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

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FORM 10-K

(Mark One)

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

For
the fiscal year ended December 31, 2001

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

For the Transition period from  to

Commission File Number: 001-14163

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)

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

Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share, registered on the 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. ý

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 the
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. o

As
of April 8, 2002, the aggregate market value of the voting stock held by non-affiliates of National Equipment Services, Inc. was approximately $17,170,398.

As
of April 8, 2002, there were 21,151,163 shares of Common Stock of National Equipment Services, Inc., par value $0.01 per share, outstanding.

Documents Incorporated by Reference:

Part III incorporates by reference certain information to be included in Registrant's Proxy Statement relating to its 2002 Annual Meeting of Stockholders.

Index to Exhibits:

Located on pages 41 through 45 of this report.

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PART I

ITEM 1.    BUSINESS

General

National Equipment Services, Inc. (the "Company") is a leading participant in the growing and highly fragmented $25 billion equipment rental
industry. Through its 42 businesses acquired since January 1997, the Company specializes in renting specialty and general equipment to industrial and construction end users. The Company rents
over 750 different types of machinery and equipment, and distributes new equipment for nationally recognized original equipment manufacturers. The Company also sells used equipment as well as
complementary parts, supplies and merchandise, and provides repair and maintenance services to its customers. The Company is geographically diversified, with 243 locations across 37 states and Canada,
and is a leading competitor in each of the geographic markets it serves.

Management
believes the Company offers one of the most modern and well-maintained fleets of specialty and general equipment in each of its markets. The average age of the
Company's equipment fleet is approximately three years. Specialty equipment includes electric and pneumatic hoists, hydraulic and truck-mounted cranes, liquid storage tanks, pumps and highway safety
equipment. General industrial and construction equipment includes aerial work platforms, air compressors, cranes, earth-moving equipment and rough terrain forklifts. The Company rents and sells this
equipment to industrial and construction end users.

The
Company is led by an experienced management team. The professionals who manage the Company's local operations average more than 15 years of experience in the equipment rental
industry and have extensive knowledge of and relationships in their local markets. These managers are typically former owners or managers of the businesses acquired by the Company. The Company also
benefits from the financial expertise of GTCR Golder Rauner and Brown Brothers Harriman & Co., established
investment firms. Golder, Thoma, Cressey, Rauner Fund V, L.P., an affiliate of GTCR Golder Rauner, and The 1818 Fund III, L.P., an affiliate of Brown Brothers
Harriman & Co., are the Company's principal equity investors.

Acquired Businesses

The Company was founded in June 1996 to acquire and integrate businesses that focus on the rental of specialty and general equipment to industrial and
construction end users. Since January 1997, the Company has acquired the 42 businesses summarized in the following table:

|Acquired Business           |  | Products                             |  | Geographic Focus       |  | Years in
Business at
Acquisition
Date |  | Date Acquired
|--------------------------- |  | ------------------------------------ |  | ---------------------- |  | ------------------------------------- |  | -------------
|Industrial Hoist Services   |  | Pneumatic and electric hoists        |  | National               |  | 16                                    |  | January 1997 
|Aerial Platforms            |  | Aerial work platforms                |  | Atlanta, Georgia       |  | 15                                    |  | February 1997
|Lone Star Rentals           |  | General equipment                    |  | Gulf Coast             |  | 17                                    |  | March 1997   
|BAT Rentals                 |  | General equipment                    |  | Las Vegas, Nevada      |  | 37                                    |  | April 1997   
|Sprintank                   |  | Liquid and specialized storage tanks |  | Gulf Coast             |  | 9                                     |  | July 1997    
|Equipco Rentals & Sales     |  | General equipment                    |  | Western Virginia       |  | 21                                    |  | July 1997    
|Genpower Pump and Equipment |  | Pumps                                |  | Gulf Coast             |  | 15                                    |  | January 1998 
|Eagle Scaffolding           |  | Scaffolding                          |  | Las Vegas, Nevada      |  | 6                                     |  | January 1998 
|Grand Hi-Reach              |  | Aerial work platforms                |  | Grand Rapids, Michigan |  | 14                                    |  | February 1998
|Work Safe Supply            |  | Highway safety equipment             |  | Michigan               |  | 20                                    |  | February 1998
|Dragon Rentals              |  | Liquid storage tanks                 |  | Gulf Coast             |  | 7                                     |  | March 1998   
|Cormier Equipment Company   |  | General equipment                    |  | East Coast             |  | 15                                    |  | March 1998   

