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Two
of the Company's directors serve as directors of AutoNation.

The Company leases certain office space from Boca Resorts, Inc. ("Boca
Resorts"). Lease payments for such space totaled zero, $89,000 and $568,000 for
the years ended December 31, 2001, 2000 and 1999, respectively. In addition, the
Company leased certain other facilities and related services from the Arena
Operating Company, which was controlled by Boca Resorts until July 2001, with
lease payments totaling zero, $112,000 and $106,000 for the years ended December
31, 2001, 2000 and 1999, respectively. Two of the Company's directors serve as
directors of Boca Resorts, one of which controls a majority of the voting
interests of Boca Resorts.

The Company has purchased certain building construction services and
certain freight services from Alvada Construction, Inc. and Alvada Trucking,
Inc. ("Alvada"), which totaled $124,000, $1,231,000 and $411,000 for the years
ended December 31, 2001, 2000 and 1999, respectively. Alvada is controlled by
the estate of a relative of the former CEO of the Company.

The Company leases certain facilities and related services from South
Florida Stadium Corporation at Pro Player Stadium which is owned by one of the
Company's directors. Lease payments for such facilities totaled $177,000,
$179,000 and $201,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.

The Company obtained certain investment banking services from Rhone Group,
which totaled $362,000 for the year ended December 31, 2000. One of the
Company's directors is a managing director of Rhone Group. No such services were
provided in 2001.

The Company purchased certain fabrication services from Findlay Machine and
Tool ("FMT"), which totaled $510,000, $118,000 and $151,000 for the years ended
December 31, 2001, 2000 and 1999, respectively. The principal shareholder of FMT
is directly related to the former CEO of the Company.

In connection with the acquisition of A-1 Rental in 1998, the Company
issued subordinated debt to and leases certain facilities from a previous owner
who served as an officer of the Company until March 2000. Subsequently, the
subordinated debt was converted to common stock of the Company. Lease payments
for such facilities totaled $1,547,000 and $1,531,000 for the years ended
December 31, 2000 and 1999, respectively.

In connection with the acquisition of Sam's Equipment Rental, Inc. and
Gabriel Trailer Manufacturing Company, Inc., the Company issued subordinated
debt to a previous owner who served as a director of the Company until March
2001. Interest payments related to this debt totaled $104,000 for the year ended
December 31, 2001 and $263,000 for each of the years ended December 31, 2000 and
1999.

55

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the recruiting and relocation of the Company's Executive
Vice President and Chief Financial Officer, the Company loaned such executive
$250,000, the principal and interest of which will be forgiven by the Company
one-third a year commencing January 2002.

17. NON-RECURRING ITEMS

In January 1999, the Company received net proceeds of $23,315,000 related
to the sale of a lift truck dealership acquired as part of an acquisition made
in April 1998. The carrying value of the tangible assets sold was $16,059,000
resulting in proceeds in excess of carrying value of $7,256,000. The Company
recorded a pre-tax gain of $1,818,000 based on the increase in value of the
dealership since the date of acquisition. The remaining $5,438,000 of proceeds
in excess of carrying value was recorded as a reduction of goodwill.

In January 1999, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Rental Service Corporation ("RSC"), a Delaware
corporation, pursuant to which the Company was to be merged with and into RSC
with RSC continuing as the surviving corporation to be named RSC NationsRent. On
May 2, 1999, the Company entered into a Termination and Release Agreement (the
"Termination Agreement") with RSC, pursuant to which the Company and RSC
mutually agreed to terminate the Merger Agreement and to abandon the proposed
merger between the parties. As part of the Termination Agreement, RSC paid the
Company $6,000,000 as reimbursement of out-of-pocket costs and expenses incurred
in connection with the proposed merger. The Company recorded a pre-tax charge of
$3,932,000 in the second quarter of 1999 for the un-reimbursed portion of
expenses incurred related to the proposed merger.

18. RETIREMENT PLAN

In November 1998, the Company adopted the NationsRent 401(k) Retirement
Plan (the "Plan") which allows its eligible employees to make contributions, up
to a certain limit, to the Plan on a tax-deferred basis under Section 401(k) of
the Internal Revenue Code of 1986, as amended. Eligible employees are those who
have completed their 90 day probationary period and are over twenty-one years of
age. The Company may, at its discretion, make matching contributions to the
Plan. The Company made matching contributions of $511,000, $1,170,000 and
$1,059,000 to the Plan for the years ended December 31, 2001, 2000 and 1999,
respectively.

19. COMPREHENSIVE INCOME (LOSS)

The objective of reporting comprehensive income is to disclose all changes
in equity of an enterprise that result from transactions and other economic
events in a period other than transactions with owners. The comprehensive income
(loss) of the Company was equal to net income (loss) for all periods presented.

56

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables set forth the Company's condensed consolidated
statements of operations by quarter for the years ended December 31, 2001 and
2000.

During the fourth quarter of 2000, the Company recorded a pre-tax
restructuring charge of approximately $72,005,000 and during 2001, the Company
recorded an additional pre-tax restructuring charge of approximately $9,653,000
(see Note 9).

