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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Amendment No. 1

on

FORM 10-K/A

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



(Mark One)



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



For the fiscal year ended December 31, 2002.



| ̈ |  | 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

United Rentals, Inc.



Commission File Number 1-13663

United Rentals (North America), Inc.

(Exact Names of Registrants as Specified in Their Charters)

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|Delaware Delaware                                            |  | 06-1522496 06-1493538                
|------------------------------------------------------------ |  | -------------------------------------
|State or Other Jurisdiction of Incorporation or Organization |  | (I.R.S. Employer Identification Nos.)
|                                                             | 
|Five Greenwich Office Park, Greenwich, Connecticut           |  | 06830                                
|(Address of Principal Executive Offices)                     |  | (Zip code)                           



Registrants
telephone number, including area code: (203) 622-3131



Securities registered pursuant to Section 12(b) of the Act:



|Title of Each Class                                   |  | Name of Each Exchange on Which Registered
|----------------------------------------------------- |  | -----------------------------------------
|Common Stock, $.01 par value, of United Rentals, Inc. |  | New York Stock Exchange                  



Securities
registered pursuant to Section 12(g) of the Act: None



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



Indicate by check mark whether the registrant is an
accelerated filer (as defined in Exchange Act Rule 12b-2). x Yes ̈No



As of June 30, 2002, there were 76,531,071 shares of United Rentals, Inc.
common stock outstanding. The aggregate market value of such common stock held by non-affiliates of the registrant at June 30, 2002 was approximately $1,579.7 million. Such aggregate market value was calculated by using the closing price of such
common stock as of such date on the New York Stock Exchange of $21.80.



As of June 16, 2003, there were 76,572,735 shares of United Rentals, Inc. common stock 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.



Documents incorporated by reference: Certain
sections of the Proxy Statement of United Rentals, Inc. to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 within 120 days of the registrants fiscal year are incorporated by reference into Part III of this Form
10-K.



This combined Form 10-K 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 (I)(1) (a) and (b) of Form
10-K and is therefore filing this form with the reduced disclosure format permitted by such instruction.



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FORM 10-K/A REPORT INDEX



|10-K/A Partand Item No. |  |                                                                                       |  | Page No.
|----------------------- |  | ------------------------------------------------------------------------------------- |  | --------
|                        |  |                                                                                      
|PART II                 |  |                                                                                       |  |         
|Item 6                  |  | Selected Financial Data                                                               |  | 1       
|Item 7                  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 3       
|Item 8                  |  | Financial Statements and Supplementary Data                                           |  | 22      
|                        |  |                                                                                      
|PART IV                 |  |                                                                                       |  |         
|Item 15                 |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 84      



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Reason for Filing Amendment to 10-K



In August 1998, a subsidiary trust of United Rentals, Inc. sold six million shares of 61/2% Convertible Quarterly Income Preferred Securities. During the first and fourth quarters of 2002, we repurchased a
total of 1,469,000 of these shares for aggregate consideration of approximately $38.1 million, which represented a discount of approximately 48% relative to the aggregate liquidation preference of these shares.



In the original Form 10-K that we filed, we appropriately reflected these
repurchase transactions on our consolidated statement of stockholders equity. However, we did not reflect the gain associated with these transactions in our calculation of earnings (loss) per share. We have recently become aware that
applicable accounting standards require that such gain be included in our earnings (loss) per share calculation and, accordingly, have restated our financial statements to do so. This restatement has a positive $0.47 per share impact on our earnings
(loss) per share calculation for 2002.



Other than the change
to our earnings (loss) per share calculation, there are no changes to our consolidated statement of operations, consolidated balance sheet, consolidated statement of stockholders equity or consolidated statement of cash flows.



For additional information concerning our earnings per share calculation, see
Note 14 to the Consolidated Financial Statements included elsewhere in this Report.



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Item 6.    
Selected Financial Data



You should
read the following data together with our Consolidated Financial Statements and related Notes included elsewhere in this Report and Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations.



We completed a number of acquisitions during the periods
presented below. We accounted for certain of these acquisitions as poolings-of-interests. This means that, for accounting and financial reporting purposes, the acquired company is treated as having been combined with us at all times since the
inception of the acquired company. Accordingly, we have restated our accounts to include the accounts of the businesses that we acquired in these pooling-of-interests transactions, except in one case where the transaction was not material. We
accounted for our other acquisitions as purchases. This means that the results of operations of the acquired company are included in our financial statements only from the date of acquisition. We believe that our results for the periods presented
below are not directly comparable because of the impact of the acquisitions accounted for as purchases. For additional information, see Note 3 of the Notes to Consolidated Financial Statements included elsewhere in this Report.



|                                                                                                                                                          |  | Year Ended December 31                |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ---------
|                                                                                                                                                          |  | 1998                                  |          
|                                                                                                                                                          |  | (in thousands, except per share data) |          
|Income statement data:                                                                                                                                    |  |                                       |          
|Total revenues                                                                                                                                            |  | $                                     | 1,220,282
|Total cost of revenues                                                                                                                                    |  |                                       | 796,834  
|                                                                                                                                                          |  |                                       |          
|Gross profit                                                                                                                                              |  |                                       | 423,448  
|Selling, general and administrative expenses                                                                                                              |  |                                       | 195,620  
|Goodwill impairment                                                                                                                                       |  |                                       |          
|Restructuring charge                                                                                                                                      |  |                                       |          
|Merger-related expenses                                                                                                                                   |  |                                       | 47,178   
|Non-rental depreciation and amortization                                                                                                                  |  |                                       | 35,248   
|                                                                                                                                                          |  |                                       |          
|Operating income                                                                                                                                          |  |                                       | 145,402  
|Interest expense                                                                                                                                          |  |                                       | 64,157   
|Preferred dividends of a subsidiary trust                                                                                                                 |  |                                       | 7,854    
|Other (income) expense, net                                                                                                                               |  |                                       | (4,906   
|                                                                                                                                                          |  |                                       |          
|Income (loss) before provision for income taxes, extraordinary items and cumulative effect of change in accounting
principle                              |  |                                       | 78,297   
|Provision for income taxes                                                                                                                                |  |                                       | 43,499   
|                                                                                                                                                          |  |                                       |          
|Income (loss) before extraordinary items and cumulative effect of change in accounting principle                                                          |  |                                       | 34,798   
|Extraordinary items, net (1)                                                                                                                              |  |                                       | 21,337   
|Cumulative effect of change in accounting principle, net (2)                                                                                              |  |                                       |          
|                                                                                                                                                          |  |                                       |          
|Net income (loss)                                                                                                                                         |  | $                                     | 13,461   
|                                                                                                                                                          |  |                                       |          
|Pro forma provision for income taxes before extraordinary items (3)                                                                                       |  | $                                     | 44,386   
|Pro forma income before extraordinary items (3)                                                                                                           |  |                                       | 33,911   
|Basic earnings (loss) available to common stockholders before extraordinary items and cumulative effect of change in accounting
principle per share (8)   |  | $                                     | 0.53     
|Diluted earnings (loss) available to common stockholders before extraordinary items and cumulative effect of change in accounting
principle per share (8) |  | $                                     | 0.48     
|Basic earnings (loss) available to common stockholders per share (4)(5)(8)                                                                                |  | $                                     | 0.20     
|Diluted earnings (loss) available to common stockholders per share (4)(5)(8)                                                                              |  | $                                     | 0.18     
|                                                                                                                                                          |  |                                       |          
|Other financial data:                                                                                                                                     |  |                                       |          
|Depreciation and amortization                                                                                                                             |  | $                                     | 211,158  
|Dividends on common stock                                                                                                                                 |  |                                       |         



|                                                                                                |  | December 31           
|----------------------------------------------------------------------------------------------- |  | ----------------------
|                                                                                                |  | 1998                  
|                                                                                                |  | (dollars in thousands)
|Balance sheet data:                                                                             |  |                       
|Cash and cash equivalents                                                                       |  | $                     
|Rental equipment, net                                                                           |  |                       
|Goodwill, net (6)                                                                               |  |                       
|Total assets                                                                                    |  |                       
|Total debt                                                                                      |  |                       
|Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust |  |                       
|Series A and B preferred stock (7)                                                              |  |                       
|Stockholders equity                                                                            |  |                       



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|(1) |  | The charge in 1998 resulted from the early extinguishment of certain debt and primarily reflected prepayment penalties. The charge in 2001 resulted from the refinancing of certain
debt and primarily reflected the write-off of deferred financing fees.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The cumulative effect of change in accounting principle in 2002 resulted from a goodwill impairment charge recognized upon the adoption of a new accounting standard. See Item
7Managements Discussion and Analysis of Financial Condition and Results of OperationsChanges in Accounting Treatment for Goodwill and Other Intangible Assets and Note 4 to the Notes to Consolidated Financial Statements
included elsewhere in this Report.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | A company that we acquired in a pooling-of-interests transaction was taxed as a Subchapter S Corporation until being acquired by us in 1998. In general, the income or loss of a
Subchapter S Corporation is passed through to its owners rather than being subjected to taxes at the entity level. Pro forma provision for income taxes before extraordinary items and pro forma income before extraordinary items reflect a provision
for income taxes as if such company was liable for federal and state income taxes as a taxable corporate entity for all periods presented.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | During 2002, we repurchased a portion of the preferred securities issued in 1998 by a subsidiary trust of United Rentals, Inc., at a repurchase price that was below the aggregate
liquidation preference of the repurchased securities. See Managements Discussion and Analysis of Financial Condition and Results of OperationsCertain Information Concerning Trust Preferred Securities. In accordance with
applicable accounting standards, the gain associated with these repurchase transactions is reflected in our earnings (loss) per share calculation, but is not otherwise reflected on our statement of operations. The gain associated with these
repurchase transactions caused the amount of our net loss per share in 2002 to be $0.47 less than it would have been had this gain not been included in our earnings (loss) per share calculation. For additional information concerning our earnings
(loss) per share calculation, see Note 14 to the Notes to Consolidated Financial Statements included elsewhere in this Report.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Our earnings during 1998 were impacted by merger-related expenses of $47.2 million ($33.2 million net of tax or $0.45 per diluted share), a $4.8 million ($0.07 per diluted share)
charge to recognize deferred tax liabilities of a company acquired in a pooling-of-interests transaction and an extraordinary item (net of tax) of $21.3 million ($0.30 per diluted share). Our earnings during 1999 were impacted by $18.2 million
($10.8 million net of tax or $0.12 per diluted share) of expenses incurred related to a terminated tender offer. Our earnings during 2001 were impacted by a restructuring charge of $28.9 million ($19.2 million net of tax or $0.20 per diluted share),
a $7.8 million ($5.2 million net of tax or $0.06 per diluted share) charge, recorded in other expense, relating to refinancing costs of a synthetic lease and an extraordinary item (net of tax) of $11.3 million ($0.12 per diluted share). Our earnings
during 2002 were impacted by a restructuring charge of $28.3 million ($17.3 million net of tax or $0.23 per share), a $247.9 million goodwill impairment charge ($198.8 million net of tax or $2.62 per share), a $1.6 million charge ($0.9 million net
of tax or $0.01 per share) recorded in other expense relating to refinancing costs, and a cumulative effect of change in accounting principle (net of tax) of $288.3 million ($3.80 per share).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Goodwill is defined as the excess of cost over the fair value of identifiable net assets of businesses acquired. Until January 1, 2002, goodwill was being amortized on a
straight-line basis over forty years. Beginning January 1, 2002, in accordance with the adoption of a new accounting standard, goodwill was no longer amortized. See Item 7Managements Discussion and Analysis of Financial Condition
and Results of OperationsChanges in Accounting Treatment for Goodwill and Other Intangible Assets and Note 4 to the Notes to Consolidated Financial Statements included elsewhere in this Report.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | We issued series A and B perpetual convertible preferred stock in 1999 and included such preferred stock in stockholders equity. In July 2001, the SEC issued guidance to all
public companies as to when redeemable preferred stock may be classified as stockholders equity. Under this guidance, the series A and B preferred would not be included in stockholders equity because this stock would be subject to
mandatory redemption on a hostile change of control. On September 28, 2001, we entered into an agreement effecting the exchange of new series C and D perpetual convertible preferred stock for the series A and B preferred. The series C and D
preferred is not subject to mandatory redemption on a hostile change of control, and is included in stockholders equity under the recent SEC guidance. The effect of the foregoing is that our perpetual convertible preferred stock is included in
stockholders equity as of September 28, 2001 and thereafter, but is outside of stockholders equity for earlier dates.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | The 2002 per share amounts have been restated. For additional information concerning our earnings (loss) per share calculation, see Note 14 to the Consolidated Financial Statements
included elsewhere in this Report.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 7.    
Managements Discussion and Analysis of Financial Condition and Results of Operations



General



We are the largest equipment rental company in the world. Our revenues are divided into three categories:



| |  |  | Equipment rentalsThis category includes our revenues from renting equipment. This category also includes related revenues such as the fees we charge for equipment
delivery, fuel, repair of rental equipment and damage waivers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of rental equipmentThis category includes our revenues from the sale of used rental equipment.
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Sales of equipment and merchandise and other revenuesThis category principally includes our revenues from the following sources: (i) the sale of new equipment, (ii) the
sale of supplies and merchandise, (iii) repair services and the sale of parts for equipment owned by customers, and (iv) the operations of our subsidiary that develops and markets software for use by equipment rental companies in managing and
operating multiple branch locations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our cost of
operations consists primarily of: (i) depreciation costs relating to the rental equipment that we own and lease payments for the rental equipment that we hold under operating leases, (ii) the cost of repairing and maintaining rental equipment, (iii)
the cost of the items that we sell including new and used equipment and related parts, merchandise and supplies and (iv) personnel costs, occupancy costs and supply costs.



We record rental equipment expenditures at cost and depreciate equipment using the straight-line method over the estimated
useful life (which ranges from two to ten years), after giving effect to an estimated salvage value of 0% to 10% of cost.



Selling, general and administrative expenses primarily include sales commissions, bad debt expense, advertising and marketing expenses, management
salaries, and clerical and administrative overhead.



Non-rental
depreciation and amortization includes (i) depreciation expense associated with equipment that is not offered for rent (such as vehicles, computers and office equipment) and amortization expense associated with leasehold improvements, (ii) the
amortization of deferred financing costs and (iii) the amortization of other intangible assets. Our other intangible assets consist of non-compete agreements. As described below, effective January 1, 2002, we no longer amortize goodwill.



We completed acquisitions in each of 2000, 2001 and 2002. See Note 3 to
the Notes to our Consolidated Financial Statements included elsewhere in this Report. In view of the fact that our operating results for these years were affected by acquisitions, we believe that our results for these periods are not directly
comparable.



Change in Accounting Treatment for Goodwill and Other
Intangible Assets



Effective January 1, 2002, we adopted
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets issued by the Financial Accountants Standards Board (FASB). Under this standard, our goodwill, which we previously
amortized over 40 years, is no longer amortized. We amortized approximately $58.4 million of goodwill in 2001. Our approximately $17.0 million of other intangible assets will continue to be amortized over their estimated useful lives. Under the new
accounting standard, we are required to periodically review our goodwill for impairment. In general, this means that we must determine whether the fair value of the goodwill, calculated in accordance with applicable accounting standards, is at least
equal to the recorded value shown on our balance sheet. If the fair value of the goodwill is less than the recorded value, we are required to write off the excess goodwill as an expense.



We completed our initial impairment analysis in the first quarter of 2002 and recorded a non-cash charge of approximately
$348.9 million ($288.3 million, net of tax). We completed a subsequent impairment analysis in the fourth quarter of 2002 and recorded an additional non-cash impairment charge of approximately



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$247.9 million ($198.8 million, net of tax). The first impairment charge, net of tax benefit, was recorded on our statement of operations as a
Cumulative Effect of Change in Accounting Principle. This charge appears below the operating income line and, accordingly, does not impact operating income. The second impairment charge was recorded on our statement of operations as
goodwill impairment. This charge appears above the operating income line and, accordingly, does impact operating income. Our stockholders equity was reduced by the amount of both charges.



We will be required to review our goodwill for further impairment at least
annually. Any future goodwill impairment charge would be recorded on our statement of operations as goodwill impairment and would reduce operating income.



We test for goodwill impairment on a branch-by-branch basis rather than on an aggregate basis. This means that a goodwill
write-off is required even if only one or a limited number of our branches has impairment and even if there is no impairment for all our branches on an aggregate basis. Factors that may cause future impairment at a particular branch, in addition to
macroeconomic factors that affect all our branches, include changes in local demand and local competitive conditions. The fact that we test for impairment on a branch-by-branch basis increases the likelihood that we will be required to take
additional non-cash goodwill write-offs in the future, although we cannot quantify at this time the magnitude of any future write-offs.



Critical Accounting Policies



We prepare our financial statements in accordance with accounting principles generally accepted in the United States. A summary of our significant
accounting policies is contained in Note 2 to the Notes to our Consolidated Financial Statements included elsewhere in this Report. In applying many accounting principles, we need to make assumptions, estimates and/or judgments. These assumptions,
estimates and judgments are often subjective and may change based on changing circumstances or changes in our analysis. Material changes in these assumptions, estimates and judgments have the potential to materially alter our results of operations.
We have identified below those of our accounting policies that we believe could potentially produce materially different results were we to change underlying assumptions, estimates and judgments.



Allowance for Doubtful Accounts.    We maintain
allowances for doubtful accounts. These allowances reflect our estimate of the amount of our receivables that we will be unable to collect. Our estimate could require change based on changing circumstances, including changes in the economy or in the
particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowance.



Useful Lives of Rental Equipment and Property and Equipment.    We depreciate rental equipment and property and equipment over
their estimated useful lives, after giving effect to an estimated salvage value of 0% to 10% of cost. The useful life of an asset is determined based on our estimate of the period the asset will generate revenues, and the salvage value is determined
based on our estimate of the minimum value we could realize from the asset after such period. We may be required to change these estimates based on changes in our industry or other changing circumstances. If these estimates change in the future, we
may be required to recognize increased or decreased depreciation expense for these assets.



Impairment of Goodwill.    As described above, we must periodically determine whether the fair value of our goodwill is at least equal to the recorded value shown on our balance sheet. See
Change in Accounting Treatment for Goodwill and Other Intangible Assets. We must make estimates and assumptions in evaluating the fair value of goodwill. We may be required to change these estimates and assumptions based on changes
in economic conditions, changes in our business prospects or other changing circumstances. If these estimates change in the future, we may be required to record additional impairment charges for goodwill.



Impairment of Long-Lived Assets.    We review the
valuation of our long-lived assets on an ongoing basis and assess the carrying value of such assets if facts and circumstances suggest they may be impaired. If this



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review indicates that the carrying value of these assets may not be recoverable, then the carrying value is reduced to its estimated fair value. The
determination of recoverability is based upon a nondiscounted cash flow analysis over the assets remaining useful life. We must make estimates and assumptions when applying the nondiscounted cash flow analysis. These estimates and assumptions
may prove to be inaccurate due to factors such as changes in economic conditions, changes in our business prospects or other changing circumstances. If these estimates change in the future, we may be required to recognize write-downs on our
long-lived assets.



Restructuring.    During 2002 and 2001, we recorded reserves in connection with the restructuring plans described below. These reserves include estimates pertaining to workforce reduction costs and costs of
vacating facilities and related settlements of contractual obligations. Although we do not anticipate significant changes, the actual costs may differ from these estimates and we may be required to record additional expense not previously recorded.



Restructuring Plans in 2001 and 2002



We adopted a restructuring plan in April 2001 and a second restructuring
plan in October 2002 as described below. These plans were adopted in response to adverse changes in economic conditions and in branch performance in certain of our markets. In connection with these plans, we recorded a restructuring charge of $28.9
million in 2001 (including a non-cash component of approximately $10.9 million) and $28.3 million in the fourth quarter of 2002 (including a non-cash component of approximately $2.5 million).



The 2001 plan involved the following principal elements: (i) 31
underperforming branches and five administrative offices were closed or consolidated with other locations, (ii) the reduction of our workforce by 489 through the termination of branch and administrative personnel, and (iii) certain information
technology hardware and software was no longer used.



The 2002
plan involved the following key elements: (i) 42 underperforming branches and five administrative offices will be closed or consolidated with other locations (including 26 closed or consolidated as of December 31, 2002); (ii) our workforce will be
reduced by 412 (including 232 terminated as of December 31, 2002), and (iii) a certain information technology project was abandoned. We expect to close or consolidate the remainder of the branches and complete the workforce reduction during 2003.



The aggregate annual revenues from the 42 branches that are
being eliminated as part of the 2002 restructuring amounted to approximately $80 million. We estimate that we will retain a substantial portion of these revenues because we expect to: (i) redeploy most of the rental equipment of the eliminated
branches to other branches that we project will be able to use this equipment to increase revenues and (ii) shift a portion of the customer base of the eliminated branches to other locations. We cannot, however, be certain that redeployed equipment
will generate increased revenues in line with our projections or that we will not lose more customers than we expect. Assuming that the retained revenues are in line with our estimate, we project that the net savings from the 2002 restructuring will
increase our annual operating income by about $20 million.



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The table below provides certain information concerning our restructuring charges. For additional
information, see Note 5 to the Notes to our Consolidated Financial Statements included elsewhere herein.



|Components of Restructuring Charge |  | Balance December 31, 2001(1) |       | Amount of 2002 Charge |   | Activity in 2002(2) |  | BalanceDecember 31, 2002(3)
|---------------------------------- |  | ---------------------------- | ----- | --------------------- | - | ------------------- |  | ---------------------------
|                                   |  | (in thousands)              
|Costs to vacate facilities(4)      |  | $                            | 3,538 |                       | $ | 24,569              |  | $                          
|Workforce reduction costs(5)       |  |                              | 2,055 |                       |   | 2,776               |  |                            
|Information technology costs(6)    |  |                              | 1,417 |                       |   | 917                 |  |                            
|                                   |  |                              |       |                       |   |                     |  |                            
|Total                              |  | $                            | 7,010 |                       | $ | 28,262              |  | $                          
|                                   |  |                              |       |                       |   |                     |  |                            

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|(1) |  | Represents the cash component of the 2001 charge that had not been paid as of December 31, 2001.
|--- |  | ------------------------------------------------------------------------------------------------

|(2) |  | Represents (i) the non-cash component of the 2002 charge that relates to the elements of the 2002 restructuring plan that were implemented through the end of 2002 and (ii) the cash
components of the 2001 and 2002 charges that were paid in 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Represents (i) the non-cash component of the 2002 charge that relates to the elements of the 2002 restructuring plan that will be implemented after 2002 and (ii) the cash components
of the 2001 and 2002 charges that were not paid as of December 31, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | These costs primarily represent (i) payment of obligations under leases offset by estimated sublease opportunities, (ii) the write-off of capital improvements made to such
facilities and (iii) the write-off of related goodwill (only in 2001).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | These costs primarily represent severance.
|--- |  | ------------------------------------------

|(6) |  | These costs primarily represent the abandonment of certain information technology projects and the payment of obligations under equipment leases relating to such projects.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As indicated in table above, the aggregate
balance of the 2001 and 2002 charges was $27.1 million as of December 31, 2002. We estimate that approximately $13.4 million of the remaining 2001 and 2002 charges will be incurred by December 31, 2003 (comprised of approximately $12.4 million
of the cash component and approximately $1.0 million of the non-cash component) and approximately $13.7 million in future periods. These payments will not affect our future earnings because the charges associated with these payments have already
been recorded in our 2002 or 2001 results. We expect to make these payments with cash from our operations.



Debt Refinancings and Extraordinary Item



We refinanced approximately $199.4 million of indebtedness in December 2002. In connection with this transaction, we recorded a $1.6 million charge ($0.9 million, net of tax) for the write-off of deferred financing
fees attributable to the debt that was refinanced. For additional information concerning this transaction, see Liquidity and Capital ResourcesFinancing Transaction in 2002.



We refinanced an aggregate of $1,695.7 million of indebtedness and other
obligations in April 2001. In connection with this transaction, we recorded the following charges: (i) a pre-tax extraordinary charge of $18.1 million ($11.3 million, net of tax) that relates to the refinancing of indebtedness and primarily reflects
the write-off of deferred financing fees attributable to the debt that was refinanced and (ii) a pre-tax charge of $7.8 million ($5.2 million, net of tax) that is recorded in other (income) expense, net, and relates to the refinancing of a synthetic
lease.



Results of Operations



Overview of 2002 Results



Our results in 2002 were hurt by the $505.4 million of after-tax charges for
non-cash goodwill write-offs and restructuring and refinancing costs described above. These charges are the reason that we ended the year with a net loss of $397.8 million.



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If you exclude the charges described above in both 2002 and 2001, then we would have had income, as
adjusted, of $107.6 million in 2002, representing a 26.8% decrease from $147.0 million in 2001. The table below reconciles our net income (loss) to our income, as adjusted, to exclude specified charges. We provide this as adjusted data because we
believe that an analysis of such data, in conjunction with an analysis of the GAAP data, may be useful to investors in understanding our 2002 results.



|                                                                                    |  | 2002           |          |   | 2001
|----------------------------------------------------------------------------------- |  | -------------- | -------- | - | ----
|                                                                                    |  | (in thousands)
|Net income (loss)                                                                   |  | $              | (397,825 | ) |     
|Plus:                                                                               |  |                |          |   |     
|Restructuring charge, net of tax                                                    |  |                | 17,343   |   |     
|Goodwill impairment charge, net of tax                                              |  |                | 198,826  |   |     
|Refinancing costs, net of tax                                                       |  |                | 932      |   |     
|Extraordinary item, net of tax                                                      |  |                |          |   |     
|Cumulative effect of accounting change (related to goodwill impairment), net of tax |  |                | 288,339  |   |     
|                                                                                    |  |                |          |   |     
|Income, as adjusted                                                                 |  | $              | 107,615  |   |     
|                                                                                    |  |                |          |   |     



Private
non-residential construction declined by 16% in 2002, according to Department of Commerce data. This reduced demand for our equipment and put downward pressure on rental rates and on used equipment prices. Our rental rates were down 4.8% and 5.2%
for full-year and fourth-quarter 2002, respectively, on a year-over-year basis. The decrease in rental rates was partially offset by a 2.1% increase in the volume of rental transactions at locations open more than one year and by revenues
attributable to new locations, partially offset by locations closed or consolidated. The net effect was that our total revenues for the year decreased 2.2% to $2,821.0 million and our same-store rental revenues decreased 2.7%.



The decrease in rental rates and used equipment prices and, to a lesser
extent, increases in certain operating costs hurt our gross profit margins. Our gross profit margin from rentals decreased to 32.1% in 2002 from 37.9% in 2001, and our gross profit margin from sales of used rental equipment decreased to 33.7% in
2002 from 39.7% in 2001. On an overall basis our gross profit margin declined to 31.4% in 2002 from 36.0% in 2001.



Our lower revenues and gross profit margins in 2002 are the principal factors that caused income, as adjusted, to decrease to $107.6 in 2002 from $147.0
in 2001. These negative factors were partially offset by the elimination of goodwill amortization in 2002 as described above, which added approximately $36.6 million to our 2002 income, as adjusted.



While income was down in 2002, we maintained ample liquidity. We generated
cash flow of $694.1 million, which included $517.9 million from operations and the balance from the sale of used rental equipment. We used $492.3 million of this cash to invest in our rental fleet. At year-end, we had $45.3 million drawn under our
revolving credit facility, leaving us with $493.1 million of available borrowing capacity on this facility after taking into account letters of credit.



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Additional Information



Years Ended December 31, 2002 and 2001



Revenues.    We had total revenues of $2,821.0 million in 2002, representing a decrease of 2.2% from total revenues of $2,886.6
million in 2001. The different components of our revenues are discussed below:



1.Equipment Rentals.    Our revenues from equipment rentals were $2,154.7 million in 2002, representing a decrease of 2.6% from $2,212.9 million in 2001. These revenues accounted
for 76.4% of our total revenues in 2002 compared with 76.7% of our total revenues in 2001. The decrease in rental revenues principally reflected the following:



| |  |  | Our rental revenues from locations open more than one year, or same store rental revenues, decreased by approximately 2.7%. This decrease reflected a decrease in rental rates, which
was partially offset by a 2.1% increase in the volume of rental transactions. The decrease in rental rates was 4.8% for full year 2002 and 5.2% for the fourth quarter of 2002 on a year-over-year basis. The decrease in rental rates principally
reflected continued weakness in non-residential construction spending.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The decrease in same store rental revenues was partially offset by additional revenues attributable to new locations that we acquired or opened. These additional revenues, net of
revenues lost due to locations sold or closed, caused our overall decline in rental revenues to be 0.1 percentage points less than it would otherwise have been.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2.Sales of Rental Equipment.    Our revenues from the sale of rental equipment were
$176.2 million in 2002, representing an increase of 19.8% from $147.1 million in 2001. These revenues accounted for 6.2% of our total revenues in 2002 compared with 5.1% of our total revenues in 2001. The increase in these revenues in 2002 reflected
an increase in volume partially offset by weaker pricing.



3.Sales of Equipment and Merchandise and Other Revenues.    Our revenues from sale of equipment and merchandise and other revenues were $490.1 million in 2002, representing a decrease of
6.9% from $526.6 million in 2001. These revenues accounted for 17.4% of our total revenues in 2002 compared with 18.2% of our total revenues in 2001. The decrease in these revenues in 2002 principally reflected a decrease in the volume of new
equipment sales.



Gross
Profit.    Gross profit decreased to $886.3 million in 2002 from $1,039.5 million in 2001. This decrease reflected the decrease in total revenues discussed above, as well as the decrease in gross profit margin described below
from equipment rental and the sale of rental equipment. Information concerning our gross profit margin by source of revenue is set forth below:



1.Equipment Rentals.    Our gross profit margin from equipment rental revenues was 32.1% in 2002 and 37.9% in 2001.
The decrease in 2002 principally reflected the decrease in rental rates described above and, to a lesser extent, higher costs related to employee benefits, fleet maintenance and delivery, and facilities.



2.Sales of Rental Equipment.    Our
gross profit margin from sales of rental equipment was 33.7% in 2002 and 39.7% in 2001. The decrease in 2002 primarily reflected continued price weakness in the used equipment market.



3.Sales of Equipment and Merchandise and Other Revenues.    Our gross profit margin
from sales of equipment and merchandise and other revenues was 27.6% in 2002 and 27.1% in 2001. The increase in the gross profit margin in 2002 primarily reflected better margins for our service revenue.



Selling, General and Administrative
Expenses.    Selling, general and administrative expenses (SG&A) were $438.9 million, or 15.6% of total revenues, during 2002 and $441.8 million, or 15.3% of total revenues,



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during 2001. Our bad debt expense, which is a component of SG&A, was approximately $9.5 million higher in 2002 than in 2001, primarily reflecting an
increase in our allowance for doubtful accounts. Without this increase in bad debt expense, our SG&A as a percentage of revenues would have decreased to 15.2% of total revenues in 2002 from 15.6% in 2001. This decrease in SG&A, excluding the
change in bad debt expense, primarily reflected our ongoing efforts at cutting costs, including reducing the number of administrative personnel, reducing discretionary expenditures and consolidating certain credit and collection facilities.



Goodwill
Impairment.    We recorded a goodwill impairment charge of $247.9 million in the fourth quarter of 2002. See Change in Accounting Treatment for Goodwill and Other Intangible Assets for
additional information.



Restructuring
Charge.    We recorded a restructuring charge of $28.3 million in 2002 and $28.9 million in 2001. See Restructuring Plans in 2002 and 2001 for additional information.



Non-rental Depreciation and
Amortization.    Non-rental depreciation and amortization was $59.3 million, or 2.1% of total revenues, in 2002 and $106.8 million, or 3.7% of total revenues, in 2001. This decrease was primarily attributable to a new
accounting standard (discussed above under Change in Accounting Treatment For Goodwill and Other Intangible Assets) which eliminated the amortization of goodwill effective January 1, 2002. If goodwill amortization had been
eliminated in 2001, then non-rental depreciation and amortization would have been $48.5 million, or 1.7% of total revenues, in 2001. The increase in non-rental depreciation and amortization in 2002 as compared to the amount in 2001, after
eliminating goodwill amortization, primarily reflected an increase in our non-rental assets such as facilities and transportation equipment.



