UNITED RENTALS NORTH AMERICA INC (Form: 10-Q, Received: 07/20/2010 17:07:43)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

¨	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 1-14387

Commission File Number 1-13663

United Rentals, Inc.

United Rentals (North America), Inc.

(Exact Names of Registrants as Specified in Their Charters)


Delaware Delaware		06-1522496 06-1493538
(States of Incorporation)		(I.R.S. Employer Identification Nos.)

Five Greenwich Office Park, Greenwich, Connecticut		06831
(Address of Principal Executive Offices)		(Zip Code)

Registrants’ Telephone Number, Including Area Code: (203) 622-3131

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨ (registrant is not yet required to provide financial disclosure in an Interactive Data File format)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of July 16, 2010, there were 60,530,626 shares of United Rentals, Inc. common stock, $.01 par value, outstanding. There is no market for the common stock of United Rentals (North America), Inc., all outstanding shares of which are owned by United Rentals, Inc.

This combined Form 10-Q is separately filed by (i) United Rentals, Inc. and (ii) United Rentals (North America), Inc. (which is a wholly owned subsidiary of United Rentals, Inc.). United Rentals (North America), Inc. meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format permitted by such instruction.

UNITED RENTALS, INC.

UNITED RENTALS (NORTH AMERICA), INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010

INDEX


		Page

PART I	FINANCIAL INFORMATION

Item 1	Unaudited Condensed Consolidated Financial Statements	4

	United Rentals, Inc. Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009 (unaudited)	4

	United Rentals, Inc. Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009 (unaudited)	5

	United Rentals, Inc. Condensed Consolidated Statement of Stockholders’ Deficit for the Six Months Ended June 30, 2010 (unaudited)	6

	United Rentals, Inc. Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (unaudited)	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4	Controls and Procedures	30

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	30

Item 1A	Risk Factors	30

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6	Exhibits	32

	Signatures	33

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,” “plan,” “project,” “forecast,” “intend” or “anticipate,” or the negative thereof or comparable terminology, or by discussions of strategy or outlook. You are cautioned that our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, our actual results may differ materially from those projected. Factors that could cause actual results to differ materially from those projected include, but are not limited to, the following: (1) on-going decreases in North American construction and industrial activities, which have significantly affected revenues and, because many of our costs are fixed, our profitability, and which may further reduce demand and prices for our products and services; (2) inability to benefit from government spending associated with stimulus-related construction projects; (3) our highly leveraged capital structure, which requires us to use a substantial portion of our cash flow for debt service and can constrain our flexibility in responding to unanticipated or adverse business conditions; (4) noncompliance with financial or other covenants in our debt agreements, which could result in our lenders terminating our credit facilities and requiring us to repay outstanding borrowings; (5) inability to access the capital that our business may require; (6) increases in our maintenance and replacement costs as we age our fleet, and decreases in the residual value of our equipment; (7) inability to sell our new or used fleet in the amounts, or at the prices, we expect; (8) rates we can charge and time utilization we can achieve being less than anticipated; and (9) costs we incur being more than anticipated, and the inability to realize expected savings in the amounts or time frames planned. For a fuller description of these and other possible uncertainties, please refer to our Annual Report on Form 10-K for the year ended December 31, 2009. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except share data)


	June 30, 2010			December 31, 2009
ASSETS
Cash and cash equivalents	$	30		$	169
Accounts receivable, net of allowance for doubtful accounts of $23 and $25 at June 30, 2010 and December 31, 2009, respectively		344			337
Inventory		60			44
Prepaid expenses and other assets		40			89
Deferred taxes		57			66

Total current assets		531			705
Rental equipment, net		2,334			2,414
Property and equipment, net		417			434
Goodwill and other intangible assets, net		227			231
Other long-term assets		65			75

Total assets	$	3,574		$	3,859


LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current maturities of long-term debt	$	124		$	125
Accounts payable		188			128
Accrued expenses and other liabilities		195			208

Total current liabilities		507			461
Long-term debt		2,587			2,826
Subordinated convertible debentures		124			124
Deferred taxes		369			424
Other long-term liabilities		37			43

Total liabilities		3,624			3,878


Common stock—$0.01 par value, 500,000,000 shares authorized, 60,527,292 and 60,163,233 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively		1			1
Additional paid-in capital		489			487
Accumulated deficit		(602	)		(574	)
Accumulated other comprehensive income		62			67

Total stockholders’ deficit		(50	)		(19	)

Total liabilities and stockholders’ deficit	$	3,574		$	3,859

See accompanying notes.

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars in millions, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenues:
Equipment rentals	$	450		$	454		$	830		$	902
Sales of rental equipment		37			84			72			151
New equipment sales		21			20			40			43
Contractor supplies sales		26			33			49			65
Service and other revenues		23			24			44			48

Total revenues		557			615			1,035			1,209


Cost of revenues:
Cost of equipment rentals, excluding depreciation		217			221			431			454
Depreciation of rental equipment		95			110			191			216
Cost of rental equipment sales		28			92			52			151
Cost of new equipment sales		18			17			34			37
Cost of contractor supplies sales		19			25			35			48
Cost of service and other revenues		9			9			18			18

Total cost of revenues		386			474			761			924


Gross profit		171			141			274			285
Selling, general and administrative expenses		90			101			176			209
Restructuring charge		6			20			12			24
Non-rental depreciation and amortization		16			15			29			29

Operating income		59			5			57			23
Interest expense, net		54			42			115			92
Interest expense—subordinated convertible debentures, net		2			(10	)		4			(8	)
Other (income) expense, net		—			2			(1	)		1

Income (loss) before benefit for income taxes		3			(29	)		(61	)		(62	)
Benefit for income taxes		(9	)		(12	)		(33	)		(26	)

Net income (loss)	$	12		$	(17	)	$	(28	)	$	(36	)


Basic earnings (loss) per share	$	0.20		$	(0.28	)	$	(0.46	)	$	(0.60	)
Diluted earnings (loss) per share	$	0.18		$	(0.28	)	$	(0.46	)	$	(0.60	)

See accompanying notes.

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

(Dollars in millions)


	Common Stock			Additional									Accumulated Other
	Number of Shares	Amount		Paid-in Capital			Accumulated Deficit			Comprehensive Loss			Comprehensive Income
Balance at December 31, 2009	60	$	1	$	487		$	(574	)				$	67
Comprehensive loss:
Net loss								(28	)	$	(28	)
Other comprehensive loss:
Foreign currency translation adjustments											(5	)		(5	)

Comprehensive loss										$	(33	)


Stock compensation expense, net					4
Excess tax benefits from share-based payment arrangements, net					(1	)
Other	1				(1	)


Balance at June 30, 2010	61	$	1	$	489		$	(602	)				$	62

See accompanying notes.

UNITED RENTALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in millions)


	Six Months Ended June 30,
	2010			2009
Cash Flows From Operating Activities:
Net loss	$	(28	)	$	(36	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		220			245
Amortization of deferred financing costs and original issue discounts		11			8
Gain on sales of rental equipment		(20	)		—
(Gain) loss on sales of non-rental equipment		(1	)		1
Stock compensation expense, net		4			4
Restructuring charge		12			24
Loss (gain) on repurchase/redemption of debt securities		3			(17	)
Gain on retirement of subordinated convertible debentures		—			(13	)
Decrease in deferred taxes		(47	)		(7	)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(7	)		83
(Increase) decrease in inventory		(16	)		4
Decrease in prepaid expenses and other assets		55			9
Increase (decrease) in accounts payable		61			(14	)
Decrease in accrued expenses and other liabilities		(28	)		(86	)

Net cash provided by operating activities		219			205
Cash Flows From Investing Activities:
Purchases of rental equipment		(174	)		(138	)
Purchases of non-rental equipment		(12	)		(26	)
Proceeds from sales of rental equipment		72			151
Proceeds from sales of non-rental equipment		3			8
Purchases of other companies		—			(1	)

Net cash used in investing activities		(111	)		(6	)
Cash Flows From Financing Activities:
Proceeds from debt		1,090			1,520
Payments of debt		(1,332	)		(1,661	)
Payments of financing costs		—			(14	)
Shares repurchased and retired		(1	)
Excess tax benefits from share-based payment arrangements, net		(1	)		(1	)

Net cash used in financing activities		(244	)		(156	)
Effect of foreign exchange rates		(3	)		5


Net (decrease) increase in cash and cash equivalents		(139	)		48
Cash and cash equivalents at beginning of period		169			77

Cash and cash equivalents at end of period	$	30		$	125


Supplemental disclosure of cash flow information:
Cash received for income taxes, net	$	50		$	4

See accompanying notes

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data, unless otherwise indicated)

1. Organization, Description of Business and Basis of Presentation

United Rentals, Inc. (“Holdings,” “United Rentals” or the “Company”) is principally a holding company and conducts its operations primarily through its wholly owned subsidiary, United Rentals (North America), Inc. (“URNA”), and subsidiaries of URNA. Holdings’ primary asset is its sole ownership of all issued and outstanding shares of common stock of URNA. URNA’s various credit agreements and debt instruments place restrictions on its ability to transfer funds to its shareholder.

We rent equipment to a diverse customer base that includes construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities in the United States and Canada. In addition to renting equipment, we sell new and used rental equipment, as well as related contractor supplies, parts and service.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the accounting policies described in our annual report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”) and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the 2009 Form 10-K. Certain reclassifications have been made to prior year financial information to conform to the current year presentation.

In our opinion, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of financial condition, operating results and cash flows for the interim periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year.

New Accounting Pronouncements

Fair Value Measurements. In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance which expanded the required disclosures about fair value measurements. In particular, this guidance requires (i) separate disclosure of the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements along with the reasons for such transfers, (ii) information about purchases, sales, issuances and settlements to be presented separately in the reconciliation for Level 3 fair value measurements, (iii) fair value measurement disclosures for each class of assets and liabilities and (iv) disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. The adoption of this guidance did not have a material effect on our financial condition or results of operations.

Subsequent Events. In February 2010, the FASB issued guidance related to events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance amended existing standards to address potential conflicts with Securities and Exchange Commission (“SEC”) guidance and refined the scope of the reissuance disclosure requirements to include revised financial statements only. Under this guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated. The adoption of this standard did not have a material effect on our financial condition or results of operations.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

2. Segment Information

Our reportable segments are general rentals and trench safety, power and HVAC. Our reportable segment for specialty operations has been renamed trench safety, power and HVAC to better reflect its fleet and service components. The segment was previously referred to as trench safety, pump and power.

The general rentals segment includes the rental of construction, infrastructure, industrial and homeowner equipment and related services and activities. The general rentals segment’s customers include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. The general rentals segment comprises seven geographic regions—the Southwest, Gulf, Northwest, Southeast, Midwest, East, and the Northeast Canada- as well as the Aerial West region and operates throughout the United States and Canada. The trench safety, power and HVAC segment includes the rental of equipment for underground construction, temporary power, climate control and disaster recovery, and related services such as training. The trench safety, power and HVAC segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates in the United States and has one location in Canada. These segments align our external segment reporting with how management evaluates and allocates resources. We evaluate segment performance based on segment operating results.

The following table sets forth financial information by segment. Information related to our condensed consolidated balance sheets is presented as of June 30, 2010 and December 31, 2009.


