---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q/A

(Amendment No. 2 to Form 10-Q)

|ý                                             |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|--------------------------------------------- |  | ----------------------------------------------------------------------------------------
|For the quarterly period ended March 31, 2002
|OR                                           
|o                                             |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|Commission File No. 001-14163                

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National Equipment Services, Inc.(Exact name of registrant as specified in its charter)

|DELAWARE(State or other Jurisdiction of
Incorporation or Organization) | 36-4087016(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------- | ----------------------------------------------

1603 Orrington Avenue, Suite 1600
Evanston, Illinois 60201(Address of principal executive offices)
(Zip code)

(847) 733-1000(Registrant's telephone number, including area code)

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

There
were 21,151,163 shares of Common Stock ($.01 par value) outstanding as of August 7, 2002.

Explanatory Note

This amendment is being filed to correct typographical and other clerical errors contained in the Company's Quarterly Report on Form 10-Q/A for the quarter
ended March 31, 2002 filed on August 14, 2002. These changes consist of (i) a reclassification of net loss between continuing operations and discontinued operations in the
consolidated statement of cash flows for the three months ended March 31, 2001 on page 5, (ii) a correction of the amount originally disclosed in Note 4 to the unaudited financial
statements as proceeds from the sale of the Company's underground trench shoring business, and (iii) a correction of the table in Note 8 to the unaudited financial statements.

---

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NATIONAL EQUIPMENT SERVICES, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter ended March 31, 2002

INDEX

|PART I.           |  | FINANCIAL INFORMATION                                                                                |  | 3 
|----------------- |  | ---------------------------------------------------------------------------------------------------- |  | --
|Item 1.           |  | Financial Statements                                                                                 |  | 3 
|                  |  | Consolidated Balance Sheets at March 31, 2002 (Unaudited) and December 31, 2001                      |  | 3 
|                  |  | Consolidated Statements of Operations for the three months ended March 31, 2002 and 2001 (Unaudited) |  | 4 
|                  |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001 (Unaudited) |  | 5 
|                  |  | Notes to Consolidated Financial Statements (Unaudited)                                               |  | 6 
|Item 2.           |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                |  | 11
|Item 3.           |  | Quantitative and Qualitative Disclosures About Market Risk                                           |  | 15
|PART II.          |  | OTHER INFORMATION                                                                                    |  | 16
|Item 1.           |  | Legal Proceedings                                                                                    |  | 16
|Item 2.           |  | Changes in Securities                                                                                |  | 16
|Item 3.           |  | Defaults upon Senior Securities                                                                      |  | 16
|Item 4.           |  | Submission of Matters to a Vote of Security Holders                                                  |  | 16
|Item 5.           |  | Other Information                                                                                    |  | 16
|Item 6.           |  | Exhibits and Reports on Form 8-K                                                                     |  | 16
|SIGNATURE         |  | 17                                                                                                  
|Index of Exhibits |  | 18                                                                                                  

2

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL EQUIPMENT SERVICES, INC.  CONSOLIDATED BALANCE SHEETS  (in thousands, except per share data)