1

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|Albany Ladder                                                                          |  | Aerial work platforms            |  | Northeast                 |  | 67 |  | March 1998    
|-------------------------------------------------------------------------------------- |  | -------------------------------- |  | ------------------------- |  | -- |  | --------------
|Falconite Equipment, Inc.                                                              |  | Aerial work platforms and cranes |  | Mid-South and Gulf Coast  |  | 44 |  | July 1998     
|R & R Rentals                                                                          |  | Cranes                           |  | Gulf Coast                |  | 16 |  | July 1998     
|Traffic Signing and Marking                                                            |  | Highway safety equipment         |  | Wisconsin                 |  | 20 |  | August 1998   
|Shaughnessy Crane Service, Inc.                                                        |  | Aerial work platforms and cranes |  | Northeast                 |  | 84 |  | September 1998
|Rebel Studio Rentals                                                                   |  | Aerial work platforms            |  | California                |  | 5  |  | October 1998  
|Barricade & Light Rental, Inc.                                                         |  | Highway safety equipment         |  | Arizona                   |  | 25 |  | March 1999    
|Mayer-Hammant                                                                          |  | Pumps and compressors            |  | Gulf Coast                |  | 30 |  | March 1999    
|Wellesley Crane Service                                                                |  | Cranes                           |  | Northeast                 |  | 29 |  | March 1999    
|Advanced Warnings, Inc.                                                                |  | Highway safety equipment         |  | Oklahoma                  |  | 16 |  | April 1999    
|The Mike Madrid Company Inc., Latshaw Traffic Services, Inc., and Madrid Leasing Corp. |  | Highway safety equipment         |  | Indiana                   |  | 16 |  | April 1999    
|The Illinois operations of S&R Equipment Co.                                           |  | Aerial work platforms and cranes |  | Mid-South and Gulf Coast  |  | 9  |  | May 1999      
|Elite Rentals                                                                          |  | Earth-moving equipment           |  | Gulf Coast                |  | 2  |  | June 1999     
|Gould & Associates, Inc.                                                               |  | Pumps                            |  | Southeast                 |  | 11 |  | July 1999     
|The Plank Company, LP                                                                  |  | Trench safety equipment          |  | Gulf Coast and West Coast |  | 39 |  | August 1999   
|Interstate Traffic Control, Inc. and Rich-Lite, Inc.                                   |  | Highway safety equipment         |  | Southeast                 |  | 18 |  | August 1999   
|American Tool Rental Corp.                                                             |  | General equipment                |  | East Coast                |  | 12 |  | August 1999   
|Management Technology America, Ltd.                                                    |  | Management information systems   |  | National                  |  | 14 |  | August 1999   
|Alternate Construction Controls, Inc.                                                  |  | Highway safety equipment         |  | Illinois                  |  | 12 |  | September 1999
|L and C Flashing Barricades, Inc.                                                      |  | Highway safety equipment         |  | East Coast                |  | 36 |  | September 1999
|Safety Light Sales & Leasing, Inc. of Texas                                            |  | Highway safety equipment         |  | Gulf Coast                |  | 31 |  | October 1999  
|Tropical Ladder and Lifts, Inc.                                                        |  | General equipment                |  | Florida                   |  | 10 |  | October 1999  
|ABC Barricade, Inc.                                                                    |  | General equipment                |  | Florida                   |  | 8  |  | October 1999  
|Cantel, Inc.                                                                           |  | Trench safety equipment          |  | Northwest                 |  | 14 |  | November 1999 
|Tri-State Signing, Inc.                                                                |  | Highway safety equipment         |  | Iowa                      |  | 11 |  | November 1999 
|Cassidy & Lee, Inc.                                                                    |  | Earth-moving equipment           |  | Northeast                 |  | 40 |  | March 2000    
|Road Light, Inc. and Interstate Sign, Inc.                                             |  | Highway safety equipment         |  | East Coast                |  | 26 |  | March 2000    
|Laser Products, Inc.                                                                   |  | Trench safety equipment          |  | Georgia                   |  | 25 |  | June 2000     
|St. Clair Equipment Company                                                            |  | Aerial work platforms            |  | Gulf Coast                |  | 40 |  | August 2000   
|Brambles Equipment Services, Inc.                                                      |  | General equipment                |  | Midwest                   |  | 12 |  | December 2001 

Products and Services

The Company is primarily involved in the business of renting equipment to industrial and construction end users. In addition, to more fully serve its customers
and leverage its fixed costs, the Company 1) sells complementary parts, merchandise and rental equipment, 2) acts as a distributor of new equipment on behalf of original equipment
manufacturers and 3) services the equipment it sells.

For
financial information about segments, refer to Note 20 of the financial statements.

2

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Equipment Rentals.The Company rents a broad selection of general equipment, ranging from large equipment, such as aerial
work platforms, air compressors, generators, earth-moving equipment and rough terrain forklifts, to small equipment, such as hand tools, to industrial and commercial construction customers. The
Company's specialty equipment available for rent includes electric and pneumatic hoists, hydraulic and truck-mounted cranes, liquid storage tanks, pumps, and trench and highway safety equipment. The
Company is the only major firm in the industry with such an extensive offering of specialty equipment. The Company is the leading renter of industrial hoists in the United
States, and the leading renter of portable storage tanks to the chemical and petrochemical industries in the Gulf Coast region. The Company's rental contracts range from one-day rental
contracts for small subcontractors to multi-year contracts for certain industrial customers, with an overall average rental period of approximately 35 days. The mix of rental
equipment at each of the Company's locations is a function of the demands of the local customer base and the focus of that business. At December 31, 2001, the original equipment cost of the
Company's rental fleet was approximately $1,121 million, and the average age of its rental equipment fleet was approximately three years.