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Total reportable segment revenues
General rentals	$	515	$	576	$	958	$	1,134
Trench safety, power and HVAC		42		39		77		75

Total revenues	$	557	$	615	$	1,035	$	1,209


Total reportable segment depreciation and amortization expense
General rentals	$	106	$	120	$	209	$	233
Trench safety, power and HVAC		5		5		11		12

Total depreciation and amortization expense	$	111	$	125	$	220	$	245

Total reportable segment operating income
General rentals	$	56	$	18	$	57	$	38
Trench safety, power and HVAC		9		7		12		9

Total reportable segment operating income	$	65	$	25	$	69	$	47

Total reportable segment capital expenditures
General rentals					$	176	$	156
Trench safety, power and HVAC						10		8

Total capital expenditures					$	186	$	164


	June 30, 2010		December 31, 2009
Total reportable segment assets
General rentals	$	3,344	$	3,633
Trench safety, power and HVAC		230		226

Total assets	$	3,574	$	3,859

The following is a reconciliation of segment operating income to total Company operating income:


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Total reportable segment operating income	$	65		$	25		$	69		$	47
Unallocated restructuring charge		(6	)		(20	)		(12	)		(24	)

Operating income	$	59		$	5		$	57		$	23

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

3. Restructuring and Asset Impairment Charges

Over the past several years we have been focused on reducing our operating costs. In connection with this strategy, we reduced our employee headcount from approximately 10,900 at December 31, 2007 to approximately 8,000 at December 31, 2009. Additionally, we reduced our branch network from 697 at December 31, 2007 to 569 at December 31, 2009. In the first half of 2010, we further reduced our headcount by approximately 600 employees, or 7 percent, and closed 17 of our less profitable branches. The restructuring charges for the three and six months ended June 30, 2010 and 2009 include severance costs associated with our headcount reductions, as well as branch closure charges, the latter of which principally relates to continuing lease obligations at vacant facilities.

The table below provides certain information concerning our restructuring charges:


Description	Reserve Balance at December 31, 2009		Charged to Costs and Expenses(1)		Payments and Other			Reserve Balance at June 30, 2010
Branch closure charges	$	20	$	8	$	(6	)	$	22
Severance costs		1		4		(3	)		2

Total	$	21	$	12	$	(9	)	$	24

(1)	Reflected in our condensed consolidated statements of operations as “Restructuring charge.”

We have incurred total restructuring charges between January 1, 2008 and June 30, 2010 of $63, comprised of $47 of branch closure charges and $16 of severance costs. We expect that the restructuring activity will be substantially complete by the end of 2010.

In addition to the restructuring charges discussed above, during the three and six months ended June 30, 2010, the company recorded asset impairment charges of $2. The asset impairment charges for the three and six months ended June 30, 2010 primarily relate to leasehold improvement write-offs which were recognized in connection with the consolidation of our branch network discussed above, and are reflected in non-rental depreciation and amortization in the accompanying condensed consolidated statements of operations.

4. Derivatives

We recognize all derivative instruments as either assets or liabilities at fair value, and recognize the changes in fair value of the derivative instruments based on the designation of the derivative. For derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure being hedged, as either a fair value hedge or a cash flow hedge. As of June 30, 2010, we do not have any outstanding derivative instruments designated as fair value hedges. The effective portion of the changes in fair value of derivatives that are designated as cash flow hedges is recorded as a component of other comprehensive income. Amounts included in accumulated other comprehensive income for cash flow hedges are reclassified into earnings in the same period that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of derivatives designated as cash flow hedges is recorded currently in earnings. For derivative instruments that do not qualify for hedge accounting, we recognize gains or losses due to changes in fair value in our condensed consolidated statements of operations during the period in which the changes in fair value occur.

We are exposed to certain risks relating to our ongoing business operations. At June 30, 2010, the primary risks we managed using derivative instruments were diesel price risk and foreign currency exchange rate risk. At June 30, 2010, we had (i) outstanding fixed price swap contracts on diesel purchases which were entered into to mitigate the price risk associated with forecasted purchases of diesel and (ii) an outstanding forward contract to purchase Canadian dollars which was entered into to mitigate the foreign currency exchange rate risk associated with URNA’s Canadian dollar denominated intercompany loan. The outstanding forward contracts on diesel purchases were designated and qualify as cash flow hedges and the forward contract to purchase Canadian dollars represents a derivative instrument not designated as a hedging instrument.

Fixed Price Diesel Swaps

The fixed price swap contracts on diesel purchases that were outstanding at June 30, 2010 were designated and qualify as cash flow hedges and the effective portion of the gain or loss on these contracts is reported as a component of other comprehensive income and reclassified into earnings in the period during which the hedged transaction affects earnings (i.e., when the hedged gallons of diesel are used). The remaining gain or loss on the fixed price swap contracts in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffectiveness portion), is recognized in our condensed consolidated statements of operations during the current period. As of June 30, 2010, we had outstanding fixed price swap contracts covering 3.2 million gallons of diesel, 2.0 million and 1.2 million of which will be purchased throughout 2010 and 2011, respectively.

Foreign Currency Forward Contracts

The forward contract to purchase Canadian dollars represents a derivative instrument not designated as a hedging instrument and gains or losses due to changes in its fair value are recognized in our condensed consolidated statements of operations during the period in which the changes in fair value occur. At June 30, 2010, there was an outstanding forward contract to purchase $161 Canadian dollars, representing the amount due at maturity for an intercompany loan entered into during the second quarter of 2010. This intercompany loan concentrated excess foreign cash into the US, and this cash was then used to pay down debt. The intercompany loan and the forward contract both mature in the third quarter of 2010. Upon maturity, the proceeds from the forward contract will be used to pay down the Canadian dollar denominated intercompany loan.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

Financial Statement Presentation

There were no derivative instruments outstanding as of December 31, 2009, or during the three and six months ended June 30, 2009, and these periods are excluded from the tables below.

Our derivative instruments were reflected in our condensed consolidated balance sheets as follows:


	Balance sheet location	June 30, 2010
Derivatives designated as hedging instruments:
Fixed price diesel swaps	Prepaid expenses and other assets	$	*
	Accrued expenses and other liabilities		*
	Accumulated other comprehensive income (1)		*

Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Accrued expenses and other liabilities		4

*	Amounts are insignificant (less than $1).

(1)	Represents the effective portion of the fixed price swap contracts, net of taxes.

The effect of our derivative instruments on our condensed consolidated statements of operations was as follows:


		Amount of income (expense) recognized on derivative						Amount of income (expense) recognized on hedged item
	Location of income (expense) recognized on derivative	Three Months Ended June 30, 2010			Six Months Ended June 30, 2010		Location of income (expense) recognized on hedged item	Three Months Ended June 30, 2010			Six Months Ended June 30, 2010
Derivatives designated as hedging instruments:
Fixed price diesel swaps	Other income (expense), net (1)	$	*		$	*
	Cost of equipment rentals, excluding depreciation (2)		*			*	Cost of equipment rentals, excluding depreciation (3)	$	(4	)	$	(5	)

Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other income (expense), net		(1	)		7	Other income (expense), net		1			(7	)

*	Amounts are insignificant (less than $1).

(1)	Represents ineffective portion of the fixed price diesel swaps.

(2)	Represents effective portion of the fixed price diesel swaps.

(3)	Reflects purchases of 1.1 million and 1.6 million gallons of diesel covered by the fixed price swap contracts during the three and six months ended June 30, 2010, respectively.

5. Fair Value Measurements

We account for certain assets and liabilities at fair value. In accordance with GAAP, we categorize each of our fair value measurements in one of the following three levels based on the lowest level input that is significant to the fair value measurement in its entirety:

Level 1- Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2- Observable inputs other than quoted prices in active markets for identical assets and liabilities include:

quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in inactive markets;

inputs other than quoted prices that are observable for the asset or liability;

inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3- Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

Assets and Liabilities Measured at Fair Value

The following table presents the fair values of our assets and liabilities that are measured at fair value:


	June 30, 2010								December 31, 2009
	Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
Held for sale assets measured at fair value on a non-recurring basis (1)	$	—	$	—	$	—	$	—	$	—	$	—	$	2	$	2
Derivatives measured at fair value on a recurring basis:
Assets:
Fuel fixed price swaps contracts (2)		—		*		—		*		—		—		—		—
Liabilities:
Foreign exchange contracts (3)		—		4		—		4		—		—		—		—
Fuel fixed price swaps contracts (2)		—		*		—		*		—		—		—		—

Total derivative liabilities	$	—	$	4	$	—	$	4	$	—	$	—	$	—	$	—

*	Amounts are insignificant (less than $1).

(1)

Primarily relates to certain rental equipment classified as held for sale in accordance with GAAP. All assets that were classified as held for sale as of December 31, 2009 were sold or transferred during the first half of 2010. A gain of $1 was recognized in depreciation of rental equipment in the accompanying condensed consolidated statements of operations associated with held for sale assets during the three and six months ended June 30, 2010. Fair value is determined using a market approach based on the proceeds we expect to receive upon sale of the equipment.

(2)

As discussed in note 4 to the condensed consolidated financial statements, we entered into fixed price swap contracts on diesel purchases to mitigate the price risk associated with forecasted purchases of diesel. Fair value is determined based on observable market data. As of June 30, 2010, we have fixed price swap contracts covering 3.2 million gallons of diesel which we will buy at the average contractual rate of $3.07 per gallon, while the average forward price for the hedged gallons was $2.98 per gallon as of June 30, 2010. Fixed price swap contracts covering 2.0 million and 1.2 million gallons of diesel mature throughout 2010 and 2011, respectively.

(3)

As discussed in note 4 to the condensed consolidated financial statements, we entered into a forward contract to purchase Canadian dollars to mitigate the foreign currency exchange rate risk associated with an outstanding intercompany loan. Fair value is determined based on observable market data. As of June 30, 2010, we have a forward contract covering $161 Canadian which we will buy at an exchange rate of $0.96 cents per Canadian dollar at contract maturity, while the forward rate at contract maturity was $0.94 cents per Canadian dollar as of June 30, 2010. This forward contract matures in the third quarter of 2010.

Fair Value of Financial Instruments

The carrying amounts reported in our condensed consolidated balance sheets for accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value due to the immediate to short-term maturity of these financial instruments. The fair values of our ABL facility, accounts receivable securitization facility and 1 ⁷ / 8 percent Convertible Senior Subordinated Notes approximate their book values as of June 30, 2010 and December 31, 2009. The estimated fair values of our other financial instruments as of June 30, 2010 and December 31, 2009 have been calculated based upon available market information or an appropriate valuation technique in accordance with GAAP, and are as follows:


	June 30, 2010				December 31, 2009
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Subordinated convertible debentures	$	124	$	69	$	124	$	75
Senior and senior subordinated notes		1,821		1,861		2,275		2,302
Other debt, including capital leases (1)		24		17		31		24

(1)	Primarily comprised of capital leases, the fair value of which is determined using an expected present value technique.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

6. Debt and Subordinated Convertible Debentures

Debt consists of the following:


	June 30, 2010			December 31, 2009
URNA and subsidiaries debt:
Accounts Receivable Securitization Facility (1)	$	209		$	193
$1.360 billion ABL Facility (1)		542			337
6 ¹ / 2 percent Senior Notes		—			435
7 ³ / 4 percent Senior Subordinated Notes		468			484
7 percent Senior Subordinated Notes		253			261
10 ⁷ / 8 percent Senior Notes		487			486
9 ¹ / 4 percent Senior Notes		492			492
1 ⁷ / 8 percent Convertible Senior Subordinated Notes		115			115
Other debt, including capital leases		24			31

Total URNA and subsidiaries debt		2,590			2,834
Less current portion		(124	)		(125	)

Long-term URNA and subsidiaries debt		2,466			2,709


Holdings:
4 percent Convertible Senior Notes		121			117

Total long-term debt (2)	$	2,587		$	2,826

(1)

$750 and $7 were available under our senior secured asset-based revolving credit facility (the “ABL facility”) and accounts receivable securitization facility, respectively, at June 30, 2010. The ABL facility availability is reflected net of $68 of letters of credit. At June 30, 2010, the interest rates applicable to our ABL facility and accounts receivable securitization facility were 3.4 percent and 1.7 percent, respectively.