During the fourth quarter of 2001, the Company incurred an operating charge
of $770,833,000 for the impairment of intangible assets related to acquired
businesses.

The Company's revenue and income are dependent upon activity in the
construction industry in the markets it serves. Construction activity is
dependent upon weather and other seasonal factors affecting construction in the
geographic areas where we have operations. Because of this variability in
demand, the Company's quarterly revenue and income may fluctuate. Accordingly,
quarterly or other interim results should not be considered indicative of
results to be expected for any other quarter or for a full year.

21. SUBSEQUENT EVENTS

In January 2002, the United States trustee for the District of Delaware
appointed an Official Committee of Unsecured Creditors in accordance with the
provisions of the Bankruptcy Code. In March 2002, the Bankruptcy Court also
entered the DIP Financing Order authorizing the Debtors to enter into the DIP
Financing Facility, and to grant first priority priming liens, mortgages, and
security interests on substantially all of the assets of the Debtors to secure
the DIP Financing Facility.

In January 2002, the Bankruptcy Court approved the Company's key employee
retention plan. Under the retention plan, certain of our key employees,
including executive officers, are eligible for a retention bonus. The key
employees are classified into different bands based on their level of
responsibility and role within the
57

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company. The amount of retention bonuses is based on a key employee's band and
base salary at the time the bonus is determined. Key employees below a certain
band are eligible for a retention bonus at the discretion of the Company payable
in one or more installments so long as they remain with the Company for a
specified period of time. Key employees above a certain band, including
executive officers, are eligible for a retention bonus only upon Emergence (as
defined in the plan), subject to approval of the allocations of such amounts by
the Company's permanent president and chief executive officer and the Board of
Directors. In order to receive payment of a retention bonus, the key employee
must be employed in good standing on the due date of the payment or have been
discharged without cause (as defined in the plan), died, become disabled, or
have resigned with good reason (as defined in the plan) within 180 days prior to
the due date for the payment.

In January 2002, the Bankruptcy Court also approved the Company's key
employee severance plan. Under the severance plan, certain of our key employees,
including executive officers, are eligible for a lump sum severance payment and
continuance of employee benefits, including continuing coverage under the
Company's directors and officers insurance policies if applicable, in the event
of an employment loss. Employment loss is defined as a termination of the key
employee's employment without cause (as defined in the plan) or a termination
initiated by the key employee with good reason (as defined in the plan). The
lump sum severance payment is equal to the key employee's monthly base salary in
effect at the time of the employment loss multiplied by a severance award
factor. If a key employee becomes eligible to receive payments and benefits
under the severance plan and any other severance plan of the Company, the key
employee may only receive the greater of the two payments and benefits. In order
to receive the payment and benefits under the severance plan, at the time of the
eligible employment loss the key employee must execute a general release
releasing the Company and its affiliates from certain claims arising in
connection with his or her employment or separation from the Company. Pursuant
to the severance plan, the executive officers are eligible to receive severance
payments equal to 18 months of their base salary in effect at the time of
employment loss.

In April 2002, the Debtors obtained approval from the Bankruptcy Court to
continue the scheduled opening of NationsRent rental centers within select
Lowe's home improvement stores.

As of April 2002, all of the Company's derivative financial instruments had
terminated or expired.

In May 2002, the Bankruptcy Court approved the Debtors' motion to establish
a bar date for filing proofs of claim. As a result, the Debtors selected August
5, 2002 as the bar date.

In May 2002, the Company was notified by the OTCBB that as a result of the
Company's late filings of required reports under the Securities Exchange Act of
1934, the Company's stock will not be eligible for trading on the OTCBB
beginning June 2002, unless all such required reports are filed.

58

NATIONSRENT, INC.
(DEBTOR-IN-POSSESSION AS OF DECEMBER 17, 2001)

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

SCHEDULE II
(IN THOUSANDS)

- ---------------

(a) Accounts written-off.
(b) Represents allowance for doubtful accounts of acquired companies.
(c) Included under the caption "Assets Held for Sale" and "Accrued Expenses and
Other Liabilities" in the accompanying consolidated balance sheets.
(d) Primarily cash payments of costs associated with restructuring activities.
(e) Primarily non-cash asset write-offs and charges to the rental fleet
disposition accrual.

59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

Set forth below is biographical information for each current director of
the Company.

THOMAS H. BRUINOOGE, age 58, joined the Company as a director in June 1998.
Mr. Bruinooge is an attorney who has been in private practice since 1968 and
founded the firm of Bruinooge & Associates in 1987.

IVAN W. GORR, age 72, joined the Company as a director in June 1999. Mr.
Gorr served as Chairman of the Board of Directors and Chief Executive Officer of
Cooper Tire & Rubber Company, a manufacturer of tires and other rubber products,
from 1989 until he retired in October 1994. Mr. Gorr also serves as a director
of Borg-Warner Automotive, Inc.