|                                                                         |                                                                                                | March 31,
2002                                       |           | December 31,
2001 |          
|------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- | --------- | ----------------- | ---------
|
|Assets                                                                   |                                                                                                |                                                      |           |                   |          
|                                                                         | Cash and cash equivalents                                                                      |                                                      | $         | 307               |          
|                                                                         | Accounts receivable, net of allowance for doubtful accounts of $5,829 and $5,344, respectively |                                                      |           | 113,644           |          
|                                                                         | Inventory, net                                                                                 |                                                      |           | 27,659            |          
|                                                                         | Rental equipment, net                                                                          |                                                      |           | 554,753           |          
|                                                                         | Property and equipment, net                                                                    |                                                      |           | 52,685            |          
|                                                                         | Intangible assets, net                                                                         |                                                      |           | 141,209           |          
|                                                                         | Loan origination costs, net                                                                    |                                                      |           | 9,894             |          
|                                                                         | Deferred income taxes, net                                                                     |                                                      |           |                  |          
|                                                                         | Prepaid expenses and other assets, net                                                         |                                                      |           | 14,524            |          
|                                                                         | Assets associated with discontinued operations                                                 |                                                      |           | 109,694           |          
|                                                                         |                                                                                                |                                                      |           |                   |          
|Total assets                                                             |                                                                                                | $                                                    | 1,024,369 |                   | $        
|                                                                         |                                                                                                |                                                      |           |                   |          
|Liabilities                                                              |                                                                                                |                                                      |           |                   |          
|                                                                         | Book overdraft                                                                                 |                                                      | $         | 4,541             |          
|                                                                         | Accounts payable                                                                               |                                                      |           | 16,203            |          
|                                                                         | Accrued interest                                                                               |                                                      |           | 15,152            |          
|                                                                         | Deferred income taxes, net                                                                     |                                                      |           |                  |          
|                                                                         | Accrued expenses and other liabilities                                                         |                                                      |           | 61,096            |          
|                                                                         | Debt                                                                                           |                                                      |           | 868,957           |          
|                                                                         | Liabilities associated with discontinued operations                                            |                                                      |           | 4,116             |          
|                                                                         |                                                                                                |                                                      |           |                   |          
|                                                                         |                                                                                                | Total liabilities                                    |           |                   | 970,065  
|                                                                         |                                                                                                |                                                      |           |                   |          
|                                                                         | Senior redeemable convertible preferred stock                                                  |                                                      |           | 96,422            |          
|                                                                         | Commitments and contingencies                                                                  |                                                      |           |                  |          
|Stockholders' Equity                                                     |                                                                                                |                                                      |           |                   |          
|Common stock, $0.01 par, 100,000 shares authorized; 24,170 shares issued |                                                                                                |                                                      | 241       |                   |          
|Additional paid-in capital                                               |                                                                                                |                                                      | 123,887   |                   |          
|Retained earnings (accumulated deficit)                                  |                                                                                                |                                                      | (139,671  | )                 |          
|Stock subscriptions receivable                                           |                                                                                                |                                                      | (80       | )                 |          
|Treasury stock at cost, 3,019 shares                                     |                                                                                                |                                                      | (19,062   | )                 |          
|Accumulated other comprehensive loss                                     |                                                                                                |                                                      | (7,433    | )                 |          
|                                                                         |                                                                                                |                                                      |           |                   |          
|                                                                         |                                                                                                | Total stockholders' equity (deficit)                 |           |                   | (42,118  
|                                                                         |                                                                                                |                                                      |           |                   |          
|                                                                         |                                                                                                | Total liabilities and stockholders' equity (deficit) |           | $                 | 1,024,369
|                                                                         |                                                                                                |                                                      |           |                   |          

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

3

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NATIONAL EQUIPMENT SERVICES, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  (in thousands, except per share data)

|                                                                  |                                                       | For the Three Months Ended
March 31, |         
|----------------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------ | --------
|
|Revenues                                                          |                                                       |                                      |         
|                                                                  | Rental revenues                                       |                                      | $       
|                                                                  | New equipment sales                                   |                                      |         
|                                                                  | Rental equipment sales                                |                                      |         
|                                                                  | Parts, service and other                              |                                      |         
|                                                                  |                                                       |                                      |         
|                                                                  |                                                       | Total revenues                       |         
|Cost of revenues                                                  |                                                       |                                      |         
|                                                                  | Rental equipment depreciation                         |                                      |         
|                                                                  | Cost of new equipment sales                           |                                      |         
|                                                                  | Cost of rental equipment sales                        |                                      |         
|                                                                  | Other operating expenses                              |                                      |         
|                                                                  |                                                       |                                      |         
|                                                                  |                                                       | Total cost of revenues               |         
|                                                                  |                                                       |                                      |         
|Gross profit                                                      |                                                       |                                      | 38,324  
|Selling, general and administrative expenses                      |                                                       |                                      | 34,525  
|Non-rental depreciation and amortization                          |                                                       |                                      | 2,440   
|                                                                  |                                                       |                                      |         
|Operating income                                                  |                                                       |                                      | 1,359   
|Other income, net                                                 |                                                       |                                      | 446     
|Interest expense, net                                             |                                                       |                                      | 16,683  
|                                                                  |                                                       |                                      |         
|Loss from continuing operations before income taxes               |                                                       |                                      | (14,878 
|Income tax benefit                                                |                                                       |                                      |        
|                                                                  |                                                       |                                      |         
|Loss from continuing operations                                   |                                                       |                                      | (14,878 
|Discontinued operations:                                          |                                                       |                                      |         
|                                                                  | Loss from discontinued operations, net of tax         |                                      |         
|                                                                  |                                                       |                                      |         
|Loss before cumulative effect of a change in accounting principle |                                                       |                                      | (16,509 
|Cumulative effect of a change in accounting principle, net of tax |                                                       |                                      | (129,505
|                                                                  |                                                       |                                      |         
|Net loss                                                          |                                                       | $                                    | (146,014
|Other comprehensive income                                        |                                                       |                                      | 3,668   
|                                                                  |                                                       |                                      |         
|Comprehensive loss                                                |                                                       | $                                    | (142,346
|Basic loss per common share:                                      |                                                       |                                      |         
|                                                                  | Continuing operations                                 |                                      | $       
|                                                                  | Discontinued operations                               |                                      |         
|                                                                  | Cumulative effect of a change in accounting principle |                                      |         
|                                                                  |                                                       |                                      |         
|                                                                  |                                                       | Net loss                             |         
|Diluted loss per common share:                                    |                                                       |                                      |         
|                                                                  | Continuing operations                                 |                                      | $       
|                                                                  | Discontinued operations                               |                                      |         
|                                                                  | Cumulative effect of a change in accounting principle |                                      |         
|                                                                  |                                                       |                                      |         
|                                                                  |                                                       | Net loss                             |         
|Weighted average shares outstanding:                              |                                                       |                                      |         
|                                                                  | Basic                                                 |                                      |         
|                                                                  | Diluted                                               |                                      |         