(2)

In August 1998, a subsidiary trust of Holdings (the “Trust”) issued and sold $300 of 6 ¹ / 2 percent Convertible Quarterly Income Preferred Securities (“QUIPS”) in a private offering. The Trust used the proceeds from the offering to purchase 6 ¹ / 2 percent subordinated convertible debentures due 2028 (the “Debentures”), which resulted in Holdings receiving all of the net proceeds of the offering. The QUIPS are non-voting securities, carry a liquidation value of $50 (fifty dollars) per security and are convertible into Holdings’ common stock. Total long-term debt at June 30, 2010 and December 31, 2009 excludes $124 of these Debentures, which are separately classified in our condensed consolidated balance sheets and referred to as “subordinated convertible debentures.” The subordinated convertible debentures reflect the obligation to our subsidiary that has issued the QUIPS. This subsidiary is not consolidated in our financial statements because we are not the primary beneficiary of the Trust.

Retirement/Redemption of Debt. During the three and six months ended June 30, 2010, we repurchased or redeemed and subsequently retired certain of our outstanding debt securities. In connection with these repurchases, we recognized gains (losses) based on the difference between the net carrying amounts of the repurchased or redeemed securities and the repurchase prices. A summary of our debt repurchase/redemption activity for the three and six months ended June 30, 2010 is as follows:


	Three months ended June 30, 2010						Six months ended June 30, 2010
	Repurchase price		Principal		Gain (1)		Repurchase price		Principal		Gain (loss) (1)
7 ³ / 4 percent Senior Subordinated Notes	$	15	$	16	$	1	$	15	$	16	$	1
7 percent Senior Subordinated Notes		8		8		—		8		8		—
6 ¹ / 2 percent Senior Notes		—		—		—		435		435		(4	)

Total	$	23	$	24	$	1	$	458	$	459	$	(3	)

(1)

The amount of the gain (loss) is calculated as the difference between the net carrying amount of the related security and the repurchase price. The net carrying amounts of the securities are less than the principal amounts due to capitalized debt issuance costs and any original issue discount. In connection with the repurchases/redemptions, aggregate debt issuance costs and original issue discounts of $0 and $4 were written off in three and six months ended June 30, 2010, respectively. The gains (losses) are reflected in interest expense, net in our consolidated statements of operations.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

Loan Covenants and Compliance. As of June 30, 2010, we were in compliance with the covenants and other provisions of the ABL facility, the accounts receivable securitization facility, the senior notes and the QUIPS. Any failure to be in compliance with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations. The only material financial covenants which currently exist relate to the fixed charge coverage ratio and the senior secured leverage ratio under the ABL facility. Both of these covenants were suspended on June 9, 2009 because availability, as defined in the agreement governing the ABL facility, had exceeded 20 percent of the maximum revolver amount under the ABL facility. Since the June 9, 2009 suspension date and through June 30, 2010, availability under the ABL facility has exceeded 10 percent of the maximum revolver amount under the ABL facility and, as a result, these maintenance covenants remained inapplicable. Subject to certain limited exceptions specified in the ABL facility, these covenants will only apply in the future if availability under the ABL facility falls below 10 percent of the maximum revolver amount under the ABL facility.

7. Legal and Regulatory Matters

As discussed in note 13 to our consolidated financial statements for the year ended December 31, 2009 filed on Form 10-K on February 3, 2010 (“Note 13”), we are subject to certain ongoing class action and derivative legal proceedings. The following information is limited to recent developments concerning certain legal proceedings in which we are involved, and supplements the discussions of these proceedings included in Note 13.

In the First New York Securities, L.L.C., et al. v. United Rentals, Inc., et al. matter, the appeal from the United States District Court for the District of Connecticut’s judgment granting defendants’ motion to dismiss is now fully briefed and awaiting oral argument, which is currently scheduled for late August 2010.

We are also subject to a number of claims and proceedings that generally arise in the ordinary conduct of our business. These matters include, but are not limited to, general liability claims (including personal injury, product liability, and property and auto claims), indemnification and guarantee obligations, employee injuries and employment-related claims, self-insurance obligations and contract and real estate matters. Based on advice of counsel and available information, including current status or stage of proceeding, and taking into account accruals for matters where we have established them, we currently believe that any liabilities ultimately resulting from these ordinary course claims and proceedings will not, individually or in the aggregate, have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

8. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares. Diluted earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the adjusted weighted-average number of common shares. Diluted earnings (loss) per share for the three months ended June 30, 2010 and 2009 excludes the impact of approximately 3.0 million and 9.6 million common stock equivalents, respectively, since the effect of including these securities would be anti-dilutive. Diluted loss per share for the six months ended June 30, 2010 and 2009 excludes the impact of approximately 9.1 million and 10.0 million common stock equivalents, respectively, since the effect of including these securities would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings (loss) per share (shares in thousands):


	Three Months Ended June 30,					Six Months Ended June 30,
	2010		2009			2010			2009
Numerator:
Net income (loss)	$	12	$	(17	)	$	(28	)	$	(36	)
Convertible debt interest—1 ⁷ / 8 percent notes		—		—			—			—

Net income (loss) available to common stockholders	$	12	$	(17	)	$	(28	)	$	(36	)

Denominator:
Denominator for basic earnings (loss) per share—weighted-average common shares		60,490		60,124			60,359			60,055
Effect of dilutive securities:
Employee stock options and warrants		332		—			—			—
Convertible subordinated notes—1 ⁷ / 8 percent		5,275		—			—			—
Convertible subordinated notes—4 percent		1,006		—			—			—
Restricted stock units		588		—			—			—

Denominator for diluted earnings (loss) per share—adjusted weighted-average common shares		67,691		60,124			60,359			60,055
Basic earnings (loss) per share	$	0.20	$	(0.28	)	$	(0.46	)	$	(0.60	)
Diluted earnings (loss) per share	$	0.18	$	(0.28	)	$	(0.46	)	$	(0.60	)

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

9. Condensed Consolidating Financial Information of Guarantor Subsidiaries

URNA is 100 percent owned by Holdings (“Parent”) and has outstanding (i) certain indebtedness that is guaranteed by Parent and (ii) certain indebtedness that is guaranteed by both Parent and, with the exception of its U.S. special purpose entity (the “SPV”) which holds receivable assets relating to the Company’s accounts receivable securitization facility, all of URNA’s U.S. subsidiaries (the “guarantor subsidiaries”). However, this indebtedness is not guaranteed by URNA’s foreign subsidiaries and the SPV (together, the “non-guarantor subsidiaries”). The guarantor subsidiaries are all 100 percent-owned and the guarantees are made on a joint and several basis and are full and unconditional (subject to subordination provisions and to a standard limitation which provides that the maximum amount guaranteed by each guarantor will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws). Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors; however, condensed consolidating financial information is presented. The condensed consolidating financial information of the Parent and its subsidiaries is as follows:

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2010


	Parent			URNA			Guarantor Subsidiaries		Non-Guarantor Subsidiaries				Eliminations			Total
	Parent			URNA			Guarantor Subsidiaries		Foreign		SPV		Eliminations			Total
ASSETS
Cash and cash equivalents (1)	$	—		$	10		$	—	$	20	$	—	$	—		$	30
Accounts receivable, net		—			6			6		48		284		—			344
Intercompany receivable (payable)		55			(976	)		907		14		—		—			—
Inventory		—			30			20		10		—		—			60
Prepaid expenses and other assets		—			12			23		5		—		—			40
Deferred taxes		—			51			5		1		—		—			57

Total current assets		55			(867	)		961		98		284		—			531

Rental equipment, net		—			1,306			759		269		—		—			2,334
Property and equipment, net		43			199			148		27		—		—			417
Investments in subsidiaries		178			1,952			—		—		—		(2,130	)		—
Goodwill and other intangibles, net		—			101			83		43		—		—			227
Other long-term assets		9			51			4		—		1		—			65

Total assets	$	285		$	2,742		$	1,955	$	437	$	285	$	(2,130	)	$	3,574


LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

Current maturities of long-term debt	$	—		$	124		$	—	$	—	$	—	$	—		$	124
Accounts payable		—			91			62		35		—		—			188
Accrued expenses and other liabilities		40			55			86		14		—		—			195

Total current liabilities		40			270			148		49		—		—			507
Long-term debt		121			2,119			138		—		209		—			2,587
Subordinated convertible debentures		124			—			—		—		—		—			124
Deferred taxes		15			175			148		31		—		—			369
Other long-term liabilities		35			—			2		—		—		—			37

Total liabilities		335			2,564			436		80		209		—			3,624

Total stockholders’ (deficit) equity		(50	)		178			1,519		357		76		(2,130	)		(50	)

Total liabilities and stockholders’ (deficit) equity	$	285		$	2,742		$	1,955	$	437	$	285	$	(2,130	)	$	3,574

(1)	As discussed in note 4 to the condensed consolidated financial statements, during the second quarter of 2010, we transferred $160 Canadian of excess foreign cash from Canada (a Foreign Non-Guarantor Subsidiary) to the U.S. (URNA). This cash was used to pay down debt.