HARRIS W. HUDSON, age 59, joined the Company as a director in June 1998.
Since May 1998, Mr. Hudson has served as Vice Chairman, Secretary and a director
of Republic Services, Inc. ("Republic Services"), a leading provider of
non-hazardous solid waste collection services. Mr. Hudson has served as a
director of AutoNation, Inc., formerly known as Republic Industries, Inc.,
("AutoNation"), which owns the nation's largest chain of franchised automotive
dealerships, since August 1995 and as Vice Chairman of AutoNation since October
1996. He served as Chairman of AutoNation's Solid Waste Group from October 1996
until July 1998. From August 1995 until October 1996, Mr. Hudson served as
President of AutoNation. From 1983 until August 1995, Mr. Hudson served as
Chairman of the Board, Chief Executive Officer and President of Hudson
Management, a solid waste collection company that he founded, which AutoNation
acquired in August 1995. From 1964 to 1982, Mr. Hudson served as Vice President
of Waste Management of Florida, Inc., a subsidiary of Waste Management, Inc. and
its predecessor ("Waste Management"), the world's largest integrated solid waste
services company. Mr. Hudson also serves as a director of Boca Resorts, Inc.
("Boca Resorts"), formerly known as Florida Panthers Holdings, Inc., an owner
and operator of luxury resort hotels.

H. WAYNE HUIZENGA, age 64, joined the Company as a director in June 1998.
Since May 1998, Mr. Huizenga has served as Chairman of the Board of Republic
Services. From May 1998 until December 1998, Mr. Huizenga also served as the
Chief Executive Officer of Republic Services. Mr. Huizenga has also served as
Chairman of AutoNation since August 1995. From August 1995 to September 1999,
Mr. Huizenga served as Chief Executive Officer or Co-Chief Executive Officer of
AutoNation. Since September 1996, Mr. Huizenga has served as Chairman of Boca
Resorts. Since January 1995, Mr. Huizenga has served as Chairman of Extended
Stay America, Inc., an operator of extended stay lodging facilities. Since June
2000, Mr. Huizenga has served as a director of ANC Rental Corporation, which
owns and operates Alamo Rent-A-Car and National Car Rental. Since May 2000, Mr.
Huizenga has been Vice Chairman of Zixit Corporation, which develops and markets
products and services that enhance privacy, security and convenience over the
internet. From September 1994 until October 1995, Mr. Huizenga served as a Vice
Chairman of Viacom Inc., a diversified entertainment and communications company.
During this period, Mr. Huizenga also served as the Chairman of Blockbuster
Entertainment Group, a division of Viacom. From April 1987 through September
1995, Mr. Huizenga served as the Chairman of the Board and Chief Executive
Officer of Blockbuster Entertainment Corporation ("Blockbuster"), during which
time he helped build Blockbuster from a 19-store chain into the world's largest
video rental company. In September 1994, Blockbuster merged into Viacom. In
1971, Mr. Huizenga co-founded Waste Management, which he helped build into the
world's largest integrated solid waste services company, and he served in
various capacities, including President, Chief Operating Officer and a director,
from its inception until 1984. Mr. Huizenga also owns the Miami Dolphins and Pro
Player Stadium, in South Florida.

60

M. STEVEN LANGMAN, age 40, joined the Company as a director in August 2000.
In 1996, Mr. Langman founded and since that time has served as Managing Director
of Rhone Group LLC, a private merchant banking firm with offices in New York,
Paris and London. Prior to joining Rhone, Mr. Langman was Managing Director of
Lazard Freres & Co. LLC where he specialized in mergers and acquisitions working
in both London and New York. Mr. Langman joined Lazard in 1987. Before joining
Lazard, he worked in the mergers and acquisition department of Goldman, Sachs &
Co. Mr. Langman currently serves on the board of directors of Dreyer's Grand Ice
Cream, Inc. as well as the boards of several private companies controlled by
Rhone Capital LLC, a private equity fund affiliated with Rhone Group LLC.

EXECUTIVE OFFICERS

Set forth below is biographical information for each of the Named Executive
Officers (as defined below).

JAMES L. KIRK, age 51, was a co-founder of the Company and served as the
Chairman of the Board of the Company from August 1997 to February 2002 and as
Chief Executive Officer of the Company from April 1998 to February 2002. Mr.
Kirk also served as President of the Company from April 1998 until October 1998.
From 1985 to February 1998, Mr. Kirk was Chairman of the Board, President and
Chief Executive Officer of OHM Corporation ("OHM"), a leading environmental
construction company.

JOSEPH H. IZHAKOFF, age 36, joined the Company as Vice President and
General Counsel in September 1998. Commencing October 1998, Mr. Izhakoff also
began serving as Secretary. Prior to joining the Company, Mr. Izhakoff was an
attorney at Akerman, Senterfitt & Eidson, P.A. since August 1995, most recently
as a shareholder of the firm, where his practice focused on corporate finance
and mergers and acquisitions.

PHILIP V. PETROCELLI, age 43, was appointed President and Chief Executive
Officer in February 2002. He joined the Company as Executive Vice President in
February 1998. From August 1993 to February 1998, Mr. Petrocelli was Vice
President -- Western Region of OHM. Before joining OHM, Mr. Petrocelli was a
Regional Director and acting Vice President -- Analytical Labs with IT
Corporation, a provider of engineering services, since September 1988.