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

4

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NATIONAL EQUIPMENT SERVICES, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  (in thousands)

|                                                                                                                      |                                                       | For the Three Months Ended
March 31,   |        
|--------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | -------------------------------------- | -------
|
|Operating Activities:                                                                                                 |                                                       |                                        |        
|Net loss from continuing operations                                                                                   |                                                       | $                                      | (14,878
|Net loss from discontinued operations                                                                                 |                                                       |                                        | (1,631 
|                                                                                                                      |                                                       |                                        |        
|                                                                                                                      | Net loss                                              |                                        |        
|Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities:            |                                                       |                                        |        
|                                                                                                                      | Depreciation and amortization                         |                                        |        
|                                                                                                                      | Cumulative effect of a change in accounting principle |                                        |        
|                                                                                                                      | Gain on sale of equipment                             |                                        |        
|                                                                                                                      | Deferred income taxes                                 |                                        |        
|                                                                                                                      | Changes in operating assets and liabilities:          |                                        |        
|                                                                                                                      |                                                       | Accounts receivable                    |        
|                                                                                                                      |                                                       | Inventory                              |        
|                                                                                                                      |                                                       | Prepaid expenses and other assets      |        
|                                                                                                                      |                                                       | Accounts payable                       |        
|                                                                                                                      |                                                       | Accrued expenses and other liabilities |        
|Adjustments to reconcile net loss from discontinued operations to net cash (used in) provided by operating activities |                                                       |                                        | 2,540  
|                                                                                                                      |                                                       |                                        |        
|Net cash provided by operating activities                                                                             |                                                       |                                        | 5,929  
|Investing Activities:                                                                                                 |                                                       |                                        |        
|Purchases of rental equipment                                                                                         |                                                       |                                        | (11,953
|Proceeds from sale of rental equipment                                                                                |                                                       |                                        | 6,508  
|Purchases of property and equipment                                                                                   |                                                       |                                        | (1,199 
|Proceeds from sale of property and equipment                                                                          |                                                       |                                        | 399    
|Net cash (used in) provided by discontinued operations                                                                |                                                       |                                        | 5      
|                                                                                                                      |                                                       |                                        |        
|Net cash used in investing activities                                                                                 |                                                       |                                        | (6,240 
|Financing Activities:                                                                                                 |                                                       |                                        |        
|Proceeds from long-term debt                                                                                          |                                                       |                                        | 27,000 
|Payments on long-term debt and capital leases                                                                         |                                                       |                                        | (27,256
|Book overdrafts                                                                                                       |                                                       |                                        | (3,499 
|Net cash provided by discontinued operations                                                                          |                                                       |                                        | 174    
|                                                                                                                      |                                                       |                                        |        
|Net cash used in financing activities                                                                                 |                                                       |                                        | (3,581 
|                                                                                                                      |                                                       |                                        |        
|Net decrease in cash and cash equivalents                                                                             |                                                       |                                        | (3,892 
|Cash and cash equivalents at beginning of period                                                                      |                                                       |                                        | 4,199  
|                                                                                                                      |                                                       |                                        |        
|Cash and cash equivalents at end of period                                                                            |                                                       | $                                      | 307    
|                                                                                                                      |                                                       |                                        |        

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

5

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NATIONAL EQUIPMENT SERVICES, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (in thousands, except per share data)

1.    Organization

National Equipment Services, Inc. (the "Company") is principally a holding company organized on June 4, 1996 (date of inception) under the laws of
Delaware. The Company conducts its operations through its wholly owned subsidiaries acquired since the date of inception. The Company owns and operates equipment rental, sales and service facilities
primarily located throughout the United States. The Company rents various types of equipment to a diverse customer base, including construction, petro-chemical and other industrial users. The Company
also sells new and used rental equipment and related parts, and provides other services. The nature of the Company's business is such that short-term obligations are typically met by cash
flow generated from long-term assets. Consequently, consistent with industry practice, the accompanying balance sheets are presented on an unclassified basis.