Operating Income.    We recorded operating income of $111.9 million in 2002 compared with operating income of $462.0 million in
2001. The principal reason for the decrease in 2002 was the $247.9 million non-cash goodwill impairment charge that we recorded in 2002. However, after excluding that charge our operating income was still lower by approximately $102.2 million from
the 2001 level. The principal reason for this decrease was the declines in revenues and gross profit described above. The adverse effects of these factors were partially offset by the decrease in non-rental depreciation and amortization described
above.



Interest
Expense.    Interest expense decreased to $196.0 million in 2002 from $221.6 million in 2001. This decrease primarily reflected lower interest rates on our variable rate debt.



Preferred Dividends of a Subsidiary
Trust.    Preferred dividends of a subsidiary trust were $18.2 million during 2002 as compared to $19.5 million during 2001. The decrease in 2002 reflects our repurchase of a portion of our outstanding trust preferred
securities.



Other (Income)
Expense.    Other income was $0.9 million in 2002 compared with other expense of $6.4 million in 2001. The other income in 2002 was primarily attributable to the favorable settlement of a lawsuit for net proceeds of $4.0
million, partially offset by other charges including the write-off of $1.6 million of deferred financing fees as described above. The other expense in 2001 was primarily attributable to a $7.8 million charge relating to the refinancing of a
synthetic lease as described above. See Debt Refinancings and Extraordinary Item.



Income Taxes.    Income taxes were $8.1 million in 2002 compared with $92.0 million in 2001. Although we had a loss in 2002, we
recorded income tax expense because a portion of our $247.9 million goodwill impairment charge was not deductible for federal income tax purposes. If you exclude the goodwill impairment charge in calculating our income, then our effective tax rate
in 2002 would have been 39.0% compared with 42.9% in 2001. The decrease in such effective rate in 2002 reflects the elimination of goodwill amortization in 2002 and the non-deductibility for income tax purposes of certain costs included in the 2001
restructuring charge.



Income (Loss) Before Extraordinary
Item and Cumulative Effect of Change in Accounting Principle.    We had a loss before extraordinary item and cumulative effect of change in accounting principle of $109.5 million in



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2002 compared with income before extraordinary item of $122.6 million in 2001. The loss in 2002 principally reflects the decrease in operating income
described above.



Cumulative Effect of Change in Accounting
Principle. As described under Change in Accounting Treatment for Goodwill and Other Intangible Assets, we recorded an amount of $288.3 million, net of tax, for impairment of goodwill as part of our transitional impairment test
upon the adoption of SFAS No. 142.



Years Ended December
31, 2001 and 2000



Revenues.    We had total revenues of $2,886.6 million in 2001, representing a decrease of 1.1% from total revenues of $2,918.9 million in 2000. The different components of our revenues are discussed below:



1.Equipment
Rentals.    Our revenues from equipment rentals were $2,212.9 million 2001, representing an increase of 7.6% from $2,056.7 million in 2000. These revenues accounted for 76.7% of our total revenues in 2001 compared with 70.5%
of our total revenues in 2000. The increase in rental revenues reflected the following:



| |  |  | We increased our revenues at locations open more than one year. This increase accounted for approximately 5.6 percentage points of the total increase of 7.6%. The increase in
revenues at these locations was due to an increase in the volume of transactions, which was more than sufficient to offset a decline in rental rates. Rental rates for 2001 were down 0.8% compared to 2000.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We also had additional revenues because we added new rental locations through start-ups and acquisitions. These additional revenues, net of revenues lost due to locations sold or
closed, accounted for approximately 2.0 percentage points of the total increase of 7.6%.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2.Sales of Rental Equipment.    Our revenues from the sale of rental equipment were $147.1 million in 2001,
representing a decrease of 57.7% from $347.7 million in 2000. These revenues accounted for 5.1% of our total revenues in 2001 compared with 11.9% of our total revenues in 2000. This decrease principally reflected our decision to slow investment in
new equipment and hold existing equipment longer during a recessionary environment.



3.Sales of Equipment and Merchandise and Other Revenues.    Our revenues from sale of equipment and merchandise and other revenues were $526.6 million in 2001,
representing an increase of 2.4% from $514.5 million in 2000. These revenues accounted for 18.2% of our total revenues in 2001 compared with 17.6% of our total revenues in 2000. The 2.4% increase in sales of equipment and merchandise and other
revenues was attributable to the increase in the volume of transactions.



Gross Profit.    Gross profit decreased to $1,039.5 million in 2001 from $1,088.6 million in 2000. This decrease reflected the decrease in total revenues discussed above, as well as the
decrease in gross profit margin described below from equipment rental and the sales of rental equipment. Information concerning our gross profit margin by source of revenue is set forth below:



1.Equipment Rentals.    Our gross
profit margin from equipment rental revenues was 37.9% in 2001 and 39.9% in 2000. The decrease in 2001 principally reflected: (i) an increase in our cost of equipment rental, which was principally attributable to an increase in the amount of
equipment that we hold under operating leases rather than owning, and (ii) the decrease in rental rates described above.



2.Sales of Rental Equipment.    Our gross profit margin from the sales of rental equipment was 39.7% in 2001 and
40.1% in 2000. This decrease was primarily the result of modest price declines in some geographic areas.



3.Sales of Equipment and Merchandise and Other Revenues.    Our gross profit margin from sales of equipment
and merchandise and other revenues was 27.1% in 2001 and 24.9% in 2000. The increase in the gross profit margin in 2001 primarily reflected: (i) lower costs resulting from our ongoing efforts to consolidate



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our suppliers and further capitalize on our purchasing power and (ii) a shift in mix which resulted in more of our sales being attributable to higher margin
areas such as providing services and merchandise sales.



Selling, General and Administrative Expenses.    SG&A was $441.8 million, or 15.3% of total revenues, during 2001 and $454.3 million, or 15.6% of total revenues, during 2000. The decrease in SG&A in 2001
primarily reflected cost-cutting measures that we have taken, including reducing the number of administrative personnel, reducing discretionary expenditures and consolidating certain credit and collection facilities.



Restructuring Charge.    We recorded
a restructuring charge of $28.9 million in 2001. See Restructuring Plans in 2001 and 2002 for additional information.



Non-rental Depreciation and Amortization.    Non-rental depreciation and amortization was $106.8 million, or 3.7% of total
revenues, in 2001 and $86.3 million, or 3.0% of total revenues, in 2000. The increase in the dollar amount of non-rental depreciation and amortization in 2001 primarily reflected (i) the amortization of goodwill attributable to acquisitions
completed during 2000 and (ii) additional non-rental vehicles which generally have shorter useful lives.



Operating Income.    We recorded operating income of $462.0 million in 2001 compared with operating income of $547.9 million in
2000. The principal reason for the decrease in 2001 was the $28.9 million restructuring charge and the decrease in revenues from the sale of rental equipment described above.



Interest Expense.    Interest expense decreased to $221.6 million in 2001 from $228.8 million in
2000. This decrease primarily reflected lower interest rates on our variable rate debt.



Preferred Dividends of a Subsidiary Trust.    During 2001 and 2000, preferred dividends of a subsidiary trust were $19.5 million.



Other (Income) Expense.    Other expense was $6.4
million in 2001 compared with other income of $1.8 million in 2000. The increase in other expense in 2001 was primarily attributable to the $7.8 million charge we incurred relating to the refinancing costs of a synthetic lease as described under
Debt Refinancings and Extraordinary Item.



Income Taxes.    Income taxes were $92.0 million, or an effective rate of 42.9%, in 2001 compared to $125.1 million, or an effective rate of 41.5%, in 2000. The increase in the effective rate in 2001 was primarily
attributable to the non-deductibility for income tax purposes of certain costs included in the restructuring charge.



Income Before Extraordinary Item.    We had income before extraordinary item of $122.6 million in 2001 compared with income
before extraordinary item of $176.4 million in 2000. The decrease in 2001 principally reflected the decrease in operating income and the $6.4 million of other expense described above.



Extraordinary Item.    We recorded an extraordinary charge of $18.1 million ($11.3 million, net
of tax) in 2001. See Debt Refinancings and Extraordinary Item for additional information.



Liquidity and Capital Resources



Financing Transaction in 2002



In
December 2002, we sold $210.0 million aggregate principal amount of our 10 3⁄4% Senior Notes Due 2008. The gross proceeds to us from the sale of the notes were approximately $203.8 million and the net proceeds were approximately $199.4 million
(after deducting the initial purchasers discount and offering expenses). These new notes are unsecured and were issued by United Rentals (North America), Inc. (URI), a wholly owned subsidiary of United Rentals, Inc.
(Holdings) and are guaranteed by Holdings and, subject to limited exceptions, our domestic subsidiaries. We used the net proceeds to (i) permanently repay approximately



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$99.7 million of outstanding indebtedness under our existing term loan and (ii) repay approximately $99.7 million of outstanding borrowings under our
revolving credit facility. For additional information concerning this transaction, see note 9 to our consolidated financial statements included elsewhere in this report.



In connection with the offering of the notes, we amended the agreement governing our existing term loan and revolving credit
facility to, among other things, (i) provide us with greater flexibility in maintaining or satisfying certain financial ratios and tests required thereunder through the end of 2004 and (ii) reduce the maximum borrowing available under our revolving
credit facility from $750 million to $650 million.



Certain Balance Sheet
Changes



The decrease in goodwill at December 31, 2002
as compared to December 31, 2001 was primarily attributable to the write-offs of goodwill as a result of the adoption of SFAS No. 142 as further described under Change in Accounting Treatment for Goodwill and Other Intangible
Assets. The decrease in deferred taxes at December 31, 2002 as compared to December 31, 2001 was primarily attributable to the tax effects of the goodwill write-off and the exercise of stock options in 2002. The decrease in retained earnings
and stockholders equity at December 31, 2002 as compared to December 31, 2001, reflects our net loss in 2002. The increase in additional paid-in capital at December 31, 2002 as compared to December 31, 2001 was primarily attributable to: (i)
the issuance of additional shares upon the exercise of stock options and restricted stock, partially offset by common stock repurchased and retired, and (ii) the repurchase of 1,469,000 shares of our Company-obligated mandatorily redeemable
convertible preferred securities at a price less than their liquidation preference.



Sources and Uses of Cash



During 2002,
we (i) generated cash from operations of $517.9 million, (ii) generated cash from the sale of rental equipment of $176.2 million, (iii) received cash of $63.8 million from the issuance of common stock for the exercise of stock options and (iv)
obtained cash from borrowings, net of repayments, of approximately $16.6 million. We used cash during this period principally to (i) pay consideration for acquisitions ($172.6 million), (ii) purchase rental equipment ($492.3 million), (iii) purchase
other property and equipment ($38.6 million), (iv) purchase and retire shares of our outstanding common stock ($26.7 million), and (v) repurchase and retire shares of our convertible preferred securities ($38.1 million).



Certain Information Concerning Our Credit Facility



Our revolving credit facility enables United Rentals (North America), Inc.
(URI), our wholly owned subsidiary, to borrow up to $650 million on a revolving basis and enables one of URIs Canadian subsidiaries to borrow up to $50 million (provided that the aggregate borrowings of URI and the Canadian
subsidiary may not exceed $650 million). Up to $175 million of the revolving credit facility is available in the form of letters of credit. The revolving credit facility will mature and terminate on October 20, 2006.



As of December 31, 2002, borrowings under the revolving credit facility by
URI accrue interest, at our option, at either (A) the ABR Rate (which is equal to the greater of (i) the Federal Funds Rate plus 0.5% or (ii) the Chase Manhattan Banks prime rate) plus a margin of 1.50% or (B) an adjusted LIBOR rate plus a
margin of 2.50%. The above interest rate margins are adjusted quarterly based on our financial leverage ratio, up to maximum margins of 1.75% and 2.75%, for revolving loans based on the ABR rate and the adjusted LIBOR rate, respectively, and down to
minimum margins of 0.75% and 1.75%, for revolving loans based on the ABR rate and the adjusted LIBOR rate, respectively. If at any time an event of default exists, the interest rate applicable to each loan will increase by 2% per annum. We are also
required to pay the lenders a commitment fee equal to 0.5% per annum in respect of undrawn commitments under the revolving credit facility.



Certain Information Concerning Receivables Securitization



We have an accounts receivable securitization facility under which one of our subsidiaries can borrow up to $250 million against a collateral pool of
accounts receivable. The borrowings under the facility and the



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receivables in the collateral pool are included in the liabilities and assets, respectively, reflected on our consolidated balance sheet. Key terms of this
facility include:



| |  |  | borrowings may be made only to the extent that the face amount of the receivables in the collateral pool exceeds the outstanding loans by a specified amount;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the facility is structured so that the receivables in the collateral pool are the lenders only source of repayment;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | prior to expiration or early termination of the facility, amounts collected on the receivables may, subject to certain conditions, be retained by the borrower, provided that the
remaining receivables in the collateral pool are sufficient to secure the then outstanding borrowings; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | after expiration or early termination of the facility, we will repay the borrowings
| | - |  | -----------------------------------------------------------------------------------



As of December 31, 2002, (i) the outstanding borrowings under the facility were approximately $160.5 million and (ii) the
aggregate face amount of the receivables in the collateral pool was approximately $346.8 million. The agreement governing this facility, which was amended in June 2001, contemplates that the term of the facility may extend for up to three years from
the date of the amended facility. However, on each anniversary of such date, the consent of the lender is required for the facility to renew for the next year. The next anniversary date is in June 2003. We plan to seek the lenders approval for
renewal or, alternatively, seek to obtain a new facility. The lenders under this facility may, at their option, terminate the facility in the event that our long-term senior secured debt securities are at any time rated B+ or below by
Standard & Poors Rating Services or B1 or below by Moodys Investor Service.



Cash Requirements Related to Operations



Our principal existing sources of cash are cash generated from operations and from the sale of rental equipment and borrowings available under our revolving credit facility. As of March 11, 2003, we had $459.1 million
of borrowing capacity available under our $650 million revolving credit facility (reflecting outstanding loans of approximately $48.1 million and outstanding letters of credit in the amount of approximately $142.8 million). We believe that our
existing sources of cash will be sufficient to support our existing operations over the next 12 months.



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, (iv) debt service, and (v) costs relating to our restructuring plans. We plan to fund such cash requirements
relating to our existing operations from our existing sources of cash described above. In addition, we plan to seek additional financing through the securitization of some of our equipment. For information on the scheduled principal payments coming
due on our outstanding debt and on the payments coming due under our existing operating leases, see Certain Information Concerning Contractual Obligations.



The amount of our future capital expenditures will depend on a number of factors, including general economic conditions and
growth prospects. Based on current conditions, we estimate that capital expenditures for the year 2003 will be approximately $350 million for our existing operations. These expenditures are comprised of approximately $300 million of expenditures to
replace rental equipment sold and $50 million of expenditures for the purchase of non-rental equipment. We expect that we will fund such expenditures from proceeds from the sale of used equipment, cash generated from operations and, if required,
borrowings available under our revolving credit facility.



We
plan to increase the weighted average age of our fleet, which is approximately 36 months, to 42 months by the end of 2003. Over the longer term we may further increase the average age of our fleet to about 45 months. This plan reflects our
belief that the optimum age of our fleet is somewhat higher than where it is today. In estimating the optimum age of our fleet, we have taken into account a number of factors, including our current estimates regarding the relationship between age
and reliability and maintenance costs and the capital



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expenditures required to maintain the fleet at a particular age. We will continue to evaluate these factors and, if our estimates prove inaccurate, may
modify our plan.



While emphasizing internal growth, we may
also continue to expand through a disciplined acquisition program. We will consider potential transactions of varying size and may, on a selective basis, pursue acquisition or consolidation opportunities involving other public companies or large
privately-held companies. We expect to pay for future acquisitions using cash, capital stock, notes and/or assumption of indebtedness. To the extent that our existing sources of cash described above are not sufficient to fund such future
acquisitions, we will require additional debt or equity financing and, consequently, our indebtedness may increase or the ownership of existing stockholders may be diluted as we implement our growth strategy.



Certain Information Concerning Contractual Obligations



The table below provides certain information concerning the payments coming
due under certain categories of our existing contractual obligations:



|                                  |  | 2003           |         |     | 2004 |   | 2005    |  | 2006 |         | 2007 |   | Thereafter |  | Total (2)
|--------------------------------- |  | -------------- | ------- | --- | ---- | - | ------- |  | ---- | ------- | ---- | - | ---------- |  | ---------
|                                  |  | (in thousands)
|Debt excluding capital leases (1) |  | $              | 163,300 | (2) |      | $ | 6,904   |  | $    | 220     |      | $ | 152,802    |  | $        
|Capital leases (1)                |  |                | 20,119  |     |      |   | 19,650  |  |      | 5,848   |      |   |            |  |          
|Operating leases(1):              |  |                |         |     |      |   |         |  |      |         |      |   |            |  |          
|Real estate                       |  |                | 68,068  |     |      |   | 63,613  |  |      | 55,650  |      |   | 50,574     |  |          
|Rental equipment                  |  |                | 110,642 |     |      |   | 88,189  |  |      | 82,325  |      |   | 246,719    |  |          
|Other equipment                   |  |                | 21,873  |     |      |   | 15,847  |  |      | 5,239   |      |   | 2,063      |  |          
|Purchase obligations              |  |                |         |     |      |   |         |  |      |         |      |   |            |  |          
|Other long-term liabilities       |  |                |         |     |      |   |         |  |      |         |      |   |            |  |          
|                                  |  |                |         |     |      |   |         |  |      |         |      |   |            |  |          
|Total                             |  | $              | 384,002 |     |      | $ | 194,203 |  | $    | 149,282 |      | $ | 452,158    |  | $        
|                                  |  |                |         |     |      |   |         |  |      |         |      |   |            |  |          

---

|(1) |  | The payments due with respect to a period represent (i) in the case of debt and capital leases, the scheduled principal payments due in such period, and (ii) in the case of
operating leases, the minimum lease payments due in such period under non-cancelable operating leases.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes $160.5 million that is payable should our accounts receivable securitization facility terminate in 2003. As described under Certain Information Concerning
Receivables Securitization, subject to the lenders consent being obtained, the term of this facility may be extended. Extension of the facility in 2003 would reduce the debt payable in 2003 from $163.3 million to $2.8 million and
increase by a corresponding amount the debt payable in the year during which the extended facility terminates.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Certain Information Concerning Off-Balance Sheet Arrangements



Restricted Stock.    We have granted to employees other than executive officers and directors approximately 1,165,000 shares of
restricted stock that contain the following provisions. The shares vest in 2004, 2005 or 2006 or earlier upon a change in control of the Company, death, disability, retirement or certain terminations of employment, and are subject to forfeiture
prior to vesting on certain other terminations of employment, the violation of non-compete provisions and certain other events. The grants provide that we will pay to employees who vest in their restricted stock, and who sell their restricted stock
within five trading days after vesting, a maximum aggregate amount for all these employees of: (i) approximately $300,000 for each dollar by which the per share proceeds of these sales are less than $27.26 but more than $15.17; (ii) a maximum
aggregate amount for all these employees of approximately $500,000 for each dollar by which the per share proceeds of these sales



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are less than $15.17 but more than $9.18; and (iii) a maximum aggregate amount for all these employees of approximately $1,165,000 for each dollar by which
the per share proceeds of these sales are less than $9.18.



Operating Leases.    We lease real estate, rental equipment and non-rental equipment under operating leases as a regular business activity. As part of many of our 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. The use of these guarantees helps to lower our monthly operating lease payments. We believe that the projected residual values are reasonable
and, accordingly, that we are not likely to incur material obligations pursuant to such guarantees. However, we cannot be certain that the actual residual values will not turn out to be significantly below the projected values that we guaranteed.
Our maximum potential liability under these guarantees is $231.6 million, which represents the aggregate amount that we would be required to pay if the residual value was zero for all equipment subject to such guarantees. In conformity with
applicable accounting standards, this potential liability is not recorded on our balance sheet. For additional information concerning lease payment obligations under our operating leases, see Certain Information Concerning Contractual
Obligations and note 15 to our consolidated financial statements included elsewhere in this Report.



Certain Information Concerning Trust Preferred Securities



In August 1998, a subsidiary trust of United Rentals, Inc. sold six million shares of 61⁄2% Convertible Quarterly Income Preferred Securities
(Trust Preferred Securities) for aggregate consideration of $300 million. During 2002, we repurchased 1,469,000 of these shares for aggregate consideration of approximately $38.1 million, which represents a discount of approximately 48%
relative to the aggregate liquidation preference of approximately $73.5 million. In accordance with applicable accounting standards, the gain associated with these repurchase transactions is reflected in our earnings (loss) per share calculation,
but is not otherwise reflected on our statement of operations. The gain associated with these repurchase transactions caused the amount of our net loss per share in 2002 to be $0.47 less than it would have been had this gain not been included in our
earnings (loss) per share calculation. For additional information concerning our earnings (loss) per share calculation, see Note 14 to the Notes to Consolidated Financial Statements included elsewhere in this Report.



Relationship Between Holdings and URI



United Rentals, Inc. (Holdings) is principally a holding company
and primarily conducts its operations through its wholly owned subsidiary United Rentals (North America), Inc. (URI) and subsidiaries of URI. Holdings provides certain services to URI in connection with its operations. These services
principally include: (i) senior management services, (ii) finance related services and support, (iii) information technology systems and support, and (iv) acquisition related services. In addition, Holdings leases certain equipment and real property
that are made available for use by URI and its subsidiaries. URI has made, and expects to continue to make, certain payments to Holdings in respect of the services provided by Holdings to URI. The expenses relating to URIs payments to Holdings
are reflected on URIs financial statements as selling, general and administrative expenses. In addition, although not legally obligated to do so, URI has in the past, and expects that it will in the future, make distributions to Holdings to,
among other things, enable Holdings to pay dividends on the Trust Preferred Securities that were issued by a subsidiary trust of Holdings as described above.



The Trust Preferred Securities are the obligation of a subsidiary trust of Holdings and are not the obligation of URI. As a result, the dividends payable
on these securities are reflected as an expense on the consolidated financial statements of Holdings, but are not reflected as an expense on the consolidated financial statements of URI. This is the principal reason why the net income reported on
the consolidated financial statements of URI is higher than the net income reported on the consolidated financial statements of Holdings.



Fluctuations in Operating Results



We expect that our revenues and operating results may fluctuate from quarter to quarter or over the longer term. Certain of the general factors that may
cause such fluctuations are discussed under Factors that May Influence Future Results and Accuracy of Forward Looking StatementsFluctuations of Operating Results.



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Accounting For Certain Expenses Relating to Potential Acquisitions



In accordance with accounting principles generally accepted in the United
States, we capitalize certain direct out-of-pocket expenditures (such as legal and accounting fees) relating to potential or pending acquisitions. Indirect acquisition costs, such as executive salaries, general corporate overhead, public affairs and
other corporate services, are expensed as incurred. Our policy is to charge against earnings any capitalized expenditures relating to any potential or pending acquisition that we determine will not be consummated. There can be no assurance that in
future periods we will not be required to incur a charge against earnings in accordance with such policy, which charge, depending upon the magnitude thereof, could adversely affect our results of operations.



Seasonality



Our business is seasonal with demand for our rental equipment tending to be lower in the winter months. The seasonality of
our business is heightened because we offer for rent traffic control equipment. Branches that rent a significant amount of this type of equipment tend to generate most of their revenues and profits in the second and third quarters of the year, slow
down during the fourth quarter and operate at a loss during the first quarter.



Inflation



Although we cannot accurately
anticipate the effect of inflation on our operations, we believe that inflation has not had, and is not likely in the foreseeable future to have, a material impact on our results of operations.



Impact of Recently Issued Accounting Standards



We adopted the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002. This standard addresses financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, Intangible Assets. Under this standard, goodwill and other intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests on a reporting unit
level. For additional information, see -Change in Accounting Treatment For Goodwill and Other Intangible Assets. Other intangible assets are being amortized over their estimated useful lives.



In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This standard addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. We adopted this standard on January 1, 2002. The adoption of SFAS No. 144 did not have an impact on our consolidated financial position or results of operations.



In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. This standard rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, SFAS No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This standard also rescinds SFAS No. 44, Accounting for Intangible Assets of Motor Carriers. This standard amends SFAS No. 13, Accounting for
Leases, to eliminate an inconsistency related to the required accounting for sale-leaseback transactions and certain lease modifications. This standard also amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed conditions. We adopted this standard on January 1, 2003, and we will reclassify a pre-tax extraordinary loss of approximately $18.1 million recognized during the second
quarter of 2001 to operating income. The adoption of the remaining provisions of SFAS No. 145 did not have a material effect on our consolidated financial position or results of operations.



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In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. This standard addresses financial accounting and reporting for costs associated with exit or disposal activities and requires companies to recognize costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. This standard nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in
a Restructuring). This standard is effective for exit or disposal activities initiated after December 31, 2002.



In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This interpretation requires certain guarantees entered into after December 31, 2002 to be initially recognized and recorded at fair value and also requires new disclosures related to guarantees even if
the likelihood of a guarantor having to make payments under the guarantees is remote. We adopted this interpretation as of December 31, 2002 and such adoption did not have an impact on our consolidated financial position or results of operations.



In December 2002, the FASB issued SFAS No. 148,
Accounting for Stock-Based CompensationTransition and Disclosure. This standard provides alternative methods of transition to the fair value method of accounting for stock-based employee compensation under SFAS No. 123,
Accounting for Stock-Based Compensation, but does not require us to use the fair value method. This standard also amends certain disclosure requirements related to stock-based employee compensation. We adopted the disclosure portion of
this standard as of December 31, 2002 and such adoption is reflected in Note 2 to the Notes to our Consolidated Financial Statements.



Factors that May Influence Future Results and Accuracy of Forward-Looking Statements



Sensitivity to Changes in Construction and Industrial Activities



Our equipment is principally used in connection with construction and
industrial activities. Consequently, decreases in construction or industrial activity due to a recession or other reasons may lead to a decrease in the demand for our equipment or the prices that we can charge. Any such decrease could adversely
affect our revenues and operating results. For example, as discussed above, our 2002 revenues, pricing and operating results were adversely affected by a significant decline in non-residential construction activity.



We have identified below certain factors that may cause a further downturn in
construction and industrial activity, either temporarily or long-term:



| |  |  | a continuation or a worsening of the current recessionary environment;
| | - |  | ----------------------------------------------------------------------



| |  |  | an increase in interest rates;
| | - |  | ------------------------------



| |  |  | adverse weather conditions which may temporarily affect a particular region; or
| | - |  | -------------------------------------------------------------------------------



| |  |  | terrorism or hostilities involving the United States.
| | - |  | -----------------------------------------------------



In addition, demand for our equipment may not reach projected levels in the event that funding for highway and other construction projects under
government programs is reduced.



Fluctuations of Operating Results



We expect that our revenues and operating results may
fluctuate from quarter to quarter or over the longer term due to a number of factors. These factors include:



| |  |  | seasonal rental patterns of our customers, with rental activity tending to be lower in the winter;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | completion of acquisitions;
| | - |  | ---------------------------



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| |  |  | changes in the amount of revenue relating to renting traffic control equipment, since revenues from this equipment category tend to be more seasonal than the rest of our business;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the size of our rental fleet or in the rate at which we sell our used equipment;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | changes in demand for our equipment or the prices therefor due to changes in economic conditions, competition or other factors;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the interest rates applicable to our floating rate debt;
| | - |  | -------------------------------------------------------------------



| |  |  | increases in the cost of fuel due to the current military conflict or other factors;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | if we determine that a potential acquisition will not be consummated, the need to charge against earnings any expenditures relating to such transaction (such as financing commitment
fees, merger and acquisition advisory fees and professional fees) previously capitalized;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the possible need, from time to time, to take goodwill write-offs as described below or other write-offs or special charges due to a variety of occurrences such as the adoption of
new accounting standards, store consolidations or closings or the refinancing of existing indebtedness.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Substantial Goodwill



At December 31, 2002, we had on our balance sheet net goodwill in the amount of $1,705.2 million, which represented approximately 36.4% of our total
assets at such date. This goodwill is an intangible asset and represents the excess of the purchase price that we paid for acquired businesses over the estimated fair value of the net assets of those businesses. We are required to test our goodwill
for impairment at least annually. In general, this means that we must determine whether the fair value of the goodwill, calculated in accordance with applicable accounting standards, is at least equal to the recorded value shown on our balance
sheet. If the fair value of the goodwill is less than the recorded value, we are required to write off the excess goodwill as an expense. Any write-off would adversely affect our results, as was the case in 2002 as described above.



We test for goodwill impairment on a branch-by-branch basis rather than on an
aggregate basis. This means that a goodwill write-off is required even if only one or a limited number of our branches has impairment and even if there is no impairment for all our branches on an aggregate basis. Factors that may cause future
impairment at a particular branch, in addition to macro economic factors that affect all our branches, include changes in local demand and local competitive conditions. The fact that we test for impairment on a branch-by-branch basis increases the
likelihood that we will be required to take additional non-cash goodwill write-offs in the future, although we cannot quantify at this time the magnitude of any future write-off.



Substantial Indebtedness



At December 31, 2002, our total indebtedness was approximately $2,512.8 million. Our substantial indebtedness has the potential to affect us adversely in
a number of ways. For example, it will or could:



| |  |  | require us to devote a substantial portion of our cash flow to debt service, reducing the funds available for other purposes;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | constrain our ability to obtain additional financing, particularly since substantially all of our assets are subject to security interests relating to existing indebtedness; or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | make it difficult for us to cope with a downturn in our business or a decrease in our cash flow.
| | - |  | ------------------------------------------------------------------------------------------------



Furthermore, if we are unable to service our indebtedness and fund our business, we will be forced to adopt an alternative
strategy that may include:



| |  |  | reducing or delaying capital expenditures;
| | - |  | ------------------------------------------



| |  |  | limiting our growth;
| | - |  | --------------------



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| |  |  | seeking additional capital;
| | - |  | ---------------------------



| |  |  | selling assets; or
| | - |  | ------------------



| |  |  | restructuring or refinancing our indebtedness.
| | - |  | ----------------------------------------------



We cannot be sure that any of these strategies could be effected on favorable terms or at all.



A portion of our indebtedness bears interest at variable rates that are
linked to changing market interest rates. As a result, an increase in market interest rates would increase our interest expense and our debt service obligations. At December 31, 2002, we had $844.9 million of variable rate indebtedness.



Need to Satisfy Financial and Other Covenants in Debt Agreements



Under the agreements governing our credit facility and our term loan, we
are required to, among other things, satisfy certain financial tests relating to: (a) minimum interest coverage ratio, (b) the ratio of funded debt to cash flow, (c) the ratio of senior debt to tangible assets and (d) the ratio of senior debt to
cash flow. If we are unable to satisfy any of these covenants, the lenders could elect to terminate the credit facility and require us to repay the outstanding borrowings under the credit facility and our term loan. In such event, unless we are able
to refinance the indebtedness coming due and replace the revolving credit facility, we would likely not have sufficient liquidity for our business needs and be forced to adopt an alternative strategy as described above. We cannot be sure that any
alternative strategy could be effected on favorable terms or at all.



We are also subject to various other covenants under the agreements governing our credit facility, term loan and other indebtedness. These covenants limit or prohibit, among other things, our ability to incur indebtedness, make prepayments
of certain indebtedness, pay dividends, make investments, create liens, make acquisitions, sell assets and engage in mergers and acquisitions. These covenants could adversely affect our business by significantly limiting our operating and financial
flexibility.



Dependence on Additional Capital



If the cash that we generate from our business, together with cash that we
may borrow under our credit facility, is not sufficient to fund our capital requirements, we will require additional debt and/or equity financing. We cannot, however, be certain that any additional financing will be available or, if available, will
be available on terms that are satisfactory to us. If we are unable to obtain sufficient additional capital in the future, we may be unable to fund the capital outlays required for the success of our business, including those relating to purchasing
equipment, making acquisitions, opening new rental locations and refinancing existing indebtedness.