EZRA SHASHOUA, age 47, joined the Company as Executive Vice President and
Chief Financial Officer in January 2001. Previously, Mr. Shashoua worked at
7-Eleven, Inc., a national convenience store chain, in Dallas, Texas, where he
served in various capacities of increasing responsibility from 1982 to January
2001, most recently as Vice President and Chief Financial Officer. Prior to
joining 7-Eleven, Mr. Shashoua was an attorney at Sonnenschein, Nath and
Rosenthal in Chicago, Illinois.

GERALD W.B. WEBER, age 50, served as the Company's Executive Vice President
of Operations from September 2000 to May 2002. From September 1998 to September
2000, Mr. Weber was Chief Operating Officer and served on the board of directors
of CarSpa, Inc., a provider of specialized car services. Prior to joining
CarSpa, Mr. Weber served as Senior Vice President of AutoNation from 1995 to
December 1997. From 1994 to 1995, Mr. Weber was President of the music division
of Viacom and from 1987 to 1994 he served as the Senior Vice President of the
video division of Viacom.

COMPENSATION OF DIRECTORS

Directors are reimbursed for their reasonable expenses incurred in
connection with their attendance at Board and Committee meetings. In addition,
until March, 2002, non-employee directors of the Company received grants of
stock options under the Company's 1998 Stock Option Plan (the "1998 Plan"). The
1998 Plan provided for an automatic grant of options to purchase 50,000 shares
of NationsRent common stock when a non-employee director joined the Board.
Additional automatic grants of options to purchase 10,000 shares of NationsRent
common stock were made at the beginning of each year to non-employee directors
continuing to serve on the Board. These options were fully vested and
immediately exercisable on the grant date, and remain exercisable for a term of
ten years from the date of grant as long as the optionee continues to serve on
the Board. The exercise price per share was set at the closing price of
NationsRent's common stock on the date immediately prior to the grant date. In
order to retain the services of non-employee directors, the Company determined
that in lieu of future grants under the 1998 Plan, non-employee directors

61

would receive cash payments for service on the Board. As of January 1, 2002,
future grants of options to non-employee directors under the 1998 Plan were
suspended. Non-employee directors now receive $2,500 for each in person Board
meeting, $1,500 for each telephonic meeting and $1,000 per Committee meeting,
whether in person or telephonic.

In February 2002, Mr. Bruinooge was elected the non-executive Chairman of
the Board in connection with the Chapter 11 Cases. As compensation for his
increased services to the Company, Mr. Bruinooge will receive $25,000 per month,
plus reasonable out of pocket costs and expenses, for as long as he serves in
such capacity.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten-percent stockholders are
required by the SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file.

Based solely upon review of the copies of such reports furnished to the
Company and written representations from certain executive officers and
directors that no other such reports were required, the Company believes that
during fiscal year ended December 31, 2001, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with on a timely basis.

62

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the annual base salaries and other
compensation that the Company paid for, and stock options granted during, the
fiscal years ended December 31, 1999, 2000 and 2001 to the persons listed below,
who were serving as executive officers as of December 31, 2001 (the "Named
Executive Officers"):