2.    Basis of presentation

GeneralThe accompanying unaudited financial statements as of and for the quarters ended March 31, 2002 and 2001 have
been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. The December 31, 2001 consolidated balance sheet was derived from audited financial statements but does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting only of
normal recurring adjustments, have been included. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for a full year. Due to the
seasonality that impacts a significant portion of the Company's locations, the second and third quarters are typically the most active quarters for the Company.

Derivative InstrumentStatement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended, became effective as of January 1, 2001. Currently, the Company's only derivative is an interest rate swap used to hedge a portion of the
Company's debt and is designated as a cash flow hedging instrument. The Company's objective for holding the derivative is to minimize interest rate risks and stabilize cash flows. The derivative is
required to be recorded as an asset or liability on the consolidated balance sheet at fair value, with an offset to other comprehensive income to the extent the hedge is effective. Any ineffectiveness
in the hedge will be recorded as an adjustment to earnings. As of March 31, 2002, the derivative liability totaled $7,433 and was recorded as an accrued liability on the consolidated balance
sheet.

Comprehensive IncomeStatement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income",
which requires comprehensive income and its components to be disclosed in the financial statements for all periods presented became effective in 1999. The only item of other comprehensive income
applicable to the Company is a change in the fair value of a derivative instrument, totaling $3,668 of income during the three-month period ending March 31, 2002.

Recently Issued Accounting StandardsIn May 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 Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of
Debt," and an amendment of that Statement, FASB Statement No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." This Statement amends FASB

6

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Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain
lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of this Statement related to the recission of Statement No. 4 are effective
beginning in 2003. All other provisions are effective after May 15, 2002.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and amends Accounting Principles Board (APB) No. 30, "Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This Statement requires that long-lived assets that are to
be disposed of by sale be measured at the lower of book value or fair value less costs to sell. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for (a) recognition
and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. This Statement also
retains APB No. 30's requirement that companies report discontinued operations separately from continuing operations. All provisions of this Statement were effective at the beginning of fiscal
2002. The adoption of this new standard did not have a significant impact on the Company's financial results.

In
June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," that supersedes Accounting Principles Board ("APB") Opinion
No. 16, Business Combinations. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and all business combinations accounted for by the purchase
method for which the date of acquisition is after June 30, 2001. All business combinations under the scope of SFAS No. 141 are to be accounted for using the purchase method.

Also
in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," that supersedes APB Opinion No. 17, Intangible Assets. SFAS No. 142
is effective for fiscal years beginning after December 15, 2001. Under this standard, goodwill is no longer amortized but subject to annual impairment tests on a reporting unit level. In the
second quarter of 2002, the Company completed a transitional impairment test on its reporting units. As a result of this test, the Company recorded an impairment charge of approximately $129,505, net
of tax benefit, as a cumulative effect of change in accounting principle retroactive to January 1, 2002.

The
effect of adopting the new standards on net income and diluted earnings per share for the quarter ended March 31, 2001 is as follows:

March 31,
2001Reported net loss

$
(8,303
)Plus: Goodwill amortization


2,432Adjusted net loss

$
(5,871
)Diluted earnings per share:Reported net loss

$
(0.40
)Goodwill amortization

$
0.12Adjusted net loss

$
(0.28
)


ReclassificationsCertain reclassifications of prior year financial statement amounts have been made to conform with the
current year reporting.

7

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3.    Earnings per share

The Company's earnings per share for the three months ended March 31, 2002 and 2001 are calculated as follows:

2002

2001Loss from continuing operations

$
(14,878
)
$
(7,269
)Less accretion on preferred stock


(125
)

(125
)Net loss available to common stockholders

$
(15,003
)
$
(7,394
)Basic weighted average shares


21,119


20,859Effect of dilutive securitiesUnvested stock





Convertible preferred stock





Exercise of stock options





Diluted weighted average shares


21,119


20,859Basic loss per share

$
(0.70
)
$
(0.35
)Dilutive loss per share

$
(0.70
)
$
(0.35
)


The
effect of dilutive securities is omitted from the computation of earnings per share because inclusion would be anti-dilutive by reducing the loss per share.