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2009


	Parent			URNA			Guarantor Subsidiaries		Non-Guarantor Subsidiaries					Eliminations			Total
	Parent			URNA			Guarantor Subsidiaries		Foreign			SPV		Eliminations			Total
ASSETS
Cash and cash equivalents	$	—		$	5		$	3	$	161		$	—	$	—		$	169
Accounts receivable, net		—			9			8		60			260		—			337
Intercompany receivable (payable)		74			(773	)		847		(148	)		—		—			—
Inventory		—			21			17		6			—		—			44
Prepaid expenses and other assets		—			53			23		13			—		—			89
Deferred taxes		—			59			6		1			—		—			66

Total current assets		74			(626	)		904		93			260		—			705

Rental equipment, net		—			1,363			788		263			—		—			2,414
Property and equipment, net		47			210			148		29			—		—			434
Investments in subsidiaries		190			1,948			—		—			—		(2,138	)		—
Goodwill and other intangibles, net		—			102			85		44			—		—			231
Other long-term assets		9			63			2		—			1		—			75

Total assets	$	320		$	3,060		$	1,927	$	429		$	261	$	(2,138	)	$	3,859


LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current maturities of long-term debt	$	—		$	125		$	—	$	—		$	—	$	—		$	125
Accounts payable		—			61			50		17			—		—			128
Accrued expenses and other liabilities		43			71			74		20			—		—			208

Total current liabilities		43			257			124		37			—		—			461
Long-term debt		117			2,375			141		—			193		—			2,826
Subordinated convertible debentures		124			—			—		—			—		—			124
Deferred taxes		14			238			141		31			—		—			424
Other long-term liabilities		41			—			2		—			—		—			43

Total liabilities		339			2,870			408		68			193		—			3,878

Total stockholders’ (deficit) equity		(19	)		190			1,519		361			68		(2,138	)		(19	)

Total liabilities and stockholders’ (deficit) equity	$	320		$	3,060		$	1,927	$	429		$	261	$	(2,138	)	$	3,859

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2010


	Parent			URNA			Guarantor Subsidiaries		Non-Guarantor Subsidiaries						Eliminations			Total
	Parent			URNA			Guarantor Subsidiaries		Foreign			SPV			Eliminations			Total
REVENUES
Equipment rentals	$	—		$	235		$	156	$	59		$	—		$	—		$	450
Sales of rental equipment		—			18			12		7			—			—			37
New equipment sales		—			10			6		5			—			—			21
Contractor supplies sales		—			12			8		6			—			—			26
Service and other revenues		—			12			6		5			—			—			23

Total revenues		—			287			188		82			—			—			557


Cost of revenues:
Cost of equipment rentals, excluding depreciation		—			104			82		31			—			—			217
Depreciation of rental equipment		—			53			32		10			—			—			95
Cost of rental equipment sales		—			14			9		5			—			—			28
Cost of new equipment sales		—			9			4		5			—			—			18
Cost of contractor supplies sales		—			8			7		4			—			—			19
Cost of service and other revenues		—			5			3		1			—			—			9

Total cost of revenues		—			193			137		56			—			—			386


Gross profit		—			94			51		26			—			—			171
Selling, general and administrative expenses		18			41			12		14			5			—			90
Restructuring charge		—			4			2		—			—			—			6
Non-rental depreciation and amortization		2			8			5		1			—			—			16

Operating (loss) income		(20	)		41			32		11			(5	)		—			59
Interest expense, net		3			50			1		(1	)		1			—			54
Interest expense-subordinated convertible debentures		2			—			—		—			—			—			2
Other (income) expense, net		(15	)		11			9		3			(8	)		—			—


(Loss) income before (benefit) provision for income taxes		(10	)		(20	)		22		9			2			—			3
(Benefit) provision for income taxes		(3	)		(25	)		8		9			2			—			(9	)


(Loss) income before equity in net earnings (loss) of subsidiaries		(7	)		5			14		—			—			—			12
Equity in net earnings (loss) of subsidiaries		19			14			—		—			—			(33	)		—


Net income (loss)	$	12		$	19		$	14	$	—		$	—		$	(33	)	$	12

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2009


	Parent			URNA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries						Eliminations		Total
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations		Total
REVENUES
Equipment rentals	$	—		$	238		$	163		$	53		$	—		$	—	$	454
Sales of rental equipment		—			45			28			11			—			—		84
New equipment sales		—			9			7			4			—			—		20
Contractor supplies sales		—			13			14			6			—			—		33
Service and other revenues		—			14			7			3			—			—		24

Total revenues		—			319			219			77			—			—		615


Cost of revenues:
Cost of equipment rentals, excluding depreciation		—			118			78			25			—			—		221
Depreciation of rental equipment		—			60			39			11			—			—		110
Cost of rental equipment sales		—			52			29			11			—			—		92
Cost of new equipment sales		—			7			6			4			—			—		17
Cost of contractor supplies sales		—			10			10			5			—			—		25
Cost of service and other revenues		—			5			2			2			—			—		9

Total cost of revenues		—			252			164			58			—			—		474


Gross profit		—			67			55			19			—			—		141
Selling, general and administrative expenses		(2	)		45			39			14			5			—		101
Restructuring charge		—			8			11			1			—			—		20
Non-rental depreciation and amortization		7			3			5			—			—			—		15

Operating (loss) income		(5	)		11			—			4			(5	)		—		5
Interest expense, net		8			30			3			(1	)		2			—		42
Interest expense-subordinated convertible debentures, net		(10	)		—			—			—			—			—		(10	)
Other (income) expense, net		(17	)		16			11			2			(10	)		—		2


Income (loss) before provision (benefit) for income taxes		14			(35	)		(14	)		3			3			—		(29	)
Provision (benefit) for income taxes		6			(14	)		(5	)		—			1			—		(12	)


Income (loss) before equity in net (loss) earnings of subsidiaries		8			(21	)		(9	)		3			2			—		(17	)
Equity in net (loss) earnings of subsidiaries		(25	)		(4	)		—			—			—			29		—


Net (loss) income	$	(17	)	$	(25	)	$	(9	)	$	3		$	2		$	29	$	(17	)

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2010


	Parent			URNA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries						Eliminations		Total
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations		Total
REVENUES
Equipment rentals	$	—		$	440		$	278		$	112		$	—		$	—	$	830
Sales of rental equipment		—			38			22			12			—			—		72
New equipment sales		—			22			9			9			—			—		40
Contractor supplies sales		—			21			16			12			—			—		49
Service and other revenues		—			24			12			8			—			—		44

Total revenues		—			545			337			153			—			—		1,035


Cost of revenues:
Cost of equipment rentals, excluding depreciation		—			216			155			60			—			—		431
Depreciation of rental equipment		—			106			64			21			—			—		191
Cost of rental equipment sales		—			28			16			8			—			—		52
Cost of new equipment sales		—			19			7			8			—			—		34
Cost of contractor supplies sales		—			16			11			8			—			—		35
Cost of service and other revenues		—			10			5			3			—			—		18

Total cost of revenues		—			395			258			108			—			—		761


Gross profit		—			150			79			45			—			—		274
Selling, general and administrative expenses		9			82			50			26			9			—		176
Restructuring charge		—			9			3			—			—			—		12
Non-rental depreciation and amortization		6			12			9			2			—			—		29

Operating (loss) income		(15	)		47			17			17			(9	)		—		57
Interest expense, net		6			107			2			(2	)		2			—		115
Interest expense-subordinated convertible debentures		4			—			—			—			—			—		4
Other (income) expense, net		(29	)		22			17			5			(16	)		—		(1	)


Income (loss) before provision (benefit) for income taxes		4			(82	)		(2	)		14			5			—		(61	)
Provision (benefit) for income taxes		2			(47	)		(1	)		10			3			—		(33	)


Income (loss) before equity in net (loss) earnings of subsidiaries		2			(35	)		(1	)		4			2			—		(28	)
Equity in net (loss) earnings of subsidiaries		(30	)		5			—			—			—			25		—


Net (loss) income	$	(28	)	$	(30	)	$	(1	)	$	4		$	2		$	25	$	(28	)

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2009


	Parent			URNA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries						Eliminations		Total
	Parent			URNA			Guarantor Subsidiaries			Foreign			SPV			Eliminations		Total
REVENUES
Equipment rentals	$	—		$	476		$	324		$	102		$	—		$	—	$	902
Sales of rental equipment		—			88			45			18			—			—		151
New equipment sales		—			21			14			8			—			—		43
Contractor supplies sales		—			26			27			12			—			—		65
Service and other revenues		—			27			15			6			—			—		48

Total revenues		—			638			425			146			—			—		1,209


Cost of revenues:
Cost of equipment rentals, excluding depreciation		—			233			169			52			—			—		454
Depreciation of rental equipment		—			120			74			22			—			—		216
Cost of rental equipment sales		—			90			45			16			—			—		151
Cost of new equipment sales		—			18			12			7			—			—		37
Cost of contractor supplies sales		—			19			20			9			—			—		48
Cost of service and other revenues		—			10			5			3			—			—		18

Total cost of revenues		—			490			325			109			—			—		924


Gross profit		—			148			100			37			—			—		285
Selling, general and administrative expenses		7			88			77			27			10			—		209
Restructuring charge		—			10			13			1			—			—		24
Non-rental depreciation and amortization		11			8			9			1			—			—		29

Operating (loss) income		(18	)		42			1			8			(10	)		—		23
Interest expense, net		16			67			7			(1	)		3			—		92
Interest expense-subordinated convertible debentures, net		(8	)		—			—			—			—			—		(8	)
Other (income) expense, net		(33	)		28			22			4			(20	)		—		1


Income (loss) before provision (benefit) for income taxes		7			(53	)		(28	)		5			7			—		(62	)
Provision (benefit) for income taxes		3			(21	)		(11	)		—			3			—		(26	)


Income (loss) before equity in net (loss) earnings of subsidiaries		4			(32	)		(17	)		5			4			—		(36	)
Equity in net (loss) earnings of subsidiaries		(40	)		(8	)		—			—			—			48		—


Net (loss) income	$	(36	)	$	(40	)	$	(17	)	$	5		$	4		$	48	$	(36	)

UNITED RENTALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions, except per share data, unless otherwise indicated)

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Six Months Ended June 30, 2010


	Parent			URNA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries						Eliminations		Total
										Foreign			SPV
Net cash provided by (used in) operating activities	$	8		$	168		$	32		$	32		$	(21	)	$	—	$	219
Net cash (used in) investing activities		(7	)		(45	)		(36	)		(23	)		—			—		(111	)
Net cash (used in) provided by financing activities		(1	)		(118	)		1			(147	)		21			—		(244	)
Effect of foreign exchange rates		—			—			—			(3	)		—			—		(3	)

Net increase (decrease) in cash and cash equivalents		—			5			(3	)		(141	)		—			—		(139	)
Cash and cash equivalents at beginning of period		—			5			3			161			—			—		169

Cash and cash equivalents at end of period	$	—		$	10		$	—		$	20		$	—		$	—	$	30

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Six Months Ended June 30, 2009


	Parent			URNA			Guarantor Subsidiaries			Non-Guarantor Subsidiaries					Eliminations		Total
										Foreign		SPV
Net cash provided by (used in) operating activities	$	4		$	100		$	(5	)	$	28	$	78		$	—	$	205
Net cash (used in) provided by investing activities		(13	)		(6	)		3			10		—			—		(6	)
Net cash provided by (used in) financing activities		9			(89	)		2			—		(78	)		—		(156	)
Effect of foreign exchange rates		—			—			—			5		—			—		5

Net increase in cash and cash equivalents		—			5			—			43		—			—		48
Cash and cash equivalents at beginning of period		—			—			4			73		—			—		77

Cash and cash equivalents at end of period	$	—		$	5		$	4		$	116	$	—		$	—	$	125

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except per share data, unless otherwise indicated)

Executive Overview

We are the largest equipment rental company in the world with an integrated network of 554 rental locations in the United States and Canada. Although the equipment rental industry is highly fragmented and diverse, we believe we are well positioned to take advantage of this environment because as a larger company we have more resources and certain competitive advantages over smaller competitors. These advantages include greater purchasing power, the ability to provide customers with a broader range of equipment and services as well as with better maintained equipment, and greater flexibility to transfer equipment among branches.

We offer for rent approximately 3,000 classes of equipment to customers that include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. Our revenues are derived from the following sources: equipment rentals, sales of used rental equipment, sales of new equipment, contractor supplies sales and service and other. In 2009, equipment rental revenues represented 78 percent of our total revenues.