- ---------------

(1) Mr. Kirk served as Chairman and Chief Executive Officer from August 1997 to
February 2002. Mr. Kirk and the Company entered into an Executive
Transition Agreement on December 14, 2001. Pursuant to the agreement, Mr.
Kirk agreed to resign all of his director and officer positions with the
Company and its subsidiaries on the earlier of (i) 60 days after the date
of the agreement or (ii) the date the Company appoints a new or interim
chief executive officer. The agreement provided for a severance payment to
Mr. Kirk of $2,000,000, of which $1,000,000 was paid in cash on the date of
the agreement. The remainder of the severance payment was in the form of a
promissory note (backed by a letter of credit) which became due and payable
on February 11, 2002, the date of Mr. Kirk's resignation. The agreement
provides Mr. Kirk with health and medical benefits similar to those offered
to NationsRent's executive officers for a period of one year from his
resignation date. The Company also agreed to name Mr. Kirk as an insured
under its tail Director and Officer policies for liability related to his
service as a director or officer of the Company, and will maintain such
coverage through February 11, 2005. The agreement also required Mr. Kirk to
execute a release in favor of the Company and its Directors and Officers in
connection with his separation from the Company. The Company deposited a
retainer of $175,000 to Mr. Kirk's counsel for coverage of Mr. Kirk's costs
and expenses in connection with the negotiation, documentation and defense
of his Executive Transition Agreement. Any unused portion of the retainer
will be returned to the Company on the later of (i) December 17, 2004 or
(ii) the date on which any action challenging the Executive Transition
Agreement is resolved.
(2) Consist of (a) $70,015 of personal use of the Company's aircraft calculated
under applicable IRS formula (Board policy expressly directs that certain
executive officers use the Company's corporate aircraft for business and
personal travel for safety and efficiency purposes and that personal
aircraft use be reported as compensation), (b) $2,000,000 in severance
payments paid pursuant to Mr. Kirk's Executive Transition Agreement; and
(c) $175,000 deposited as a retainer with Mr. Kirk's counsel for costs and
expenses incurred in connection with the Executive Transition Agreement.
(3) Since the executive is no longer employed by the Company, these options
have expired in accordance with their terms.
(4) Consists of personal use of the Company's aircraft calculated under
applicable IRS formula.
(5) Consists of relocation expenses of $71,774 and personal use of the
Company's aircraft of $40,495.
(6) Mr. Weber served as Executive Vice President of Operations from September
2000 to May 2002.
(7) Mr. Petrocelli was appointed President and Chief Executive Officer of the
Company in February 2002.
(8) These options have an exercise price of $0.45 per share and vest in a
four-year period at the rate of 25% per year commencing in May 2002. These
options become immediately exercisable upon a change of control of the
Company (as defined in the 1998 Stock Option Plan).
(9) One-half of these options have an exercise price of $4.625 and vest over a
four-year period at a rate of 25% per year commencing in March 2001, and
one-half of these options have an exercise price of $1.6875 and vest over a
four-year period at a rate of 25% per year commencing in November 2001.
These options become immediately exercisable upon a change of control of
the Company (as defined in the 1998 Stock Option Plan).
(10) Consists of relocation expenses.
(11) These options have an exercise price of $5.5625 per share and vest over a
four-year period at the rate of 25% per year commencing in June 2000. These
options become immediately exercisable upon a change of control of the
Company (as defined in the 1998 Stock Option Plan).
(12) Mr. Shashoua joined the Company in January 2001.
(13) 200,000 of these options have an exercise price of $1.75 per share and vest
over a four-year period at the rate of 25% per year commencing in January
2002 and 250,000 of these options have an exercise price of $0.45 per share
and vest over a four-year period at the rate of 25% per year commencing in
May 2002. These options become immediately exercisable upon a change of
control of the Company (as defined in the 1998 Stock Option Plan).

63

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning grants of
stock options made to the Named Executive Officers during the fiscal year ended
December 31, 2001.

- ---------------

(1) Based on an aggregate of 3,030,000 options granted to all employees during
the fiscal year ended December 31, 2001.
(2) These amounts represent assumed rates of appreciation in the price of the
Company's common stock during the term of the options in accordance with
rates specified in applicable federal securities regulations, and do not
represent the Company's estimate or projection of the price of the Company's
common stock in the future. Actual gains, if any, on stock option exercises
depend on the actual future price of common stock and the continued
employment of the option holders throughout the vesting period. Accordingly,
the potential realizable values set forth in this table may not be achieved.
(3) Since the executive is no longer employed by the Company, these options
expired in accordance with their terms.

OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

The following table sets forth certain information regarding the options
exercised by the Named Executive Officers during the fiscal year ended 2001 and
the value of options outstanding for such individuals at December 31, 2001.

- ---------------

(1) Based on the difference between the closing price of Common Stock on the
OTCBB on December 31, 2001 of $0.09 per share and the exercise price.

1998 STOCK OPTION PLAN

The Board of Directors and stockholders adopted the 1998 Plan effective
August 6, 1998. Pursuant to the 1998 Plan, as amended, options to acquire a
maximum of 12,000,000 shares of common stock may be granted to employees,
directors (including employee and non-employee directors) and certain
independent contractors and consultants of the Company or any Subsidiary (as
defined therein). As of March 27, 2002, there were outstanding options to
purchase 9,053,792 shares at exercise prices ranging from $8.00 per share to
$0.16 per share granted under the 1998 Plan, 3,004,745 of which were immediately
exercisable at that time.

64

The Compensation Committee administers the 1998 Plan. The Compensation
Committee determines which persons will receive options and the number of
options to be granted to such persons. The 1998 Stock Option Plan also provides
for annual mandatory grants of options to non-employee directors, which were
suspended as of January 1, 2002. See "-- Compensation of Directors." The Board
of Directors or the Compensation Committee, as the case may be, makes all
determinations that it may deem necessary or advisable for the administration of
the 1998 Plan.

Pursuant to the 1998 Plan, the Company may grant Incentive Stock Options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and Non-Qualified Stock Options ("NQSOs"), not intended to
qualify under Section 422 of the Code. The price at which the common stock may
be purchased upon the exercise of options granted under the 1998 Stock Option
Plan is not less than the per share fair market value of the Common Stock on the
date the particular options are granted. Options granted under the 1998 Plan may
have maximum terms of not more than ten years and are not transferable, except
by will or the laws of descent and distribution.

Generally, options granted under the 1998 Plan terminate upon the date the
person to whom such options were granted is no longer employed or retained by
the Company or serving on our Board of Directors other than by reason of death
or disability. However, if any of the options granted under the 1998 Plan had
vested by such date, then the person to whom such options were granted has five
business days during which he or she may exercise any vested options, provided
such person was not terminated by the Company for cause.