Certain Risks Relating to Acquisitions



We have grown in part through acquisitions and may continue to do so. The making of acquisitions entails certain risks, including:



| |  |  | unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigations;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | difficulty in assimilating the operations and personnel of the acquired company with our existing operations or in maintaining uniform standards; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | loss of key employees of the acquired company.
| | - |  | ----------------------------------------------



We cannot guarantee that we will realize the expected benefits from our acquisitions or that our existing operations will not be harmed as a result of
acquisitions.



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Dependence on Management



Our success is highly dependent on the experience and skills of our senior management team. If we lose the services of any
member of this team and are unable to find a suitable replacement, we may not have the depth of senior management resources required to efficiently manage our business and execute our strategy. We do not maintain key man life insurance
on the lives of members of senior management.



Competition



The equipment rental industry is highly fragmented
and competitive. Our competitors primarily include small, independent businesses with one or two rental locations, regional competitors which operate in one or more states, public companies or divisions of public companies, and equipment vendors and
dealers who both sell and rent equipment directly to customers. We may in the future encounter increased competition from our existing competitors or from new companies. Competitive pressures could adversely affect our revenues and operating results
by decreasing our market share or depressing the prices that we can charge.



Dependence on Information Technology Systems



Our information technology systems facilitate our ability to monitor and control our operations and adjust to changing market conditions. Any disruptions in these systems or the failure of these systems to operate as expected could,
depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our operations and adjust to changing market conditions.



Liability and Insurance



We are exposed to various possible claims relating to our business. These
possible claims include those relating to (1) personal injury or death caused by equipment rented or sold by us, (2) motor vehicle accidents involving our delivery and service personnel and (3) employment related claims. We carry a broad range of
insurance for the protection of our assets and operations. However, such insurance may not fully protect us for a number of reasons, including:



| |  |  | our coverage is subject to deductibles of $2 million for general liability and $3 million for automobile liability and limited to a maximum of $100 million per occurrence;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we do not maintain coverage for environmental liability (other than legally required fuel storage tank coverage), since we believe that the cost for such coverage is high relative
to the benefit that it provides; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | certain types of claims, such as claims for punitive damages or for damages arising from intentional misconduct, which are often alleged in third party lawsuits, might not be
covered by our insurance.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If we are found liable for any
significant claims that are not covered by insurance, our operating results could be adversely affected. We cannot be certain that insurance will continue to be available to us on economically reasonable terms, if at all.



Environmental and Safety Regulations



Our operations are subject to numerous laws governing environmental
protection and occupational health and safety matters. These laws regulate such issues as wastewater, stormwater, solid and hazardous wastes and materials, and air quality. Under these laws, we may be liable for, among other things, (1) the costs of
investigating and remediating contamination at our sites as well as sites to which we sent hazardous wastes for disposal or treatment regardless of fault and (2) fines and penalties for non-compliance. Our operations generally do not raise
significant environmental risks, but we use hazardous materials to clean and maintain equipment, and dispose of solid and hazardous waste and wastewater from equipment washing, and store and dispense petroleum products from underground and
above-ground storage tanks located at certain of our locations.



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Based on the conditions currently known to us, we do not believe that any pending or likely remediation
and compliance costs will have a material adverse effect on our business. We cannot be certain, however, as to the potential financial impact on our business if new adverse environmental conditions are discovered or environmental and safety
requirements become more stringent. If we are required to incur environmental compliance or remediation costs that are not currently anticipated by us, our business could be adversely affected depending on the magnitude of the cost.



Labor Matters



We have 1,063 employees that are represented by unions and covered by collective bargaining agreements. If we should
experience a prolonged labor dispute involving a significant number of our employees, our ability to serve our customers could be adversely affected. Furthermore, our labor costs could increase as a result of the settlement of actual or threatened
labor disputes.



Operations Outside the United States



Our operations in Canada and Mexico are subject to the risks normally
associated with international operations. These include (1) the need to convert currencies, which could result in a gain or loss depending on fluctuations in exchange rates, (2) the need to comply with foreign laws and (3) the possibility of
political or economic instability in foreign countries.





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REPORT OF INDEPENDENT AUDITORS



Board of Directors

United Rentals, Inc.



We have audited the accompanying consolidated balance sheets of United Rentals, Inc. as of December 31, 2002 and 2001 and the related consolidated
statements of operations, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2002. These consolidated financial statements are the responsibility of the management of United Rentals, Inc. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of United Rentals, Inc. at December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2002 in conformity with accounting principles generally accepted in the United States.



As discussed in Notes 2 and 4 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 142,
Goodwill and Other Intangible Assets, effective January 1, 2002.



As discussed in Note 14, the Company has restated its loss per share for the year ended December 31, 2002.



/s/    ERNST & YOUNG LLP



MetroPark, New Jersey

February 20, 2003

(except for Note 14, as to

which the date is June 23, 2003)



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UNITED RENTALS, INC.



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                    |  | December 31                      |          
|----------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------
|                                                                                                                                    |  | 2002                             |          
|                                                                                                                                    |  | (In thousands,except share data) |          
|ASSETS                                                                                                                              |  |                                  |          
|Cash and cash equivalents                                                                                                           |  | $                                | 19,231   
|Accounts receivable, net of allowance for doubtful accounts of $48,542 in 2002 and $47,744 in 2001                                  |  |                                  | 466,196  
|Inventory                                                                                                                           |  |                                  | 91,798   
|Prepaid expenses and other assets                                                                                                   |  |                                  | 131,293  
|Rental equipment, net                                                                                                               |  |                                  | 1,845,675
|Property and equipment, net                                                                                                         |  |                                  | 425,352  
|Goodwill, net                                                                                                                       |  |                                  | 1,705,191
|Other intangible assets, net                                                                                                        |  |                                  | 5,821    
|                                                                                                                                    |  |                                  |          
|                                                                                                                                    |  | $                                | 4,690,557
|                                                                                                                                    |  |                                  |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                |  |                                  |          
|Liabilities:                                                                                                                        |  |                                  |          
|Accounts payable                                                                                                                    |  | $                                | 207,038  
|Debt                                                                                                                                |  |                                  | 2,512,798
|Deferred taxes                                                                                                                      |  |                                  | 225,587  
|Accrued expenses and other liabilities                                                                                              |  |                                  | 187,079  
|                                                                                                                                    |  |                                  |          
|Total liabilities                                                                                                                   |  |                                  | 3,132,502
|Commitments and contingencies                                                                                                       |  |                                  |          
|Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust                                     |  |                                  | 226,550  
|Stockholders equity:                                                                                                               |  |                                  |          
|Preferred stock$.01 par value, 5,000,000 shares authorized:                                                                        |  |                                  |          
|Series C perpetual convertible preferred stock$300,000 liquidation preference, 300,000 shares issued and
outstanding               |  |                                  | 3        
|Series D perpetual convertible preferred stock$150,000 liquidation preference, 150,000 shares issued and
outstanding               |  |                                  | 2        
|Common stock$.01 par value, 500,000,000 shares authorized, 76,657,521 shares issued and outstanding in 2002 and 73,361,407
in 2001 |  |                                  | 765      
|Additional paid-in capital                                                                                                          |  |                                  | 1,341,290
|Deferred compensation                                                                                                               |  |                                  | (52,988  
|Retained earnings                                                                                                                   |  |                                  | 69,281   
|Accumulated other comprehensive loss                                                                                                |  |                                  | (26,848  
|                                                                                                                                    |  |                                  |          
|Total stockholders equity                                                                                                          |  |                                  | 1,331,505
|                                                                                                                                    |  |                                  |          
|                                                                                                                                    |  | $                                | 4,690,557
|                                                                                                                                    |  |                                  |          



See accompanying notes.



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UNITED RENTALS, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                                                                 |  | Year Ended December 31                   |          
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---------
|                                                                                                                                 |  | 2002                                     |          
|                                                                                                                                 |  | (In thousands, except per share amounts) |          
|Revenues:                                                                                                                        |  |                                          |          
|Equipment rentals                                                                                                                |  | $                                        | 2,154,681
|Sales of rental equipment                                                                                                        |  |                                          | 176,179  
|Sales of equipment and merchandise and other revenues                                                                            |  |                                          | 490,129  
|                                                                                                                                 |  |                                          |          
|Total revenues                                                                                                                   |  |                                          | 2,820,989
|Cost of revenues:                                                                                                                |  |                                          |          
|Cost of equipment rentals, excluding depreciation                                                                                |  |                                          | 1,137,609
|Depreciation of rental equipment                                                                                                 |  |                                          | 325,548  
|Cost of rental equipment sales                                                                                                   |  |                                          | 116,821  
|Cost of equipment and merchandise sales and other operating costs                                                                |  |                                          | 354,734  
|                                                                                                                                 |  |                                          |          
|Total cost of revenues                                                                                                           |  |                                          | 1,934,712
|                                                                                                                                 |  |                                          |          
|Gross profit                                                                                                                     |  |                                          | 886,277  
|Selling, general and administrative expenses                                                                                     |  |                                          | 438,918  
|Goodwill impairment                                                                                                              |  |                                          | 247,913  
|Restructuring charge                                                                                                             |  |                                          | 28,262   
|Non-rental depreciation and amortization                                                                                         |  |                                          | 59,301   
|                                                                                                                                 |  |                                          |          
|Operating income                                                                                                                 |  |                                          | 111,883  
|Interest expense                                                                                                                 |  |                                          | 195,961  
|Preferred dividends of a subsidiary trust                                                                                        |  |                                          | 18,206   
|Other (income) expense, net                                                                                                      |  |                                          | (900     
|                                                                                                                                 |  |                                          |          
|Income (loss) before provision for income taxes, extraordinary item and cumulative effect of change in accounting
principle      |  |                                          | (101,384 
|Provision for income taxes                                                                                                       |  |                                          | 8,102    
|                                                                                                                                 |  |                                          |          
|Income (loss) before extraordinary item and cumulative effect of change in accounting principle                                  |  |                                          | (109,486 
|Extraordinary item, net of tax benefit of $6,759                                                                                 |  |                                          |          
|Cumulative effect of change in accounting principle, net of tax benefit of $60,529                                               |  |                                          | (288,339 
|                                                                                                                                 |  |                                          |          
|Net income (loss)                                                                                                                |  | $                                        | (397,825 
|                                                                                                                                 |  |                                          |          
|Earnings (loss) per sharebasic (2002 Restated):                                                                                 |  |                                          |          
|Income (loss) available to common stockholders before extraordinary item and cumulative effect of change in accounting
principle |  | $                                        | (0.98    
|Extraordinary item, net                                                                                                          |  |                                          |          
|Cumulative effect of change in accounting principle, net                                                                         |  |                                          | (3.80    
|                                                                                                                                 |  |                                          |          
|Income (loss) available to common stockholders                                                                                   |  | $                                        | (4.78    
|                                                                                                                                 |  |                                          |          
|Earnings (loss) per sharediluted (2002 Restated):                                                                               |  |                                          |          
|Income (loss) available to common stockholders before extraordinary item and cumulative effect of change in accounting
principle |  | $                                        | (0.98    
|Extraordinary item, net                                                                                                          |  |                                          |          
|Cumulative effect of change in accounting principle, net                                                                         |  |                                          | (3.80    
|                                                                                                                                 |  |                                          |          
|Income (loss) available to common stockholders                                                                                   |  | $                                        | (4.78    
|                                                                                                                                 |  |                                          |          



See accompanying notes.





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UNITED RENTALS, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|                                                             |  |                                            |  |                                            |  | Common Stock    |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|------------------------------------------------------------ |  | ------------------------------------------ |  | ------------------------------------------ |  | --------------- | - |  | ------ | - |  | ------------------------ | - |  | -------------------- | - |  | ---------------- |  | -------------------------- | -
|                                                             |  | Series CPerpetualConvertiblePreferredStock |  | Series DPerpetualConvertiblePreferredStock |  | Number ofShares |   |  | Amount |   |  | AdditionalPaid-inCapital |   |  | DeferredCompensation |   |  | RetainedEarnings |  | ComprehensiveIncome (Loss) |  
|                                                             |  | (In thousands)                             | 
|Balance, December 31, 1999                                   |  |                                            |  |                                            |  | 72,051          |   |  | $721   |   |  | $  786,173               |   |  |                      |   |  | $179,475         |  |                            |  
|Comprehensive income:                                        |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Net income                                                   |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  | 176,375          |  | $ 176,375                  |  
|Other comprehensive income:                                  |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Foreign currency translation adjustments                     |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  | (7,264                     | )
|                                                             |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Comprehensive income                                         |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  | $ 169,111                  |  
|                                                             |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Issuance of common stock                                     |  |                                            |  |                                            |  | 774             |   |  | 8      |   |  | 9,867                    |   |  |                      |   |  |                  |  |                            |  
|Exercise of common stock options                             |  |                                            |  |                                            |  | 26              |   |  |        |   |  | 421                      |   |  |                      |   |  |                  |  |                            |  
|Shares repurchased and retired                               |  |                                            |  |                                            |  | (1,785          | ) |  | (18    | ) |  | (30,932                  | ) |  |                      |   |  |                  |  |                            |  
|                                                             |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Balance, December 31, 2000                                   |  |                                            |  |                                            |  | 71,066          |   |  | 711    |   |  | 765,529                  |   |  |                      |   |  | 355,850          |  |                            |  
|Comprehensive income:                                        |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Net income                                                   |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  | 111,256          |  | $111,256                   |  
|Other comprehensive income:                                  |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Foreign currency translation adjustments                     |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  | (16,137                    | )
|Cumulative effect on equity of adopting SFAS 133, net of tax |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  | (2,516                     | )
|Derivatives qualifying as hedges, net of tax                 |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  | (4,527                     | )
|                                                             |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Comprehensive income                                         |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  | $   88,076                 |  
|                                                             |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  
|Issuance of common stock under deferred compensation plans   |  |                                            |  |                                            |  | 2,928           |   |  | 29     |   |  | 61,941                   |   |  | $(61,970             | ) |  |                  |  |                            |  
|Amortization of deferred compensation                        |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  | 6,176                |   |  |                  |  |                            |  
|Issuance of Series C perpetual convertible preferred stock   |  | $3                                         |  |                                            |  |                 |   |  |        |   |  | 286,734                  |   |  |                      |   |  |                  |  |                            |  
|Issuance of Series D perpetual convertible preferred stock   |  |                                            |  | $2                                         |  |                 |   |  |        |   |  | 143,667                  |   |  |                      |   |  |                  |  |                            |  
|Issuance of common stock                                     |  |                                            |  |                                            |  | 3               |   |  |        |   |  | 50                       |   |  |                      |   |  |                  |  |                            |  
|Exercise of common stock options                             |  |                                            |  |                                            |  | 715             |   |  | 8      |   |  | 10,409                   |   |  |                      |   |  |                  |  |                            |  
|Shares repurchased and retired                               |  |                                            |  |                                            |  | (1,351          | ) |  | (14    | ) |  | (24,744                  | ) |  |                      |   |  |                  |  |                            |  
|                                                             |  |                                            |  |                                            |  |                 |   |  |        |   |  |                          |   |  |                      |   |  |                  |  |                            |  



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UNITED RENTALS, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Continued)



|                                                                                                                                                     |  |                                            |   |                                            |   | Common Stock    |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | - | ------------------------------------------ | - | --------------- |  | ------ | ------ |  | - | ------------------------ | - |  | -------------------- | --------- | - | ---------------- | - | ------- | -------------------------- | 
|                                                                                                                                                     |  | Series CPerpetualConvertiblePreferredStock |   | Series DPerpetualConvertiblePreferredStock |   | Number ofShares |  |        | Amount |  |   | AdditionalPaid-inCapital |   |  | DeferredCompensation |           |   | RetainedEarnings |   |         | ComprehensiveIncome (Loss) | 
|Balance, December 31, 2001                                                                                                                           |  |                                            | 3 |                                            |   | 2               |  | 73,361 |        |  |   | 734                      |   |  |                      | 1,243,586 |   |                  |   | (55,794 | )                          | 
|Comprehensive income (loss):                                                                                                                         |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|Net loss                                                                                                                                             |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|Other comprehensive income:                                                                                                                          |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|Foreign currency translation adjustments                                                                                                             |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|Derivatives qualifying as hedges, net of tax                                                                                                         |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|                                                                                                                                                     |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|Comprehensive loss:                                                                                                                                  |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|                                                                                                                                                     |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|Issuance of common stock under deferred compensation plans                                                                                           |  |                                            |   |                                            |   |                 |  | 469    |        |  |   | 3                        |   |  |                      | 8,634     |   |                  |   | (8,637  | )                          | 
|Amortization of deferred compensation                                                                                                                |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   | 11,443  |                            | 
|Exercise of common stock options                                                                                                                     |  |                                            |   |                                            |   |                 |  | 3,736  |        |  |   | 37                       |   |  |                      | 77,768    |   |                  |   |         |                            | 
|Common stock repurchased and retired                                                                                                                 |  |                                            |   |                                            |   |                 |  | (1,066 | )      |  |   | (11                      | ) |  |                      | (26,715   | ) |                  |   |         |                            | 
|Convertible debt converted to common stock                                                                                                           |  |                                            |   |                                            |   |                 |  | 157    |        |  |   | 2                        |   |  |                      | 2,678     |   |                  |   |         |                            | 
|Liquidation preference in excess of amounts paid for Company-obligated mandatorily redeemable convertible preferred securities of
a subsidiary trust |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      | 35,339    |   |                  |   |         |                            | 
|                                                                                                                                                     |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 
|Balance December 31, 2002                                                                                                                            |  | $                                          | 3 |                                            | $ | 2               |  | 76,657 |        |  | $ | 765                      |   |  | $                    | 1,341,290 |   |                  | $ | (52,988 | )                          | 
|                                                                                                                                                     |  |                                            |   |                                            |   |                 |  |        |        |  |   |                          |   |  |                      |           |   |                  |   |         |                            | 



See accompanying notes.



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##### Table of Contents

UNITED RENTALS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                                        |  | Year Ended December 31 |         
|----------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------
|                                                                                                                        |  | 2002                   |         
|                                                                                                                        |  | (In thousands)         |         
|Cash Flows From Operating Activities:                                                                                   |  |                        |         
|Net income (loss)                                                                                                       |  | $                      | (397,825
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                |  |                        |         
|Depreciation and amortization                                                                                           |  |                        | 384,850 
|Gain on sales of rental equipment                                                                                       |  |                        | (59,359 
|Gain on sales of businesses                                                                                             |  |                        |         
|Amortization of deferred compensation                                                                                   |  |                        | 11,443  
|Restructuring charge                                                                                                    |  |                        | 2,497   
|Goodwill impairment                                                                                                     |  |                        | 247,913 
|Extraordinary item                                                                                                      |  |                        |         
|Cumulative effect of a change in accounting principle, net of tax                                                       |  |                        | 288,339 
|Deferred taxes                                                                                                          |  |                        | 5,871   
|Changes in operating assets and liabilities:                                                                            |  |                        |         
|Accounts receivable                                                                                                     |  |                        | (6,949  
|Inventory                                                                                                               |  |                        | 21,189  
|Prepaid expenses and other assets                                                                                       |  |                        | 8,353   
|Accounts payable                                                                                                        |  |                        | 2,252   
|Accrued expenses and other liabilities                                                                                  |  |                        | 9,335   
|                                                                                                                        |  |                        |         
|Net cash provided by operating activities                                                                               |  |                        | 517,909 
|                                                                                                                        |  |                        |         
|Cash Flows From Investing Activities:                                                                                   |  |                        |         
|Purchases of rental equipment                                                                                           |  |                        | (492,259
|Purchases of property and equipment                                                                                     |  |                        | (38,599 
|Proceeds from sales of rental equipment                                                                                 |  |                        | 176,179 
|Proceeds from sales of businesses                                                                                       |  |                        |         
|Purchases of other companies                                                                                            |  |                        | (172,583
|Payments of contingent purchase price                                                                                   |  |                        |         
|In-process acquisition costs                                                                                            |  |                        | (4,342  
|Deposits on rental equipment purchases                                                                                  |  |                        | (4,644  
|                                                                                                                        |  |                        |         
|Net cash used in investing activities                                                                                   |  |                        | (536,248
|                                                                                                                        |  |                        |         
|Cash Flows From Financing Activities:                                                                                   |  |                        |         
|Proceeds from debt                                                                                                      |  |                        | 508,316 
|Payments on debt                                                                                                        |  |                        | (491,728
|Proceeds from sale-leaseback                                                                                            |  |                        |         
|Payments of financing costs                                                                                             |  |                        | (6,197  
|Proceeds from the exercise of common stock options                                                                      |  |                        | 63,755  
|Shares repurchased and retired                                                                                          |  |                        | (26,726 
|Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust repurchased and
retired |  |                        | (38,111 
|                                                                                                                        |  |                        |         
|Net cash provided by (used in) financing activities                                                                     |  |                        | 9,309   
|Effect of foreign exchange rates                                                                                        |  |                        | 935     
|                                                                                                                        |  |                        |         
|Net increase (decrease) in cash and cash equivalents                                                                    |  |                        | (8,095  
|Cash and cash equivalents at beginning of year                                                                          |  |                        | 27,326  
|                                                                                                                        |  |                        |         
|Cash and cash equivalents at end of year                                                                                |  | $                      | 19,231  
|                                                                                                                        |  |                        |         



See accompanying notes.



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UNITED RENTALS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)



|                                                                                                   |  | Year Ended December 31 |        
|-------------------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                                   |  | 2002                   |        
|                                                                                                   |  | (In thousands)         |        
|Supplemental disclosure of cash flow information:                                                  |  |                        |        
|Cash paid for interest                                                                             |  | $                      | 212,199
|Cash paid for taxes, net of refunds                                                                |  | $                      | (1,454 
|                                                                                                   |  |                        |        
|Supplemental schedule of non-cash investing and financing activities                               |  |                        |        
|Conversion of operating leases to capital leases                                                   |  | $                      | 31,451 
|Conversion of convertible debt to common stock                                                     |  | $                      | 2,680  
|                                                                                                   |  |                        |        
|The Company acquired the net assets and assumed certain liabilities of other companies as follows: |  |                        |        
|Assets, net of cash acquired                                                                       |  | $                      | 172,222
|Liabilities assumed                                                                                |  |                        | (4,705 
|Less:                                                                                              |  |                        |        
|Amounts paid in common stock                                                                       |  |                        |        
|Amounts paid through issuance of debt                                                              |  |                        |        
|                                                                                                   |  |                        |        
|                                                                                                   |  |                        | 167,517
|Due to seller and other payments                                                                   |  |                        | 5,066  
|                                                                                                   |  |                        |        
|Net cash paid                                                                                      |  | $                      | 172,583
|                                                                                                   |  |                        |        











See accompanying notes.





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##### Table of Contents

UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.    Organization and Basis of Presentation



United Rentals, Inc. (Holdings) is principally a holding company and conducts its operations primarily through
its wholly owned subsidiary United Rentals (North America), Inc. (URI) and subsidiaries of URI. Holdings was incorporated in July 1998 and became the parent of URI on August 5, 1998, pursuant to the reorganization of the legal structure
of URI. Prior to such reorganization, the name of URI was United Rentals, Inc. References herein to the Company refer to Holdings and its subsidiaries, with respect to periods following the reorganization, and to URI and its
subsidiaries, with respect to periods prior to the reorganization. As a result of the reorganization, Holdings primary asset is its sole ownership of all issued and outstanding shares of common stock of URI. URIs various credit
agreements and debt instruments place restrictions on its ability to transfer funds to its shareholder.



The Company rents a broad array of equipment to a diverse customer base that includes construction and industrial companies, manufacturers, utilities,
municipalities, homeowners and others in the United States, Canada and Mexico. In addition to renting equipment, the Company sells used rental equipment, acts as a dealer for new equipment and sells related merchandise, parts and service. The nature
of the Companys business is such that short-term obligations are typically met by cash flow generated from long-term assets. Therefore, the accompanying balance sheets are presented on an unclassified basis.



The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, giving retroactive effect for the reorganization for all periods presented. All significant intercompany accounts and transactions have been eliminated.



2.    Summary of Significant Accounting Policies



Cash Equivalents



The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash
equivalents.



Allowance for Doubtful Accounts



The Company maintains an allowance for doubtful accounts. This allowance
reflects the Companys estimate of the amount of its receivables that it will be unable to collect.



Inventory



Inventory
consists of equipment, tools, parts, fuel and related supply items. Inventory is stated at the lower of cost or market and is net of a reserve for obsolescence and shrinkage of $6.5 million and $9.4 million at December 31, 2002 and 2001,
respectively. Cost is determined on either a weighted average or first-in, first-out method.



Rental Equipment



Rental equipment is recorded at cost and depreciated over the estimated useful lives of the equipment using the straight-line method. The range of estimated useful lives for rental equipment is two to ten years. Rental equipment is
depreciated to a salvage value of zero to ten percent of cost. Ordinary repair and maintenance costs are charged to operations as incurred.



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Property and Equipment



Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line
method. The range of estimated useful lives for property and equipment is two to thirty-nine years. Ordinary repair and maintenance costs are charged to operations as incurred. Leasehold improvements are amortized using the straight-line method over
their estimated useful lives or the remaining life of the lease, whichever is shorter.



Goodwill



Goodwill consists of the excess of
cost over the fair value of identifiable net assets of businesses acquired and is amortized on a straight-line basis over forty years. Beginning January 1, 2002, goodwill is no longer amortized, but is tested on at least an annual basis for
impairment, see Note 4.





Other Intangible Assets



Other intangible assets consists of non-compete agreements. The non-compete agreements are being amortized on a straight-line basis for periods ranging from three to eight years.



Long-Lived Assets



Long-lived assets are recorded at the lower of amortized cost or fair value. As part of an ongoing review of the valuation of long-lived assets, the
Company assesses the carrying value of such assets if facts and circumstances suggest they may be impaired. If this review indicates that the carrying value of these assets may not be recoverable, as determined by a nondiscounted cash flow analysis
over the remaining useful life, the carrying value would be reduced to its estimated fair value. There have been no material impairments recognized in these financial statements.



Derivative Financial Instruments



Under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, all derivatives are required to be recorded as assets or
liabilities and measured at fair value. Gains or losses resulting from changes in the values of derivatives are recognized immediately or deferred, depending on the use of the derivative and whether or not it qualifies as a hedge. Derivative
financial instruments are periodically used by the Company in the management of its interest rate and foreign currency exposures. Derivative financial instruments are not used for trading purposes.



Translation of Foreign Currency



Assets and liabilities of the Companys subsidiaries operating outside
the United States which account in a functional currency other than U.S. dollars are translated into U.S. dollars using exchange rates at the end of the year. Revenues and expenses are translated at average exchange rates effective during the year.
Foreign currency translation gains and losses are included as a component of accumulated other comprehensive loss within shareholders equity.



Fair Value of Financial Instruments



The carrying amounts reported in the 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 the revolving credit facility, term loan, and receivables securitization are determined using current interest rates for similar instruments as of
December 31, 2002 and 2001 and approximate the carrying value of these financial instruments due to the fact that the underlying instruments



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



include provisions to adjust interest rates to approximate fair market value. The estimated fair value of the Companys other financial instruments at
December 31, 2002 and 2001 are based upon available market information and are as follows:



|                                            |  | 2002           |           | 2001      
|------------------------------------------- |  | -------------- | --------- | ----------
|                                            |  | CarryingAmount |           | Fair Value
|                                            |  | (In thousands)
|Redeemable convertible preferred securities |  | $              | 226,550   |           
|Senior and senior subordinated notes        |  |                | 1,605,947 |           
|Other debt                                  |  |                | 61,984    |           



Preferred Stock



The Company issued Series A Perpetual Convertible Preferred Stock
(Series A Preferred) and Series B Perpetual Convertible Preferred Stock (Series B Preferred) in 1999 and included such preferred stock in stockholders equity. In July 2001, the SEC issued guidance to all public
companies as to when redeemable preferred stock may be classified as stockholders equity. This guidance indicates that preferred stock that would be subject to redemption on the occurrence of an event outside the control of the issuer may not
be classified as equity and that the probability of the event occurring is not a factor to be considered. Under this guidance, the Series A Preferred and Series B Preferred would not be included in stockholders equity because this stock would
be subject to mandatory redemption on a hostile change of control. On September 28, 2001, the Company entered into an agreement effecting the exchange of new Series C Perpetual Convertible Preferred Stock (Series C Preferred) for the
Series A Preferred and new Series D Perpetual Convertible Preferred Stock (Series D Preferred) for the Series B Preferred (see Note 11). The Series C Preferred and Series D Preferred stock is not subject to mandatory redemption on a
hostile change of control, and is classified as stockholders equity under the recently issued SEC guidance.



The effect of the foregoing is that the Companys perpetual convertible preferred stock is classified as stockholders equity as of September
28, 2001 and thereafter, but is classified outside of stockholders equity for earlier dates. Accordingly, the Company has restated the 2000 balance sheet to show its $430.8 million of perpetual convertible preferred stock under Series A
and B Preferred Stock rather than under Stockholders Equity. The Company has also made a corresponding change to the related Consolidated Statements of Stockholders Equity. In all other respects, the financial
statements remain unchanged, including total assets and liabilities, revenues, operating income, net income and earnings per share.



Revenue Recognition



Revenue related to the sale of equipment and merchandise is recognized at the time of delivery to, or pick-up by, the customer. Revenue related to rental
equipment is recognized over the contract term.



Advertising Expense



The Company advertises primarily through trade
publications and Yellow Pages. Advertising expense is recognized over the period of related benefit. Advertising expense was $7.8 million, $11.9 million and $23.8 million for the years ended December 31, 2002, 2001 and 2000, respectively.



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Income Taxes



The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the
differences between financial statement and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Recognition of deferred tax assets
is limited to amounts considered by management to be more likely than not realized in future periods.



Use of Estimates



The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Significant estimates include restructuring charges, allowance for doubtful accounts, useful lives for depreciation, goodwill and other asset impairments, loss contingencies and fair values of financial instruments. Actual results could
differ from those estimates.



Concentrations of Credit Risk



Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and accounts receivable. The Company maintains cash and cash equivalents with high quality financial institutions. Concentration of credit risk with respect to accounts receivable
is limited because a large number of geographically diverse customers make up the Companys customer base. The Companys largest customer in 2002 represented approximately 1% of total revenues and no single customer represented greater
than 1% of total accounts receivable. The Company controls credit risk through credit approvals, credit limits, and monitoring procedures.



Stock-Based Compensation



The Company accounts for its stock-based compensation arrangements using the intrinsic value method under the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees. At December 31, 2002, the Company had six stock-based compensation plans (see Note 12). Since stock options are granted by the Company with exercise prices at or
greater than the fair value of the shares at the date of grant, no compensation expense is recognized. Restricted stock awards granted by the Company are recognized as deferred compensation. The Company recognizes compensation expense related to
these restricted stock awards over their vesting periods. The following table provides additional information related to the Companys stock-based compensation arrangements for the years ended December 31, 2002, 2001 and 2000 (in thousands):



|                                                                                         |  | December 31 |         
|---------------------------------------------------------------------------------------- |  | ----------- | --------
|                                                                                         |  | 2002        |         
|Net income (loss), as reported                                                           |  | $           | (397,825
|Plus: Stock-based compensation expense includedin reported net income (loss), net of tax |  |             | 6,980   
|Less: Stock-based compensation expense determinedusing the fair value method, net of tax |  |             | (11,402 
|                                                                                         |  |             |         
|Pro forma net income (loss)                                                              |  | $           | (402,247
|                                                                                         |  |             |         
|Basic earnings (loss) per share (2002 restated):                                         |  |             |         
|As reported                                                                              |  | $           | (4.78   
|Pro forma                                                                                |  | $           | (4.84   
|Diluted earnings (loss) per share (2002 restated):                                       |  |             |         
|As reported                                                                              |  | $           | (4.78   
|Pro forma                                                                                |  | $           | (4.84   





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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The weighted average fair value of options granted was $5.57, $7.34 and $7.70 during 2002, 2001 and
2000, respectively. The fair value is estimated on the date of grant using the Black-Scholes option pricing model which uses subjective assumptions which can materially affect fair value estimates and, therefore, does not necessarily provide a
single measure of fair value of options. The Company used a risk-free interest rate average of 2.01%, 3.74% and 5.15% in 2002, 2001 and 2000, respectively, a volatility factor for the market price of the Companys common stock of 66%, 49% and
69% in 2002, 2001 and 2000, respectively, and a weighted-average expected life of options of approximately three years in 2002, 2001 and 2000. For purposes of these pro forma disclosures, the estimated fair value of options is amortized over
the options vesting period. Since the number of options granted and their fair value may vary significantly from year to year, the pro forma compensation expense in future years may be materially different.