At
March 31, 2002 and 2001, approximately 2,800 stock options were excluded from the computation of the diluted earnings per share because the exercise prices were greater than
the average market price of the common shares.

4.    Acquisitions and Dispositions

In December 2001, the Company purchased Brambles Equipment Services, Inc. ("BESI"), an equipment rental company based in Taylor, MI. The following
unaudited financial information for the quarter ended March 31, 2001 represents the pro forma results of operations as if the BESI acquisition had been completed on January 1, 2001,
after giving effect to certain adjustments including increased depreciation of property and equipment, interest expense for acquisition debt and amortization of related intangibles. These pro forma
results and loss per share have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have been achieved had this acquisition been
completed as of January 1, 2001, nor are the results indicative of the Company's future results of operations.

2001Revenues

$
168,991Operating income


8,886Net loss


(6,456
)Net loss per share:Basic

$
(0.31
)Diluted

$
(0.31
)Weighed average shares outstandingBasic


20,859Diluted


20,859


On
June 30, 2002, the Company sold its underground trench shoring business. The proceeds from the sale of $108,890 were used to repay existing indebtedness under the Credit
Facility on July 1, 2002. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the financial condition and results of operations
of this business are reflected herein as discontinued operations.

8

---

5.    Inventory

Inventory, net consists of the following, at:

March 31,
2002

December 31,
2001New equipment

$
8,060

$
5,288Used equipment


4,309


4,512Contractor supplies


4,848


4,495Parts


15,638


17,16632,855


31,461Reserves for excess and obsolete inventory


(5,196
)

(4,676
)$
27,659

$
26,785


6.    Income Taxes

As a result of the adoption of SFAS No. 142, the Company's deferred tax assets exceeded the Company's deferred tax liabilities. The Company did not provide
any current or deferred US federal, state or foreign income tax provision or benefit during 2002 because it has recently experienced significant operating losses. The Company has provided a full
valuation allowance on the deferred tax asset, consisting primarily of net operating loss, because of uncertainty regarding its realizability. As of March 31, 2002, the valuation allowance was
$10,653.

7.    Debt

The Company's Credit Facility provides for a term loan of $100,000 and a revolving loan of $550,000. Based upon the available borrowing base (which is based on
inventory, accounts receivable and rental equipment levels) at March 31, 2002, the Company had $3,658 available on the revolving Credit Facility loan. The Credit Facility is collateralized by
substantially all of the Company's assets.

During
1997, the Company issued $100,000 of Senior Subordinated Notes due 2004 (the "Series A Notes") at a discount netting proceeds of $99,000. During 1998, the Company completed
its exchange of $100,000 of Senior Subordinated Notes due 2004, Series B (the "Series B Notes"), which have been registered for public trading, for the Series A Notes. During
1998, the Company issued $125,000 of Senior Subordinated Notes due 2004, Series C (the "Series C Notes") at a discount netting proceeds of $122,000. During 1999, the Company issued
$50,000 of additional Series C Notes, at a discount netting proceeds of $49,000. Later during 1999, the Company completed its exchange of $175,000 of Senior Subordinated Notes due 2004,
Series D (the "Series D Notes"), which have been registered for public trading, for the Series C Notes.

The
Company is a holding company with no independent operations, and the Company's assets (excluding the intercompany receivables and common stock of its subsidiaries) are insignificant.
All of the Company's subsidiaries make full, unconditional, joint and several guarantees of the Series B Notes and the Series D Notes, and all of these subsidiaries are directly or
indirectly wholly-owned by the Company. The separate financial statements of each of these wholly-owned subsidiaries are not presented as management believes that separate financial statements and
other disclosures concerning these subsidiaries are not individually meaningful for presentation or material to investors.

The
Credit Facility contains certain covenants that, among other things, require the Company to satisfy certain financial tests, including tests relating to (i) the ratio of
senior debt to earnings before interest, taxes, depreciation, and amortization ("EBITDA"), (ii) minimum interest coverage ratio and (iii) the ratio of funded debt to EBITDA. In addition,
the Credit Facility and the indentures for the Series B and Series D Notes contain certain covenants that set certain limitations on the granting of liens, asset sales, additional
indebtedness, transactions with affiliates, restricted payments, investments, issuances of stock and payment of dividends. The Company is currently in compliance with all covenants of the Credit
Facility and the indentures for the Series B and Series D Notes. However, based on current operating projections as of August 8, 2002, the Company expects that it will violate

9

---

the leverage covenants under its Credit Facility at the end of the third quarter of 2002. A failure by the Company to comply with these covenants could result in an event of default under the Credit
Facility, which could have an adverse effect on the Company. The Company is currently in discussions with its lenders to amend its leverage covenants, which would give the Company additional financial
flexibility.