Options granted pursuant to the 1998 Plan, unless otherwise determined by
the Board of Directors, vest over a four-year period at the rate of 25.0% per
year commencing on the first anniversary of the date of grant. These options
become immediately exercisable upon a change in control of the Company. A
"change in control" of the Company is deemed to occur when any person becomes
the beneficial owner of or acquires more than 50.0% of the total combined voting
power with respect to the election of directors of the Company's issued and
outstanding capital stock.

ISOs granted under the 1998 Plan are subject to the restriction that the
aggregate fair market value (determined as of the date of grant) of options
which first become exercisable in any calendar year cannot exceed $100,000.

In 2001 the Company granted 3,030,000 options to purchase shares of the
Company's common stock under the 1998 Plan.

CERTAIN OTHER STOCK OPTIONS

Certain of the Company's executive officers and other employees were
granted stock options to purchase shares of the Company's common stock prior to
the adoption of the 1998 Plan. As of December 31, 2001, there were outstanding
options, granted prior to the adoption of the plan, to purchase 883,367 shares
at exercise prices ranging from $2.96 per share to $6.67 per share of which
673,075 were exercisable at that time. These options vest over a four-year
period at the rate of 25.0% per year commencing on the first anniversary of the
date of grant. Also, these options become immediately exercisable upon a change
in control of the Company. A "change in control" of the Company is deemed to
occur when any person becomes the beneficial owner of or acquires voting control
with respect to more than 50.0% of the Common Stock or any person has the
ability to elect or to cause the election of directors consisting at the time of
such election of a majority of the Board.

401(K) PLAN AND OTHER BENEFITS

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 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.

65

KEY EMPLOYEE RETENTION AND SEVERANCE PLANS

In January 2002, the Bankruptcy Court approved our key employee retention
and severance plans.

Retention Plan

Under the retention plan, certain of our key employees, including the Named
Executive Officers, are eligible for a retention bonus. The key employees are
classified into different bands based on their level of responsibility and role
within NationsRent. The amount of retention bonuses is based on a key employee's
band and base salary at the time the bonus is determined. Key employees below a
certain band are eligible for a retention bonus at the discretion of the Company
payable in one or more installments so long as they remain with the Company for
a specified period of time. Key employees above a certain band, including the
Named Executive Officers, are eligible for a retention bonus only upon Emergence
(as defined in the plan), subject to approval of the allocations of such amounts
by the Company's permanent president and chief executive officer and the Board
of Directors. In order to receive payment of a retention bonus, the key employee
must be employed in good standing on the due date of the payment or have been
discharged without cause (as defined in the plan), died, become disabled, or
have resigned with good reason (as defined in the plan) within 180 days prior to
the due date for the payment.

Severance Plan

Under the severance plan, certain of our key employees, including the Named
Executive Officers, are eligible for a lump sum severance payment and
continuance of employee benefits, including continuing coverage under
NationsRent's directors and officers insurance policies if applicable, in the
event of an employment loss. Employment loss is defined as a termination of the
key employee's employment without cause (as defined in the plan) or a
termination initiated by the key employee with good reason (as defined in the
plan). The lump sum severance payment is equal to the key employee's monthly
base salary in effect at the time of the employment loss multiplied by a
severance award factor. If a key employee becomes eligible to receive payments
and benefits under the severance plan and any other severance plan of the
Company, the key employee may only receive the greater of the two payments and
benefits. In order to receive the payment and benefits under the plan, at the
time of the eligible employment loss the key employee must execute a general
release releasing NationsRent and its affiliates from certain claims arising in
connection with his or her employment or separation from NationsRent. Pursuant
to the severance plan, the Named Executive Officers are eligible to receive
severance payments equal to 18 months of their base salary in effect at the time
of employment loss.

Change in Control Severance Agreements

In January 2001, the Company entered into change in control severance
agreements with each of the Named Executive Officers. However, pursuant to the
terms of the key employee severance plan described above, the Named Executive
Officers waived all rights they had under the change of control severance
agreements as a condition precedent to participation in the new key employee
severance plan. In addition, Mr. Kirk's change in control severance agreement
was terminated in connection with his Executive Transition Agreement.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee was an officer or employee of the
Company or of any of its subsidiaries during the prior year or was formerly an
officer of the Company or of any of its subsidiaries. During the last fiscal
year, none of the executive officers of the Company have served on the board of
directors or compensation committee of any other entity, any of whose officers
served either on the Board of the Company or on the Compensation Committee of
the Company.

66

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of April 30, 2002, information with
respect to the beneficial ownership of the Common Stock by (1) each Named
Executive Officer in the summary compensation table, (2) each of the Company's
directors, (3) all of the Company's directors and executive officers as a group,
and (4) each person the Company believes beneficially owns more than 5% of the
outstanding shares of Common Stock, based upon such person's filings with the
SEC. Unless otherwise indicated, each such stockholder has sole voting and
investment power with respect to the shares beneficially owned by such
stockholder. Percentages of shares beneficially owned are based upon 57,359,437
shares of Common Stock outstanding as of April 30, 2001 plus for each person
named below any shares of Common Stock that may be acquired by such person
within 60 days of such date upon exercise of outstanding options or other
rights.