The latter part of 2008 through 2009 was challenging for both our company and the U.S. equipment rental industry as a whole. As the financial crisis led into a recession, credit restrictions and the macro economy triggered a severe downturn in non-residential construction activity of unprecedented depth and duration. Late in the first quarter of 2010, we began to see signs of a potential recovery in our end markets; this has continued through the second quarter, becoming more pronounced by June. We believe that our performance in the second quarter—which includes record time utilization for that period of 65.4 percent—reflects both seasonal and cyclical improvements in our operating environment. Although there is no certainty that these trends will continue, we believe that our strategy will strengthen our leadership position in the recovery. Our strategy is to optimize our core rental business through customer segmentation, rate management and fleet management; achieve differentiation and a competitive advantage through customer service excellence; and maintain a disciplined approach to cost control.

Financial Overview

Net income (loss). Net income (loss) and diluted earnings (loss) per share for the three and six months ended June 30, 2010 and 2009 were as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
	2010		2009			2010			2009
Net income (loss)	$	12	$	(17	)	$	(28	)	$	(36	)
Diluted earnings (loss) per share	$	0.18	$	(0.28	)	$	(0.46	)	$	(0.60	)

Net income (loss) and diluted earnings (loss) per share for the three and six months ended June 30, 2010 and 2009 include the impacts of the following special items (amounts presented on an after-tax basis):


	Three Months Ended June 30,												Six Months Ended June 30,
	2010						2009						2010						2009
	Net (loss) income			Diluted (loss) earnings per share			Net (loss) income			Diluted (loss) earnings per share			Net loss			Diluted loss per share			Net (loss) income			Diluted (loss) earnings per share
Restructuring charge (1)	$	(4	)	$	(0.06	)	$	(12	)	$	(0.22	)	$	(7	)	$	(0.13	)	$	(15	)	(0.25	)
Gain (loss) on repurchases/redemptions of debt securities and retirement of subordinated convertible debentures		*			0.01			16			0.27			(2	)		(0.03	)		19		0.31
Asset impairment charge (2)		(1	)		(0.02	)		(6	)		(0.09	)		(1	)		(0.02	)		(6	)	(0.10	)

*	Amount is less than $1.

(1)	As discussed below (see “Restructuring charge”), this relates to branch closure charges and severance costs.

(2)	As discussed in note 3 to the condensed consolidated financial statements, the 2010 charge primarily relates to the impact of leasehold improvement write-offs. The 2009 charge includes the impact of impairing certain rental equipment and leasehold improvement write-offs.

In addition to the matters discussed above, our 2010 performance reflects increased gross profit from the sale of rental equipment and reductions in selling, general and administrative expenses. Additionally, and as discussed below (see “Income taxes”), our results for the three months ended June 30, 2010 include a tax benefit of $9 due to a revised estimate of the Company’s full year projected income (loss) and the resulting effective tax rate.

EBITDA GAAP Reconciliation. EBITDA represents the sum of net income (loss), benefit for income taxes, interest expense, net, interest expense-subordinated convertible debentures, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the restructuring charge and stock compensation expense, net. These items are excluded from adjusted EBITDA internally when evaluating our operating performance and allow investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies. Management believes that EBITDA and adjusted EBITDA, when viewed with the Company’s results under GAAP and the accompanying reconciliation, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that EBITDA and adjusted EBITDA permit investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced. However, EBITDA and adjusted EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net loss or cash flow from operating activities as indicators of operating performance or liquidity. The table below provides a reconciliation between net loss and EBITDA and adjusted EBITDA.


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net income (loss)	$	12		$	(17	)	$	(28	)	$	(36	)
Benefit for income taxes		(9	)		(12	)		(33	)		(26	)
Interest expense, net		54			42			115			92
Interest expense – subordinated convertible debentures, net		2			(10	)		4			(8	)
Depreciation of rental equipment		95			110			191			216
Non-rental depreciation and amortization		16			15			29			29

EBITDA	$	170		$	128		$	278		$	267
Restructuring charge (1)		6			20			12			24
Stock compensation expense, net (2)		3			2			4			4

Adjusted EBITDA	$	179		$	150		$	294		$	295

(1)	As discussed below (see “Restructuring charge”), this relates to branch closure charges and severance costs.

(2)	Represents non-cash, share-based payments associated with the granting of equity instruments.

For the three months ended June 30, 2010, EBITDA increased $42, or 32.8 percent, and adjusted EBITDA increased $29, or 19.3 percent, primarily reflecting increased margins from sales of rental equipment, and selling, general and administrative expense reductions. For the six months ended June 30, 2010, EBITDA increased $11, or 4.1 percent, primarily reflecting increased margins from sales of rental equipment, and selling, general and administrative expense reductions, partially offset by reduced margins from equipment rentals.

Results of Operations

As discussed in note 2 to our condensed consolidated financial statements, our reportable segments are general rentals and trench safety, power and HVAC. Our reportable segment for specialty operations has been renamed trench safety, power and HVAC to better reflect its fleet and service components. The segment was previously referred to as trench safety, pump and power.

The general rentals segment includes the rental of construction, aerial, industrial and homeowner equipment and related services and activities. The general rentals segment’s customers include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and government entities. The general rentals segment operates throughout the United States and Canada. The trench safety, power and HVAC segment includes the rental of equipment for underground construction, temporary power, climate control and disaster recovery, and related services such as training. The trench safety, power and HVAC segment’s customers include construction companies involved in infrastructure projects, municipalities and industrial companies. This segment operates in the United States and has one location in Canada.

As discussed in note 2 to our condensed consolidated financial statements, we aggregate our seven geographic regions—the Southwest, Gulf, Northwest, Southeast, Midwest, East, and the Northeast Canada- as well as the Aerial West region into our general rentals reporting segment. Historically, there have been variances in the levels of equipment rentals gross margins achieved by these regions. For instance, for the five year period ended June 30, 2010, our Midwest region’s equipment rentals gross margin varied by more than 10 percent from the equipment rentals gross margin of the aggregated general rentals’ regions over the same period. Although the margin for the Midwest region exceeded a 10 percent variance level for this five year period, prior to the significant economic downturn in 2009 that negatively impacted all our regions, the Midwest region’s margin was converging with those achieved at the other general rentals’ regions, and, given management’s focus on cost cutting, improved processes and fleet sharing, we expect further convergence going forward. Although we believe aggregating these regions into our general rentals reporting segment for segment reporting purposes is appropriate, to the extent that the margin variances persist and the equipment rentals gross margins do not converge, we may be required to disaggregate the regions into separate reporting segments. Any such disaggregation would have no impact on our consolidated results of operations.

These segments align our external segment reporting with how management evaluates and allocates resources. We evaluate segment performance based on segment operating results. Our revenues, operating results, and financial condition fluctuate from quarter to quarter reflecting the seasonal rental patterns of our customers, with rental activity tending to be lower in the winter.

Revenues by segment were as follows:


	General rentals		Trench safety, power and HVAC		Total
Three months ended June 30, 2010
Equipment rentals	$	415	$	35	$	450
Sales of rental equipment		34		3		37
Sales of new equipment		19		2		21
Contractor supplies sales		24		2		26
Service and other revenues		23		—		23

Total revenue	$	515	$	42	$	557

Three months ended June 30, 2009
Equipment rentals	$	423	$	31	$	454
Sales of rental equipment		82		2		84
Sales of new equipment		19		1		20
Contractor supplies sales		30		3		33
Service and other revenues		22		2		24

Total revenue	$	576	$	39	$	615

Six months ended June 30, 2010
Equipment rentals	$	767	$	63	$	830
Sales of rental equipment		66		6		72
Sales of new equipment		37		3		40
Contractor supplies sales		46		3		49
Service and other revenues		42		2		44

Total revenue	$	958	$	77	$	1,035

Six months ended June 30, 2009
Equipment rentals	$	841	$	61	$	902
Sales of rental equipment		146		5		151
Sales of new equipment		40		3		43
Contractor supplies sales		61		4		65
Service and other revenues		46		2		48

Total revenue	$	1,134	$	75	$	1,209

Three months ended June 30, 2010 and 2009 . 2010 equipment rentals of $450 decreased $4, or 0.9 percent, reflecting a 4.7 percent decrease in average fleet size, on an original equipment cost basis, and a 2.0 percent decrease in rental rates, partially offset by a 4.1 percentage point increase in time utilization. Dollar utilization, which reflects the impact of both rental rates and time utilization, and is calculated based on annualized rental revenue divided by the average original equipment cost of our fleet, increased 1.8 percentage points to 46.7 percent. Same-store rental revenues increased 2.7 percent. Equipment rentals represented 81 percent of total revenues for the three months ended June 30, 2010. On a segment basis, equipment rentals represented 81 percent and 83 percent of total revenues for general rentals and trench safety, power and HVAC, respectively. General rentals equipment rentals decreased $8, or 1.9 percent, primarily due to the impact of closed locations. General rentals same-store rental revenues increased 2.1 percent. Trench safety, power and HVAC equipment rentals increased $4, or 12.9 percent, reflecting an 11.2 percent increase in same-store rental revenues.

Six months ended June 30, 2010 and 2009 . 2010 equipment rentals of $830 decreased $72, or 8.0 percent, reflecting a 6.2 percent decrease in average fleet size, on an original equipment cost basis, and a 4.2 percent decline in rental rates, partially offset by a 2.3 percentage point increase in time utilization. Dollar utilization decreased 1.0 percentage points to 42.9 percent. Same-store rental revenues decreased 4.3 percent. Equipment rentals represented 80 percent of total revenues for the six months ended June 30, 2010. On a segment basis, equipment rentals represented 80 percent and 82 percent of total revenues for general rentals and trench safety, power and HVAC, respectively. General rentals equipment rentals decreased $74, or 8.8 percent, reflecting a 4.8 percent decrease in same-store rental revenues. Trench safety, power and HVAC equipment rentals increased $2, or 3.3 percent, reflecting a 1.8 percent increase in same-store rental revenues.

Sales of rental equipment . For the three and six months ended June 30, 2010, sales of rental equipment represented approximately 7 percent of our total revenues and our general rentals segment accounted for approximately 92 percent of these sales. Sales of rental equipment for trench safety, power and HVAC were insignificant. For the three and six months ended June 30, 2010, sales of rental equipment decreased 56.0 and 52.3 percent, respectively, primarily reflecting a decline in the volume of equipment sold and the mix of equipment sold.

New equipment sales. For the three and six months ended June 30, 2010, new equipment sales represented approximately 4 percent of our total revenues and our general rentals segment accounted for approximately 92 percent of these sales. Sales of new equipment for trench safety, power and HVAC were insignificant. For the three and six months ended June 30, 2010, sales of new equipment increased 5.0 and decreased 7.0 percent, respectively, primarily reflecting changes in the volume of equipment sold.

Contractor supplies sales. Contractor supplies sales represent our revenues associated with selling a variety of supplies including construction consumables, tools, small equipment and safety supplies. Consistent with sales of rental and new equipment, general rentals accounts for substantially all of our contractor supplies sales. For the three and six months ended June 30, 2010, contractor supplies sales decreased 21.2 and 24.6 percent, respectively, reflecting a reduction in the volume of supplies sold, partially offset by improved pricing and product mix.

Service and other revenues . Service and other revenues primarily represent our revenues earned from providing repair and maintenance services (including parts sales). Consistent with sales of rental and new equipment as well as sales of contractor supplies, general rentals accounts for substantially all of our service and other revenues. For the three and six months ended June 30, 2010, service and other revenues decreased 4.2 and 8.3 percent, respectively, primarily reflecting reduced revenues from service labor and parts sales.