8.    Segment information

All operations are managed on a branch basis. The Company has two reporting segments, Traffic Safety and General Rental and Other. The Traffic Safety operations
have different contractual, regulatory and capital requirements than the General Rental and Other operations. Intersegment revenues are not material and the operating earnings of the segments do not
include interest expense (income) or income tax expense (benefit). The Company has no single customer that represents greater than 2% of the Company's consolidated revenues. Indentifiable assets are
those used in the Company's operations in each segment.

The
following table presents the information for the reported segments for the quarters ended March 31:

Traffic Safety

Continuing
General Rental
and Other

Discontinued
Operations

Consolidated2002:Total revenues

$
14,485

$
123,966



$
138,451Operating income (loss)


(3,767
)

5,126




1,359Identifiable assets


104,836


809,839

109,694


1,024,369Depreciation and amortization


2,971


27,014




29,985Capital expenditures


780


12,372




13,152Goodwill, net


39,645


98,469




138,1142001:Total revenues

$
13,569

$
113,922



$
127,491Operating income (loss)


(3,800
)

9,386




5,586Identifiable assets


114,173


975,682

114,685


1,204,540Depreciation and amortization


3,414


25,337




28,751Capital expenditures


795


4,129




4,924Goodwill, net


39,971


257,243




297,214


9.    Restructuring charge

During the fourth quarter of 2001, the Company recorded a non-recurring pre-tax restructuring charge of $1,700 related to the acquisition
of BESI. This charge consists primarily of a reserve for lease termination and severance costs. The Company also established a reserve of $8,000, which was recorded against goodwill, related to the
closure of certain BESI locations in conjunction with the purchase accounting for the acquisition (Note 4). Details of the restructuring reserve are as follows:

Balance at
December 31,
2001

Utilized

Balance at
March 31,
2002Lease termination costs and other facility closure costs

$
5,059

$
218

$
4,841Severance


4,641


671


3,970$
9,700

$
889

$
8,811


It
is expected that the restructuring activities will be substantially complete by the end of the year.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollar amounts in thousands)

The following table shows information derived from the Company's historical consolidated statements of operations as a percentage of total revenues.

Three Months Ended
March 31,2002

2001Rental revenues

76.4
%
77.7
%New equipment sales

6.8

8.4Rental equipment sales

4.7

4.6Parts, service and other

12.1

9.3Total revenues

100.0

100.0Cost of revenues

72.3

68.0Gross margin

27.7

32.0Selling, general and administrative expenses

24.9

24.2Non-rental depreciation and amortization

1.8

3.4Operating income

1.0

4.4Other income, net

0.3

0.1Interest expense, net

12.0

14.5Loss before income taxes

(10.7
)
(10.0
)Income tax benefit



(4.3
)Loss from continuing operations

(10.7
)
(5.7
)Loss from discontinued operations, net of tax

(1.2
)
(0.8
)Cumulative effect of a change in accounting principle, net of tax

(93.6
)
Net loss

(105.5
)%
(6.5
)%


Results of Operations

Quarter Ended March 31, 2002, Compared with the Quarter Ended March 31, 2001

Revenues.Total revenues increased to $138,451 in 2002 from $127,491 in 2001. Rental revenues increased 6.8% to 105,747 from
$99,014. These increases were the result of the acquisition of Brambles Equipment Services, Inc. ("BESI") in December 2001, partially offset by continued softness in the economy.

Gross Profit.Gross profit decreased to $38,324 in 2002 from $40,854 in 2001. Gross margin decreased to 27.7% in 2002 from
32.0% in 2001. The decrease in gross margin is primarily due to increased depreciation and direct operating costs as a result of the fleet and infrastructure acquired in conjunction with the BESI
transaction.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased to $34,525 in 2002 from
$30,902 in 2001. This increase results from the infrastructure acquired in conjunction with the BESI transaction. As a percentage of total revenues, however, selling, general and administrative
expenses remained a relatively constant 24.9% and 24.2% in 2002 and 2001, respectively.

Non-rental Depreciation and Amortization.Non-rental depreciation and amortization decreased to
$2,440 in 2002 from $4,366 in 2001 as a result of the Company recording no amortization expense in the first quarter of 2002 in connection with the adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets".