Insurance



The Company is insured for general liability, automobile liability, workers compensation, and group medical claims up
to a specified claim and aggregate amounts (subject to deductibles of two million dollars for general liability and three million dollars for automobile liability). Insured losses subject to this deductible are accrued based upon the aggregate
liability for reported claims incurred and an estimated liability for claims incurred but not reported. These liabilities are not discounted.



Impact of Recently Issued Accounting Standards



The Company adopted the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard (SFAS) No. 142,
Goodwill and Other Intangible Assets, effective January 1, 2002. This standard addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible
Assets. Under this standard, goodwill and other intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests on a reporting unit level. For additional information see Note 4. Other
intangible assets are being amortized over their estimated useful lives.



In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This standard addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company adopted this standard on January 1, 2002 and such adoption did not have an impact
on its consolidated financial position or results of operations.



In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. This standard rescinds SFAS No. 4, Reporting Gains and Losses
from Extinguishment of Debt, and an amendment of that Statement, SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This standard also rescinds SFAS No. 44, Accounting for Intangible Assets of
Motor Carriers. This standard amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency related to the required accounting for sale-leaseback transactions and certain lease modifications. This standard also amends
other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company adopted this standard on January 1, 2003, and will reclassify a pre-tax
extraordinary loss of approximately $18.1 million recognized during the second quarter of 2001 to operating income. The adoption of the remaining provisions of SFAS No. 145 did not have a material effect on the Companys consolidated financial
position or results of operations.



In June 2002, the FASB
issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This standard addresses financial accounting and reporting for costs associated with exit or disposal



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



activities and requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. This standard nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The restructuring charge in 2002 was recorded in accordance with EITF Issue No. 94-3. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002.



In November 2002, the FASB issued Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation requires certain guarantees entered into after December 31, 2002 to be initially
recognized and recorded at fair value and also requires new disclosures related to guarantees even if the likelihood of a guarantor having to make payments under the guarantees is remote. The Company adopted this interpretation as of December 31,
2002 and such adoption did not have an impact on the Companys consolidated financial position or results of operations.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure. This standard provides
alternative methods of transition to the fair value method of accounting for stock-based employee compensation under SFAS No. 123, Accounting for Stock-Based Compensation, but does not require the Company to use the fair value method.
This standard also amends certain disclosure requirements related to stock-based employee compensation. The Company adopted the disclosure portion of this standard as of December 31, 2002 and such adoption is reflected under Stock-Based
Compensation above.



Reclassifications



Certain prior year balances have been reclassified to conform to the 2002
presentation.



3.    Acquisitions



The acquisitions completed during the years ended December 31, 2002, 2001
and 2000 include 2, 3 and 53 acquisitions, respectively, that were accounted for as purchases. The results of operations of the businesses acquired in these acquisitions have been included in the Companys results of operations from their
respective acquisition dates.



On June 30, 2002, the Company
acquired 35 rental locations from National Equipment Services, Inc. for initial consideration of approximately $111.6 million in cash, which was determined based primarily on the number of locations acquired and their financial performance. The
acquisition of these rental locations was made to complement the Companys existing network of rental locations. The results of operations of the acquisitions are included in the Companys statement of operations as of the date of
acquisition. The initial consideration paid by the Company for the other 2002 acquisition was approximately $45.9 million in cash. The Company estimates that approximately $93.1 million of goodwill related to the 2002 acquisitions will be deductible
for tax purposes.



The aggregate initial consideration paid by
the Company for 2001 acquisitions that were accounted for as purchases was approximately $12.1 million and consisted of approximately $11.5 million in cash and $0.6 million in seller notes. In addition, the Company repaid or assumed outstanding
indebtedness in the aggregate amount of approximately $4.9 million.



During 2000, the Company purchased the outstanding stock and certain assets of (i) Liddell Brothers Inc., in February, (ii) Safety Lites Sales and Leasing, Inc., in March, (iii) Durante Equipment Corp., Inc., in June, (iv) Horizon High
Reach, Inc., in September, and (v) Wiese Planning & Engineering Inc., in December. The aggregate initial consideration paid for these five acquisitions that were accounted for as purchases was



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



approximately $153.1 million and consisted of $83.8 million in cash and 761,905 shares of common stock and $59.3 million in seller notes. In addition, the
Company repaid or assumed outstanding indebtedness of these companies acquired in the aggregate amount of approximately $5.5 million.



The aggregate initial consideration paid by the Company for other 2000 acquisitions that were accounted for as purchases was $210.2 million and consisted
of approximately $184.6 million in cash and $6.2 million in seller notes. In addition, the Company repaid or assumed outstanding indebtedness of the companies acquired in the other 2000 acquisitions in the aggregate amount of $77.5 million.



The purchase prices for all acquisitions accounted for as
purchases have been allocated to the assets acquired and liabilities assumed based on their respective fair values at their respective acquisition dates. However, the Company has not completed its valuation of all of its purchases and, accordingly,
the purchase price allocations are subject to change when additional information concerning asset and liability valuations are completed. The preliminary purchase price allocations that are subject to change primarily consist of rental and
non-rental equipment valuations. These allocations are finalized within 12 months of the acquisition date and are not expected to result in significant differences between the preliminary and final allocations.



The following table summarizes, on an unaudited pro forma basis, the combined
results of operations of the Company for the years ended December 31, 2002 and 2001 as though each acquisition described above was made on January 1, 2001 (in thousands, except per share data).



|                                                                                                                                    |  | 2002 |           |   | 2001
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ----
|Revenues                                                                                                                            |  | $    | 2,851,853 |   |     
|Income (loss) before extraordinary item and cumulative effect of change in accounting principle                                     |  |      | (108,871  | ) |     
|Basic earnings (loss) before extraordinary item and cumulative effect of change in accounting principle per share (2002
restated)   |  | $    | (0.97     | ) |     
|                                                                                                                                    |  |      |           |   |     
|Diluted earnings (loss) before extraordinary item and cumulative effect of change in accounting principle per share (2002
restated) |  | $    | (0.97     | ) |     
|                                                                                                                                    |  |      |           |   |     



The unaudited pro
forma results are based upon certain assumptions and estimates which are subject to change. These results are not necessarily indicative of the actual results of operations that might have occurred, nor are they necessarily indicative of expected
results in the future.



4.    Goodwill and Other
Intangible Assets



Changes in the Companys carrying
amount of goodwill for 2002 are as follows (in thousands):



|Balance at December 31, 2001                       |  | $ | 2,199,774 |  
|-------------------------------------------------- |  | - | --------- | -
|Impairment charges                                 |  |   | (596,781  | )
|Foreign currency translation and other adjustments |  |   | 945       |  
|Goodwill related to acquisitions                   |  |   | 101,253   |  
|                                                   |  |   |           |  
|Balance at December 31, 2002                       |  | $ | 1,705,191 |  
|                                                   |  |   |           |  



The Company adopted
SFAS No. 142, Goodwill and Other Intangible Assets issued by the Financial Accountants Standards Board (FASB). Under this standard, goodwill, which was previously amortized over 40 years, is no longer amortized. The Company
amortized approximately $58.4 million of goodwill in 2001. The



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Companys approximately $5.8 million of other intangible assets, will continue to be amortized over their estimated useful lives. Under the new
accounting standard, the Company is required to periodically review its goodwill for impairment. In general, this means that the Company must determine whether the fair value of the goodwill, calculated in accordance with applicable accounting
standards, is at least equal to the recorded value shown on its balance sheet. If the fair value of the goodwill is less than the recorded value, the Company is required to write off the excess goodwill as an expense.



The Company completed its initial impairment analysis in the first quarter of
2002 and recorded a non-cash charge of approximately $348.9 million ($288.3 million, net of tax). The Company completed a subsequent impairment analysis in the fourth quarter of 2002 and recorded an additional non-cash impairment charge of
approximately $247.9 million. The first impairment charge, net of tax, was recorded on the statement of operations as a Cumulative Effect of Change in Accounting Principle. The second impairment charge was recorded on the statement of
operations as goodwill impairment. The Companys stockholders equity was reduced by the amount of both charges.



The impairment charges recognized in 2002 related to certain branches that decreased in value. The factors that negatively affected the value of these
branches included the following: (i) continued weakness in non-residential construction spending which negatively affected the earnings of the Companys branches and (ii) to a lesser extent, operational weakness at some branches and increased
competition for some branches. Fair values used in impairment testing were based upon valuation techniques using multiples of earnings and revenues.



The Company is required to review its goodwill for further impairment at least annually. Any future goodwill impairment charge would be recorded on the
statement of operations as goodwill impairment and would reduce operating income.



The Company tests for goodwill impairment on a branch-by-branch basis rather than on an aggregate basis. This means that a goodwill write-off is required even if only one or a limited number of the Companys
branches has impairment and even if there is no impairment for all its branches on an aggregate basis. Factors that may cause future impairment at a particular branch, in addition to macroeconomic factors that affect all the Companys branches,
include changes in local demand and local competitive conditions. Since the Company tests for impairment on a branch-by-branch basis, the Company believes that it may be required to take additional non-cash goodwill write-offs in the future,
although it cannot quantify at this time the magnitude of any future write-offs.



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The reconciliation of previously reported net income and earnings per share to adjusted net income
and earnings per share excluding goodwill amortization is as follows for the years ended December 31, 2002, 2001 and 2000 (in thousands, except per share data):



|                                                                                                         |  | 2002 |          |   | 2001 |   | 2000   
|-------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------
|Income (loss) before extraordinary item and cumulative effect of change in accounting principle          |  | $    | (109,486 | ) |      | $ | 122,573
|Goodwill amortization expense, net of tax                                                                |  |      |          |   |      |   | 47,046 
|                                                                                                         |  |      |          |   |      |   |        
|Adjusted income (loss) before extraordinary item and cumulative effect of change in accounting principle |  | $    | (109,486 | ) |      | $ | 169,619
|                                                                                                         |  |      |          |   |      |   |        
|Net income (loss)                                                                                        |  | $    | (397,825 | ) |      | $ | 111,256
|Goodwill amortization expense, net of tax                                                                |  |      |          |   |      |   | 47,046 
|                                                                                                         |  |      |          |   |      |   |        
|Adjusted net income (loss)                                                                               |  | $    | (397,825 | ) |      | $ | 158,302
|                                                                                                         |  |      |          |   |      |   |        
|Earnings (loss) per share  basic (2002 restated):                                                       |  |      |          |   |      |   |        
|Income (loss) before extraordinary item and cumulative effect of change in accounting principle          |  | $    | (0.98    | ) |      | $ | 1.70   
|Goodwill amortization expense, net of tax                                                                |  |      |          |   |      |   | 0.65   
|                                                                                                         |  |      |          |   |      |   |        
|Adjusted income (loss) before extraordinary item and cumulative effect of change in accounting principle |  | $    | (0.98    | ) |      | $ | 2.35   
|                                                                                                         |  |      |          |   |      |   |        
|Net income (loss)                                                                                        |  | $    | (4.78    | ) |      | $ | 1.54   
|Goodwill amortization expense, net of tax                                                                |  |      |          |   |      |   | 0.65   
|                                                                                                         |  |      |          |   |      |   |        
|Adjusted net income (loss)                                                                               |  | $    | (4.78    | ) |      | $ | 2.19   
|                                                                                                         |  |      |          |   |      |   |        
|Earnings (loss) per share  diluted (2002 restated):                                                     |  |      |          |   |      |   |        
|Income (loss) before extraordinary item and cumulative effect of change in accounting principle          |  | $    | (0.98    | ) |      | $ | 1.30   
|Goodwill amortization expense, net of tax                                                                |  |      |          |   |      |   | 0.49   
|                                                                                                         |  |      |          |   |      |   |        
|Adjusted income (loss) before extraordinary item and cumulative effect of change in accounting principle |  | $    | (0.98    | ) |      | $ | 1.79   
|                                                                                                         |  |      |          |   |      |   |        
|Net income (loss)                                                                                        |  | $    | (4.78    | ) |      | $ | 1.18   
|Goodwill amortization expense, net of tax                                                                |  |      |          |   |      |   | 0.49   
|                                                                                                         |  |      |          |   |      |   |        
|Adjusted net income (loss)                                                                               |  | $    | (4.78    | ) |      | $ | 1.67   
|                                                                                                         |  |      |          |   |      |   |        



Other intangible
assets consist of non-compete agreements and are amortized over periods ranging from three to eight years. The cost of other intangible assets and the related accumulated amortization as of December 31, 2002 were $17.0 million and $11.2 million,
respectively, and as of December 31, 2001 were $15.8 million and $7.9 million, respectively. Amortization expense of other intangible assets was $3.5 million, $3.2 million and $3.2 million for the years ended December 31, 2002, 2001 and 2000,
respectively.



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of December 31, 2002, estimated amortization expense of other intangible assets for each of the
next five years is as follows (in thousands):



|2003       |  | $ | 3,040
|---------- |  | - | -----
|2004       |  |   | 1,637
|2005       |  |   | 574  
|2006       |  |   | 293  
|2007       |  |   | 170  
|Thereafter |  |   | 107  
|           |  |   |      
|           |  | $ | 5,821
|           |  |   |      



5.    Restructuring Charges



The Company adopted a restructuring plan in 2001 and a second restructuring plan in the fourth quarter of 2002 as described below. In connection with these plans, the Company recorded a restructuring charge of $28.9 million in 2001
(including a non-cash component of approximately $10.9 million) and $28.3 million in the fourth quarter of 2002 (including a non-cash component of approximately $2.5 million).



The 2001 plan involved the following principal elements: (i) 31 underperforming branches were closed or consolidated with
other locations, (ii) five administrative offices were closed or consolidated with other locations, (iii) the reduction of the Companys workforce by 489 through the termination of branch and administrative personnel, and (iv) certain
information technology hardware and software was no longer used.



The 2002 plan involved the following key elements: (i) 42 underperforming branches and five administrative offices will be closed or consolidated with other locations (including 26 closed or consolidated as of December 31, 2002); (ii) the
Companys workforce will be reduced by 412 (including 232 terminated as of December 31, 2002), and (iii) a certain information technology project was abandoned.



The costs to vacate facilities primarily represent the payment of obligations under leases offset by estimated sublease
opportunities, the write-off of capital improvements made to such facilities and the write-off of related goodwill (only in 2001). The workforce reduction costs primarily represent severance. The information technology costs represent the payment of
obligations under equipment leases relating to the abandonment of certain information technology projects.



The aggregate balance of the 2001 and 2002 charges was $27.1 million as of December 31, 2002. The Company estimates that approximately $13.4 million of
this amount will be incurred by December 31, 2003 (comprised of approximately $12.4 million of the cash component and approximately $1.0 million of the non-cash component) and approximately $13.7 million will be paid in future periods.



Components of the restructuring charges are as follows:



|                             |  | BalanceDecember 31, 2001 |       | Charges in2002 |   | Activity in2002 |  | BalanceDecember 31, 2002
|---------------------------- |  | ------------------------ | ----- | -------------- | - | --------------- |  | ------------------------
|                             |  | (In thousands)          
|Costs to vacate facilities   |  | $                        | 3,538 |                | $ | 24,569          |  | $                       
|Workforce reduction costs    |  |                          | 2,055 |                |   | 2,776           |  |                         
|Information technology costs |  |                          | 1,417 |                |   | 917             |  |                         
|                             |  |                          |       |                |   |                 |  |                         
|                             |  | $                        | 7,010 |                | $ | 28,262          |  | $                       
|                             |  |                          |       |                |   |                 |  |                         



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6.    Rental Equipment



Rental equipment consists of the following:



|                              |  | December 31    |          
|----------------------------- |  | -------------- | ---------
|                              |  | 2002           |          
|                              |  | (In thousands) |          
|Rental equipment              |  | $              | 2,682,258
|Less accumulated depreciation |  |                | (836,583 
|                              |  |                |          
|Rental equipment, net         |  | $              | 1,845,675
|                              |  |                |          





7.    Property and Equipment



Property and equipment consist of the following:



|                                               |  | December 31    |         
|---------------------------------------------- |  | -------------- | --------
|                                               |  | 2002           |         
|                                               |  | (In thousands) |         
|Land                                           |  | $              | 46,623  
|Buildings                                      |  |                | 94,842  
|Transportation equipment                       |  |                | 278,853 
|Machinery and equipment                        |  |                | 45,086  
|Furniture and fixtures                         |  |                | 73,722  
|Leasehold improvements                         |  |                | 70,545  
|                                               |  |                |         
|                                               |  |                | 609,671 
|Less accumulated depreciation and amortization |  |                | (184,319
|                                               |  |                |         
|Property and equipment, net                    |  | $              | 425,352 
|                                               |  |                |         



8.    Accrued
Expenses and Other Liabilities



Accrued expenses and other
liabilities consist of the following:



|                               |  | December 31   
|------------------------------ |  | --------------
|                               |  | 2002          
|                               |  | (In thousands)
|Accrued incentive compensation |  | $             
|Accrued insurance              |  |               
|Accrued interest               |  |               
|Restructuring accrual          |  |               
|Other                          |  |               
|                               |  |               
|                               |  | $             
|                               |  |               



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



9.    Debt



Debt consists of the following:



|                                                                                                                                                                               |  | December 31   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------
|                                                                                                                                                                               |  | 2002          
|                                                                                                                                                                               |  | (In thousands)
|Credit Facility, interest payable at a weighted average rate of 5.3% and 4.5% at December 31, 2002 and 2001,
respectively                                                      |  | $             
|Term Loan, interest payable at 4.8% and at 5.3% at December 31, 2002 and 2001, respectively                                                                                    |  |               
|91/2% Senior Subordinated Notes, interest payable semi-annually                                                                                                                |  |               
|8.8% Senior Subordinated Notes, interest payable semi-annually                                                                                                                 |  |               
|91/4% Senior Subordinated Notes, interest payable semi-annually                                                                                                                |  |               
|9% Senior Subordinated Notes, interest payable semi-annually                                                                                                                   |  |               
|103/4% Senior Notes, interest payable semi-annually                                                                                                                            |  |               
|Receivables securitization, interest payable at 2.2% and 2.6% at December 31, 2002 and 2001, respectively                                                                      |  |               
|Other debt, including capital leases, interest payable at various rates ranging from 5.5% to 10% and 5.3% to 10% at December 31,
2002 and 2001, respectively, due through 2005 |  |               
|                                                                                                                                                                               |  |               
|                                                                                                                                                                               |  | $             
|                                                                                                                                                                               |  |               



Refinancing
Transaction in 2002.    On December 24, 2002, URI issued an additional $210.0 million aggregate principal amount of its 103/4% Senior Notes (the new 103/4% Notes) which are due April 15, 2008 for approximately $203.8 million. The net proceeds from the sale of the new 103/4% Notes were approximately $199.4 million (after deducting the initial
purchasers discount and offering expenses). The new 103/4% Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URIs domestic subsidiaries. The new 103/4% Notes mature on April 15, 2008 and may be redeemed by URI on or after April 15, 2005, at specified redemption prices that range from 105.375% in 2005 to 100.0% in 2007 and thereafter. In addition, on or prior to April 15, 2004, URI
may, at its option, use the proceeds of a public equity offering to redeem up to 35% of the outstanding new 103/4% Notes at a redemption price of 110.75%. The indenture governing the new 103/4% Notes
contains certain restrictive covenants, including limitations on (i) additional indebtedness, (ii) restricted payments, (iii) liens, (iv) dividends and other payments, (v) preferred stock of certain subsidiaries, (vi) transactions with affiliates,
(vii) the disposition of proceeds of asset sales and (viii) the Companys ability to consolidate, merge or sell all or substantially all of its assets. The Company used the net proceeds from the new 103/4% Notes to
(i) permanently repay approximately $99.7 million of outstanding indebtedness under the Companys existing term loan and (ii) repay approximately $99.7 million of outstanding borrowings under the revolving credit facility. As a result of the
refinancing, the Company recorded in other (income) expense a charge of approximately $1.6 million ($0.9 million, net of tax) related to the write-off of financing fees.



In September and December 2002, the Company entered into amendments to the
agreement governing its revolving credit facility and term loan. These amendments, among other things, (i) increased the aggregate amount of the credit facility that is available in the form of letters of credit, (ii) reduced the minimum interest
coverage ratio that the Company is required to maintain for the period July 1, 2002 through December 31, 2004, (iii) changed certain definitions for purposes of measuring the Companys compliance with its financial covenants under the credit
agreement and (iv) reduced the maximum borrowings available under the Companys revolving credit facility by $100.0 million.



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Refinancing Transaction in 2001.    In April 2001, the Company obtained a
new senior secured credit facility and issued $450.0 million in 103/4% senior notes. The senior secured credit facility is comprised of a revolving credit facility and a term loan. The proceeds from the senior secured credit
facility and senior notes were used to refinance outstanding secured indebtedness of approximately $1,664.5 million and obligations under a synthetic lease of $31.2 million. As a result of the refinancing, the Company recorded an extraordinary
charge of approximately $18.1 million ($11.3 million, net of tax), primarily related to the write-off of financing fees, and a charge of approximately $7.8 million recorded in other (income) expense, net related to refinancing costs of the synthetic
lease.



Revolving Credit
Facility.    The revolving credit facility enables URI to borrow up to $650 million on a revolving basis and enables one of its Canadian subsidiaries to borrow up to $50 million (provided that the aggregate borrowings of URI
and the Canadian subsidiary may not exceed $650 million). Up to $175 million of the revolving credit facility is available in the form of letters of credit ($111.6 million outstanding as of December 31, 2002). The revolving credit facility will
mature and terminate on October 20, 2006.



As of December 31,
2002, borrowings under the revolving credit facility accrue interest, at the Companys option, at either (A) the ABR Rate (which is equal to the greater of (i) the Federal Funds Rate plus0.5% or (ii) the Chase Manhattan Banks
prime rate) plus a margin of 1.50% or (B) an adjusted LIBOR rate plus a margin of 2.50%. The above interest rate margins are adjusted quarterly based on the Companys financial leverage ratio, up to maximum margins of 1.75% and 2.75%, for
revolving loans based on the ABR rate and the adjusted LIBOR rate, respectively, and down to minimum margins of 0.75% and 1.75%, for revolving loans based on the ABR rate and the adjusted LIBOR rate, respectively.



As of December 31, 2002, borrowings by the Canadian subsidiary under the
revolving credit facility accrue interest, at such subsidiarys option, at either (X) the Prime rate (which is equal to the Chase Manhattan Bank of Canadas prime rate) plus a margin of 1.50% or (Y) the B/A rate (which is equal to the
Chase Manhattan Bank of Canadas B/A rate) plus a margin of 2.50%. The above interest rate margins are adjusted quarterly based on the Companys financial leverage ratio, up to maximum margins of 1.75% and 2.75%, for revolving loans based
on the Prime rate and the B/A rate, respectively, and down to minimum margins of 0.75% and 1.75%, for revolving loans based on the Prime rate and the B/A rate, respectively. If at any time an event of default exists, the interest rate applicable to
each loan will increase by 2% per annum.



The Company is also
required to pay the lenders a commitment fee equal to 0.5% per annum in respect of undrawn commitments under the revolving credit facility.



Term Loan.    On April 20, 2001, URI obtained a $750 million term loan. Amounts repaid in respect of the term loan may not be
reborrowed. URI must repay the principal of the term loan in installments. After giving effect to the prepayment of approximately $99.7 million of the term loan described above, remaining principal installments are: (i) on December 31, 2006, URI
must repay approximately $107.5 million and (ii) on the last day of each calendar quarter thereafter up to and including September 30, 2007, URI must repay approximately $177.2 million.



Borrowings under the term loan accrue interest, at URIs option, at either (a) the ABR rate (which is equal to the
greater of (i) the Federal Funds Rate plus 0.5% or (ii) the Chase Manhattan Banks prime rate) plus a margin of 2.0%, or (b) an adjusted LIBOR rate plus a margin of 3.0%.



Covenants.    The agreements governing the senior secured credit facility contain certain
covenants that require the Company to, among other things, satisfy certain financial tests relating to: (a) the ratio of senior debt



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



to cash flow, (b) minimum interest coverage ratio, (c) the ratio of funded debt to cash flow, and (d) the ratio of senior debt to tangible assets. These
agreements also contain various other covenants that restrict the Companys ability to, among other things, (i) incur additional indebtedness, (ii) permit liens to attach to its assets, (iii) pay dividends or make other restricted payments on
its common stock and certain other securities, and (iv) make acquisitions unless certain financial conditions are satisfied.



Guarantees and Security.    URIs obligations under the senior secured facility are, subject to limited exceptions, (i)
guaranteed by Holdings and URIs United States subsidiaries and (ii) secured by substantially all of URIs assets, the stock of URI and the stock of Holdings other United States subsidiaries and a portion of the stock of
Holdings Canadian subsidiaries. The obligations of the Canadian subsidiary that may borrow under the revolving credit facility are guaranteed by the Companys other Canadian subsidiaries and are secured by substantially all of the assets
of this Canadian subsidiary and the stock of its subsidiaries.



103/4% Senior Notes.In April 2001, URI issued $450 million aggregate principal amount of 103/4% Senior Notes (the 103/4% Notes) which are due April 15, 2008. The net proceeds
from the sale of the 103/4% Notes were approximately $439.9 million (after deducting the initial
purchasers discount and offering expenses). The 103/4% Notes are unsecured and are guaranteed by Holdings
and, subject to limited exceptions, URIs domestic subsidiaries. The 103/4% Notes mature on April 15, 2008
and may be redeemed by URI on or after April 15, 2005, at specified redemption prices that range from 105.375% in 2005 to 100.0% in 2007 and thereafter. In addition, on or prior to April 15, 2004, URI may, at its option, use the proceeds of a public
equity offering to redeem up to 35% of the outstanding 103/4% Notes at a redemption price of 110.75%. The
indenture governing the 103/4% Notes contains certain restrictive covenants, including limitations on (i)
additional indebtedness, (ii) restricted payments, (iii) liens, (iv) dividends and other payments, (v) preferred stock of certain subsidiaries, (vi) transactions with affiliates, (vii) the disposition of proceeds of asset sales and (viii) the
Companys ability to consolidate, merge or sell all or substantially all of its assets. The amounts shown for the 103/4% Notes in the debt table above include the amount outstanding from the issuance of the new 103/4% Notes.



Senior Subordinated Notes.    The senior subordinated notes shown in the debt table above were issued by URI, are unsecured, and are guaranteed by, subject to limited exceptions, URIs
domestic subsidiaries. The 91/2% Senior Subordinated Notes mature on June 1, 2008 and may be redeemed by URI on or after June 1, 2003, at specified redemption prices that range from 104.75% in 2003 to 100.0%
in 2006 and thereafter. The 8.80% Senior Subordinated Notes mature on August 15, 2008 and may be redeemed by URI on or after August 15, 2003, at specified redemption prices that range from 104.4% in 2003 to 100.0% in 2006 and thereafter. The
91/4% Senior Subordinated Notes mature on January 15, 2009 and may be redeemed by URI on or after June 15, 2004, at specified redemption prices that range from 104.625% in 2004 to 100.0% in 2007 and thereafter. The 9% Senior
Subordinated Notes mature on April 1, 2009 and may be redeemed by URI on or after April 1, 2004, at specified redemption prices that range from 104.5% in 2004 to 100.0% in 2007 and thereafter.



The indentures governing URIs senior subordinated notes contain certain
restrictive covenants, including limitations on (i) additional indebtedness, (ii) restricted payments, (iii) liens, (iv) dividends and other payments, (v) preferred stock of certain subsidiaries, (vi) transactions with affiliates, (vii) the
disposition of proceeds of asset sales, and (viii) the Companys ability to consolidate, merge or sell all or substantially all of its assets.



Receivables Securitization.    The Company has an accounts receivable securitization facility under which one of its
subsidiaries can borrow up to $250 million against a collateral pool of accounts receivable. The borrowings under the facility and the receivables in the collateral pool are included in the liabilities and assets, respectively, reflected on the
Companys consolidated balance sheet. Key terms of this facility include: (i) borrowings may be made only to the extent that the face amount of the receivables in the collateral pool exceeds the outstanding loans by a specified amount, (ii) the
facility is structured so that the receivables in the collateral



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pool are the lenders only source of repayment, (iii) prior to expiration or early termination of the facility, amounts collected on the receivables
may, subject to certain conditions, be retained by the borrower, provided that the remaining receivables in the collateral pool are sufficient to secure the then outstanding borrowings, and (iv) after expiration or early termination of the facility,
the Company will repay the borrowings.



As of December 31,
2002, (i) the outstanding borrowings under the facility were approximately $160.5 million and (ii) the aggregate face amount of the receivables in the collateral pool was approximately $346.8 million. The agreement governing this facility, which was
amended in June 2001, contemplates that the term of the facility may extend for up to three years from the date of the amended facility. However, on each anniversary of such date, the consent of the lender is required for the facility to renew for
the next year. The next anniversary date is in June 2003. The Company plans to seek the lenders approval for renewal. However, the Company cannot be certain it will be able to obtain such renewal with comparable terms or at all.



Interest Rate Swap Agreements.    As of December
31, 2002, the Company had outstanding interest rate swap agreements that convert $200 million of its variable rate term loan to a fixed rate instrument through 2003. These swap agreements are designated as cash flow hedges. Changes in the fair
values of the Companys cash flow hedges are recorded in other comprehensive income and reclassified into earnings in the same periods during which the hedged transactions affect earnings. The Company also had outstanding interest rate swap
agreements that convert $300 million of its fixed rate 91/4% Notes to a floating rate instrument through 2009. These swap agreements are designated as fair value hedges. Changes in the fair values of the
Companys fair value hedges, as well as the offsetting fair value changes in the hedged items, are recorded on the statement of operations. The Company estimates the amount that will be reclassified into earnings in 2003 is approximately $2.1
million. There is no ineffectiveness related to the Companys hedges.



Maturities.    Maturities of the Companys debt for each of the next five years at December 31, 2002 are as follows (in thousands):



|2003       |  | $ | 183,419  
|---------- |  | - | ---------
|2004       |  |   | 26,554   
|2005       |  |   | 6,068    
|2006       |  |   | 152,802  
|2007       |  |   | 531,563  
|Thereafter |  |   | 1,612,392



The maturities in 2003
are comprised primarily of amounts outstanding under the accounts receivable securitization facility. As described above, the annual renewal of the Companys accounts receivable securitization facility requires the lenders consent. If the
Company does not obtain this consent, then the facility will terminate in June 2003 and the Company will repay the borrowings thereunder.