Segment Operating Income

Segment operating income and operating margin were as follows:


	General rentals			Trench safety, power and HVAC			Total
Three months ended June 30, 2010
Operating Income	$	56		$	9		$	65
Operating Margin		10.9	%		21.4	%		11.7	%
Three months ended June 30, 2009
Operating Income	$	18		$	7		$	25
Operating Margin		3.1	%		17.9	%		4.1	%
Six months ended June 30, 2010
Operating Income	$	57		$	12		$	69
Operating Margin		5.9	%		15.6	%		6.7	%
Six months ended June 30, 2009
Operating Income	$	38		$	9		$	47
Operating Margin		3.4	%		12.0	%		3.9	%

The following is a reconciliation of segment operating income to total Company operating income:


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Total reportable segment operating income	$	65		$	25		$	69		$	47
Unallocated restructuring charge		(6	)		(20	)		(12	)		(24	)

Operating income	$	59		$	5		$	57		$	23

General rentals . For the three months ended June 30, 2010, operating income increased $38 and operating margin increased 7.8 percentage points, primarily reflecting increased gross margins from equipment rentals and sales of rental equipment, and selling, general and administrative expense reductions. Additionally, operating income for the three months ended June 30, 2010 included asset impairment charges of $2, as compared to $9 for the three months ended June 30, 2009.

For the six months ended June 30, 2010, operating income increased $19 and operating margin increased 2.5 percentage points, primarily reflecting increased gross margins from sales of rental equipment and selling, general and administrative expense reductions, partially offset by reduced gross margins from equipment rentals. Additionally, operating income for the six months ended June 30, 2010 included asset impairment charges of $2, as compared to $9 for the six months ended June 30, 2009.

Trench safety, power and HVAC . For the three and six months ended June 30, 2010, operating income increased by $2 and $3, respectively, and operating margin increased by 3.5 and 3.6 percentage points, respectively, reflecting increased gross margins from equipment rentals and improved selling, general and administrative leverage.

Gross Margin . Gross margins by revenue classification were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Total gross margin	30.7	%	22.9	%	26.5	%	23.6	%
Equipment rentals	30.7	%	27.1	%	25.1	%	25.7	%
Sales of rental equipment	24.3	%	(9.5	)%	27.8	%	—	%
New equipment sales	14.3	%	15.0	%	15.0	%	14.0	%
Contractor supplies sales	26.9	%	24.2	%	28.6	%	26.2	%
Service and other revenues	60.9	%	62.5	%	59.1	%	62.5	%

For the three months ended June 30, 2010, total gross margin increased 7.8 percentage points as compared to the same period in 2009, primarily reflecting increased gross margins from equipment rentals and sales of rental equipment. Equipment rentals gross margin increased 3.6 percentage points, primarily reflecting a 4.1 percentage point increase in time utilization to a second quarter record of 65.4 percent, and savings realized from ongoing cost saving initiatives, partially offset by a 2.0 percent rental rate decline. Additionally, equipment rentals gross margin for the three months ended June 30, 2010 included a benefit of $1 recognized upon the sale of certain assets that had been classified as held for sale, while the three months ended June 30, 2009 included asset impairment charges of $7. The 33.8 percentage point increase in gross margins from sales of rental equipment primarily reflects a higher proportion of retail sales, which yield higher margins, in 2010. For the three months ended June 30, 2010 and 2009, on an original equipment cost-weighted basis, retail sales represented 60 and 26 percent of our sales of rental equipment, respectively, while auction sales represented 22 and 52 percent, respectively.

For the six months ended June 30, 2010, total gross margin increased 2.9 percentage points as compared to the same period in 2009, primarily reflecting increased gross margins from sales of rental equipment. The 27.8 percentage point increase in gross margins from sales of rental equipment primarily reflects a higher proportion of retail sales, which yield higher margins, in 2010. For the six months ended June 30, 2010 and 2009, on an original equipment cost-weighted basis, retail sales represented 65 and 29 percent of our sales of rental equipment, respectively, while auction sales represented 19 and 47 percent, respectively. Gross margins from sales of rental equipment may change in future periods if the mix of the channels that we use to sell rental equipment changes.

Selling, general and administrative expenses (“SG&A”) . SG&A expense information for the three and six months ended June 30, 2010 and 2009 was as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Total SG&A expenses	$	90		$	101		$	176		$	209
SG&A as a percentage of revenue		16.2	%		16.4	%		17.0	%		17.3	%

SG&A expense includes sales force compensation, bad debt expense, information technology costs, advertising and marketing expenses, third-party professional fees, management salaries and clerical and administrative overhead. For the three months ended June 30, 2010, SG&A expense of $90 decreased $11 as compared to 2009 and decreased by 0.2 percentage points as a percentage of revenue. The decline in SG&A reflects the benefits we are realizing from our cost-saving initiatives, including reduced compensation costs and professional fees.

For the six months ended June 30, 2010, SG&A expense of $176 decreased $33 as compared to 2009 and decreased by 0.3 percentage points as a percentage of revenue. The decline in SG&A reflects the benefits we are realizing from our cost-saving initiatives, including reduced compensation costs, travel and entertainment expenses and professional fees.

Restructuring charge. For the three months ended June 30, 2010 and 2009, restructuring charges of $6 and $20 relate to the closure of 10 and 38 branches, respectively, and severance costs associated with reductions in headcount of approximately 100 and 800, respectively. For the six months ended June 30, 2010 and 2009, restructuring charges of $12 and $24 relate to the closure of 17 and 48 branches, respectively, and severance costs associated with reductions in headcount of approximately 600 and 1,300, respectively. We expect that the restructuring activity will be substantially complete by the end of 2010.

Interest expense, net for the three and six months ended June 30, 2010 and 2009 was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Interest expense, net	$	54	$	42	$	115	$	92

Interest expense, net for the three months ended June 30, 2010 increased by $12, or 29 percent. Interest expense, net for the three months ended June 30, 2010 and 2009 includes gains of $1 and $13, respectively, related to repurchases or redemptions of $24 and $306 principal amounts of our outstanding debt, respectively. Excluding the impact of the gains on the debt repurchases/redemptions, interest expense, net was flat as the impact of higher interest rates offset the impact of lower average outstanding debt.

Interest expense, net for the six months ended June 30, 2010 increased by $23, or 25 percent. Interest expense, net for the six months ended June 30, 2010 and 2009 includes a loss of $3 and a gain of $17, respectively, related to repurchases or redemptions of $459 and $328 principal amounts of our outstanding debt, respectively. Excluding the impact of the gains/losses on the debt repurchases/redemptions, interest expense, net increased slightly primarily due to higher interest rates on lower average outstanding debt.

Interest expense- subordinated convertible debentures, net for the three and six months ended June 30, 2010 and 2009 was as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
	2010		2009			2010		2009
Interest expense- subordinated convertible debentures, net	$	2	$	(10	)	$	4	$	(8	)

As discussed in note 6 to our condensed consolidated financial statements, the subordinated convertible debentures included in our consolidated balance sheets reflect the obligation to our subsidiary trust that has issued Quarterly Income Preferred Securities (“QUIPS”). This subsidiary is not consolidated in our financial statements because we are not the primary beneficiary of the trust. As of June 30, 2010 and December 31, 2009, the aggregate amount of subordinated convertible debentures outstanding was $124. Interest expense-subordinated convertible debentures, net for the three and six months ended June 30, 2010 increased by $12 due to a $13 gain we recognized during the second quarter of 2009 in connection with the simultaneous purchase of $22 of QUIPS and retirement of $22 principal amount of our subordinated convertible debentures.

Other (income) expense, net was $0 and $2 for the three months ended June 30, 2010 and 2009, respectively, and $(1) and $1 for the six months ended June 30, 2010 and 2009, respectively. As discussed in note 4 to our condensed consolidated financial statements, other (income) expense, net for the three months ended June 30, 2010 includes (i) a loss of $1 associated with foreign currency forward contracts and (ii) a gain of $1 associated with the revaluation of certain intercompany loans. Other (income) expense, net for the six months ended June 30, 2010 includes (i) a gain of $7 associated with foreign currency forward contracts and (ii) a loss of $7 associated with the revaluation of certain intercompany loans.

Income taxes . The following table summarizes our benefit for income taxes and the related effective tax rates for the three and six months ended June 30, 2010 and 2009:


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Income (loss) before benefit for income taxes	$	3		$	(29	)	$	(61	)	$	(62	)
Benefit for income taxes		(9	)		(12	)		(33	)		(26	)
Effective tax rate		*			41.4	%		54.1	%		41.9	%

*	Not meaningful, see discussion of the tax benefit for the three months ended June 30, 2010 below.

The difference between the effective tax rate for the six months ended June 30, 2010 and the U.S. federal statutory income tax rate of 35 percent primarily relates to the geographical mix of income between foreign and domestic operations, as well as the impact of state and local taxes, and certain nondeductible charges. The difference between the 2009 effective tax rates and the U.S. federal statutory income tax rate of 35 percent primarily relates to the geographical mix of income between foreign and domestic operations, as well as the impact of state and local taxes.

The income tax benefit of $9 for the three months ended June 30, 2010 resulted from a revised estimate of the Company’s full year projected income (loss) and the resulting effective tax rate. For the three and six months ended June 30, 2010, our net income (loss) and diluted earnings (loss) per share as reported and calculated using the U.S. federal statutory income tax rate of 35 percent were as follows:


	Three Months Ended June 30, 2010				Six Months Ended June 30, 2010
	As reported		At federal statutory income tax rate of 35 percent		As reported			At federal statutory income tax rate of 35 percent
Net income (loss)	$	12	$	2	$	(28	)	$	(40	)
Diluted earnings (loss) per share	$	0.18	$	0.03	$	(0.46	)	$	(0.66	)

The balance of prepaid expenses and other assets at June 30, 2010 decreased by $49, or 55.1 percent, as compared to December 31, 2009, primarily due to a federal tax refund of $55 received in March 2010.

Liquidity and Capital Resources

Liquidity. We manage our liquidity using internal cash management practices, which are subject to (i) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services, (ii) the terms and other requirements of the agreements to which we are a party and (iii) the statutes, regulations and practices of each of the local jurisdictions in which we operate.

Our principal existing sources of cash are cash generated from operations and from the sale of rental equipment and borrowings available under the ABL facility and accounts receivable securitization facility. As of June 30, 2010, we had (i) $750 of borrowing capacity available under the ABL facility, (ii) $7 of borrowing capacity available under our accounts receivable securitization facility and (iii) cash and cash equivalents of $30. Cash equivalents at June 30, 2010 consist of direct obligations of AA rated financial institutions. We believe that our existing sources of cash will be sufficient to support our existing operations over the next 12 months.

As discussed further in note 4 to the condensed consolidated financial statements, during the second quarter of 2010, we concentrated $160 Canadian of excess foreign cash from Canada into the U.S. through an intercompany loan. This cash was used to pay down existing debt. As a result, the balance of cash and cash equivalents decreased significantly from December 31, 2009.

We expect that our principal needs for cash relating to our existing operations over the next 12 months will be to fund (i) operating activities and working capital, (ii) the purchase of rental equipment and inventory items offered for sale, (iii) payments due under operating leases and (iv) debt service. We plan to fund such cash requirements from our existing sources of cash. In addition, we may seek additional financing through the securitization of some of our real estate, the use of additional operating leases or other financing sources as market conditions permit.