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Interest Expense, Net.Interest expense, net, decreased to $16,683 in 2002 from $18,472 in 2001, due primarily to lower
interest rates on the Company's variable rate debt in the first quarter of 2002.

Loss from Discontinued Operations.On June 30, 2002, the Company sold its underground trench shoring business. The
proceeds from the sale were used to repay existing indebtedness under the Credit Facility. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," the financial condition and results of operations of this business are reflected herein as discontinued operations.

Cumulative Effect of a Change in Accounting Principle.The cumulative effect of a change in accounting principle reflects the
charge recognized in conjunction with the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets", effective January 1, 2002.

Liquidity and Capital Resources

The Company's primary capital requirements are for purchasing new rental equipment. The Company's other capital expenditures include buying vehicles used for
delivery and maintenance, and for property, plant and equipment. The Company purchases rental equipment throughout the year to replace equipment that has been sold as well as to maintain adequate
levels of equipment to meet existing and new customer needs. Rental fleet purchases for the Company were $11,954 and $4,079 in the first three
months of 2002 and 2001, respectively. The Company's expenditures for rental fleet are expected to be approximately $35,000 in 2002 compared to $23,000 in 2001.

For
the three months ended March 31, 2002 and 2001, the Company's net cash provided by operations was $5,929 and $11,293, respectively. The decrease in 2002 was due primarily to
an increase in accounts receivable. For the three months ended March 31, 2002 and 2001, the Company's net cash used in investing activities was $6,240 and $834, respectively. Net cash used for
investing activities consists primarily of purchases of rental equipment and property and equipment, and the increase in 2002 was attributable to increased purchases of rental equipment as compared to
the same period in the previous year. For the three months ended March 31, 2002 and 2001, the Company's net cash used in financing activities was $3,581 and $11,191, respectively. Net cash used
in financing activities consists primarily of repayments of indebtedness under the Company's credit facility. The decrease in 2002 is the result of the Company's need to fund the working capital
requirements for BESI immediately following the acquisition with cash flow generated by operations.

The
Company's credit facility provides for a $100,000 term loan and a revolving credit facility up to a maximum of $550,000 (subject to availability based on certain financial tests
including a borrowing base) to meet acquisition needs, as well as seasonal working capital and general corporate requirements. As of March 31, 2002, $592,000 was outstanding under the credit
facility. Based upon the available borrowing base (which is based on inventory, accounts receivable and rental equipment amounts) at March 31, 2002, the Company had additional availability of
$3,658 on the credit facility. The credit facility contains certain covenants that require the Company to, among other things, satisfy certain financial tests, including tests relating to
1) the ratio of senior debt to EBITDA, 2) minimum interest coverage ratio and 3) the ratio of funded debt to EBITDA. The credit facility also contains various other covenants that
restrict the Company's ability to, among other things, 1) incur additional indebtedness, 2) permit liens to attach to its assets, 3) pay dividends or make other restricted
payments on its common stock and certain other securities and 4) make acquisitions unless certain financial conditions are satisfied. The Company is currently in compliance with all covenants
governing the credit facility. However, based on current operating projections as of August 8, 2002, the Company expects that it will violate the leverage ratio covenants under its credit
facility at the end of the third quarter of 2002 because it expects that EBITDA will not be sufficient to satisfy the required levels under the covenants. A failure by the Company to comply with these
covenants could result in an event of default under the credit facility, which could have a material adverse effect on the Company. The Company is

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currently in discussions with its lenders to amend its leverage ratio covenants, which would give the Company additional financial flexibility.

During
1997, the Company issued $100,000 of Senior Subordinated Notes due 2004 (the "Series A Notes") at a discount netting proceeds of $98,767. During 1998, the Company completed
its exchange of $100,000 of Senior Subordinated Notes due 2004, Series B (the "Series B Notes"), which have been registered for public trading, for the Series A Notes.

During
1998, the Company issued $125,000 of Senior Subordinated Notes due 2004, Series C (the "Series C Notes") at a discount netting proceeds of $122,288. During 1999, the
Company issued $50,000
of additional Series C Notes, at a discount netting proceeds of $49,000. Later during 1999, the Company completed its exchange of $175,000 of Senior Subordinated Notes due 2004, Series D
(the "Series D Notes"), which have been registered for public trading, for the Series C Notes.