- ---------------

* Less than 1%
(1) Consists of shares held by Kirk Holdings Limited Partnership, a Nevada
limited partnership controlled by Mr. Kirk. Mr. Kirk served as Chairman and
Chief Executive Officer of the Company until February 2002.
(2) Consists of 238,750 shares issuable upon exercise of options.
(3) Consists of 50,000 shares issuable upon exercise of options.
(4) Consists of (a) 123,776 shares and (b) 478,604 shares issuable upon
exercise of options.
(5) Consists of (a) 37,092 shares and (b) 80,000 shares issuable upon exercise
of options.
(6) Consists of (a) 5,700 shares and (b) 70,000 shares issuable upon exercise
of options.
(7) Consists of (a) 713,650 shares held directly by Mr. Hudson, (b) 250,000
shares owned by Mr. Hudson's spouse, as to which Mr. Hudson disclaims
beneficial ownership and (c) 80,000 shares issuable upon exercise of
options.
(8) Consists of 80,000 shares issuable upon exercise of options.

67

(9) Consists of (a) 35,492 shares and (b) 60,000 shares issuable upon exercise
of options.
(10) Includes an aggregate of 1,327,423 shares issuable upon exercise of options
held by certain executive officers and directors.
(11) Investcorp S.A. does not directly own any shares of Common Stock or
Preferred Stock. The number of shares of Common Stock shown as owned by
Investcorp S.A. includes (a) 3,000,000 shares of Common Stock issuable upon
conversion of 21,000 shares of Series A Preferred Stock held by Investcorp
NationsRent Limited Partnership, a Cayman Islands limited partnership in
which Investcorp owns a majority economic ownership interest and is the
sole general partner, (b) 11,285,714 shares of Common Stock issuable upon
conversion of 79,000 shares of Series A Preferred Stock held by NR Holdings
Limited (which represents beneficial ownership by NR Holdings Limited of
approximately 16.4% of the outstanding Common Stock calculated in
accordance with Rule 13d-3 under the Exchange Act), (c) 4,444,444 shares of
Common Stock issuable upon conversion of 20,000 shares of Series B
Preferred Stock held by NR2 Holdings Limited (which represents beneficial
ownership by NR2 Holdings Limited of approximately 7.1% of the outstanding
Common Stock calculated in accordance with Rule 13d-3 under the Exchange
Act), and (d) 1,401,155 shares of Common Stock held by REF Equity Limited.
Investcorp S.A. may be deemed to share beneficial ownership of the shares
held by NR Holdings Limited, NR2 Holdings Limited and REF Equity Limited
because such entities, the holders of their voting securities or their
principals have entered into revocable management services or similar
agreements with an affiliate of Investcorp S.A. pursuant to which each such
person or entity indirectly has granted such affiliate of Investcorp S.A.
the authority to direct the voting of the voting securities of NR Holdings,
NR2 Holdings and/or REF Equity Limited for so long as such agreement is in
effect. Sipco Limited, a passive holding company entity without operations
or employees, may be deemed to be the beneficial owner of the shares of
Common Stock beneficially owned by Investcorp S.A. because Sipco Limited
may be deemed to control Investcorp S.A. through its ownership of a
majority of the stock of a company which indirectly owns a majority of the
outstanding stock of Investcorp.
(12) Consists of (a) 8,888,889 shares of Common Stock issuable upon conversion
of 40,000 shares of Series B Preferred Stock and (b) 344,828 shares of
Common Stock. DB Capital Investors, L.P. shares beneficial ownership of
such shares with Taunus Corporation, DB Capital Partners, Inc. and DB
Capital Partners, L.P. DB Capital Investors is an indirect wholly-owned
subsidiary of Taunus Corporation. DB Capital Partners, L.P. is the general
partner of DB Capital Investors and DB Capital Partners, Inc. is the
general partner of DB Capital Partners, L.P.
(13) Consists of (a) 6,666,667 shares of Common Stock issuable upon conversion
of 30,000 shares of Series B Preferred Stock owned by J.P. Morgan Capital
Corporation, (b) 2,222,222 shares of Common Stock issuable upon conversion
of 10,000 shares of Series B Preferred Stock held by Sixty Wall Street
Fund, L.P., an affiliate of J.P. Morgan, and (c) 344,828 shares of Common
Stock owned by J.P. Morgan Capital Corporation. J.P. Morgan and Sixty Wall
Street share beneficial ownership of each of their respective shares with
J.P. Morgan Chase & Co. (formerly J.P. Morgan & Co. Incorporated). J.P.
Morgan Capital Corporation is an indirect wholly-owned subsidiary of J.P.
Morgan Chase & Co. Sixty Wall Street Corporation, which is the general
partner of Sixty Wall Street Fund, is an indirect wholly-owned subsidiary
of J.P. Morgan Chase & Co.
(14) Consists of (a) 775,180 shares of Common Stock owned by Mr. O'Neal's
spouse, as to which Mr. O'Neal disclaims beneficial ownership, (b)
2,452,564 shares of Common Stock held by the 1997 Ray L. O'Neal and Ellen
M. O'Neal irrevocable trust for Don R. O'Neal of which Mr. O'Neal is a
trustee, and (c) 1,791,787 shares of Common Stock owned directly by Mr.
O'Neal. Mr. O'Neal served as President of the Company from October 1998
until May 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As part of our Chapter 11 filing, the Debtors have the right, subject to
Bankruptcy Court approval and other conditions, to assume or reject any
prepetition executory contracts and unexpired leases. Parties affected by these
rejections may file claims with the Bankruptcy Court. We can provide no
assurance that after negotiations with various parties in interest, the terms of
the agreements described herein will or will not be significantly revised or
that any of these agreements will be assumed or rejected.