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10.    Income Taxes



The provision for federal, state and provincial income taxes is as follows:



|                    |  | Year ended December 31
|------------------- |  | ----------------------
|                    |  | 2002                  
|                    |  | (In thousands)        
|Domestic federal:   |  |                       
|Current             |  |                       
|Deferred            |  | $                     
|                    |  |                       
|                    |  |                       
|Domestic state:     |  |                       
|Current             |  |                       
|Deferred            |  |                       
|                    |  |                       
|                    |  |                       
|                    |  |                       
|Total domestic      |  |                       
|Foreign federal:    |  |                       
|Current             |  |                       
|Deferred            |  |                       
|                    |  |                       
|                    |  |                       
|Foreign provincial: |  |                       
|Current             |  |                       
|Deferred            |  |                       
|                    |  |                       
|                    |  |                       
|                    |  |                       
|Total foreign       |  |                       
|                    |  |                       
|                    |  | $                     
|                    |  |                       



A reconciliation of
the provision for income taxes and the amount computed by applying the statutory federal income tax rate of 35% to income before provision for income taxes and extraordinary item is as follows:



|                                               |  | Year ended December 31
|---------------------------------------------- |  | ----------------------
|                                               |  | 2002                  
|                                               |  | (In thousands)        
|Computed tax at statutory tax rate             |  | $                     
|State income taxes, net of federal tax benefit |  |                       
|Non-deductible expenses                        |  |                       
|Other                                          |  |                       
|                                               |  |                       
|                                               |  | $                     
|                                               |  |                       



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The components of deferred income tax assets (liabilities) are as follows:



|                                            |  | December 31    |         
|------------------------------------------- |  | -------------- | --------
|                                            |  | 2002           |         
|                                            |  | (In thousands) |         
|Property and equipment                      |  | $              | (539,431
|Intangibles                                 |  |                | 32,799  
|Reserves and allowances                     |  |                | 57,057  
|Net operating loss and credit carryforwards |  |                | 221,905 
|Other                                       |  |                | 2,083   
|                                            |  |                |         
|                                            |  | $              | (225,587
|                                            |  |                |         



The current and
deferred tax assets and liabilities at December 31, 2002 include the effects of certain reclassifications related to differences between the income tax provisions and tax returns for prior years. These reclassifications had no effect on net income.



For financial reporting purposes, income before income taxes
and extraordinary items for the Companys foreign subsidiaries was $9.2 million, $8.6 million and $15.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001, unremitted earnings (deficit) of
foreign subsidiaries were approximately $(1.7) million and $27.6 million, respectively. Since it is the Companys intention to indefinitely reinvest these earnings, no United States taxes have been provided. Determination of the amount of
unrecognized deferred tax liability on these unremitted taxes is not practicable.



The Company has net operating loss carryforwards (NOLs) of $564.2 million for federal income tax purposes that expire through 2022.



|11. |  | Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of a Subsidiary Trust and Series A, B, C and D Preferred Stock
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------



Trust Securities.    In August 1998, a subsidiary
trust (the Trust) of Holdings issued and sold in a private offering (the Preferred Securities Offering) $300.0 million of 30 year, 61/2% Convertible Quarterly Income Preferred Securities (the
Preferred Securities). The Trust used the proceeds from the Preferred Securities Offering to purchase 61/2% convertible subordinated debentures due 2028 (the Debentures) from Holdings
which resulted in Holdings receiving all of the net proceeds of the Preferred Securities Offering. Holdings in turn contributed the net proceeds of the Preferred Securities Offering to URI. The Preferred Securities are non-voting securities, carry a
liquidation value of $50 per security and are convertible into the Companys common stock at an initial rate of 1.146 shares per security (equivalent to an initial conversion price of $43.63 per share). They are convertible at any time at the
holders option and are redeemable, at the Companys option, after three years, subject to certain conditions.



Holders of the Preferred Securities are entitled to preferential cumulative cash distributions from the Trust at an annual rate of 61/2% of the liquidation value, accruing from the original issue date and payable quarterly in arrears beginning February 1, 1999. The distribution rate and dates correspond to the interest rate and payment dates on the Debentures.
Holdings may defer interest payments on the Debentures for up to twenty consecutive quarters, but not beyond the maturity date of the Debentures. If interest payments on the Debentures are deferred, so are the payments on the Preferred Securities.
Under this circumstance, Holdings will be prohibited from paying dividends on any of its capital stock or making payments with respect to its debt that rank pari passu with or junior to the Debentures.



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Holdings has executed a guarantee with regard to payment of the Preferred Securities to the extent
that the Trust has sufficient funds to make the required payments.



Series A Preferred and Series B Preferred.    The Company sold 300,000 shares of its Series A Preferred on January 7, 1999 and sold 150,000 shares of its Series B Preferred on September 30, 1999. On September 28,
2001, the Company entered into an agreement effecting (a) the exchange of the outstanding Series A Preferred for an equal number of shares of Series C Preferred and (b) the exchange of the outstanding Series B Preferred for an equal number of shares
of Series D Preferred.



Series C Preferred and Series D
Preferred.    There are 300,000 shares of the Companys Series C Preferred outstanding and 150,000 shares of the Companys Series D Preferred outstanding. The Series D Preferred includes 105,252 shares designated as
Class D-1 and 44,748 shares designated as Class D-2. The rights of the two classes of Series D Preferred are substantially the same, except that only the Class D-1 has the voting rights described below.



Principal terms of the Series C Preferred and Series D Preferred include the
following (subject to the special provisions described below that will apply in the event of certain Non-Approved Change of Control transactions): (i) each share is entitled to a liquidation preference of $1,000 per share; (ii) at holders
option, each share of Series C Preferred is convertible into 40 shares of common stock subject to adjustment (representing a conversion price of $25 per share based on the liquidation preference) and each share of Series D Preferred is convertible
into 331/3shares of common stock subject to adjustment (representing a conversion price of $30 per share based on the liquidation preference); (iii) the holders of the Series C Preferred and Series D Preferred
(on an as converted basis) and the holders of the common stock vote together as a single class on all matters (except that the Series C Preferred may vote as a separate class as described in the next clause); (iv) the holders of the Series C
Preferred, voting separately as a single class, may elect two directors (subject to reduction to one, if the shares of Series C Preferred owned by specified holders cease to represent, on an as converted basis, at least eight million shares of
common stock, and reduction to zero, if such shares of Series C Preferred cease to represent at least four million shares of common stock), (v) there are no stated dividends on the Series C Preferred or Series D Preferred, but the Series C Preferred
and Series D Preferred, on an as converted basis, will participate in any dividends declared on the common stock, (vi) upon the occurrence of specified change of control transactions, other than a Non-Approved Change of Control (as defined below),
the Company must offer to redeem the Series C Preferred and Series D Preferred at a price per share equal to the liquidation preference plus an amount equal to 6.25% of the liquidation preference compounded annually from the date of the issuance of
the Series A Preferred, in the case of the Series C Preferred, and the date of the issuance of the Series B Preferred, in the case of the Series D Preferred, to the redemption date, (vii) if the Company issues for cash common stock (or a series of
preferred stock convertible into common stock) and the price for the common stock is below the conversion price of the Series C Preferred, then the Company must offer to repurchase a specified portion of the outstanding Series C Preferred at the
price per share set forth in the preceding clause, and (viii) if the Company issues for cash common stock (or a series of preferred stock convertible into common stock) for a price for the common stock below the conversion price of the Series D
Preferred, then the Company must offer to repurchase a specified portion of the outstanding Series D Preferred at the price per share specified in the second preceding clause.



Special Rights of Series C Preferred and Series D Preferred Upon Non-Approved Change of
Control.    In general, a Non-Approved Change of Control transaction is a change of control transaction that the Board of Directors (the Board) has disapproved and which the Board has not facilitated by such
actions as weakening or eliminating the Companys Stockholder Rights Plan. If a Non-Approved Change of Control occurs, and the Board does not offer the holders of the Series C Preferred and Series D Preferred essentially the same redemption



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



rights that apply to an Approved Change of Control transaction: (i) the holders of the Series C Preferred would elect a majority of the Board for a specified
period, (ii) the holders of the Series C Preferred and Series D Preferred would be entitled to an additional 6.25% return on the liquidation preference, compounded annually from January 1999 for the Series C Preferred and from September 1999 for the
Series D Preferred, (iii) after the holders of the common stock receive an amount equivalent to the liquidation preference, the holders of the Series C Preferred and Series D Preferred would share with the holders of the common stock, on an as
converted basis, in any remaining amounts available for distribution, and (iv) the Series C Preferred and Series D Preferred would accrue dividends at a maximum annual rate, compounded annually, equal to 18% of the liquidation preference.



12.    Capital Stock



Warrants.    As of December 31, 2002 there are
outstanding warrants to purchase an aggregate of 7,144,298 shares of common stock. The weighted average exercise price of the warrants is $11.76 per share. The warrants may be exercised through 2011 and there were 7,116,930 warrants exercisable as
of December 31, 2002.



Common
Stock.    The Company has a share repurchase program to acquire up to $200 million of its issued and outstanding common stock. Share repurchases under the program may be made from time to time, subject to certain restrictions
under the Companys credit agreements, continuing through May 2003. The Company repurchased and retired 1,066,641 and 1,350,600 shares of common stock during 2002 and 2001, respectively.



2001 Senior Stock Plan.    In June 2001, the
Companys shareholders approved the adoption of the 2001 Senior Stock Plan. This plan provides for the awarding of common stock and other equity-linked awards to our officers and directors. The maximum number of shares of common stock that can
be issued under the plan is 4,000,000. The Company records each share that is awarded under this plan at an amount not less than 100% of the fair market value per share at the date of the award. No shares may be awarded under this plan after June 5,
2011. As of December 31, 2002, 2,026,592 shares had been awarded under this plan at a weighted-average price of $23.79 per share with vesting periods up to ten years. Determinations concerning the persons to receive awards, the form, amount and
timing of such awards and terms and provisions of such awards are made by the Board (or a committee appointed by the Board).



2001 Stock Plan.    In March 2001, the Company adopted the 2001 Stock Plan. This plan provides for the awarding of common stock
and other equity-linked awards to certain employees (other than officers and directors) and others who render services to the Company. The maximum number of shares of common stock that can be issued under the plan is 2,000,000. The Company records
each share that is awarded under this plan at an amount not less than 100% of the fair market value per share at the date of the award. No shares may be awarded under this plan after March 23, 2011. As of December 31, 2002, 1,370,837 shares had been
awarded under this plan at a weighted-average price of $17.14 per share with vesting periods up to three years. Determinations concerning the persons to receive awards, the form, amount and timing of such awards and terms and provisions of such
awards are made by the Board (or a committee appointed by the Board).



The Company records the issuance of common shares at the quoted market price on the date of the grants. Amortization of deferred compensation is then recognized on a straight-line basis over the related vesting period. Amortization expense
recognized for the years ended December 31, 2002 and 2001 for the awards of the above stock plans was approximately $11.4 million and $6.2 million, respectively.



1997 Stock Option Plan.    The Companys 1997 Stock Option Plan provides for the granting of
options to purchase not more than an aggregate of 5,000,000 shares of common stock. Some or all of such options may be incentive stock options within the meaning of the Internal Revenue Code. All officers, directors and employees



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



of the Company and other persons who perform services on behalf of the Company are eligible to participate in this plan. Each option granted pursuant to this
plan must provide for an exercise price per share that is at least equal to the fair market value per share of common stock on the date of grant. No options may be granted under this plan after August 31, 2007. As of December 31, 2002 and 2001,
options to purchase an aggregate of 4,033,030 shares and 4,845,783 shares of common stock, respectively, were outstanding under this plan. The exercise price of each option, the period during which each option may be exercised and other terms and
conditions of each option are determined by the Board (or by a committee appointed by the Board).



1998 Stock Option Plan.    The Companys 1998 Stock Option Plan provides for the granting of options to purchase not more
than an aggregate of 4,200,000 shares of common stock. Some or all of the options issued under the 1998 Stock Option Plan may be incentive stock options within the meaning of the Internal Revenue Code. All officers and directors of the
Company and its subsidiaries are eligible to participate in the 1998 Stock Option Plan. Each option granted pursuant to the 1998 Stock Option Plan must provide for an exercise price per share that is at least equal to the fair market value per share
of common stock on the date of grant. No options may be granted under the 1998 Stock Option Plan after August 20, 2008. As of December 31, 2002 and 2001, options to purchase an aggregate of 2,250,000 shares and 3,686,667 shares of common stock,
respectively, were outstanding pursuant to this plan to executive officers and directors. The exercise price of each option, the period during which each option may be exercised and other terms and conditions of each option are determined by the
Board (or by a committee appointed by the Board).



1998
Supplemental Stock Option Plan.    The Company has adopted a stock option plan pursuant to which options, for up to an aggregate of 5,600,000 shares of common stock, may be granted to employees who are not officers or
directors and to consultants and independent contractors who perform services for the Company or its subsidiaries. As of December 31, 2002 and 2001, options to purchase an aggregate of 4,752,565 shares and 5,342,097 shares of common stock,
respectively, were outstanding pursuant to this plan. The exercise price of each option, the period during which each option may be exercised and other terms and conditions of each option are determined by the Board (or by a committee appointed by
the Board).



1997 Performance Award
Plan.    Effective February 20, 1997, U.S. Rentals adopted the 1997 Performance Award Plan under which stock options and other awards could be granted to key employees and directors at prices and terms established by U.S.
Rentals at the date of grant. The options expire in 2007. As a result of the merger, all outstanding options to purchase shares of U.S. Rentals common stock became fully vested and were converted into options to purchase the Companys common
stock. As of December 31, 2002 and 2001, options to purchase an aggregate of 1,561,123 shares and 2,547,467 shares of common stock, respectively, were outstanding pursuant to this plan.



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



A summary of the transactions within the Companys stock option plans follows:



|                                 |  | Shares     |   |  | Weighted AverageExercise Price
|-------------------------------- |  | ---------- | - |  | ------------------------------
|Outstanding at December 31, 1999 |  | 15,653,242 |   |  |                               
|Granted                          |  | 1,921,125  |   |  |                               
|Exercised                        |  | (26,307    | ) |  |                               
|Canceled                         |  | (451,965   | ) |  |                               
|                                 |  |            |   |  |                               
|Outstanding at December 31, 2000 |  | 17,096,095 |   |  |                               
|Granted                          |  | 633,400    |   |  |                               
|Exercised                        |  | (715,143   | ) |  |                               
|Canceled                         |  | (592,338   | ) |  |                               
|                                 |  |            |   |  |                               
|Outstanding at December 31, 2001 |  | 16,422,014 |   |  |                               
|Granted                          |  | 722,550    |   |  |                               
|Exercised                        |  | (3,735,666 | ) |  |                               
|Canceled                         |  | (812,180   | ) |  |                               
|                                 |  |            |   |  |                               
|Outstanding at December 31, 2002 |  | 12,596,718 |   |  | $                             
|                                 |  |            |   |  |                               
|Exercisable at December 31, 2002 |  | 10,693,526 |   |  | $                             
|                                 |  |            |   |  |                               



|                         |  | Options Outstanding |  | Options Exercisable                     
|------------------------ |  | ------------------- |  | ----------------------------------------
|Range of Exercise Prices |  | AmountOutstanding   |  | WeightedAverageRemainingContractual Life
|$10.00-$15.00            |  | 3,237,029           |  | 6.6 years                               
|15.01-20.00              |  | 1,807,765           |  | 7.4 years                               
|20.01-25.00              |  | 5,285,578           |  | 5.3 years                               
|25.01-30.00              |  | 1,176,597           |  | 6.3 years                               
|30.01-50.00              |  | 1,089,749           |  | 5.7 years                               
|                         |  |                     |  |                                         
|                         |  | 12,596,718          |  | 6.1 years                               
|                         |  |                     |  |                                         



At December 31, 2002
there are (i) 7,144,298 shares of common stock reserved for the exercise of warrants, (ii) 12,596,718 shares of common stock reserved for issuance pursuant to options granted and that may be granted in the future under the Companys stock
option plans, (iii) 5,192,526 shares of common stock reserved for the issuance of outstanding preferred securities of a subsidiary trust, (iv) 17,000,000 shares of common stock reserved for the issuance of Series C and Series D preferred stock, and
(v) 203,495 shares of common stock reserved for the conversion of convertible debt.



Stockholders Rights Plan.    The Company adopted a Stockholders Rights Plan on September 28, 2001 (with a record date of October 19, 2001). This plan and other provisions of the
Companys charter and bylaws may have the effect of deferring hostile takeovers or delaying or preventing changes in control or management of the Company, including transactions in which the shareholders of the Company might otherwise receive a
premium for their shares over then current market prices. The rights expire on September 27, 2011.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



13.    Comprehensive Income



The following table sets forth the components of the Companys accumulated other comprehensive income (loss):



|                             |  | Foreign Currency Translation Adjustments |         |   | Derivatives Qualifying as Hedges |   |        | Accumulated Other Comprehensive Income/(Loss) | 
|---------------------------- |  | ---------------------------------------- | ------- | - | -------------------------------- | - | ------ | --------------------------------------------- | 
|Balance at December 31, 1999 |  | $                                        | 317     |   |                                  |   |        |                                               | 
|2000 activity                |  |                                          | (7,264  | ) |                                  |   |        |                                               | 
|                             |  |                                          |         |   |                                  |   |        |                                               | 
|Balance at December 31, 2000 |  |                                          | (6,947  | ) |                                  |   |        |                                               | 
|2001 activity                |  |                                          | (16,137 | ) |                                  | $ | (7,043 | )                                             | 
|                             |  |                                          |         |   |                                  |   |        |                                               | 
|Balance at December 31, 2001 |  |                                          | (23,084 | ) |                                  |   | (7,043 | )                                             | 
|2002 activity                |  |                                          | 2,484   |   |                                  |   | 795    |                                               | 
|                             |  |                                          |         |   |                                  |   |        |                                               | 
|Balance at December 31, 2002 |  | $                                        | (20,600 | ) |                                  | $ | (6,248 | )                                             | 
|                             |  |                                          |         |   |                                  |   |        |                                               | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



14.    Earnings Per Share



The following table sets forth the computation of basic and diluted earnings per share:



|                                                                                                                                 |  | Year Ended December 31                         
|-------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------
|                                                                                                                                 |  | (Restated) 2002                                
|                                                                                                                                 |  | (In thousands, except share and per share data)
|Numerator:                                                                                                                       |  |                                                
|Income (loss) before extraordinary item and cumulative effect of change in accounting principle                                  |  | $                                              
|Plus:                                                                                                                            |  |                                                
|Preferred dividends of a subsidiary trust, net of taxes                                                                          |  |                                                
|Liquidation preference in excess of amounts paid for convertible preferred securities                                            |  |                                                
|                                                                                                                                 |  |                                                
|Income (loss) available to common stockholders                                                                                   |  | $                                              
|                                                                                                                                 |  |                                                
|                                                                                                                                 |  |                                                
|Denominator:                                                                                                                     |  |                                                
|Denominator for basic earnings per share-weighted-average shares                                                                 |  |                                                
|Effect of dilutive securities:                                                                                                   |  |                                                
|Employee stock options                                                                                                           |  |                                                
|Warrants                                                                                                                         |  |                                                
|Series A Preferred                                                                                                               |  |                                                
|Series B Preferred                                                                                                               |  |                                                
|Series C Preferred                                                                                                               |  |                                                
|Series D Preferred                                                                                                               |  |                                                
|Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust                                  |  |                                                
|                                                                                                                                 |  |                                                
|Denominator for dilutive earnings per shareadjusted weighted-average shares                                                     |  |                                                
|                                                                                                                                 |  |                                                
|                                                                                                                                 |  |                                                
|Earnings (loss) per share-basic:                                                                                                 |  |                                                
|Income (loss) available to common stockholders before extraordinary item and cumulative effect of change in accounting
principle |  | $                                              
|Extraordinary item, net                                                                                                          |  |                                                
|Cumulative effect of change in accounting principle, net                                                                         |  |                                                
|                                                                                                                                 |  |                                                
|Income (loss) available to common stockholders                                                                                   |  | $                                              
|                                                                                                                                 |  |                                                
|                                                                                                                                 |  |                                                
|Earnings (loss) per share-diluted:                                                                                               |  |                                                
|Income (loss) available to common stockholders before extraordinary item and cumulative effect of change in accounting
principle |  | $                                              
|Extraordinary item, net                                                                                                          |  |                                                
|Cumulative effect of change in accounting principle, net                                                                         |  |                                                
|                                                                                                                                 |  |                                                
|Income (loss) available to common stockholders                                                                                   |  | $                                              
|                                                                                                                                 |  |                                                



During the first and
fourth quarters of 2002, the Company repurchased a total of 1,469,000 shares of its 61/2% Convertible Quarterly
Income Preferred Securities for aggregate consideration of approximately $38.1 million. These transactions resulted in an aggregate gain of approximately $35.3 million. In the Companys



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



original Form 10-K, the repurchase transactions were appropriately reflected on the consolidated statement of stockholders equity. However, the Company
did not reflect the gain associated with these transactions in the earnings (loss) per share calculation. The Company has recently become aware that applicable accounting standards require that such gain be reflected in the calculation of earnings
(loss) per share and, accordingly, the Company has restated its consolidated financial statements to do so. This restatement reduced the Companys 2002 loss per share by $0.47 from $5.25 to $4.78. Other than the change to the earnings (loss)
per share calculation, there are no other changes to the Companys consolidated statement of operations, consolidated balance sheet, consolidated statement of stockholders equity or consolidated statement of cash flows.



The diluted share base for years where the numerator represents a loss
excludes incremental weighted shares for the above-captioned -Effect of dilutive securities due to their antidilutive effect.



15.    Commitments and Contingencies



Operating Leases



The Company leases rental equipment, real estate and certain office equipment under operating leases. Certain real estate leases require the Company to
pay maintenance, insurance, taxes and certain other expenses in addition to the stated rentals. Future minimum lease payments, by year and in the aggregate, for non-cancelable operating leases with initial or remaining terms of one year or more are
as follows at December 31, 2002:



|           |  | RealEstateLeases |         | RentalEquipmentLeases |   | OtherEquipmentLeases
|---------- |  | ---------------- | ------- | --------------------- | - | --------------------
|           |  | (In thousands)  
|2003       |  | $                | 68,068  |                       | $ | 110,642             
|2004       |  |                  | 63,613  |                       |   | 88,189              
|2005       |  |                  | 55,650  |                       |   | 82,325              
|2006       |  |                  | 50,574  |                       |   | 246,719             
|2007       |  |                  | 46,383  |                       |   | 39,927              
|Thereafter |  |                  | 108,093 |                       |   |                     
|           |  |                  |         |                       |   |                     
|           |  | $                | 392,381 |                       | $ | 567,802             
|           |  |                  |         |                       |   |                     



As part of certain of
its equipment operating leases, the Company guarantees that the value of the equipment at the end of the lease term will not be less than a specified projected residual value. The use of these guarantees helps to lower the Companys monthly
operating lease payments. The Company believes that the projected residual values are reasonable and, accordingly, that it is not likely to incur material obligations pursuant to such guarantees. However, the Company cannot be certain that the
actual residual values will not turn out to be significantly below the projected values that the Company guaranteed. The Companys maximum potential liability under these guarantees is $231.6 million, which represents the aggregate amount that
it would be required to pay if the residual value was zero for all equipment subject to such guarantees. In conformity with applicable accounting standards, this potential liability is not recorded on the Companys balance sheet.



The Company was the seller-lessee in sale-leaseback transactions with
unrelated third parties in which it sold rental equipment for aggregate proceeds of $3.4 million in 2002, rental equipment and real estate for aggregate proceeds of $51.0 million in 2001, and rental equipment for aggregate proceeds of $218.8 million
in 2000. For the 2002 transactions, the Company leased back the rental equipment for a minor period of one to eight months. For the 2001 transactions, the Company leased back the real estate over a 10-year period and the rental equipment for a minor
period of one to eight months. For the 2000 transactions, the Company leased back a portion of the rental equipment for a minor period of one to eight months, and the balance over a five-year period. The total gains related to these transactions in
2002, 2001, and 2000 were, respectively, approximately $1.5 million of which none was deferred, $21.6 million of which $1.4 million was deferred, and approximately



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



$16.5 million of which $4.0 million was deferred. The deferred gains are amortized over the respective lease periods on a straight-line basis.



Rent expense under all non-cancelable real estate, rental equipment and other
equipment operating leases totaled $185.0 million, $170.9 million, and $137.3 million for the years ended December 31, 2002, 2001, and 2000, respectively. The Companys real estate leases provide for varying terms, including leases subject to
customary escalation clauses, and include 43 leases that are on a month-to-month basis and 36 leases that provide for a remaining term of less than one year and do not provide a renewal option.



Restricted Stock Awards



The Company has granted to employees other than executive officers and directors approximately 1,165,000 shares of
restricted stock that contain the following provisions. The shares vest in 2004, 2005 or 2006 or earlier upon a change in control of the Company, death, disability, retirement or certain terminations of employment, and are subject to forfeiture
prior to vesting on certain other terminations of employment, the violation of non-compete provisions and certain other events. The grants provide that the Company will pay to employees who vest in their restricted stock, and who sell their
restricted stock within five trading days after vesting, a maximum aggregate amount for all these employees of approximately $300,000 for each dollar by which the per share proceeds of these sales are less than $27.26 but more than $15.17, a maximum
aggregate amount for all these employees of approximately $500,000 for each dollar by which the per share proceeds of these sales are less than $15.17 but more than $9.18, and a maximum aggregate amount for all these employees of approximately
$1,165,000 for each dollar by which the per share proceeds of these sales are less than $9.18.



Employee Benefit Plans



The Company currently sponsors one defined contribution 401(k) retirement plan which is subject to the provisions of ERISA. The Company also sponsors a deferred profit sharing plan for the benefit of the full-time employees of its Canadian
subsidiaries. Under these plans, the Company matches a percentage of the participants contributions up to a specified amount. Company contributions to the plans were $5.2 million, $6.0 million, and $6.2 million for the years ended December 31,
2002, 2001, and 2000, respectively.



Legal and Insurance Matters



The Company is party to legal proceedings and potential
claims arising in the ordinary course of its business. In the opinion of management, the Company has adequate legal defenses, reserves, or insurance coverage with respect to these matters so that the ultimate resolution will not have a material
adverse effect on the Companys financial position, results of operations, or cash flows. The Company had accrued $22.2 million and $28.3 million at December 31, 2002 and 2001, respectively, to cover the uninsured portion of estimated costs
arising from these pending claims and other potential unasserted claims.



Environmental Matters



The Company and its
operations are subject to various laws and related regulations governing environmental matters. Under such laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located
on or in, or emanating from, such property, as well as investigation of property damage. The Company incurs ongoing expenses associated with the removal of underground storage tanks and the performance of appropriate remediation at certain of its
locations. The Company believes that such removal and remediation will not have a material adverse effect on the Companys financial position, results of operations, or cash flows.



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



16.    Segment Information



Each of the Companys branch locations is an operating segment which consists of the rental and sales of equipment and
related merchandise and parts. Certain of the Companys branches also provide specialty traffic control services as a product line. Of the total revenues for these branches, the amount of revenue attributable to such traffic control services
was $291.6 million, $272.2 million, and $245.0 million during the years ended December 31, 2002, 2001, and 2000, respectively. All of the Companys branches have been aggregated into one reportable segment because they offer similar products
and services in similar markets and the factors determining strategic decisions are comparable.



The Company operates in the United States, Canada and Mexico. Revenues are attributable to countries based upon the location of the customers. Geographic
area information for the years ended December 31, 2002, 2001, and 2000 is as follows:



|                                                             |  | Year ended December 31
|------------------------------------------------------------ |  | ----------------------
|                                                             |  | 2002                  
|                                                             |  | (In thousands)        
|Revenues from external customers                             |  |                       
|Domestic                                                     |  | $                     
|Foreign                                                      |  |                       
|                                                             |  |                       
|Total revenues from external customers                       |  | $                     
|                                                             |  |                       
|                                                             |  |                       
|Rental equipment, net                                        |  |                       
|Domestic                                                     |  | $                     
|Foreign                                                      |  |                       
|                                                             |  |                       
|Total consolidated rental equipment, net                     |  | $                     
|                                                             |  |                       
|                                                             |  |                       
|Property and equipment, net                                  |  |                       
|Domestic                                                     |  | $                     
|Foreign                                                      |  |                       
|                                                             |  |                       
|Total consolidated property and equipment, net               |  | $                     
|                                                             |  |                       
|                                                             |  |                       
|Goodwill and other intangible assets, net                    |  |                       
|Domestic                                                     |  | $                     
|Foreign                                                      |  |                       
|                                                             |  |                       
|Total consolidated goodwill and other intangible assets, net |  | $                     
|                                                             |  |                       



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



17.    Quarterly Financial Information (Unaudited)



Selected Financial Data



The following table of quarterly financial information has been prepared
from unaudited financial statements of the Company, and reflects adjustments which are, in the opinion of management, necessary for a fair presentation of the interim periods presented.



|                                                                                             |  | First Quarter                         |          |   | Second Quarter |   | Third Quarter |  | Fourth Quarter |        
|-------------------------------------------------------------------------------------------- |  | ------------------------------------- | -------- | - | -------------- | - | ------------- |  | -------------- | -------
|                                                                                             |  | (In thousands, except per share data) |         
|For the year ended December 31, 2002:                                                        |  |                                       |          |   |                |   |               |  |                |        
|Total revenues                                                                               |  | $                                     | 598,965  |   |                | $ | 744,759       |  | $              | 783,103
|Gross profit                                                                                 |  |                                       | 179,208  |   |                |   | 253,262       |  |                | 245,747
|Goodwill impairment                                                                          |  |                                       |          |   |                |   |               |  |                |        
|Restructuring charge                                                                         |  |                                       |          |   |                |   |               |  |                |        
|Income (loss) before cumulative effect of change in accounting principle                     |  |                                       | 7,584    |   |                |   | 51,114        |  |                | 40,767 
|Cumulative effect of change in accounting principle                                          |  |                                       | (288,339 | ) |                |   |               |  |                |        
|Net income (loss)                                                                            |  |                                       | (280,755 | ) |                |   | 51,114        |  |                | 40,767 
|Basic earnings (loss) before cumulative effect of change in accounting principle per share   |  | $                                     | 0.17     |   |                | $ | 0.67          |  | $              | 0.53   
|Diluted earnings (loss) before cumulative effect of change in accounting principle per share |  |                                       | 0.13     |   |                |   | 0.51          |  |                | 0.43   



The Company has
restated its first quarter and fourth quarter of 2002 earnings (loss) per share calculation to reflect the gain recorded on the repurchase of its 61/2% Convertible Quarterly Income Preferred Securities. The Companys 2002 first quarter diluted earnings per share increased by $0.05 from earnings of $0.08 to earnings of $0.13 and the
Companys 2002 fourth quarter loss per share was reduced by $0.40 from a loss of $2.73 to a loss of $2.33. For additional information concerning these repurchases and the earnings (loss) per share calculation, see Note 14.



|                                                     |  | First Quarter                         |         | Second Quarter |   | Third Quarter |  | Fourth Quarter
|---------------------------------------------------- |  | ------------------------------------- | ------- | -------------- | - | ------------- |  | --------------
|                                                     |  | (In thousands, except per share data)
|                                                     |  |                                       |         |               
|For the year ended December 31, 2001:                |  |                                       |         |                |   |               |  |               
|Total revenues                                       |  | $                                     | 619,104 |                | $ | 768,013       |  | $             
|Gross profit                                         |  |                                       | 202,567 |                |   | 286,063       |  |               
|Restructuring charge                                 |  |                                       |         |                |   | 28,922        |  |               
|Income before extraordinary item                     |  |                                       | 3,412   |                |   | 24,935        |  |               
|Extraordinary item                                   |  |                                       |         |                |   | 11,317        |  |               
|Net income                                           |  |                                       | 3,412   |                |   | 13,618        |  |               
|Basic earnings before extraordinary item per share   |  | $                                     | 0.05    |                | $ | 0.35          |  | $             
|Diluted earnings before extraordinary item per share |  |                                       | 0.04    |                |   | 0.26          |  |               



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



18.    Condensed Consolidating Financial Information of Guarantor Subsidiaries



Certain indebtedness of URI, a wholly owned subsidiary of Holdings (the
Parent), is guaranteed by URIs United States subsidiaries (the guarantor subsidiaries) and, in certain cases, also by Parent. However, this indebtedness is not guaranteed by URIs foreign subsidiaries (the
non-guarantor subsidiaries). The guarantor subsidiaries are all wholly-owned and the guarantees are made on a joint and several basis and are full and unconditional (subject to subordination provisions and subject 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 as of December 31, 2002 and 2001, and for each of the
three years in the period ended December 31, 2002, are presented. The condensed consolidating financial information of the Company and its subsidiaries are as follows:



CONDENSED CONSOLIDATING BALANCE SHEET



December 31, 2002



|                                                                                                |  | Parent         |           |   | URI |   |           | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Other andEliminations |          |   | ConsolidatedTotal |  
|----------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | --- | - | --------- | --------------------- |  | - | ------------------------- | - |  | --------------------- | -------- | - | ----------------- | -
|                                                                                                |  | (In thousands) |          
|ASSETS                                                                                          |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Cash and cash equivalents                                                                       |  |                |           |   |     |   |           |                       |  | $ | 16,908                    |   |  | $                     | 2,323    |   |                   |  
|Accounts receivable, net                                                                        |  |                |           |   |     | $ | 7,354     |                       |  |   | 426,733                   |   |  |                       | 32,109   |   |                   |  
|Intercompany receivable (payable)                                                               |  |                |           |   |     |   | 604,962   |                       |  |   | (422,624                  | ) |  |                       | (182,338 | ) |                   |  
|Inventory                                                                                       |  |                |           |   |     |   | 36,602    |                       |  |   | 50,450                    |   |  |                       | 4,746    |   |                   |  
|Prepaid expenses and other assets                                                               |  |                |           |   |     |   | 42,158    |                       |  |   | 79,323                    |   |  |                       | 1,326    |   |                   | $
|Rental equipment, net                                                                           |  |                |           |   |     |   | 1,003,791 |                       |  |   | 709,615                   |   |  |                       | 132,269  |   |                   |  
|Property and equipment, net                                                                     |  | $              | 25,765    |   |     |   | 137,713   |                       |  |   | 246,307                   |   |  |                       | 15,567   |   |                   |  
|Investment in subsidiaries                                                                      |  |                | 1,532,290 |   |     |   | 2,216,629 |                       |  |   |                           |   |  |                       |          |   |                   |  
|Intangible assets, net                                                                          |  |                |           |   |     |   | 243,529   |                       |  |   | 1,344,537                 |   |  |                       | 122,946  |   |                   |  
|                                                                                                |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|                                                                                                |  | $              | 1,558,055 |   |     | $ | 4,292,738 |                       |  | $ | 2,451,249                 |   |  | $                     | 128,948  |   |                   | $
|                                                                                                |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|                                                                                                |  |                |           |   |     |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                            |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Liabilities:                                                                                    |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Accounts payable                                                                                |  |                |           |   |     | $ | 50,931    |                       |  | $ | 139,922                   |   |  | $                     | 16,185   |   |                   |  
|Debt                                                                                            |  | $              | 226,550   |   |     |   | 2,454,119 |                       |  |   | 711                       |   |  |                       | 57,968   |   |                   | $
|Deferred taxes                                                                                  |  |                |           |   |     |   | 226,392   |                       |  |   | (805                      | ) |  |                       |          |   |                   |  
|Accrued expenses and other liabilities                                                          |  |                |           |   |     |   | 58,968    |                       |  |   | 115,430                   |   |  |                       | 8,699    |   |                   |  
|                                                                                                |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Total liabilities                                                                               |  |                | 226,550   |   |     |   | 2,790,410 |                       |  |   | 255,258                   |   |  |                       | 82,852   |   |                   |  
|Commitments and contingencies                                                                   |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Stockholders equity:                                                                           |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Preferred stock                                                                                 |  |                | 5         |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Common stock                                                                                    |  |                | 765       |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Additional paid-in capital                                                                      |  |                | 1,341,290 |   |     |   | 1,562,410 |                       |  |   | 1,901,936                 |   |  |                       | 68,395   |   |                   |  
|Deferred compensation                                                                           |  |                | (52,988   | ) |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Retained earnings                                                                               |  |                | 69,281    |   |     |   | (53,830   | )                     |  |   | 294,055                   |   |  |                       | (1,703   | ) |                   |  
|Accumulated other comprehensive loss                                                            |  |                | (26,848   | ) |     |   | (6,252    | )                     |  |   |                           |   |  |                       | (20,596  | ) |                   |  
|                                                                                                |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|Total stockholders equity                                                                      |  |                | 1,331,505 |   |     |   | 1,502,328 |                       |  |   | 2,195,991                 |   |  |                       | 46,096   |   |                   | $
|                                                                                                |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  
|                                                                                                |  | $              | 1,558,055 |   |     | $ | 4,292,738 |                       |  | $ | 2,451,249                 |   |  | $                     | 128,948  |   |                   | $
|                                                                                                |  |                |           |   |     |   |           |                       |  |   |                           |   |  |                       |          |   |                   |  



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING BALANCE SHEET



December 31, 2001



|                                                                                                |  | Parent         |           |   | URI |   |           | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |           |  | Other andEliminations |          |   | ConsolidatedTotal |  
|----------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | --- | - | --------- | --------------------- |  | ------------------------- | --------- |  | --------------------- | -------- | - | ----------------- | -
|                                                                                                |  | (In thousands) |          
|ASSETS                                                                                          |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Cash and cash equivalents                                                                       |  |                |           |   |     | $ | 6,385     |                       |  | $                         | 19,798    |  | $                     | 1,143    |   |                   |  
|Accounts receivable, net                                                                        |  |                |           |   |     |   | 7,142     |                       |  |                           | 418,260   |  |                       | 24,871   |   |                   |  
|Intercompany receivable (payable)                                                               |  |                |           |   |     |   | 89,612    |                       |  |                           | 39,548    |  |                       | (129,160 | ) |                   |  
|Inventory                                                                                       |  |                |           |   |     |   | 36,335    |                       |  |                           | 46,410    |  |                       | 3,019    |   |                   |  
|Prepaid expenses and other assets                                                               |  |                |           |   |     |   | 57,764    |                       |  |                           | 64,699    |  |                       | 1,935    |   |                   | $
|Rental equipment, net                                                                           |  |                |           |   |     |   | 885,442   |                       |  |                           | 744,969   |  |                       | 116,771  |   |                   |  
|Property and equipment, net                                                                     |  | $              | 26,793    |   |     |   | 135,240   |                       |  |                           | 231,508   |  |                       | 16,512   |   |                   |  
|Investment in subsidiaries                                                                      |  |                | 1,904,000 |   |     |   | 2,414,710 |                       |  |                           |           |  |                       |          |   |                   |  
|Intangible assets, net                                                                          |  |                |           |   |     |   | 855,360   |                       |  |                           | 1,231,121 |  |                       | 121,220  |   |                   |  
|                                                                                                |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|                                                                                                |  | $              | 1,930,793 |   |     | $ | 4,487,990 |                       |  | $                         | 2,796,313 |  | $                     | 156,311  |   |                   | $
|                                                                                                |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|                                                                                                |  |                |           |   |     |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                            |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Liabilities:                                                                                    |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Accounts payable                                                                                |  |                |           |   |     | $ | 38,436    |                       |  | $                         | 155,029   |  | $                     | 11,308   |   |                   |  
|Debt                                                                                            |  | $              | 300,000   |   |     |   | 2,193,380 |                       |  |                           | 203,896   |  |                       | 62,246   |   |                   | $
|Deferred income taxes                                                                           |  |                |           |   |     |   | 296,974   |                       |  |                           | 50        |  |                       |          |   |                   |  
|Accrued expenses and other liabilities                                                          |  |                | 5,283     |   |     |   | 57,108    |                       |  |                           | 96,793    |  |                       | 12,253   |   |                   |  
|                                                                                                |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Total liabilities                                                                               |  |                | 305,283   |   |     |   | 2,585,898 |                       |  |                           | 455,768   |  |                       | 85,807   |   |                   |  
|Commitments and contingencies                                                                   |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Stockholders equity:                                                                           |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Preferred stock                                                                                 |  |                | 5         |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Common stock                                                                                    |  |                | 734       |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Additional paid-in capital                                                                      |  |                | 1,243,586 |   |     |   | 1,498,655 |                       |  |                           | 1,840,604 |  |                       | 65,970   |   |                   |  
|Deferred compensation                                                                           |  |                | (55,794   | ) |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Retained earnings                                                                               |  |                | 467,106   |   |     |   | 410,480   |                       |  |                           | 499,941   |  |                       | 27,618   |   |                   |  
|Accumulated other comprehensive loss                                                            |  |                | (30,127   | ) |     |   | (7,043    | )                     |  |                           |           |  |                       | (23,084  | ) |                   |  
|                                                                                                |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|Total stockholders equity                                                                      |  |                | 1,625,510 |   |     |   | 1,902,092 |                       |  |                           | 2,340,545 |  |                       | 70,504   |   |                   |  
|                                                                                                |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  
|                                                                                                |  | $              | 1,930,793 |   |     | $ | 4,487,990 |                       |  | $                         | 2,796,313 |  | $                     | 156,311  |   |                   | $
|                                                                                                |  |                |           |   |     |   |           |                       |  |                           |           |  |                       |          |   |                   |  



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS



For the Year Ended December 31, 2002



|                                                                                                                    |  | Parent |          |   | URI |   |           | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Other andEliminations |         |   | ConsolidatedTotal |  
|------------------------------------------------------------------------------------------------------------------- |  | ------ | -------- | - | --- | - | --------- | --------------------- |  | - | ------------------------- | - |  | --------------------- | ------- | - | ----------------- | -
|Revenues:                                                                                                           |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Equipment rentals                                                                                                   |  |        |          |   |     | $ | 905,752   |                       |  | $ | 1,133,860                 |   |  | $                     | 115,069 |   |                   |  
|Sales of rental equipment                                                                                           |  |        |          |   |     |   | 98,156    |                       |  |   | 61,577                    |   |  |                       | 16,446  |   |                   |  
|Sales of equipment and merchandise and other revenues                                                               |  |        |          |   |     |   | 237,603   |                       |  |   | 222,021                   |   |  |                       | 30,505  |   |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Total revenues                                                                                                      |  |        |          |   |     |   | 1,241,511 |                       |  |   | 1,417,458                 |   |  |                       | 162,020 |   |                   |  
|Cost of revenues:                                                                                                   |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Cost of equipment rentals, excluding depreciation                                                                   |  |        |          |   |     |   | 419,854   |                       |  |   | 661,794                   |   |  |                       | 55,961  |   |                   |  
|Depreciation of rental equipment                                                                                    |  |        |          |   |     |   | 152,163   |                       |  |   | 151,619                   |   |  |                       | 21,766  |   |                   |  
|Cost of rental equipment sales                                                                                      |  |        |          |   |     |   | 62,689    |                       |  |   | 44,037                    |   |  |                       | 10,095  |   |                   |  
|Cost of equipment and merchandise sales and other operating costs                                                   |  |        |          |   |     |   | 174,721   |                       |  |   | 157,379                   |   |  |                       | 22,634  |   |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Total cost of revenues                                                                                              |  |        |          |   |     |   | 809,427   |                       |  |   | 1,014,829                 |   |  |                       | 110,456 |   |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Gross profit                                                                                                        |  |        |          |   |     |   | 432,084   |                       |  |   | 402,629                   |   |  |                       | 51,564  |   |                   |  
|Selling, general and administrative expenses                                                                        |  |        |          |   |     |   | 191,584   |                       |  |   | 222,437                   |   |  |                       | 24,897  |   |                   |  
|Goodwill impairment                                                                                                 |  |        |          |   |     |   | 81,494    |                       |  |   | 159,802                   |   |  |                       | 6,617   |   |                   |  
|Restructuring charge                                                                                                |  |        |          |   |     |   | 8,362     |                       |  |   | 17,962                    |   |  |                       | 1,938   |   |                   |  
|Non-rental depreciation and amortization                                                                            |  | $      | 8,938    |   |     |   | 25,716    |                       |  |   | 21,909                    |   |  |                       | 2,738   |   |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Operating income (loss)                                                                                             |  |        | (8,938   | ) |     |   | 124,928   |                       |  |   | (19,481                   | ) |  |                       | 15,374  |   |                   |  
|Interest expense                                                                                                    |  |        | 18,206   |   |     |   | 183,882   |                       |  |   | 7,567                     |   |  |                       | 4,512   |   |                   | $
|Preferred dividends of a subsidiary trust                                                                           |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Other (income) expense, net                                                                                         |  |        |          |   |     |   | 12,874    |                       |  |   | (15,435                   | ) |  |                       | 1,661   |   |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Income (loss) before provision (benefit) for income taxes and cumulative effect of change in accounting principle   |  |        | (27,144  | ) |     |   | (71,828   | )                     |  |   | (11,613                   | ) |  |                       | 9,201   |   |                   |  
|Provision (benefit) for income taxes                                                                                |  |        | (10,586  | ) |     |   | (12,366   | )                     |  |   | 26,195                    |   |  |                       | 4,859   |   |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Income (loss) before cumulative effect of change in accounting principle and equity in net earnings of
subsidiaries |  |        | (16,558  | ) |     |   | (59,462   | )                     |  |   | (37,808                   | ) |  |                       | 4,342   |   |                   |  
|Cumulative effect of change in accounting principle                                                                 |  |        |          |   |     |   | (86,598   | )                     |  |   | (168,078                  | ) |  |                       | (33,663 | ) |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Income (loss) before equity in net earnings of subsidiaries                                                         |  |        | (16,558  | ) |     |   | (146,060  | )                     |  |   | (205,886                  | ) |  |                       | (29,321 | ) |                   |  
|Equity in net loss of subsidiaries                                                                                  |  |        | (381,267 | ) |     |   | (235,207  | )                     |  |   |                           |   |  |                       |         |   |                   |  
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  
|Net income (loss)                                                                                                   |  | $      | (397,825 | ) |     | $ | (381,267  | )                     |  | $ | (205,886                  | ) |  | $                     | (29,321 | ) |                   | $
|                                                                                                                    |  |        |          |   |     |   |           |                       |  |   |                           |   |  |                       |         |   |                   |  



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS



For the Year Ended December 31, 2001



|                                                                                   |  | Parent         |         |   | URI |   |           | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   | Other andEliminations |   |         | ConsolidatedTotal
|---------------------------------------------------------------------------------- |  | -------------- | ------- | - | --- | - | --------- | --------------------- |  | - | ------------------------- | - | --------------------- | - | ------- | -----------------
|                                                                                   |  | (In thousands)
|Revenues:                                                                          |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Equipment rentals                                                                  |  |                |         |   |     | $ | 907,070   |                       |  | $ | 1,201,439                 |   |                       | $ | 104,391 |                  
|Sales of rental equipment                                                          |  |                |         |   |     |   | 63,612    |                       |  |   | 70,331                    |   |                       |   | 13,158  |                  
|Sales of equipment and merchandise and other revenues                              |  |                |         |   |     |   | 244,020   |                       |  |   | 254,222                   |   |                       |   | 28,362  |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Total revenues                                                                     |  |                |         |   |     |   | 1,214,702 |                       |  |   | 1,525,992                 |   |                       |   | 145,911 |                  
|                                                                                   |  |                |         |   |     |  
|Cost of revenues:                                                                  |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Cost of equipment rentals, excluding depreciation                                  |  |                |         |   |     |   | 376,634   |                       |  |   | 626,867                   |   |                       |   | 50,134  |                  
|Depreciation of rental equipment                                                   |  |                |         |   |     |   | 150,619   |                       |  |   | 149,868                   |   |                       |   | 20,476  |                  
|Cost of rental equipment sales                                                     |  |                |         |   |     |   | 38,702    |                       |  |   | 42,088                    |   |                       |   | 7,952   |                  
|Cost of equipment and merchandise sales and other operating costs                  |  |                |         |   |     |   | 177,659   |                       |  |   | 185,223                   |   |                       |   | 20,913  |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Total cost of revenues                                                             |  |                |         |   |     |   | 743,614   |                       |  |   | 1,004,046                 |   |                       |   | 99,475  |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Gross profit                                                                       |  |                |         |   |     |   | 471,088   |                       |  |   | 521,946                   |   |                       |   | 46,436  |                  
|Selling, general and administrative expenses                                       |  |                |         |   |     |   | 192,640   |                       |  |   | 224,707                   |   |                       |   | 24,404  |                  
|Restructuring charge                                                               |  |                |         |   |     |   | 8,877     |                       |  |   | 17,096                    |   |                       |   | 2,949   |                  
|Non-rental depreciation and amortization                                           |  | $              | 7,862   |   |     |   | 42,012    |                       |  |   | 51,014                    |   |                       |   | 5,875   |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Operating income (loss)                                                            |  |                | (7,862  | ) |     |   | 227,559   |                       |  |   | 229,129                   |   |                       |   | 13,208  |                  
|Interest expense                                                                   |  |                | 19,500  |   |     |   | 211,220   |                       |  |   | 7,834                     |   |                       |   | 2,509   |                  
|Preferred dividends of a subsidiary trust                                          |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Other (income) expense, net                                                        |  |                |         |   |     |   | 25,586    |                       |  |   | (21,202                   | ) |                       |   | 2,037   |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Income (loss) before provision (benefit) for income taxes and extraordinary item   |  |                | (27,362 | ) |     |   | (9,247    | )                     |  |   | 242,497                   |   |                       |   | 8,662   |                  
|Provision (benefit) for income taxes                                               |  |                | (11,355 | ) |     |   | (1,226    | )                     |  |   | 100,636                   |   |                       |   | 3,922   |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Income (loss) before extraordinary item and equity in net earnings of subsidiaries |  |                | (16,007 | ) |     |   | (8,021    | )                     |  |   | 141,861                   |   |                       |   | 4,740   |                  
|Extraordinary item                                                                 |  |                |         |   |     |   | 11,317    |                       |  |   |                           |   |                       |   |         |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Income (loss) before equity in net earnings of subsidiaries                        |  |                | (16,007 | ) |     |   | (19,338   | )                     |  |   | 141,861                   |   |                       |   | 4,740   |                  
|Equity in net earnings of subsidiaries                                             |  |                | 127,263 |   |     |   | 146,601   |                       |  |   |                           |   |                       |   |         |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  
|Net income                                                                         |  | $              | 111,256 |   |     | $ | 127,263   |                       |  | $ | 141,861                   |   |                       | $ | 4,740   |                  
|                                                                                   |  |                |         |   |     |   |           |                       |  |   |                           |   |                       |   |         |                  



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS



For the Year Ended December 31, 2000



|                                                                  |  | Parent         |         |   | URI |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   | Other andEliminations |   |         | ConsolidatedTotal |  
|----------------------------------------------------------------- |  | -------------- | ------- | - | --- | - | --------------------- |  | - | ------------------------- | - | --------------------- | - | ------- | ----------------- | -
|                                                                  |  | (In thousands) |        
|Revenues:                                                         |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Equipment rentals                                                 |  |                |         |   |     | $ | 851,541               |  | $ | 1,094,613                 |   |                       | $ | 110,529 |                   |  
|Sales of rental equipment                                         |  |                |         |   |     |   | 145,519               |  |   | 178,576                   |   |                       |   | 23,583  |                   |  
|Sales of equipment and merchandise and other revenues             |  |                |         |   |     |   | 253,798               |  |   | 229,219                   |   |                       |   | 31,483  |                   |  
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Total revenues                                                    |  |                |         |   |     |   | 1,250,858             |  |   | 1,502,408                 |   |                       |   | 165,595 |                   |  
|                                                                  |  |                |         |   |     |  
|Cost of revenues:                                                 |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Cost of equipment rentals, excluding depreciation                 |  |                |         |   |     |   | 364,047               |  |   | 494,350                   |   |                       |   | 49,080  |                   |  
|Depreciation of rental equipment                                  |  |                |         |   |     |   | 152,640               |  |   | 155,239                   |   |                       |   | 20,252  |                   |  
|Cost of rental equipment sales                                    |  |                |         |   |     |   | 87,161                |  |   | 106,617                   |   |                       |   | 14,404  |                   |  
|Cost of equipment and merchandise sales and other operating costs |  |                |         |   |     |   | 197,190               |  |   | 164,186                   |   |                       |   | 25,125  |                   |  
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Total cost of revenues                                            |  |                |         |   |     |   | 801,038               |  |   | 920,392                   |   |                       |   | 108,861 |                   |  
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Gross profit                                                      |  |                |         |   |     |   | 449,820               |  |   | 582,016                   |   |                       |   | 56,734  |                   |  
|Selling, general and administrative expenses                      |  |                |         |   |     |   | 184,135               |  |   | 245,431                   |   |                       |   | 24,764  |                   |  
|Non-rental depreciation and amortization                          |  | $              | 7,718   |   |     |   | 33,692                |  |   | 39,618                    |   |                       |   | 5,273   |                   |  
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Operating income (loss)                                           |  |                | (7,718  | ) |     |   | 231,993               |  |   | 296,967                   |   |                       |   | 26,697  |                   |  
|Interest expense                                                  |  |                | 19,500  |   |     |   | 217,904               |  |   | 135                       |   |                       |   | 10,740  |                   | $
|Preferred dividends of a subsidiary trust                         |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Other (income) expense, net                                       |  |                |         |   |     |   | 2,129                 |  |   | (4,285                    | ) |                       |   | 320     |                   |  
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Income (loss) before provision (benefit) for income taxes         |  |                | (27,218 | ) |     |   | 11,960                |  |   | 301,117                   |   |                       |   | 15,637  |                   |  
|Provision (benefit) for income taxes                              |  |                | (11,295 | ) |     |   | 4,908                 |  |   | 124,964                   |   |                       |   | 6,544   |                   |  
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Income (loss) before equity in net earnings of subsidiaries       |  |                | (15,923 | ) |     |   | 7,052                 |  |   | 176,153                   |   |                       |   | 9,093   |                   |  
|Equity in net earnings of subsidiaries                            |  |                | 192,298 |   |     |   | 185,246               |  |   |                           |   |                       |   |         |                   | $
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  
|Net income                                                        |  | $              | 176,375 |   |     | $ | 192,298               |  | $ | 176,153                   |   |                       | $ | 9,093   |                   | $
|                                                                  |  |                |         |   |     |   |                       |  |   |                           |   |                       |   |         |                   |  



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING CASH FLOW INFORMATION



For the Year Ended December 31, 2002



|                                                                                                                        |  | Parent         |         |   | URI |   |          | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Other andEliminations |         |   | Consolidated |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | --- | - | -------- | --------------------- |  | - | ------------------------- | - |  | --------------------- | ------- | - | ------------ | -
|                                                                                                                        |  | (In thousands) |        
|Net cash provided by (used in) operating activities                                                                     |  | $              | (13,231 | ) |     | $ | 387,190  |                       |  | $ | 111,072                   |   |  | $                     | 28,536  |   |              | $
|Cash flows from investing activities:                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Purchases of rental equipment                                                                                           |  |                |         |   |     |   | (302,417 | )                     |  |   | (150,864                  | ) |  |                       | (38,978 | ) |              |  
|Purchases of property and equipment                                                                                     |  |                | (4,975  | ) |     |   | (9,088   | )                     |  |   | (23,054                   | ) |  |                       | (1,482  | ) |              |  
|Proceeds from sales of rental equipment                                                                                 |  |                |         |   |     |   | 98,156   |                       |  |   | 61,577                    |   |  |                       | 16,446  |   |              |  
|Capital contributed to subsidiary                                                                                       |  |                | (63,755 | ) |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Purchases of other companies                                                                                            |  |                |         |   |     |   | (172,583 | )                     |  |   |                           |   |  |                       |         |   |              |  
|Deposits on rental equipment purchases                                                                                  |  |                |         |   |     |   | (4,644   | )                     |  |   |                           |   |  |                       |         |   |              |  
|In-process acquisition costs                                                                                            |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Net cash used in investing activities                                                                                   |  |                | (68,730 | ) |     |   | (390,576 | )                     |  |   | (112,341                  | ) |  |                       | (24,014 | ) |              |  
|Cash flows from financing activities:                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Proceeds from debt                                                                                                      |  |                |         |   |     |   | 505,567  |                       |  |   | 82                        |   |  |                       | 2,667   |   |              |  
|Payments of debt                                                                                                        |  |                | (38,111 | ) |     |   | (483,081 | )                     |  |   | (1,703                    | ) |  |                       | (6,944  | ) |              |  
|Proceeds from sale-leaseback                                                                                            |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Payments of financing costs                                                                                             |  |                |         |   |     |   | (6,197   | )                     |  |   |                           |   |  |                       |         |   |              |  
|Capital contributions by parent                                                                                         |  |                |         |   |     |   | 63,755   |                       |  |   |                           |   |  |                       |         |   |              |  
|Dividend distributions to parent                                                                                        |  |                |         |   |     |   | (83,043  | )                     |  |   |                           |   |  |                       |         |   |              |  
|Shares repurchased and retired                                                                                          |  |                | (26,726 | ) |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Proceeds from the exercise of common stock options                                                                      |  |                | 63,755  |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust repurchased and
retired |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Proceeds from dividends from subsidiary                                                                                 |  |                | 83,043  |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Net cash provided by (used in) financing activities                                                                     |  |                | 81,961  |   |     |   | (2,999   | )                     |  |   | (1,621                    | ) |  |                       | (4,277  | ) |              |  
|Effect of foreign exchange rates                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       | 935     |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Net increase (decrease) in cash and cash equivalents                                                                    |  |                |         |   |     |   | (6,385   | )                     |  |   | (2,890                    | ) |  |                       | 1,180   |   |              |  
|Cash and cash equivalents at beginning of period                                                                        |  |                |         |   |     |   | 6,385    |                       |  |   | 19,798                    |   |  |                       | 1,143   |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Cash and cash equivalents at end of period                                                                              |  |                |         |   |     |   |          |                       |  | $ | 16,908                    |   |  | $                     | 2,323   |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Supplemental disclosure of cash flow information:                                                                       |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Cash paid for interest                                                                                                  |  | $              | 18,946  |   |     | $ | 181,045  |                       |  | $ | 1,232                     |   |  | $                     | 10,976  |   |              |  
|Cash paid for income taxes, net of refunds                                                                              |  |                |         |   |     | $ | (3,115   | )                     |  |   |                           |   |  | $                     | 1,661   |   |              |  
|                                                                                                                        |  |                |         |   |     |  
|Supplemental disclosure of non-cash investing and financing activities:                                                 |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Conversion of operating leases to capital leases                                                                        |  |                |         |   |     | $ | 31,451   |                       |  |   |                           |   |  |                       |         |   |              |  
|The Company acquired the net assets and assumed certain liabilities of other companies as follows:                      |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Assets, net of cash acquired                                                                                            |  |                |         |   |     | $ | 172,222  |                       |  |   |                           |   |  |                       |         |   |              |  
|Liabilities assumed                                                                                                     |  |                |         |   |     |   | (4,705   | )                     |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                                        |  |                |         |   |     |   | 167,517  |                       |  |   |                           |   |  |                       |         |   |              |  
|Due to seller and other payments                                                                                        |  |                |         |   |     |   | 5,066    |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  
|Net cash paid                                                                                                           |  |                |         |   |     | $ | 172,583  |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                                        |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |              |  



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING CASH FLOW INFORMATION



For the Year Ended December 31, 2001



|                                                                                                   |  | Parent         |         |   | URI |   |            | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Other andEliminations |         |   | Consolidated |  
|-------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | --- | - | ---------- | --------------------- |  | - | ------------------------- | - |  | --------------------- | ------- | - | ------------ | -
|                                                                                                   |  | (In thousands) |        
|Net cash provided by (used in) operating activities                                                |  | $              | (16,826 | ) |     | $ | 622,289    |                       |  | $ | 97,695                    |   |  | $                     | (8,933  | ) |              | $
|Cash flows from investing activities:                                                              |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Purchases of rental equipment                                                                      |  |                |         |   |     |   | (277,032   | )                     |  |   | (148,125                  | ) |  |                       | (24,613 | ) |              |  
|Purchases of property and equipment                                                                |  |                | (2,674  | ) |     |   | (13,159    | )                     |  |   | (28,214                   | ) |  |                       | (3,501  | ) |              |  
|Proceeds from sales of rental equipment                                                            |  |                |         |   |     |   | 63,612     |                       |  |   | 70,331                    |   |  |                       | 13,158  |   |              |  
|Capital contributed to subsidiary                                                                  |  |                | (10,417 | ) |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Purchases of other companies                                                                       |  |                |         |   |     |   | (53,565    | )                     |  |   |                           |   |  |                       | (1,273  | ) |              |  
|Payments of contingent purchase price                                                              |  |                |         |   |     |   | (2,103     | )                     |  |   |                           |   |  |                       |         |   |              |  
|In-process acquisition costs                                                                       |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Net cash used in investing activities                                                              |  |                | (13,091 | ) |     |   | (282,247   | )                     |  |   | (106,008                  | ) |  |                       | (16,229 | ) |              |  
|Cash flows from financing activities:                                                              |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Proceeds from debt                                                                                 |  |                |         |   |     |   | 2,008,644  |                       |  |   | 65                        |   |  |                       | 44,758  |   |              |  
|Payments of debt                                                                                   |  |                |         |   |     |   | (2,292,186 | )                     |  |   | (1,687                    | ) |  |                       | (6,634  | ) |              |  
|Proceeds from sale-leaseback                                                                       |  |                |         |   |     |   | 12,435     |                       |  |   |                           |   |  |                       |         |   |              |  
|Payments of financing costs                                                                        |  |                |         |   |     |   | (28,709    | )                     |  |   |                           |   |  |                       | (333    | ) |              |  
|Capital contributions by parent                                                                    |  |                |         |   |     |   | 10,417     |                       |  |   |                           |   |  |                       |         |   |              |  
|Dividend distributions to parent                                                                   |  |                |         |   |     |   | (44,258    | )                     |  |   |                           |   |  |                       |         |   |              |  
|Shares repurchased and retired                                                                     |  |                | (24,758 | ) |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Proceeds from the exercise of common stock options                                                 |  |                | 10,417  |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Proceeds from dividends from subsidiary                                                            |  |                | 44,258  |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Net cash provided by (used in) financing activities                                                |  |                | 29,917  |   |     |   | (333,657   | )                     |  |   | (1,622                    | ) |  |                       | 37,791  |   |              |  
|Effect of foreign exchange rates                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       | (16,137 | ) |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                |         |   |     |   | 6,385      |                       |  |   | (9,935                    | ) |  |                       | (3,508  | ) |              |  
|Cash and cash equivalents at beginning of period                                                   |  |                |         |   |     |   |            |                       |  |   | 29,733                    |   |  |                       | 4,651   |   |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Cash and cash equivalents at end of period                                                         |  |                |         |   |     | $ | 6,385      |                       |  | $ | 19,798                    |   |  | $                     | 1,143   |   |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Supplemental disclosure of cash flow information:                                                  |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Cash paid for interest                                                                             |  | $              | 19,500  |   |     | $ | 197,315    |                       |  | $ | 10,561                    |   |  | $                     | 3,009   |   |              |  
|Cash paid for income taxes, net of refunds                                                         |  |                |         |   |     | $ | (31,122    | )                     |  |   |                           |   |  | $                     | 323     |   |              |  
|Supplemental disclosure of non-cash investing and financing activities:                            |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|The Company acquired the net assets and assumed certain liabilities of other companies as follows: |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Assets, net of cash acquired                                                                       |  |                |         |   |     | $ | 20,264     |                       |  |   |                           |   |  | $                     | 1,201   |   |              |  
|Liabilities assumed                                                                                |  |                |         |   |     |   | (4,468     | )                     |  |   |                           |   |  |                       | (144    | ) |              |  
|Less:                                                                                              |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Amounts paid through issuance of debt                                                              |  |                |         |   |     |   | (600       | )                     |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|                                                                                                   |  |                |         |   |     |   | 15,196     |                       |  |   |                           |   |  |                       | 1,057   |   |              |  
|Due to seller and other payments                                                                   |  |                |         |   |     |   | 38,369     |                       |  |   |                           |   |  |                       | 216     |   |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  
|Net cash paid                                                                                      |  |                |         |   |     | $ | 53,565     |                       |  |   |                           |   |  | $                     | 1,273   |   |              |  
|                                                                                                   |  |                |         |   |     |   |            |                       |  |   |                           |   |  |                       |         |   |              |  