The
Company accretes the original issue discount of the Series B Notes and Series D Notes over the term of the notes using the effective interest rate method. The
indentures for the Series B and Series D notes contain a number of covenants that, among other things, set certain limitations on the granting of liens, asset sales, additional
indebtedness, transactions with affiliates, restricted payments, investments, issuances of stock and payment of dividends. The Company is currently in compliance with all such covenants under the
indentures.

The
Company believes that its credit facility, together with funds generated by operations and related activities, will provide the Company with sufficient liquidity and capital
resources in the near-term to finance its operations and pursue its business strategy. Over the long term, the Company will need to refinance its credit facility, its Series B Notes
and its Series D Notes since the credit facility becomes due and payable in July 2003 and its Series B Notes and Series D Notes become due and payable in
November 2004. There can be no assurance that the Company will be able to raise the necessary capital to refinance its debt on favorable terms, and any such failure would have a material
adverse effect on the Company's future financial condition and results of operations.

General Economic Conditions, Inflation and Seasonality

The Company's operating results may be adversely affected by 1) changes in general economic conditions, including changes in construction and industrial
activity, or increases in interest rates, or 2) adverse weather conditions that may temporarily decrease construction and industrial activity in a particular geographic area. Although the
Company cannot accurately anticipate the effect of inflation on its operations, management believes that inflation has not had a material impact on the Company's results of operations and is not
likely to in the foreseeable future.

The
Company's revenues and operating results fluctuate due to the seasonal nature of the industry in which the Company operates, with rental activity tending to be lower in winter.

Recently Issued Accounting Pronouncements

In May 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 Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64,
"Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." This Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The

13

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provisions of this Statement related to the rescission of Statement No. 4 are effective beginning in 2003. All other provisions are effective after May 15, 2002.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal or Long-Lived Assets." This Statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and amends Accounting Principles Board (APB) No. 30, "Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This Statement requires that long-lived assets that are to
be disposed of by sale be measured at the lower of book value or fair value less costs to sell. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for (a) recognition
and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. This Statement also
retains APB No. 30's requirement that companies report discontinued operations separately from continuing operations. All provisions of this Statement were effective at the beginning of fiscal
2002.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's credit facility, as amended, provides the Company with a $100,000 term loan and permits the Company to borrow up to an additional $550,000 of
revolving loans provided that certain conditions and financial tests are met, subject to a borrowing base. Borrowings under the credit facility bear interest, at the Company's option, at a specified
base rate or Eurodollar rate plus the applicable borrowing margin. At August 8, 2002, the Company had total borrowings under the credit facility of $487,535, $87,535 of which was subject to
interest rate risk. Each 100 basis point increase in interest rates on the variable rate debt would decrease pretax earnings by approximately $875.

The
Company may, from time to time, use interest rate swap contracts to hedge the impact of interest rate fluctuations on certain variable rate debt. The Company does not hold or issue
derivative financial instruments for trading or speculative purposes. Effective April 18, 2001, the Company entered into an interest rate swap contract, which fixes the interest rate at 4.71%
on $400,000 of variable rate debt through April 17, 2003. The interest differential is paid or received on a monthly basis and recognized currently as a component of interest expense. The
counterparty to the swap is a major financial institution and management believes that the risk of incurring credit losses is remote.

Forward Looking Statements

Note: This document contains forward-looking statements as encouraged by the Private Securities Litigation Reform Act of 1995. All statements contained in this document, other
than historical information, are forward-looking statements. These statements represent management's current judgement on what the future holds. A variety of factors could cause business conditions
and the Company's actual results to differ materially from those expected by the Company or expressed in the Company's forward-looking statements. These factors include, without limitation, the
Company's ability to successfully integrate acquired businesses; changes in market price or market demand; loss of business from customers; unanticipated expenses; changes in financial markets; and
other factors discussed in the Company's filings with the Securities and Exchange Commission.

15

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 2. CHANGES IN SECURITIES

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

See Index of Exhibits on page 16. The Company filed a Current Report on Form 8-K dated January 2, 2002, to report the acquisition of
Brambles Equipment Services, Inc.

16

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized on August 23, 2002.

| | NATIONAL EQUIPMENT SERVICES, INC.
| | ---------------------------------
| | By:                              
| |                                  

Form 10-Q:
For the quarter ended March 31, 2002.

17

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INDEX OF EXHIBITS

|Exhibit
Number |  | Description of Document                                                                                                                                                                          
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11.1           |  | Statement re Computation of Per Share Earnings. Not required because the relevant computations can be clearly determined from the material contained in the financial statements included herein.
|99.1           |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                           
|99.2           |  | Certification 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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