The Company subleases certain office space from AutoNation in downtown Ft.
Lauderdale. The Company also leases certain data storage space from AutoNation.
Lease payments for this space totaled $0.7 million for the year ended December
31, 2001. Messrs. Huizenga and Hudson serve as directors of AutoNation.

The Company licenses the use of an executive suite from South Florida
Stadium Corporation at Pro Player Stadium, a professional sports stadium in
South Florida which is owned by Mr. Huizenga, pursuant to a seven year agreement
which expires in 2005. Payments for such facility totaled $0.2 million for the
year ended December 31, 2001.

The Company has entered into certain contracts for building construction
and freight services with Alvada Construction, Inc., and Alvada Trucking, Inc.
entities controlled by the estate of Mr. Kirk's brother. Payments for such
contracts totaled approximately $0.1 million for the year ended December 31,
2001. The Company purchased certain fabrication services from Findlay Machine
and Tool, an entity controlled by Mr. Kirk's other brother. As of December 31,
2001, the aggregate amount paid for these services was $0.5 million.
68

In connection with the recruiting and relocation of Ezra Shashoua, the
Company's Executive Vice President and Chief Financial Officer, in January 2001
the Company loaned Mr. Shashoua $0.3 million, the principal and interest of
which will be forgiven by the Company one-third a year commencing January 2002.
The amount forgiven shall be reported as compensation to Mr. Shashoua.

In December 2001, the Company entered into an Executive Transition
Agreement with Mr. Kirk, which provides for severance payments aggregating $2.0
million and certain health, insurance and other benefits to Mr. Kirk through
2004. A complete description of this agreement is contained in footnote (1) to
the Summary Compensation Table.

The Company leases certain properties from TTG Properties, a general
partnership controlled by Gary L. Gabriel, who served as a director of the
Company until March 2001. Rental expense for such properties totaled $1.1
million for the year ended December 31, 2001. In addition, in connection with
the acquisition of Sam's Equipment Rental, Inc. and Gabriel Trailer
Manufacturing Company, Inc., the Company issued subordinated debt to Mr.
Gabriel. Interest payments related to this debt totaled $0.1 million for the
year ended December 31, 2001.

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

69

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Exhibits and Financial Statement Schedules

(1) Financial Statements of the Company are set forth in Part II, Item
8.

(2) Schedule II -- Valuation and Qualifying Accounts and
Reserves -- is set forth following the notes to the Consolidated
Financial Statements.

Other schedules are omitted because they are not applicable, are not
present in amounts sufficient to require submission of the schedules
or the required information is presented in the Consolidated
Financial Statements or related notes.

(3) Exhibits -- (See Index to Exhibits set forth following the
signature page to this Report.)

(b) Reports on Form 8-K

The Company filed Current Reports on Form 8-K on November 21, 2001 relating
to the New York Stock Exchange's suspension of trading of the Company's Common
Stock on the Exchange and on December 20, 2001 relating to the Company's filing
of a voluntary petition under Chapter 11 of Title II of the United States Code
(the "Bankruptcy Code").

70

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.

May 23, 2002
NATIONSRENT, INC.

By: /s/ PHILIP V. PETROCELLI
------------------------------------
Philip V. Petrocelli,
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report on Form 10-K has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.

71

EXHIBIT INDEX

- ---------------

* Filed herewith
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended, Commission File No. 333-56233.
(2) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1998.
(3) Incorporated by reference to the Company's Current Report on Form 8-K filed
on November 9, 1998.
(4) Incorporated by reference to the Company's Registration Statement on Form
S-4, Commission File No. 333-69691.
(5) Incorporated by reference to the Company's Registration Statement on Form
S-3, Commission File No. 333-88603.
(6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1999.
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ending June 30, 2000.
(8) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 2000.
(9) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the period ending June 30, 2001.

74

EXHIBIT 21.1

NATIONSRENT, INC.
SUBSIDIARIES
(AS OF APRIL 30, 2002)

NRGP, Inc., a Delaware corporation

NationsRent West, Inc., a Delaware corporation

Logan Equipment Corp., a Delaware corporation

NationsRent USA, Inc., a Delaware corporation

NationsRent Transportation Services, Inc., a Delaware corporation

NR Delaware, Inc., a Delaware corporation

NationsRent of Texas, LP, a Delaware limited partnership

NationsRent of Indiana, LP, a Delaware limited partnership

NR Dealer, Inc., a Delaware corporation

NR Franchise Company, a Delaware corporation

BDK Equipment Company, Inc., a California corporation