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UNITED RENTALS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Year Ended December 31, 2000



|                                                                                                   |  | Parent         |         |   | URI |   |          | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Other andEliminations |         |   | ConsolidatedTotal |  
|-------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | --- | - | -------- | --------------------- |  | - | ------------------------- | - |  | --------------------- | ------- | - | ----------------- | -
|                                                                                                   |  | (In thousands) |        
|Net cash provided by (used in) operating activities                                                |  | $              | (6,429  | ) |     | $ | 243,759  |                       |  | $ | 227,855                   |   |  | $                     | 43,066  |   |                   | $
|Cash flows from investing activities:                                                              |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Purchases of rental equipment                                                                      |  |                |         |   |     |   | (489,259 | )                     |  |   | (283,488                  | ) |  |                       | (35,457 | ) |                   |  
|Purchases of property and equipment                                                                |  |                | (13,071 | ) |     |   | (34,477  | )                     |  |   | (102,510                  | ) |  |                       | (3,712  | ) |                   |  
|Proceeds from sales of rental equipment                                                            |  |                |         |   |     |   | 145,519  |                       |  |   | 178,576                   |   |  |                       | 23,583  |   |                   |  
|Proceeds from sale of businesses                                                                   |  |                |         |   |     |   | 16,246   |                       |  |   | 3,000                     |   |  |                       |         |   |                   |  
|Payments of contingent purchase price                                                              |  |                |         |   |     |   | (3,030   | )                     |  |   | (13,236                   | ) |  |                       |         |   |                   |  
|Purchases of other companies                                                                       |  |                |         |   |     |   | (337,257 | )                     |  |   |                           |   |  |                       | (10,080 | ) |                   |  
|Capital contributed to subsidiary                                                                  |  |                | (331    | ) |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|In-process acquisition costs                                                                       |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Net cash used in investing activities                                                              |  |                | (13,402 | ) |     |   | (702,258 | )                     |  |   | (217,658                  | ) |  |                       | (25,666 | ) |                   |  
|Cash flows from financing activities:                                                              |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Shares repurchased and retired                                                                     |  |                | (30,950 | ) |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Dividend distributions to parent                                                                   |  |                |         |   |     |   | (50,450  | )                     |  |   |                           |   |  |                       |         |   |                   |  
|Proceeds from debt                                                                                 |  |                |         |   |     |   | 452,912  |                       |  |   | 3,290                     |   |  |                       |         |   |                   |  
|Repayments of debt                                                                                 |  |                |         |   |     |   | (125,238 | )                     |  |   | (168                      | ) |  |                       | (9,193  | ) |                   |  
|Proceeds from sale-leaseback                                                                       |  |                |         |   |     |   | 193,478  |                       |  |   |                           |   |  |                       |         |   |                   |  
|Payments of financing costs                                                                        |  |                |         |   |     |   | (16,223  | )                     |  |   |                           |   |  |                       |         |   |                   |  
|Capital contributions by parent                                                                    |  |                |         |   |     |   | 331      |                       |  |   |                           |   |  |                       |         |   |                   |  
|Proceeds from the exercise of stock options                                                        |  |                | 331     |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Proceeds from dividends from subsidiary                                                            |  |                | 50,450  |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Net cash provided by (used in) financing activities                                                |  |                | 19,831  |   |     |   | 454,810  |                       |  |   | 3,122                     |   |  |                       | (9,193  | ) |                   |  
|Effect of foreign exchange rates                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       | (7,264  | ) |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                |         |   |     |   | (3,689   | )                     |  |   | 13,319                    |   |  |                       | 943     |   |                   |  
|Cash and cash equivalents at beginning of period                                                   |  |                |         |   |     |   | 3,689    |                       |  |   | 16,414                    |   |  |                       | 3,708   |   |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Cash and cash equivalents at end of period                                                         |  |                |         |   |     | $ |          |                       |  | $ | 29,733                    |   |  | $                     | 4,651   |   |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Supplemental disclosure of cash flow information:                                                  |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Cash paid for interest                                                                             |  | $              | 19,500  |   |     | $ | 218,346  |                       |  | $ | 135                       |   |  | $                     | 10,782  |   |                   |  
|Cash paid for income taxes                                                                         |  |                |         |   |     | $ | 19,833   |                       |  |   |                           |   |  | $                     | 3,913   |   |                   |  
|Supplemental disclosure of non-cash investing and financing activities:                            |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|The Company acquired the net assets and assumed certain liabilities of other companies as follows: |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Assets, net of cash acquired                                                                       |  |                |         |   |     | $ | 518,167  |                       |  |   |                           |   |  | $                     | 11,037  |   |                   |  
|Liabilities assumed                                                                                |  |                |         |   |     |   | (132,163 | )                     |  |   |                           |   |  |                       | (957    | ) |                   |  
|Less:                                                                                              |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Amounts paid in common stock of parent                                                             |  |                |         |   |     |   | (10,000  | )                     |  |   |                           |   |  |                       |         |   |                   |  
|Amounts paid through issuance of debt                                                              |  |                |         |   |     |   | (65,500  | )                     |  |   |                           |   |  |                       |         |   |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|                                                                                                   |  |                |         |   |     |   | 310,504  |                       |  |   |                           |   |  |                       | 10,080  |   |                   |  
|Due to seller and other payments                                                                   |  |                |         |   |     |   | 26,753   |                       |  |   |                           |   |  |                       |         |   |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  
|Net cash paid                                                                                      |  |                |         |   |     | $ | 337,257  |                       |  |   |                           |   |  | $                     | 10,080  |   |                   |  
|                                                                                                   |  |                |         |   |     |   |          |                       |  |   |                           |   |  |                       |         |   |                   |  



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REPORT OF INDEPENDENT AUDITORS



|Board |  | of Directors
|----- |  | ------------

|United |  | Rentals, Inc. (Parent Company of United Rentals (North America), Inc.)
|------ |  | ----------------------------------------------------------------------



We have audited the accompanying consolidated balance sheets of United Rentals (North America), Inc. as of December 31, 2002 and 2001 and the related
consolidated statements of operations, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2002. These consolidated financial statements are the responsibility of the management of United Rentals
(North America), Inc. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of United Rentals (North America), Inc. at December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States.



As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 142, Goodwill
and Other Intangible Assets, effective January 1, 2002.



/s/    ERNST & YOUNG LLP



MetroPark, New Jersey

February 20, 2003



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UNITED RENTALS (NORTH AMERICA), INC.



CONSOLIDATED BALANCE SHEETS



|                                                                                                                  |  | December 31                      |          
|----------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------
|                                                                                                                  |  | 2002                             |          
|                                                                                                                  |  | (In thousands,except share data) |          
|Assets                                                                                                            |  |                                  |          
|Cash and cash equivalents                                                                                         |  | $                                | 19,231   
|Accounts receivable, net of allowance for doubtful accounts of $48,542 and $47,744 in 2002 and 2001, respectively |  |                                  | 466,196  
|Inventory                                                                                                         |  |                                  | 91,798   
|Prepaid expenses and other assets                                                                                 |  |                                  | 122,807  
|Rental equipment, net                                                                                             |  |                                  | 1,845,675
|Property and equipment, net                                                                                       |  |                                  | 399,587  
|Goodwill, net                                                                                                     |  |                                  | 1,705,191
|Other intangible assets, net                                                                                      |  |                                  | 5,821    
|                                                                                                                  |  |                                  |          
|                                                                                                                  |  | $                                | 4,656,306
|                                                                                                                  |  |                                  |          
|Liabilities and Stockholders Equity                                                                              |  |                                  |          
|Liabilities:                                                                                                      |  |                                  |          
|Accounts payable                                                                                                  |  | $                                | 207,038  
|Debt                                                                                                              |  |                                  | 2,512,798
|Deferred taxes                                                                                                    |  |                                  | 225,587  
|Accrued expenses and other liabilities                                                                            |  |                                  | 209,728  
|                                                                                                                  |  |                                  |          
|Total liabilities                                                                                                 |  |                                  | 3,155,151
|Commitments and contingencies                                                                                     |  |                                  |          
|Stockholders equity:                                                                                             |  |                                  |          
|Common stock$.01 par value, 3,000 shares authorized, 1,000 shares issued and outstanding                         |  |                                  |          
|Additional paid-in capital                                                                                        |  |                                  | 1,581,833
|Retained earnings                                                                                                 |  |                                  | (53,830  
|Accumulated other comprehensive loss                                                                              |  |                                  | (26,848  
|                                                                                                                  |  |                                  |          
|Total stockholders equity                                                                                        |  |                                  | 1,501,155
|                                                                                                                  |  |                                  |          
|                                                                                                                  |  | $                                | 4,656,306
|                                                                                                                  |  |                                  |          



See accompanying notes.



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UNITED RENTALS (NORTH AMERICA), INC.



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                                                            |  | Year Ended December 31 |          
|--------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ---------
|                                                                                                                            |  | 2002                   |          
|                                                                                                                            |  | (In thousands)         |          
|Revenues:                                                                                                                   |  |                        |          
|Equipment rentals                                                                                                           |  | $                      | 2,154,681
|Sales of rental equipment                                                                                                   |  |                        | 176,179  
|Sales of equipment and merchandise and other revenues                                                                       |  |                        | 490,129  
|                                                                                                                            |  |                        |          
|Total revenues                                                                                                              |  |                        | 2,820,989
|Cost of revenues:                                                                                                           |  |                        |          
|Cost of equipment rentals, excluding depreciation                                                                           |  |                        | 1,137,609
|Depreciation of rental equipment                                                                                            |  |                        | 325,548  
|Cost of rental equipment sales                                                                                              |  |                        | 116,821  
|Cost of equipment and merchandise sales and other operating costs                                                           |  |                        | 354,734  
|                                                                                                                            |  |                        |          
|Total cost of revenues                                                                                                      |  |                        | 1,934,712
|                                                                                                                            |  |                        |          
|Gross profit                                                                                                                |  |                        | 886,277  
|Selling, general and administrative expenses                                                                                |  |                        | 438,918  
|Goodwill impairment                                                                                                         |  |                        | 247,913  
|Restructuring charge                                                                                                        |  |                        | 28,262   
|Non-rental depreciation and amortization                                                                                    |  |                        | 50,363   
|                                                                                                                            |  |                        |          
|Operating income                                                                                                            |  |                        | 120,821  
|Interest expense                                                                                                            |  |                        | 195,961  
|Other (income) expense, net                                                                                                 |  |                        | (900     
|                                                                                                                            |  |                        |          
|Income (loss) before provision for income taxes, extraordinary item and cumulative effect of change in accounting
principle |  |                        | (74,240  
|Provision for income taxes                                                                                                  |  |                        | 18,688   
|                                                                                                                            |  |                        |          
|Income (loss) before extraordinary item and cumulative effect of change in accounting principle                             |  |                        | (92,928  
|Extraordinary item, net of tax benefit                                                                                      |  |                        |          
|Cumulative effect of change in accounting principle                                                                         |  |                        | (288,339 
|                                                                                                                            |  |                        |          
|Net income (loss)                                                                                                           |  | $                      | (381,267 
|                                                                                                                            |  |                        |          



See accompanying notes.



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UNITED RENTALS (NORTH AMERICA), INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                                                      |  | Common Stock                        |  | AdditionalPaid-inCapital |  | RetainedEarnings |           |  | ComprehensiveIncome (Loss) |          |   | AccumulatedOtherComprehensive(Loss) Income |  
|--------------------------------------------------------------------- |  | ----------------------------------- |  | ------------------------ |  | ---------------- | --------- |  | -------------------------- | -------- | - | ------------------------------------------ | -
|                                                                      |  | Numberof Shares                     |  | Amount                   |  |                  |           | 
|                                                                      |  | (In thousands except share amounts) | 
|Balance, December 31, 1999                                            |  | 1,000                               |  |                          |  | $                | 1,507,330 |  | $                          | 185,627  |   |                                            |  
|Comprehensive income:                                                 |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Net income                                                            |  |                                     |  |                          |  |                  |           |  |                            | 192,298  |   |                                            | $
|Other comprehensive income:                                           |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Foreign currency translation adjustments                              |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Comprehensive income                                                  |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            | $
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Contributed capital from parent                                       |  |                                     |  |                          |  |                  | 331       |  |                            |          |   |                                            |  
|Dividend distributions to parent                                      |  |                                     |  |                          |  |                  |           |  |                            | (50,450  | ) |                                            |  
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Balance, December 31, 2000                                            |  | 1,000                               |  |                          |  |                  | 1,507,661 |  |                            | 327,475  |   |                                            |  
|Comprehensive income:                                                 |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Net income                                                            |  |                                     |  |                          |  |                  |           |  |                            | 127,263  |   |                                            | $
|Other comprehensive income:                                           |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Foreign currency translation adjustments                              |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Cumulative effect on equity of adopting FAS 133, net of tax of $1,784 |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Derivatives qualifying as hedges, net of tax $3,212                   |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Comprehensive income                                                  |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            | $
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Contributed capital from parent                                       |  |                                     |  |                          |  |                  | 10,417    |  |                            |          |   |                                            |  
|Dividend distributions to parent                                      |  |                                     |  |                          |  |                  |           |  |                            | (44,258  | ) |                                            |  
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Balance, December 31, 2001                                            |  | 1,000                               |  |                          |  | $                | 1,518,078 |  | $                          | 410,480  |   |                                            |  
|Comprehensive loss:                                                   |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Net loss                                                              |  |                                     |  |                          |  |                  |           |  |                            | (381,267 | ) |                                            | $
|Other comprehensive income                                            |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Foreign currency translation adjustments                              |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Derivatives qualifying as hedges, net of tax                          |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Comprehensive loss                                                    |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            | $
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Contributed capital from parent                                       |  |                                     |  |                          |  |                  | 63,755    |  |                            |          |   |                                            |  
|Dividend distributions to parent                                      |  |                                     |  |                          |  |                  |           |  |                            | (83,043  | ) |                                            |  
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  
|Balance, December 31, 2002                                            |  | 1,000                               |  |                          |  | $                | 1,581,833 |  | $                          | (53,830  | ) |                                            |  
|                                                                      |  |                                     |  |                          |  |                  |           |  |                            |          |   |                                            |  



See accompanying notes.



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UNITED RENTALS (NORTH AMERICA), INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                   |  | Year Ended December 31 |         
|-------------------------------------------------------------------------------------------------- |  | ---------------------- | --------
|                                                                                                   |  | 2002                   |         
|                                                                                                   |  | (In thousands)         |         
|Cash Flows From Operating Activities:                                                              |  |                        |         
|Net income (loss)                                                                                  |  | $                      | (381,267
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:           |  |                        |         
|Depreciation and amortization                                                                      |  |                        | 376,244 
|Gain on sales of rental equipment                                                                  |  |                        | (59,359 
|Gain on sale of businesses                                                                         |  |                        |         
|Restructuring charge                                                                               |  |                        | 2,497   
|Goodwill impairment                                                                                |  |                        | 247,913 
|Extraordinary item                                                                                 |  |                        |         
|Cumulative effect of change in accounting principle, net                                           |  |                        | 288,339 
|Deferred taxes                                                                                     |  |                        | 5,871   
|Changes in operating assets and liabilities:                                                       |  |                        |         
|Accounts receivable                                                                                |  |                        | (6,949  
|Inventory                                                                                          |  |                        | 21,189  
|Prepaid expenses and other assets                                                                  |  |                        | 3,601   
|Accounts payable                                                                                   |  |                        | 2,252   
|Accrued expenses and other liabilities                                                             |  |                        | 26,467  
|                                                                                                   |  |                        |         
|Net cash provided by operating activities                                                          |  |                        | 526,798 
|                                                                                                   |  |                        |         
|Cash Flows From Investing Activities:                                                              |  |                        |         
|Purchases of rental equipment                                                                      |  |                        | (492,259
|Purchases of property and equipment                                                                |  |                        | (33,624 
|Proceeds from sales of rental equipment                                                            |  |                        | 176,179 
|Proceeds from sale of businesses                                                                   |  |                        |         
|Purchases of other companies                                                                       |  |                        | (172,583
|Payments of contingent purchase price                                                              |  |                        |         
|Deposits on rental equipment purchases                                                             |  |                        | (4,644  
|                                                                                                   |  |                        |         
|Net cash used in investing activities                                                              |  |                        | (526,931
|                                                                                                   |  |                        |         
|Cash Flows From Financing Activities:                                                              |  |                        |         
|Capital contributions by Parent                                                                    |  |                        | 63,755  
|Proceeds from debt                                                                                 |  |                        | 508,316 
|Payments on debt                                                                                   |  |                        | (491,728
|Proceeds from sale-leaseback                                                                       |  |                        |         
|Dividend distributions to Parent                                                                   |  |                        | (83,043 
|Payments of financing costs                                                                        |  |                        | (6,197  
|                                                                                                   |  |                        |         
|Net cash (used in) provided by financing activities                                                |  |                        | (8,897  
|Effect of foreign exchange rates                                                                   |  |                        | 935     
|                                                                                                   |  |                        |         
|Net increase (decrease) in cash and cash equivalents                                               |  |                        | (8,095  
|Cash and cash equivalents at beginning of year                                                     |  |                        | 27,326  
|                                                                                                   |  |                        |         
|Cash and cash equivalents at end of year                                                           |  | $                      | 19,231  
|                                                                                                   |  |                        |         
|Supplemental disclosure of cash flow information:                                                  |  |                        |         
|Cash paid for interest                                                                             |  | $                      | 193,253 
|Cash paid for taxes, net of refunds                                                                |  | $                      | (1,454  
|Supplemental schedule of non cash investing and financing activities:                              |  |                        |         
|Conversion of operating leases to capital leases                                                   |  | $                      | 31,451  
|The Company acquired the net assets and assumed certain liabilities of other companies as follows: |  |                        |         
|Assets, net of cash acquired                                                                       |  | $                      | 172,222 
|Liabilities assumed                                                                                |  |                        | (4,705  
|Less:                                                                                              |  |                        |         
|Amounts paid in common stock of the parent                                                         |  |                        |         
|Amounts paid through issuance of debt                                                              |  |                        |         
|                                                                                                   |  |                        |         
|                                                                                                   |  |                        | 167,517 
|Due to seller and other payments                                                                   |  |                        | 5,066   
|                                                                                                   |  |                        |         
|Net cash paid                                                                                      |  | $                      | 172,583 
|                                                                                                   |  |                        |         



See accompanying
notes.



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.    Basis of Presentation



United Rentals (North America), Inc., (URI) and subsidiaries is a wholly owned subsidiary of United Rentals,
Inc., which is principally a holding company (Holdings or Parent). Holdings was incorporated in July 1998 and became the parent of URI on August 5, 1998, pursuant to the reorganization of the legal structure of URI. Prior to
such reorganization, the name of URI was United Rentals, Inc. References herein to the Company refer to URI and its subsidiaries.



Certain footnotes are not provided for the accompanying financial statements as the information in Notes 1 through 10, 12, 13 and 15 through 17 to the
consolidated financial statements of United Rentals, Inc. included elsewhere in this report is substantially equivalent to that required for the consolidated financial statements of URI and its subsidiaries. Earnings per share data is not provided
for the operating results of URI and subsidiaries, as they are wholly owned subsidiaries of Holdings. URIs various credit agreements and debt instruments place restrictions on its ability to transfer funds to its shareholder.



Holdings provides certain services to URI in connection with its operations.
These services principally include: (i) senior management services, (ii) finance related services and support, (iii) information technology systems and support and (iv) acquisition related services. In addition, Holdings leases certain equipment and
real property that are made available for use by URI and its subsidiaries. URI has made, and expects to continue to make, certain payments to Holdings in respect of the services provided by Holdings to the Company. The expenses relating to
URIs payments to Holdings are reflected on URIs financial statements as selling, general and administrative expenses. In addition, although not legally obligated to do so, URI has in the past made, and expects that it will in the future
make, distributions to Holdings for, among other things, enabling Holdings to pay dividends on its preferred securities.



2.    Capital Stock and Contributions



At December 31, 2002, the Company had authorized 3,000 shares of its $0.01 par value common stock of which 1,000 shares were issued and outstanding. All
of the issued and outstanding common shares of URI are owned by its Parent.



Pursuant to the reorganization described in Note 1, the net proceeds from the Companys initial public offering completed in December 1997 and the public offering completed in March 1998 have been reflected as
Contributed Capital from the Parent in the accompanying statement of stockholders equity. Holdings also contributed the net proceeds from the issuance of redeemable convertible preferred securities in August 1998 to URI. During 1999, Holdings
contributed the net proceeds from the issuance of common stock in a public offering and the net proceeds from the issuance of perpetual convertible preferred stock to URI.



3.    Condensed Consolidating Financial Information of Guarantor Subsidiaries



Certain indebtedness of URI is guaranteed by URIs United States
subsidiaries (the guarantor subsidiaries) but is not guaranteed by URIs foreign subsidiaries (the non-guarantor subsidiaries). The guarantor subsidiaries are all wholly-owned and the guarantees are made on a joint and
several basis and are full and unconditional (subject to subordination provisions and subject 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



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



information would not be material to investors. However, condensed consolidating financial information as of December 31, 2002 and 2001, and for each of the
three years in the period ended December 31, 2002, are presented. The condensed consolidating financial information of URI and its subsidiaries are as follows:



CONDENSED CONSOLIDATING BALANCE SHEET



December 31, 2002



|                                       |  | URI            |           |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal |           
|-------------------------------------- |  | -------------- | --------- | - | --------------------- | - | --------- | ------------------------- |  | - | ------------ | - |  | ----------------- | ----------
|                                       |  | (In thousands) |          
|ASSETS                                 |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|                                       |  |                |           |   |                      
|Cash and cash equivalents              |  |                |           |   |                       | $ | 16,908    |                           |  | $ | 2,323        |   |  |                   |           
|Accounts receivable, net               |  | $              | 7,354     |   |                       |   | 426,733   |                           |  |   | 32,109       |   |  |                   |           
|Intercompany receivable (payable)      |  |                | 604,962   |   |                       |   | (422,624  | )                         |  |   | (182,338     | ) |  |                   |           
|Inventory                              |  |                | 36,602    |   |                       |   | 50,450    |                           |  |   | 4,746        |   |  |                   |           
|Prepaid expenses and other assets      |  |                | 42,158    |   |                       |   | 79,323    |                           |  |   | 1,326        |   |  |                   |           
|Rental equipment, net                  |  |                | 1,003,791 |   |                       |   | 709,615   |                           |  |   | 132,269      |   |  |                   |           
|Property and equipment, net            |  |                | 137,713   |   |                       |   | 246,307   |                           |  |   | 15,567       |   |  |                   |           
|Investment in subsidiaries             |  |                | 2,216,629 |   |                       |   |           |                           |  |   |              |   |  | $                 | (2,216,629
|Intangible assets, net                 |  |                | 243,529   |   |                       |   | 1,344,537 |                           |  |   | 122,946      |   |  |                   |           
|                                       |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|                                       |  | $              | 4,292,738 |   |                       | $ | 2,451,249 |                           |  | $ | 128,948      |   |  | $                 | (2,216,629
|                                       |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|                                       |  |                |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY   |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|                                       |  |                |           |   |                      
|Liabilities:                           |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|Accounts payable                       |  | $              | 50,931    |   |                       | $ | 139,922   |                           |  | $ | 16,185       |   |  |                   |           
|Debt                                   |  |                | 2,454,119 |   |                       |   | 711       |                           |  |   | 57,968       |   |  |                   |           
|Deferred taxes                         |  |                | 226,392   |   |                       |   | (805      | )                         |  |   |              |   |  |                   |           
|Accrued expenses and other liabilities |  |                | 58,968    |   |                       |   | 115,430   |                           |  |   | 8,699        |   |  | $                 | 26,631    
|                                       |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|Total liabilities                      |  |                | 2,790,410 |   |                       |   | 255,258   |                           |  |   | 82,852       |   |  |                   | 26,631    
|Commitments and contingencies          |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|Stockholders equity:                  |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|Common stock                           |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|Additional paid-in capital             |  |                | 1,562,410 |   |                       |   | 1,901,936 |                           |  |   | 68,395       |   |  |                   | (1,950,908
|Retained earnings                      |  |                | (53,830   | ) |                       |   | 294,055   |                           |  |   | (1,703       | ) |  |                   | (292,352  
|Accumulated other comprehensive loss   |  |                | (6,252    | ) |                       |   |           |                           |  |   | (20,596      | ) |  |                   |           
|                                       |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|Total stockholders equity             |  |                | 1,502,328 |   |                       |   | 2,195,991 |                           |  |   | 46,096       |   |  |                   | (2,243,260
|                                       |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           
|                                       |  | $              | 4,292,738 |   |                       | $ | 2,451,249 |                           |  | $ | 128,948      |   |  | $                 | (2,216,629
|                                       |  |                |           |   |                       |   |           |                           |  |   |              |   |  |                   |           





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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2001



|                                                    |  | URI            |           |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal |           
|--------------------------------------------------- |  | -------------- | --------- | - | --------------------- | - | ------------------------- |  | - | ------------ | - |  | ----------------- | ----------
|                                                    |  | (In thousands) |          
|ASSETS                                              |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|Cash and cash equivalents                           |  | $              | 6,385     |   |                       | $ | 19,798                    |  | $ | 1,143        |   |  |                   |           
|Accounts receivable, net                            |  |                | 7,142     |   |                       |   | 418,260                   |  |   | 24,871       |   |  |                   |           
|Intercompany receivable (payable)                   |  |                | 89,612    |   |                       |   | 39,548                    |  |   | (129,160     | ) |  |                   |           
|Inventory                                           |  |                | 36,335    |   |                       |   | 46,410                    |  |   | 3,019        |   |  |                   |           
|Prepaid expenses and other assets                   |  |                | 57,764    |   |                       |   | 64,699                    |  |   | 1,935        |   |  |                   |           
|Rental equipment, net                               |  |                | 885,442   |   |                       |   | 744,969                   |  |   | 116,771      |   |  |                   |           
|Property and equipment, net                         |  |                | 135,240   |   |                       |   | 231,508                   |  |   | 16,512       |   |  |                   |           
|Investment in subsidiaries                          |  |                | 2,414,710 |   |                       |   |                           |  |   |              |   |  | $                 | (2,414,710
|Intangible assets, net                              |  |                | 855,360   |   |                       |   | 1,231,121                 |  |   | 121,220      |   |  |                   |           
|                                                    |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|                                                    |  | $              | 4,487,990 |   |                       | $ | 2,796,313                 |  | $ | 156,311      |   |  | $                 | (2,414,710
|                                                    |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY               
|Liabilities:                                        |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|Accounts payable                                    |  | $              | 38,436    |   |                       | $ | 155,029                   |  | $ | 11,308       |   |  |                   |           
|Debt                                                |  |                | 2,193,380 |   |                       |   | 203,896                   |  |   | 62,246       |   |  |                   |           
|Deferred taxes                                      |  |                | 296,974   |   |                       |   | 50                        |  |   |              |   |  |                   |           
|Accrued expenses and other liabilities              |  |                | 57,108    |   |                       |   | 96,793                    |  |   | 12,253       |   |  |                   |           
|                                                    |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|Total liabilities                                   |  |                | 2,585,898 |   |                       |   | 455,768                   |  |   | 85,807       |   |  |                   |           
|Commitments and contingencies Stockholders equity: |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|Common stock                                        |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|Additional paid-in capital                          |  |                | 1,498,655 |   |                       |   | 1,840,604                 |  |   | 65,970       |   |  | $                 | (1,887,151
|Retained earnings                                   |  |                | 410,480   |   |                       |   | 499,941                   |  |   | 27,618       |   |  |                   | (527,559  
|Accumulated other comprehensive loss                |  |                | (7,043    | ) |                       |   |                           |  |   | (23,084      | ) |  |                   |           
|                                                    |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|Total stockholders equity                          |  |                | 1,902,092 |   |                       |   | 2,340,545                 |  |   | 70,504       |   |  |                   | (2,414,710
|                                                    |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           
|                                                    |  | $              | 4,487,990 |   |                       | $ | 2,796,313                 |  | $ | 156,311      |   |  | $                 | (2,414,710
|                                                    |  |                |           |   |                       |   |                           |  |   |              |   |  |                   |           



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2002



|                                                                                                                    |  | URI            |           |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiaries |  |   | Other andEliminations |   | ConsolidatedTotal |  
|------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | --------------------- | - | --------- | ------------------------- |  | - | --------------------- | - | ----------------- | -
|                                                                                                                    |  | (In thousands) |          
|Revenues:                                                                                                           |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Equipment rentals                                                                                                   |  | $              | 905,752   |   |                       | $ | 1,133,860 |                           |  | $ | 115,069               |   |                   |  
|Sales of rental equipment                                                                                           |  |                | 98,156    |   |                       |   | 61,577    |                           |  |   | 16,446                |   |                   |  
|Sales of equipment and merchandise and other revenues                                                               |  |                | 237,603   |   |                       |   | 222,021   |                           |  |   | 30,505                |   |                   |  
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Total revenues                                                                                                      |  |                | 1,241,511 |   |                       |   | 1,417,458 |                           |  |   | 162,020               |   |                   |  
|Cost of revenues:                                                                                                   |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Cost of equipment rentals, excluding depreciation                                                                   |  |                | 419,854   |   |                       |   | 661,794   |                           |  |   | 55,961                |   |                   |  
|Depreciation of rental equipment                                                                                    |  |                | 152,163   |   |                       |   | 151,619   |                           |  |   | 21,766                |   |                   |  
|Cost of rental equipment sales                                                                                      |  |                | 62,689    |   |                       |   | 44,037    |                           |  |   | 10,095                |   |                   |  
|Cost of equipment and merchandise sales and other operating costs                                                   |  |                | 174,721   |   |                       |   | 157,379   |                           |  |   | 22,634                |   |                   |  
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Total cost of revenues                                                                                              |  |                | 809,427   |   |                       |   | 1,014,829 |                           |  |   | 110,456               |   |                   |  
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Gross profit                                                                                                        |  |                | 432,084   |   |                       |   | 402,629   |                           |  |   | 51,564                |   |                   |  
|Selling, general and administrative expenses                                                                        |  |                | 191,584   |   |                       |   | 222,437   |                           |  |   | 24,897                |   |                   |  
|Goodwill impairment                                                                                                 |  |                | 81,494    |   |                       |   | 159,802   |                           |  |   | 6,617                 |   |                   |  
|Restructuring charge                                                                                                |  |                | 8,362     |   |                       |   | 17,962    |                           |  |   | 1,938                 |   |                   |  
|Non-rental depreciation and amortization                                                                            |  |                | 25,716    |   |                       |   | 21,909    |                           |  |   | 2,738                 |   |                   |  
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Operating income                                                                                                    |  |                | 124,928   |   |                       |   | (19,481   | )                         |  |   | 15,374                |   |                   |  
|Interest expense                                                                                                    |  |                | 183,882   |   |                       |   | 7,567     |                           |  |   | 4,512                 |   |                   |  
|Other (income) expense, net                                                                                         |  |                | 12,874    |   |                       |   | (15,435   | )                         |  |   | 1,661                 |   |                   |  
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Income (loss) before provision (benefit) for income taxes and cumulative effect of change in accounting principle   |  |                | (71,828   | ) |                       |   | (11,613   | )                         |  |   | 9,201                 |   |                   |  
|Provision (benefit) for income taxes                                                                                |  |                | (12,366   | ) |                       |   | 26,195    |                           |  |   | 4,859                 |   |                   |  
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Income (loss) before cumulative effect of change in accounting principle and equity in net earnings of
subsidiaries |  |                | (59,462   | ) |                       |   | (37,808   | )                         |  |   | 4,342                 |   |                   |  
|Cumulative effect of change in accounting principle, net of tax                                                     |  |                | (86,598   | ) |                       |   | (168,078  | )                         |  |   | (33,663               | ) |                   |  
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Income (loss) before equity in net earnings of subsidiaries                                                         |  |                | (146,060  | ) |                       |   | (205,886  | )                         |  |   | (29,321               | ) |                   |  
|Equity in net loss of subsidiaries                                                                                  |  |                | (235,207  | ) |                       |   |           |                           |  |   |                       |   |                   | $
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  
|Net income (loss)                                                                                                   |  | $              | (381,267  | ) |                       | $ | (205,886  | )                         |  | $ | (29,321               | ) |                   | $
|                                                                                                                    |  |                |           |   |                       |   |           |                           |  |   |                       |   |                   |  