The amount of our future capital expenditures will depend on a number of factors, including general economic conditions and growth prospects. We expect that we will fund such expenditures from cash generated from operations, proceeds from the sale of rental equipment and, if required, borrowings available under the ABL facility and accounts receivable securitization facility.

Retirement of Senior Notes. As discussed above, in the three and six months ended June 30, 2010, we repurchased or redeemed and subsequently retired $24 and $459 principal amounts of our outstanding indebtedness, respectively.

Loan Covenants and Compliance. As of June 30, 2010, we were in compliance with the covenants and other provisions of the ABL facility, the accounts receivable securitization facility, the senior notes and the QUIPS. Any failure to be in compliance with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

The only material financial covenants which currently exist relate to the fixed charge coverage ratio and the senior secured leverage ratio under the ABL facility. Both of these covenants were suspended on June 9, 2009 because the availability, as defined in the agreement governing the ABL facility, had exceeded 20 percent of the maximum revolver amount under the ABL facility. Since the June 9, 2009 suspension date and through June 30, 2010, availability under the ABL facility has exceeded 10 percent of the maximum revolver amount under the ABL facility and, as a result, these maintenance covenants remained inapplicable. Subject to certain limited exceptions specified in the ABL facility, these covenants will only apply in the future if availability under the ABL facility falls below 10 percent of the maximum revolver amount under the ABL facility.

As of June 30, 2010, primarily due to our 2008 goodwill impairment charge, we no longer had any restricted payment capacity under the most restrictive restricted payment covenants in the indentures governing our outstanding senior subordinated notes. This depletion limits our ability to move operating cash flows to Holdings, although certain intercompany arrangements are exempted.

Sources and Uses of Cash. During the six months ended June 30, 2010, we (i) generated cash from operating activities of $219, including $55 related to a federal tax refund and (ii) generated cash from the sale of rental and non-rental equipment of $75. We used cash during this period principally to (i) fund payments on debt, net of proceeds, of $242 and (ii) purchase rental and non-rental equipment of $186. During the six months ended June 30, 2009, we (i) generated cash from operating activities of $205 and (ii) generated cash from the sale of rental and non-rental equipment of $159. We used cash during this period principally to (i) purchase rental and non-rental equipment of $164 and (ii) fund payments on debt, net of proceeds, of $141.

The balance of accounts payable at June 30, 2010 increased by $60, or 46.9 percent, as compared to December 31, 2009, primarily due to increased capital expenditures in 2010.

Free Cash Flow GAAP Reconciliation. We define free cash flow as (i) net cash provided by operating activities less (ii) purchases of rental and non-rental equipment plus (iii) proceeds from sales of rental and non-rental equipment and excess tax benefits from share-based payment arrangements, net. Management believes that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. However, free cash flow is not a measure of financial performance or liquidity under GAAP. Accordingly, free cash flow should not be considered an alternative to net loss or cash flow from operating activities as an indicator of operating performance or liquidity. The table below provides a reconciliation between net cash provided by operating activities and free cash flow.


	Six Months Ended June 30,
	2010			2009
Net cash provided by operating activities	$	219		$	205
Purchases of rental equipment		(174	)		(138	)
Purchases of non-rental equipment		(12	)		(26	)
Proceeds from sales of rental equipment		72			151
Proceeds from sales of non-rental equipment		3			8
Excess tax benefits from share-based payment arrangements, net		(1	)		(1	)

Free cash flow	$	107		$	199

Free cash flow for the six months ended June 30, 2010 was $107, a decrease of $92 as compared to free cash flow of $199 for the six months ended June 30, 2009. As noted above, net cash provided by operating activities for the six months ended June 30, 2010 includes a $55 federal tax refund. Excluding the impact of this refund, the year-over-year decrease in free cash flow primarily reflects reduced proceeds from sales of rental equipment and increased purchases of rental equipment.

Our credit ratings as of July 16, 2010 were as follows:


	Corporate Rating	Outlook
Moody’s (1)	B3	Stable
S&P (1)	B	Stable
Fitch (1)	B	Stable

(1)

Prior to the June 2009 issuance of URNA’s 10 ⁷ / 8 percent Senior Notes, and in recognition of the deteriorating economic environment, Standard & Poor’s and Fitch downgraded the Company to a corporate rating of B and Fitch placed the Company on negative outlook. In November 2009, prior to the issuance of URNA’s 9 ¹ / 4 percent Senior Notes and URI’s 4 percent Convertible Senior Notes, and in recognition of the deteriorating economic environment, Moody’s downgraded the Company to a corporate rating of B3 and placed the Company on stable outlook. In the second quarter of 2010, Fitch and Standard & Poor’s raised the Company’s outlook from negative to stable.

Both our ability to obtain financing and the related cost of borrowing are affected by our credit ratings, which are periodically reviewed by these rating agencies. Our current credit ratings are below investment grade and we expect our access to the public debt markets to be limited to the non-investment grade segment as long as our ratings reflect a below investment grade rating.

A security rating is not a recommendation to buy, sell or hold securities insofar as such ratings do not comment as to market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for a given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if in its judgment circumstances warrant.

Certain Information Concerning Off-Balance Sheet Arrangements. We lease real estate and non-rental equipment under operating leases as a regular business activity. As part of some of our non-rental equipment operating leases, we guarantee that the value of the equipment at the end of the term will not be less than a specified projected residual value. If the actual residual value for all equipment subject to such guarantees were to be zero, then our maximum potential liability under these guarantees would be approximately $14. Under current circumstances we do not anticipate paying significant amounts under these guarantees; however, we cannot be certain that changes in market conditions or other factors will not cause the actual residual values to be lower than those currently anticipated. In accordance with GAAP, this potential liability was not reflected on our balance sheet as of June 30, 2010 or any prior date as we believe that proceeds from the sale of the equipment under these operating leases would approximate the payment obligation.

Relationship between Holdings and URNA. Holdings is principally a holding company and primarily conducts its operations through its wholly owned subsidiary, URNA, and subsidiaries of URNA. Holdings licenses its tradename and other intangibles and provides certain services to URNA in connection with its operations. These services principally include: (i) senior management services; (ii) finance and tax-related services and support; (iii) information technology systems and support; (iv) acquisition-related services; (v) legal services; and (vi) human resource support. In addition, Holdings leases certain equipment and real property that are made available for use by URNA and its subsidiaries.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk primarily consists of (i) interest rate risk associated with our variable and fixed rate debt, (ii) foreign currency exchange rate risk primarily associated with our Canadian operations and (iii) equity price risk associated with our convertible debt.

Interest Rate Risk. As of June 30, 2010, we had an aggregate of $751 of indebtedness that bears interest at variable rates, comprised of $542 of borrowings under the ABL facility and $209 of borrowings under our accounts receivable securitization facility. The amount of variable rate indebtedness outstanding under the ABL facility and accounts receivable securitization facility may fluctuate significantly. The interest rates applicable to our variable rate debt on June 30, 2010 were (i) 3.4 percent for the ABL facility and (ii) 1.7 percent for the accounts receivable securitization facility. As of June 30, 2010, based upon the amount of our variable rate debt outstanding, our annual after-tax earnings would decrease by approximately $3 for each one percentage point increase in the interest rates applicable to our variable rate debt.

At June 30, 2010, we had an aggregate of $2.1 billion of indebtedness that bears interest at fixed rates, including our subordinated convertible debentures. A one percentage point increase in market interest rates as of June 30, 2010 would reduce the fair value of our fixed rate indebtedness by approximately four percent. For additional information concerning the fair value of our fixed rate debt, see note 5 (see “Fair Value of Financial Instruments”) to our condensed consolidated financial statements.

Currency Exchange Risk. The functional currency for our Canadian operations is the Canadian dollar. As a result, our future earnings could be affected by fluctuations in the exchange rate between the U.S. and Canadian dollars. Based upon the level of our Canadian operations during 2009 relative to the Company as a whole, a 10 percent change in this exchange rate would not have a material impact on our earnings. As discussed in note 4 to our condensed consolidated financial statements, during the three and six months ended June 30, 2010, we recognized foreign currency gains of $1 and losses of $7, respectively, associated with the revaluation of certain intercompany loans, however these losses were offset by losses of $1 and gains of $7, respectively, recognized on forward contracts to purchase Canadian dollars, and the aggregate foreign currency impact of the intercompany loans and forward contracts did not have a material impact on our earnings. We do not engage in purchasing forward exchange contracts for speculative purposes.

Equity Price Risk. In connection with the November 2009 issuance of $173 aggregate principal amount of 4 percent Convertible Senior Notes, Holdings entered into convertible note hedge transactions with option counterparties. The convertible note hedge transactions cover, subject to anti-dilution adjustments, 15.5 million shares of our common stock. The convertible note hedge transactions are intended to reduce, subject to a limit, the potential dilution with respect to our common stock upon conversion of the 4 percent Convertible Notes. The effect of the convertible note hedge transactions is to increase the effective conversion price to approximately $15.56 per share, equal to an approximately 75 percent premium over the $8.89 closing price of our common stock on November 10, 2009. However, in the event the market value of our common stock exceeds $15.56 per share, the settlement amount received from such transactions will only partially offset the potential dilution. For example, if, at the time of exercise of the conversion right, the price of our common stock was $17.00 or $20.00 per share, on a net basis, we would issue 1.3 million or 3.4 million shares, respectively.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a–15(e) and 15d–15(e) of the Exchange Act, as of June 30, 2010. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2010.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

The information set forth under note 7 to our unaudited condensed consolidated financial statements of this quarterly report on Form 10-Q is incorporated by reference in answer to this item. Such information is limited to certain recent developments and should be read in conjunction with note 13 to our consolidated financial statements for the year ended December 31, 2009 filed on Form 10-K on February 3, 2010.

As previously reported, the U.S. Environmental Protection Agency (the “EPA”) notified the Company that we were a potential responsible party (“PRP”) at a former waste disposal facility included on the National Priorities List of contaminated sites. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, also known as the Superfund law, persons identified as PRPs may be subject to strict, joint and several liability for the costs of cleaning up environmental contamination resulting from releases of hazardous substances at National Priorities List sites. We were identified by the EPA as a PRP at the Operating Industries, Inc. Superfund site in Monterey Park, California. On May 7, 2010, we entered into a settlement agreement with the EPA whereby we agreed to be recognized as a de minimis party in regard to this site and to make a payment of approximately $107,000 to the EPA.

Item 1A.

Risk Factors

Our results of operations and financial condition are subject to numerous risks and uncertainties described in our 2009 Form 10-K, which risk factors are incorporated herein by reference. You should carefully consider these risk factors in conjunction with the other information contained in this report. Should any of these risks materialize, our business, financial condition and future prospects could be negatively impacted.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information about purchases of Holdings’ common stock by Holdings during the second quarter of 2010:


Period	Total Number of Shares Purchased	Average Price Paid Per Share
April 1, 2010 to April 30, 2010	566	$	9.51
May 1, 2010 to May 31, 2010	912	$	12.51
June 1, 2010 to June 30, 2010	—	$	—

Total (1)	1,478

(1)	The shares were withheld by Holdings to satisfy tax withholding obligations upon the vesting of restricted stock unit awards. These shares were not acquired pursuant to any repurchase plan or program.

Item 6.