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2001



|                                                                                   |  | URI            |           |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiaries |  | Other andEliminations |         |  | ConsolidatedTotal
|---------------------------------------------------------------------------------- |  | -------------- | --------- | - | --------------------- | - | --------- | ------------------------- |  | --------------------- | ------- |  | -----------------
|                                                                                   |  | (In thousands)
|Revenues:                                                                          |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Equipment rentals                                                                  |  | $              | 907,070   |   |                       | $ | 1,201,439 |                           |  | $                     | 104,391 |  |                  
|Sales of rental equipment                                                          |  |                | 63,612    |   |                       |   | 70,331    |                           |  |                       | 13,158  |  |                  
|Sales of equipment and merchandise and other revenues                              |  |                | 244,020   |   |                       |   | 254,222   |                           |  |                       | 28,362  |  |                  
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Total revenues                                                                     |  |                | 1,214,702 |   |                       |   | 1,525,992 |                           |  |                       | 145,911 |  |                  
|Cost of revenues:                                                                  |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Cost of equipment rentals, excluding depreciation                                  |  |                | 376,634   |   |                       |   | 626,867   |                           |  |                       | 50,134  |  |                  
|Depreciation of rental equipment                                                   |  |                | 150,619   |   |                       |   | 149,868   |                           |  |                       | 20,476  |  |                  
|Cost of rental equipment sales                                                     |  |                | 38,702    |   |                       |   | 42,088    |                           |  |                       | 7,952   |  |                  
|Cost of equipment and merchandise sales and other operating costs                  |  |                | 177,659   |   |                       |   | 185,223   |                           |  |                       | 20,913  |  |                  
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Total cost of revenues                                                             |  |                | 743,614   |   |                       |   | 1,004,046 |                           |  |                       | 99,475  |  |                  
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Gross profit                                                                       |  |                | 471,088   |   |                       |   | 521,946   |                           |  |                       | 46,436  |  |                  
|Selling, general and administrative expenses                                       |  |                | 192,640   |   |                       |   | 224,707   |                           |  |                       | 24,404  |  |                  
|Restructuring charge                                                               |  |                | 8,877     |   |                       |   | 17,096    |                           |  |                       | 2,949   |  |                  
|Non-rental depreciation and amortization                                           |  |                | 42,012    |   |                       |   | 51,014    |                           |  |                       | 5,875   |  |                  
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Operating income                                                                   |  |                | 227,559   |   |                       |   | 229,129   |                           |  |                       | 13,208  |  |                  
|Interest expense                                                                   |  |                | 211,220   |   |                       |   | 7,834     |                           |  |                       | 2,509   |  |                  
|Other (income) expense, net                                                        |  |                | 25,586    |   |                       |   | (21,202   | )                         |  |                       | 2,037   |  |                  
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Income (loss) before provision (benefit) for income taxes and extraordinary item   |  |                | (9,247    | ) |                       |   | 242,497   |                           |  |                       | 8,662   |  |                  
|Provision (benefit) for income taxes                                               |  |                | (1,226    | ) |                       |   | 100,636   |                           |  |                       | 3,922   |  |                  
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Income (loss) before extraordinary item and equity in net earnings of subsidiaries |  |                | (8,021    | ) |                       |   | 141,861   |                           |  |                       | 4,740   |  |                  
|Extraordinary item                                                                 |  |                | 11,317    |   |                       |   |           |                           |  |                       |         |  |                  
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Income (loss) before equity in net earnings of subsidiaries                        |  |                | (19,338   | ) |                       |   | 141,861   |                           |  |                       | 4,740   |  |                  
|Equity in net earnings of subsidiaries                                             |  |                | 146,601   |   |                       |   |           |                           |  |                       |         |  | $                
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  
|Net income                                                                         |  | $              | 127,263   |   |                       | $ | 141,861   |                           |  | $                     | 4,740   |  | $                
|                                                                                   |  |                |           |   |                       |   |           |                           |  |                       |         |  |                  



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2000



|                                                                  |  | URI            |           | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiaries |  | Eliminations |         |  | ConsolidatedTotal |         
|----------------------------------------------------------------- |  | -------------- | --------- | --------------------- | - | --------- | ------------------------- |  | ------------ | ------- |  | ----------------- | --------
|                                                                  |  | (In thousands) |          
|Revenues:                                                         |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Equipment rentals                                                 |  | $              | 851,541   |                       | $ | 1,094,613 |                           |  | $            | 110,529 |  |                   |         
|Sales of rental equipment                                         |  |                | 145,519   |                       |   | 178,576   |                           |  |              | 23,583  |  |                   |         
|Sales of equipment and merchandise and other revenues             |  |                | 253,798   |                       |   | 229,219   |                           |  |              | 31,483  |  |                   |         
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Total revenues                                                    |  |                | 1,250,858 |                       |   | 1,502,408 |                           |  |              | 165,595 |  |                   |         
|Cost of revenues:                                                 |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Cost of equipment rentals, excluding depreciation                 |  |                | 364,047   |                       |   | 494,350   |                           |  |              | 49,080  |  |                   |         
|Depreciation of rental equipment                                  |  |                | 152,640   |                       |   | 155,239   |                           |  |              | 20,252  |  |                   |         
|Cost of rental equipment sales                                    |  |                | 87,161    |                       |   | 106,617   |                           |  |              | 14,404  |  |                   |         
|Cost of equipment and merchandise sales and other operating costs |  |                | 197,190   |                       |   | 164,186   |                           |  |              | 25,125  |  |                   |         
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Total cost of revenues                                            |  |                | 801,038   |                       |   | 920,392   |                           |  |              | 108,861 |  |                   |         
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Gross profit                                                      |  |                | 449,820   |                       |   | 582,016   |                           |  |              | 56,734  |  |                   |         
|Selling, general and administrative expenses                      |  |                | 184,135   |                       |   | 245,431   |                           |  |              | 24,764  |  |                   |         
|Non-rental depreciation and amortization                          |  |                | 33,692    |                       |   | 39,618    |                           |  |              | 5,273   |  |                   |         
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Operating income                                                  |  |                | 231,993   |                       |   | 296,967   |                           |  |              | 26,697  |  |                   |         
|Interest expense                                                  |  |                | 217,904   |                       |   | 135       |                           |  |              | 10,740  |  |                   |         
|Other (income) expense, net                                       |  |                | 2,129     |                       |   | (4,285    | )                         |  |              | 320     |  |                   |         
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Income before provision for income taxes                          |  |                | 11,960    |                       |   | 301,117   |                           |  |              | 15,637  |  |                   |         
|Provision for income taxes                                        |  |                | 4,908     |                       |   | 124,964   |                           |  |              | 6,544   |  |                   |         
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Income before equity in net earnings of subsidiaries              |  |                | 7,052     |                       |   | 176,153   |                           |  |              | 9,093   |  |                   |         
|Equity in net earnings of subsidiaries                            |  |                | 185,246   |                       |   |           |                           |  |              |         |  | $                 | (185,246
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         
|Net income                                                        |  | $              | 192,298   |                       | $ | 176,153   |                           |  | $            | 9,093   |  | $                 | (185,246
|                                                                  |  |                |           |                       |   |           |                           |  |              |         |  |                   |         



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Year Ended December 31, 2002



|                                                                                                   |  | URI            |          |   | GuarantorSubsidiaries |   |          | Non-GuarantorSubsidiaries |  |   | Eliminations |   | ConsolidatedTotal | 
|-------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | --------------------- | - | -------- | ------------------------- |  | - | ------------ | - | ----------------- | 
|                                                                                                   |  | (In thousands) |         
|Net cash provided by operating activities                                                          |  | $              | 387,190  |   |                       | $ | 111,072  |                           |  | $ | 28,536       |   |                   | 
|Cash flows from investing activities:                                                              |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Purchases of rental equipment                                                                      |  |                | (302,417 | ) |                       |   | (150,864 | )                         |  |   | (38,978      | ) |                   | 
|Purchases of property and equipment                                                                |  |                | (9,088   | ) |                       |   | (23,054  | )                         |  |   | (1,482       | ) |                   | 
|Proceeds from sales of rental equipment                                                            |  |                | 98,156   |   |                       |   | 61,577   |                           |  |   | 16,446       |   |                   | 
|Purchases of other companies                                                                       |  |                | (172,583 | ) |                       |   |          |                           |  |   |              |   |                   | 
|Deposits on rental equipment purchases                                                             |  |                | (4,644   | ) |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash used in investing activities                                                              |  |                | (390,576 | ) |                       |   | (112,341 | )                         |  |   | (24,014      | ) |                   | 
|Cash flows from financing activities:                                                              |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Dividend distributions to parent                                                                   |  |                | (83,043  | ) |                       |   |          |                           |  |   |              |   |                   | 
|Proceeds from debt                                                                                 |  |                | 505,567  |   |                       |   | 82       |                           |  |   | 2,667        |   |                   | 
|Repayments of debt                                                                                 |  |                | (483,081 | ) |                       |   | (1,703   | )                         |  |   | (6,944       | ) |                   | 
|Payments of financing costs                                                                        |  |                | (6,197   | ) |                       |   |          |                           |  |   |              |   |                   | 
|Capital contributions by parent                                                                    |  |                | 63,755   |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash provided by (used in) financing activities                                                |  |                | (2,999   | ) |                       |   | (1,621   | )                         |  |   | (4,277       | ) |                   | 
|Effect of foreign exchange rates                                                                   |  |                |          |   |                       |   |          |                           |  |   | 935          |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net increase (decrease) in cash and cash equivalents                                               |  |                | (6,385   | ) |                       |   | (2,890   | )                         |  |   | 1,180        |   |                   | 
|Cash and cash equivalents at beginning of period                                                   |  |                | 6,385    |   |                       |   | 19,798   |                           |  |   | 1,143        |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Cash and cash equivalents at end of period                                                         |  |                |          |   |                       | $ | 16,908   |                           |  | $ | 2,323        |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Supplemental disclosure of cash flow information:                                                  |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Cash paid for interest                                                                             |  | $              | 181,045  |   |                       | $ | 1,232    |                           |  | $ | 10,976       |   |                   | 
|Cash paid for income taxes                                                                         |  | $              | (3,115   | ) |                       |   |          |                           |  | $ | 1,661        |   |                   | 
|                                                                                                   |  |                |          |   |                      
|Supplemental disclosure of non-cash investing and financing activities:                            |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Conversion of operating leases to capital leases                                                   |  | $              | 31,451   |   |                       |   |          |                           |  |   |              |   |                   | 
|The Company acquired the net assets and assumed certain liabilities of other companies as follows: |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Assets, net of cash acquired                                                                       |  | $              | 172,222  |   |                       |   |          |                           |  |   |              |   |                   | 
|Liabilities assumed                                                                                |  |                | (4,705   | ) |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                | 167,517  |   |                       |   |          |                           |  |   |              |   |                   | 
|Due to seller and other payments                                                                   |  |                | 5,066    |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash paid                                                                                      |  | $              | 172,583  |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Year Ended December 31, 2001



|                                                                                                   |  | URI            |            |   | GuarantorSubsidiaries |   |          | Non-GuarantorSubsidiaries |  |   | Eliminations |   | ConsolidatedTotal | 
|-------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | - | --------------------- | - | -------- | ------------------------- |  | - | ------------ | - | ----------------- | 
|                                                                                                   |  | (In thousands) |           
|Net cash provided by operating activities                                                          |  | $              | 622,289    |   |                       | $ | 97,695   |                           |  | $ | (8,933       | ) |                   | 
|Cash flows from investing activities:                                                              |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Purchases of rental equipment                                                                      |  |                | (277,032   | ) |                       |   | (148,125 | )                         |  |   | (24,613      | ) |                   | 
|Purchases of property and equipment                                                                |  |                | (13,159    | ) |                       |   | (28,214  | )                         |  |   | (3,501       | ) |                   | 
|Proceeds from sales of rental equipment                                                            |  |                | 63,612     |   |                       |   | 70,331   |                           |  |   | 13,158       |   |                   | 
|Payments of contingent purchase price                                                              |  |                | (2,103     | ) |                       |   |          |                           |  |   |              |   |                   | 
|Purchases of other companies                                                                       |  |                | (53,565    | ) |                       |   |          |                           |  |   | (1,273       | ) |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash used in investing activities                                                              |  |                | (282,247   | ) |                       |   | (106,008 | )                         |  |   | (16,229      | ) |                   | 
|Cash flows from financing activities:                                                              |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Dividend distributions to parent                                                                   |  |                | (44,258    | ) |                       |   |          |                           |  |   |              |   |                   | 
|Proceeds from debt                                                                                 |  |                | 2,008,644  |   |                       |   | 65       |                           |  |   | 44,758       |   |                   | 
|Repayments of debt                                                                                 |  |                | (2,292,186 | ) |                       |   | (1,687   | )                         |  |   | (6,634       | ) |                   | 
|Proceeds from sale-leaseback                                                                       |  |                | 12,435     |   |                       |   |          |                           |  |   |              |   |                   | 
|Payments of financing costs                                                                        |  |                | (28,709    | ) |                       |   |          |                           |  |   | (333         | ) |                   | 
|Capital contributions by parent                                                                    |  |                | 10,417     |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash provided by (used in) financing activities                                                |  |                | (333,657   | ) |                       |   | (1,622   | )                         |  |   | 37,791       |   |                   | 
|Effect of foreign exchange rates                                                                   |  |                |            |   |                       |   |          |                           |  |   | (16,137      | ) |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Net increase (decrease) in cash and cash equivalents                                               |  |                | 6,385      |   |                       |   | (9,935   | )                         |  |   | (3,508       | ) |                   | 
|Cash and cash equivalents at beginning of period                                                   |  |                |            |   |                       |   | 29,733   |                           |  |   | 4,651        |   |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Cash and cash equivalents at end of period                                                         |  | $              | 6,385      |   |                       | $ | 19,798   |                           |  | $ | 1,143        |   |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Supplemental disclosure of cash flow information:                                                  |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Cash paid for interest                                                                             |  | $              | 197,315    |   |                       | $ | 10,561   |                           |  | $ | 3,009        |   |                   | 
|Cash paid for income taxes                                                                         |  | $              | (31,122    | ) |                       |   |          |                           |  | $ | 323          |   |                   | 
|Supplemental disclosure of non-cash investing and financing activities:                            |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|The Company acquired the net assets and assumed certain liabilities of other companies as follows: |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Assets, net of cash acquired                                                                       |  | $              | 20,264     |   |                       |   |          |                           |  | $ | 1,201        |   |                   | 
|Liabilities assumed                                                                                |  |                | (4,468     | ) |                       |   |          |                           |  |   | (144         | ) |                   | 
|Less:                                                                                              |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Amounts paid through issuance of debt                                                              |  |                | (600       | ) |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                | 15,196     |   |                       |   |          |                           |  |   | 1,057        |   |                   | 
|Due to seller and other payments                                                                   |  |                | 38,369     |   |                       |   |          |                           |  |   | 216          |   |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash paid                                                                                      |  | $              | 53,565     |   |                       |   |          |                           |  | $ | 1,273        |   |                   | 
|                                                                                                   |  |                |            |   |                       |   |          |                           |  |   |              |   |                   | 



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UNITED RENTALS (NORTH AMERICA), INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING CASH FLOW INFORMATION

For the Year Ended December 31, 2000



|                                                                                                   |  | URI            |          |   | GuarantorSubsidiaries |   |          | Non-GuarantorSubsidiaries |  |   | Eliminations |   | ConsolidatedTotal | 
|-------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | --------------------- | - | -------- | ------------------------- |  | - | ------------ | - | ----------------- | 
|                                                                                                   |  | (In thousands) |         
|Net cash provided by operating activities                                                          |  | $              | 243,759  |   |                       | $ | 227,855  |                           |  | $ | 43,066       |   |                   | 
|Cash flows from investing activities:                                                              |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Purchases of rental equipment                                                                      |  |                | (489,259 | ) |                       |   | (283,488 | )                         |  |   | (35,457      | ) |                   | 
|Purchases of property and equipment                                                                |  |                | (34,477  | ) |                       |   | (102,510 | )                         |  |   | (3,712       | ) |                   | 
|Proceeds from sales of rental equipment                                                            |  |                | 145,519  |   |                       |   | 178,576  |                           |  |   | 23,583       |   |                   | 
|Proceeds from sale of businesses                                                                   |  |                | 16,246   |   |                       |   | 3,000    |                           |  |   |              |   |                   | 
|Payments of contingent purchase price                                                              |  |                | (3,030   | ) |                       |   | (13,236  | )                         |  |   |              |   |                   | 
|Purchases of other companies                                                                       |  |                | (337,257 | ) |                       |   |          |                           |  |   | (10,080      | ) |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash used in investing activities                                                              |  |                | (702,258 | ) |                       |   | (217,658 | )                         |  |   | (25,666      | ) |                   | 
|Cash flows from financing activities:                                                              |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Dividend distributions to parent                                                                   |  |                | (50,450  | ) |                       |   |          |                           |  |   |              |   |                   | 
|Proceeds from debt                                                                                 |  |                | 452,912  |   |                       |   | 3,290    |                           |  |   |              |   |                   | 
|Repayments of debt                                                                                 |  |                | (125,238 | ) |                       |   | (168     | )                         |  |   | (9,193       | ) |                   | 
|Proceeds from sale-leaseback                                                                       |  |                | 193,478  |   |                       |   |          |                           |  |   |              |   |                   | 
|Payments of financing costs                                                                        |  |                | (16,223  | ) |                       |   |          |                           |  |   |              |   |                   | 
|Capital contributions by parent                                                                    |  |                | 331      |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash provided by (used in) financing activities                                                |  |                | 454,810  |   |                       |   | 3,122    |                           |  |   | (9,193       | ) |                   | 
|Effect of foreign exchange rates                                                                   |  |                |          |   |                       |   |          |                           |  |   | (7,264       | ) |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net increase (decrease) in cash and cash equivalents                                               |  |                | (3,689   | ) |                       |   | 13,319   |                           |  |   | 943          |   |                   | 
|Cash and cash equivalents at beginning of period                                                   |  |                | 3,689    |   |                       |   | 16,414   |                           |  |   | 3,708        |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Cash and cash equivalents at end of period                                                         |  | $              |          |   |                       | $ | 29,733   |                           |  | $ | 4,651        |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Supplemental disclosure of cash flow information:                                                  |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Cash paid for interest                                                                             |  | $              | 218,346  |   |                       | $ | 135      |                           |  | $ | 10,782       |   |                   | 
|Cash paid for income taxes                                                                         |  | $              | 19,833   |   |                       |   |          |                           |  | $ | 3,913        |   |                   | 
|Supplemental disclosure of non-cash investing and financing activities:                            |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|The Company acquired the net assets and assumed certain liabilities of other companies as follows: |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Assets, net of cash acquired                                                                       |  | $              | 518,167  |   |                       |   |          |                           |  | $ | 11,037       |   |                   | 
|Liabilities assumed                                                                                |  |                | (132,163 | ) |                       |   |          |                           |  |   | (957         | ) |                   | 
|Less:                                                                                              |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Amounts paid in common stock of parent                                                             |  |                | (10,000  | ) |                       |   |          |                           |  |   |              |   |                   | 
|Amounts paid through issuance of debt                                                              |  |                | (65,500  | ) |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                | 310,504  |   |                       |   |          |                           |  |   | 10,080       |   |                   | 
|Due to seller and other payments                                                                   |  |                | 26,753   |   |                       |   |          |                           |  |   |              |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 
|Net cash paid                                                                                      |  | $              | 337,257  |   |                       |   |          |                           |  | $ | 10,080       |   |                   | 
|                                                                                                   |  |                |          |   |                       |   |          |                           |  |   |              |   |                   | 





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REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES



Board of Directors

United Rentals, Inc.



We have audited the consolidated financial statements of United Rentals, Inc. as of December 31, 2002 and 2001, and for each of the three years in the
period ended December 31, 2002, and have issued our report thereon dated February 20, 2003, included elsewhere in this Amendment No. 1 on Form 10-K/A. Our audits also included the financial statement schedules listed in Item 15(a)(2). These
schedules are the responsibility of the Companys management. Our responsibility is to express an opinion based on our audits.



In our opinion, the financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth therein.



/S/    ERNST & YOUNG LLP



MetroPark, New Jersey

February 20, 2003



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SCHEDULE ICONDENSED FINANCIAL INFORMATION OF REGISTRANT



UNITED RENTALS, INC.



CONDENSED BALANCE SHEET



|                                           |  | December 31    |          
|------------------------------------------ |  | -------------- | ---------
|                                           |  | 2002           |          
|                                           |  | (in thousands) |          
|ASSETS                                     |  |                |          
|Property and equipment, net                |  | $              | 25,765   
|Investment in and advances to subsidiaries |  |                | 1,532,290
|                                           |  |                |          
|                                           |  | $              | 1,558,055
|                                           |  |                |          
|                                           |  |               
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                |          
|Liabilities:                               |  |                |          
|Debt                                       |  | $              | 226,550  
|Accrued expenses and other liabilities     |  |                |          
|                                           |  |                |          
|Total liabilities                          |  |                | 226,550  
|                                           |  |               
|Commitments and contingencies              |  |                |          
|                                           |  |               
|Stockholders equity:                      |  |                |          
|Preferred stock                            |  |                | 5        
|Common stock                               |  |                | 765      
|Additional paid-in capital                 |  |                | 1,341,290
|Deferred compensation                      |  |                | (52,988  
|Retained earnings                          |  |                | 69,281   
|Accumulated other comprehensive loss       |  |                | (26,848  
|                                           |  |                |          
|Total stockholders equity                 |  |                | 1,331,505
|                                           |  |                |          
|                                           |  | $              | 1,558,055
|                                           |  |                |          





See accompanying notes.



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SCHEDULE ICONDENSED FINANCIAL INFORMATION OF REGISTRANT



UNITED RENTALS, INC.



CONDENSED STATEMENT OF OPERATIONS



|                                                   |  | Year Ended December 31 |         
|-------------------------------------------------- |  | ---------------------- | --------
|                                                   |  | 2002                   |         
|                                                   |  | (In thousands)         |         
|Non-rental depreciation and amortization           |  | $                      | 8,938   
|                                                   |  |                        |         
|Operating loss                                     |  |                        | (8,938  
|Interest expense                                   |  |                        | 18,206  
|                                                   |  |                        |         
|Loss before benefit for income taxes               |  |                        | (27,144 
|Benefit for income taxes                           |  |                        | 10,586  
|                                                   |  |                        |         
|Net loss before equity in earnings of subsidiaries |  |                        | (16,558 
|Equity in earnings (loss) of subsidiaries          |  |                        | (381,267
|                                                   |  |                        |         
|Net income (loss)                                  |  | $                      | (397,825
|                                                   |  |                        |         







See accompanying notes.



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SCHEDULE ICONDENSED FINANCIAL INFORMATION OF REGISTRANT



UNITED RENTALS, INC.



CONDENSED CASH FLOW INFORMATION



|                                                 |  | Year Ended December 31, |        
|------------------------------------------------ |  | ----------------------- | -------
|                                                 |  | 2002                    |        
|                                                 |  | (In thousands)          |        
|Net cash used in operating activities            |  | $                       | (13,231
|Cash flows from investing activities:            |  |                         |        
|Purchase of property and equipment               |  |                         | (4,975 
|Capital contributed to subsidiary                |  |                         | (63,755
|                                                 |  |                         |        
|Net cash used in investing activities            |  |                         | (68,730
|                                                 |  |                         |        
|Cash flows from financing activities:            |  |                         |        
|Payments of debt                                 |  |                         | (38,111
|Shares repurchased and retired                   |  |                         | (26,726
|Proceeds from the exercise of stock options      |  |                         | 63,755 
|Proceeds from dividends from subsidiary          |  |                         | 83,043 
|                                                 |  |                         |        
|Net cash provided by financing activities        |  |                         | 81,961 
|                                                 |  |                         |        
|Net change in cash and cash equivalents          |  |                         |        
|Cash and cash equivalents at beginning of period |  |                         |        
|                                                 |  |                         |        
|Cash and cash equivalents at end of period       |  |                         |        
|                                                 |  |                         |        







See accompanying notes.



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SCHEDULE ICONDENSED FINANCIAL INFORMATION OF REGISTRANT



UNITED RENTALS, INC.



NOTES TO CONDENSED FINANCIAL STATEMENTS



1.    Basis of Presentation



United Rentals, Inc. is principally a holding company (Holdings)
and conducts its operations primarily through its wholly owned subsidiary United Rentals (North America), Inc. (URI) and subsidiaries. In the parent company-only financial statements, Holdings investment in subsidiaries is stated at cost
plus equity in undistributed earnings of subsidiaries since the date of acquisition. Holdings share of net income of its unconsolidated subsidiaries is included in consolidated income using the equity method. The parent company-only financial
statements should be read in conjunction with the Companys consolidated financial statements.



2.    Debt



See Note 11 to the Consolidated Financial Statements for information concerning debt.



3.    Guarantee



See Note 11 to the Consolidated Financial Statements for information concerning the guarantee.



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SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS



UNITED RENTALS, INC.



|                                                 |  |                              |        | Additions                   |   |         |  |   |            |     
|------------------------------------------------ |  | ---------------------------- | ------ | --------------------------- | - | ------- |  | - | ---------- | ----
|Description                                      |  | Balance atBeginningof Period |        | Charged toCosts andExpenses |   | Other   |  |   | Deductions |     
|                                                 |  | (In thousands)              
|Year ended December 31, 2002:                    |  |                              |        |                             |   |         |  |   |            |     
|Allowance for doubtful accounts                  |  | $                            | 47,744 |                             | $ | 36,791  |  | $ | (1,378     | )(a)
|Reserve for inventory obsolescence and shrinkage |  |                              | 9,395  |                             |   | 10,586  |  |   | 910        | (b) 
|Insurance reserves                               |  |                              | 18,559 |                             |   | 105,957 |  |   | 6,232      | (c) 
|                                                 |  |                              |        |                             |  
|Year ended December 31, 2001:                    |  |                              |        |                             |   |         |  |   |            |     
|Allowance for doubtful accounts                  |  | $                            | 55,624 |                             | $ | 31,194  |  | $ | 906        | (a) 
|Reserve for inventory obsolescence and shrinkage |  |                              | 15,461 |                             |   | 9,229   |  |   | 544        | (b) 
|Insurance reserves                               |  |                              | 15,428 |                             |   | 87,238  |  |   |            |     
|                                                 |  |                              |        |                             |  
|Year ended December 31, 2000:                    |  |                              |        |                             |   |         |  |   |            |     
|Allowance for doubtful accounts                  |  | $                            | 58,376 |                             | $ | 38,431  |  | $ | 14,791     | (a) 
|Reserve for inventory obsolescence and shrinkage |  |                              | 16,782 |                             |   | 9,124   |  |   | 11,302     | (b) 
|Insurance reserves                               |  |                              | 22,750 |                             |   | 63,728  |  |   |            |     

---

|(a) |  | Represents allowance for doubtful accounts established through acquisitions offset, in the case of 2002, for reductions to the allowance through purchase accounting.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Represents reserve for inventory obsolescence and shrinkage assumed through acquisitions.
|--- |  | -----------------------------------------------------------------------------------------

|(c) |  | Represents reclassification to other assets of receivable claims.
|--- |  | -----------------------------------------------------------------

|(d) |  | Represents write-offs of accounts, net of recoveries.
|--- |  | -----------------------------------------------------

|(e) |  | Represents write-offs of inventory items.
|--- |  | -----------------------------------------

|(f) |  | Represents payments.
|--- |  | --------------------



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PART IV



Item 15.    
Exhibits, Financial Statement Schedules and Reports on Form 8-K



(a)(1)  Consolidated Financial Statements:



Report of Independent Auditors



United Rentals, Inc. Consolidated Balance SheetsDecember 31, 2002 and 2001



United Rentals, Inc. Consolidated Statements of Operations for the years ended December 31, 2002, 2001, and 2000



United Rentals, Inc. Consolidated Statements of Stockholders Equity for the years ended December 31, 2002, 2001, and 2000



United Rentals, Inc. Consolidated Statements of Cash Flows for the years
ended December 31, 2002, 2001, and 2000



Notes to
Consolidated Financial Statements



Report of Independent
Auditors



United Rentals (North America), Inc. Consolidated
Balance SheetsDecember 31, 2002 and 2001



United
Rentals (North America), Inc. Consolidated Statements of Operations for the years ended December 31, 2002, 2001, and 2000



United Rentals (North America), Inc. Consolidated Statements of Stockholders Equity for the years ended December 31, 2002, 2001, and 2000



United Rentals (North America), Inc. Consolidated Statements
of Cash Flows for the years ended December 31, 2002, 2001, and 2000



Notes to Consolidated Financial Statements



(a)(2)  Financial Statement Schedules:



Report of Independent Auditors on Financial Statement Schedules



Schedule I Condensed Financial Information of Registrant



Schedule II Valuation and Qualifying Accounts



Schedules other than those listed are omitted as they are not applicable or the required or equivalent information has been included in the financial statements or notes thereto.



(a)(3)  Exhibits



The list of exhibits included in the original 10-K is not being modified. However, the following additional exhibits are being filed with this amendment.



23


Consent of Ernst & Young LLP99
(a)

Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200299
(b)

Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




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##### Table of Contents

(b)  Reports on Form 8-K:



| | 1. |  | Form 8-K filed on October 1, 2002 (earliest event reported September 30, 2002); Item 5 was reported.
| | -- |  | ----------------------------------------------------------------------------------------------------



| | 2. |  | Form 8-K filed on December 9, 2002 (earliest event reported December 9, 2002); Item 5 was reported.
| | -- |  | ---------------------------------------------------------------------------------------------------



| | 3. |  | Form 8-K filed on December 10, 2002 (earliest event reported December 10, 2002); Item 5 was reported.
| | -- |  | -----------------------------------------------------------------------------------------------------



| | 4. |  | Form 8-K filed on December 17, 2002 (earliest event reported December 17, 2002); Item 5 was reported.
| | -- |  | -----------------------------------------------------------------------------------------------------



| | 5. |  | Form 8-K filed on December 26, 2002 (earliest event reported December 17, 2002); Item 5 was reported.
| | -- |  | -----------------------------------------------------------------------------------------------------







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##### Table of Contents

SIGNATURES



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



|                    |  |  |  | UNITED RENTALS, INC.
|------------------- |  |  |  | --------------------
|                    |  |  | 
|Date: June 23, 2003 |  |  |  | By:                 
|                    |  |  |  |                     





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##### Table of Contents

SIGNATURES



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



|                    |  |  |  | UNITED RENTALS (NORTH AMERICA), INC.
|------------------- |  |  |  | ------------------------------------
|                    |  |  | 
|Date: June 23, 2003 |  |  |  | By:                                 
|                    |  |  |  |                                     





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##### Table of Contents

CERTIFICATIONS



I, Bradley S. Jacobs, certify that:



|1. |  | I have reviewed this annual report* on Form 10-K of United Rentals, Inc. and United Rentals (North America), Inc.;
|-- |  | ------------------------------------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this annual 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 annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrants and have:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the
Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants boards of directors (or persons performing the equivalent function):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



June 23, 2003



/s/    BRADLEY S.
JACOBS

Bradley S. Jacobs

Chief Executive Officer



*All references to this annual report refer to the original annual report filed on Form 10-K, as amended by this Amendment No. 1 on Form 10-K/A.



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##### Table of Contents

CERTIFICATIONS



I, John N. Milne, certify that:



|1. |  | I have reviewed this annual report* on Form 10-K of United Rentals, Inc. and United Rentals (North America), Inc.;
|-- |  | ------------------------------------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this annual 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 annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrants and have:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the
Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants boards of directors (or persons performing the equivalent function):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



June 23, 2003



/s/    JOHN N.
MILNE

John N. Milne

President and Chief Financial Officer



*All references to this annual report refer to the original annual report filed on Form 10-K, as amended by this Amendment No. 1 on Form 10-K/A.



89