Exhibits



3(a)		Restated Certificate of Incorporation of United Rentals, Inc., dated March 16, 2009 (incorporated by reference to Exhibit 3.1 of the United Rentals, Inc. Report on Form 8-K filed on March 17, 2009)

3(b)		By-laws of United Rentals, Inc., amended as of January 16, 2009 (incorporated by reference to Exhibit 3.1 of the United Rentals, Inc. Report on Form 8-K filed on January 20, 2009)

10(a)		United Rentals, Inc. 2010 Long Term Incentive Plan (incorporated by reference to Appendix A of the United Rentals, Inc. Proxy Statement on Schedule 14A filed on March 31, 2010)

10(b)*		Form of United Rentals, Inc. 2010 Long Term Incentive Plan Director Restricted Stock Unit Agreement

12.1*		Computation of Ratio of Earnings to Fixed Charges

31(a)*		Rule 13a-14(a) Certification by Chief Executive Officer

31(b)*		Rule 13a-14(a) Certification by Chief Financial Officer

32(a)**		Section 1350 Certification by Chief Executive Officer

32(b)**		Section 1350 Certification by Chief Financial Officer

*	Filed herewith.

**	Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	UNITED RENTALS, INC.

Dated: July 19, 2010	By:	/ S / J OHN J. F AHEY
		John J. Fahey
		Vice President, Controller and Principal Accounting Officer

	UNITED RENTALS (NORTH AMERICA), INC.

Dated: July 19, 2010	By:	/ S / J OHN J. F AHEY
		John J. Fahey
		Vice President, Controller and Principal Accounting Officer

Exhibit 10(b)

FORM OF

2010 LONG TERM INCENTIVE PLAN

DIRECTOR RESTRICTED STOCK UNIT AGREEMENT

Awardee: [Insert Name] (“Awardee”)

Grant Date: [Insert Grant Date]

Restricted Stock Units: [Insert Value]

This DIRECTOR RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”) is made as of the Grant Date by and between UNITED RENTALS, INC., a Delaware corporation having an office at Five Greenwich Office Park, Greenwich, CT 06831 (the “Company”), and Awardee. Capitalized terms not defined herein shall have the meanings ascribed to them in the Company’s 2010 Long Term Incentive Plan (the “Plan”).

In consideration of the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Grant of Restricted Stock Units . The Company hereby grants to Awardee [Insert Value] Restricted Stock Units (the “Units”). The grant of Units is pursuant to the Plan and subject to the terms and conditions of this Agreement and the Plan.

2. Vesting . The Units are fully vested as of the Grant Date.

3. Payment . Units shall be settled in shares of the Company’s common stock (“Stock”) on a one-for-one basis. On the earlier of (i) (the “Specified Date”), (ii) the fifth business day following Awardee’s “separation from service” (within the meaning of Treasury Regulation section 1.409A-3(a)(1)) for any reason, and (iii) the date of a “change in control” (within the meaning of Treasury Regulation section 1.409A-3(a)(5)), the Company shall deliver to Awardee (or Awardee’s estate in the event of the death of Awardee) a certificate, free and clear of any restrictive legend, representing a number of shares of Stock equal to the number of Units.

4. Deferral Elections . Notwithstanding the foregoing, subject to any conditions deemed appropriate from time to time by the Committee (including suspension of the right to elect deferrals or to make changes to any existing deferral election), the Awardee may elect to defer the delivery of the Stock to be delivered in settlement of the Units using such deferral election form as approved by the Committee from time to time.

5. No Rights as a Stockholder; Dividends and Dividend Equivalents . Neither the Units nor this Agreement shall entitle Awardee to any voting rights or other rights as a stockholder of the Company unless and until Stock has been issued in settlement thereof. Without limiting the generality of the foregoing, no dividends or dividend equivalents shall accrue or be paid with respect to any Units.

6. Transferability . Units are not transferable by Awardee, whether by sale, assignment, exchange, pledge, or hypothecation, or by operation of law or otherwise.

7. Transferability of Shares of Stock . The Company shall, to the extent it has not already done so, file a Registration Statement on Form S-8 (or otherwise) with the Securities and Exchange Commission relating to the shares of Stock to be delivered hereunder and comply with all applicable state securities laws prior to the distribution of shares of Stock hereunder.

8. Conformity with Plan . Except as specifically set forth herein, this Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan, which is incorporated herein by reference. Any inconsistencies between this Agreement and the Plan with respect to any mandatory provisions of the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed copy of this Agreement, Awardee acknowledges its receipt of the Plan and its agreement to be bound by all the terms of the Plan.

9. Awardee Advised To Obtain Personal Counsel and Tax Representation . IMPORTANT: The Company and its employees do not provide any guidance or advice to individuals who may be granted an Award under the Plan regarding the federal, state or local income tax consequences or employment tax consequences of participating in the Plan. Each person who may be entitled to any benefit under the Plan is responsible for determining their own personal tax consequences of participating in the Plan, and for satisfying all tax liabilities associated with such participation. Accordingly, you may wish to retain the services of a professional tax advisor in connection with any Awards under the Plan.

10. Adjustments for Changes in Capital Structure . In the event of any change in capital structure or business of the Company by reason of a transaction or event described in Section 1.6.4 of the Plan, the Committee shall make appropriate adjustments described in said Section 1.6.4 as are equitable and reasonably necessary or desirable to preserve the intended benefits under this Agreement.

11. Section 409A . This Agreement constitutes “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code and the regulations and other guidance promulgated thereunder (“Section 409A”). This Agreement, any deferral election made in accordance with Section 4 above and the Plan provisions that apply to this Award are intended to comply with Section 409A and shall be interpreted, administered and construed in a manner consistent with such intent. To the extent necessary to give effect to this intent, in the case of any conflict or potential inconsistency between the provisions of the Plan (including, without limitation, Sections 1.3.1 and 2.1 thereof) and this Agreement, the provisions of this Agreement shall govern, and in the case of any conflict or potential inconsistency between this Section 11 and the other provisions of this Agreement, this Section 11 shall govern. The Company shall have no liability to the Awardee if the Award is subject to the additional tax and penalties under Section 409A.

12. Miscellaneous .

(a)

This Agreement may not be changed or terminated except by written agreement signed by the Company and Awardee. It shall be binding on the parties and on their personal representatives and permitted assigns.

(b)

This Agreement sets forth all agreements of the parties. It supersedes and cancels all prior agreements with respect to the subject matter hereof. It shall be enforceable by decrees of specific performance (without posting bond or other security) as well as by other available remedies.

(c)

Awardee understands and agrees, in accordance with Section 3.3 of the Plan, by accepting this Award, Awardee has expressly consented to all of the items listed in Section 3.3.3(d) of the Plan, which are incorporated herein by reference.

(d)

This Agreement shall be governed by, and construed in accordance with, the laws of Connecticut, without regard to principles of conflict of laws.

(e)

BY ACCEPTING THIS AWARD, AWARDEE UNDERSTANDS AND AGREES THAT THE CHOICE OF FORUM AND DISPUTE RESOLUTION PROVISIONS SET FORTH IN SECTIONS 3.15 AND 3.16 OF THE PLAN, WHICH ARE EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND WHICH, AMONG OTHER THINGS, PROVIDE THAT ANY DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE COMPANY AND AWARDEE ARISING OUT OF OR RELATING TO OR CONCERNING THE PLAN OR THIS AGREEMENT SHALL BE FINALLY SETTLED BY ARBITRATION IN NEW YORK, NEW YORK, PURSUANT TO THE TERMS MORE FULLY SET FORTH IN SECTIONS 3.15 AND 3.16 OF THE PLAN, SHALL APPLY.

(f)

This Agreement may be signed in one or more counterparts, each of which shall be an original, with the same effect as if the signature thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.


UNITED RENTALS, INC.

By:
		Name: Michael Kneeland Title: Chief Executive Officer


AWARDEE:

By:
		Name: [Insert Name]

Exhibit 12.1

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(In millions, except ratios)


	Year Ended December 31,										Six Months Ended June 30, 2010
	2005		2006		2007		2008		2009
Earnings:
Income (loss) from continuing operations before provision (benefit) for income taxes	331		405		578		(813	)	(107	)	(61	)
Add:
Fixed charges, net of capitalized interest	262		289		251		277		288		138
Total earnings available for fixed charges	593		694		829		(536	)	181		77
Fixed charges (1):
Interest expense, net	181		208		187		174		226		115
Add back interest income, which is netted in interest expense	8		11		6		6		1		1
Add back gains (losses) on bond repurchases/redemptions and retirement of subordinated convertible debentures, included in interest expense	—		—		—		41		20		(3	)
Interest expense – subordinated convertible debentures, net	14		13		9		9		(4	)	4
Capitalized interest	1		1		2		1		1		—
Interest component of rent expense	55		53		49		47		45		21
Interest expense – discontinued operation	4		4		—		—		—		—
Fixed charges	263		290		253		278		289		138
Ratio of earnings to fixed charges	2.3	x	2.4	x	3.3	x	—	(2)(3)	—	(2)	—	(2)

(1)

Fixed charges consist of interest expense, which includes amortization of deferred finance charges, interest expense-subordinated debentures, capitalized interest and imputed interest on our lease obligations. The interest component of rent is determined based on an estimate of a reasonable interest factor at the inception of the leases.

(2)

Due to our losses for the six months ended June 30, 2010 and the years ended December 31, 2009 and 2008, the ratio coverage was less than 1:1 for these periods. We would have had to have generated additional earnings of $61, $108, and $814 for the six months ended June 30, 2010 and the years ended December 31, 2009 and 2008, respectively, to have achieved coverage ratios of 1:1.

(3)

The loss for the year ended December 31, 2008 includes the effect of an $1,147 pretax non-cash goodwill impairment charge. The effect of this charge was to reduce the ratio of earnings to fixed charges. Had this charge been excluded from the calculation, the ratio of earnings to fixed charges would have been 2.2x for the year ended December 31, 2008.

Exhibit 31(a)

CERTIFICATIONS

I, Michael J. Kneeland, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of United Rentals, Inc. and United Rentals (North America), Inc. for the quarterly period ended June 30, 2010;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

The registrants’ other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5.	The registrants’ other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

July 19, 2010

/ S / M ICHAEL J. K NEELAND

Michael J. Kneeland

Chief Executive Officer

Exhibit 31(b)

CERTIFICATIONS

I, William B. Plummer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of United Rentals, Inc. and United Rentals (North America), Inc. for the quarterly period ended June 30, 2010;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

5.	The registrants’ other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

July 19, 2010

/ S / W ILLIAM B. P LUMMER

William B. Plummer

Chief Financial Officer

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of United Rentals, Inc. and United Rentals (North America), Inc. (the “Companies”) on Form 10-Q for the quarterly period ended June 30, 2010 as filed with the Securities and Exchange Commission (the “Report”), I, Michael J. Kneeland, Chief Executive Officer of the Companies, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m); and

2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.

/ S / M ICHAEL J. K NEELAND

Michael J. Kneeland

Chief Executive Officer

July 19, 2010

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of United Rentals, Inc. and United Rentals (North America), Inc. (the “Companies”) on Form 10-Q for the quarterly period ended June 30, 2010 as filed with the Securities and Exchange Commission (the “Report”), I, William B. Plummer, Chief Financial Officer of the Companies, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m); and

2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.

/ S / W ILLIAM B. P LUMMER

William B. Plummer

Chief Financial Officer

July 19, 2010

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company