Sales of New Equipment.The Company sells new equipment to end users from certain original equipment manufacturers, including
JLG Industries, Genie Industries, OmniQuip, Manitowoc, Gehl, Broderson, Ingersoll-Rand, Miller Electric, SkyJack, Tadano, Avant Garde, Multiquip and Wacker. The Company believes the volume
of equipment it buys creates significant purchasing power with suppliers, which generally leads to favorable prices and terms for equipment the Company purchases for its rental fleet and sells as new
equipment. The Company's ability to sell new equipment offers flexibility to its customers, and the Company believes this enhances its customer relations.

Sales of Rental Equipment.The Company routinely sells rental equipment to adjust the size and composition of its rental
fleet to changing market conditions, and as part of its ongoing commitment to maintain a high quality fleet. The Company can receive favorable sales prices for its rental equipment due to its strong
preventive maintenance program and its practice of selling rental equipment before it becomes irreparable or obsolete. Senior management works with local managers to optimize the timing of sales of
rental equipment by taking into account maintenance costs, rental demand patterns and resale prices. The Company sells rental equipment to its existing rental customers, as well as to domestic and
international used-equipment buyers.

Sales of Parts and Merchandise; Service and Repair.The Company also sells a wide range of parts and merchandise, including
saw blades, drill bits, shovels, goggles, hard hats and other safety gear, as a complement to its core equipment rental business. The Company believes these sales enable the Company to attract and
retain customers by offering the convenience of "one-stop shopping." The Company also provides repair and maintenance services in connection with the equipment it sells as a complement to
its core business.

Customers

Management estimates the Company currently has more than 90,000 customers, ranging from "Fortune 500" companies to small contractors. For fiscal 2001, no single
customer accounted for more than 1.3% of the Company's total revenues, while the top five customers represented less than 4.1% of total revenues. Customers look to the Company as an ongoing,
comprehensive source of rental equipment because of the economic advantages and convenience of renting, as well as the high costs associated with equipment ownership. The Company's primary customer
base can be classified into the following categories: 1) industrial, including manufacturers, petrochemical facilities, chemical companies, paper mills and public utilities and
2) commercial and residential construction, repair and renovation, including contractors. In addition to maintaining its historically strong relationship with local customers, the Company is
increasing its emphasis on larger national and multi-regional accounts.

3

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Industrial.The Company's industrial customers, many of whom operate 24 hours per day, use the Company to outsource
their equipment requirements, which reduces the capital investment and minimizes the ongoing maintenance, repair and storage costs associated with equipment ownership. Management believes the Company
is well positioned to take advantage of the increasing trend among industrial customers to outsource their equipment needs. In addition, the Company's specialty products, such as hoists and tanks, are
tailored to meet the needs of industrial end users. Management believes that given its multi-regional presence, the Company is well positioned to increase its industrial revenue base. The Company
intends to expand its industrial customer base by providing additional equipment and services to its existing industrial customers and establishing new relationships through its existing businesses.

Construction.The Company's construction customers include "Fortune 500" companies, national and regional contractors and
subcontractors involved in construction projects such as 1) chemical plants and other manufacturing facilities, 2) roads, bridges and highways, 3) schools, hospitals and airports
and 4) residential developments and apartment buildings.

Management Information Systems

The Company has made significant investments in its information systems. These information systems substantially integrate customer and equipment tracking
programs that allow the sales force to use the Internet to track customer requirements, while coordinating with inside sales and logistics personnel to ensure customer demands are met on a timely
basis. These systems also provide real-time rental management data, which allows management to monitor asset utilization, rental rates, repairs and maintenance, and inventory levels by
region, location, equipment classification, and individual rental item.

Operations

The Company's equipment rental yards typically include 1) a customer service center and showroom displaying selected rental equipment, new equipment
offered for sale and related merchandise, 2) an equipment service area, and 3) equipment storage facilities. Each rental center is staffed by an average of 16 employees, including a
manager, an assistant manager, sales people, back office clerks, truck drivers, mechanics, and yard personnel. The rental center employees' knowledge of the equipment enables them to recommend the
best equipment for a customer's particular application. Each rental center manager is responsible for all aspects of the center's operation, including establishing rental rates, selecting equipment,
and determining employee compensation at such location. The Company also maintains two re-manufacturing facilities utilized for equipment refurbishing.

Sales

The Company offers rental equipment and related services primarily through its sales force of approximately 400 employees. The sales force at each location is
knowledgeable about all of the services and products provided there. Sales managers and representatives regularly call on contractors' job sites and industrial facilities in their sales territories,
often assisting customers in planning for their equipment requirements. The Company also provides its sales force with extensive training, including frequent in-house training by supplier
representatives, covering the operating features and maintenance requirements of its equipment. Members of the Company's sales force generally are compensated in part through commissions on all
equipment rentals and sales they generate.

Seasonality

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

4

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Purchasing and Suppliers

Management believes that the Company's size enables it to purchase equipment directly from manufacturers at favorable prices. The Company has developed strong
relationships with many leading original equipment manufacturers, including JLG Industries, Genie Industries, OmniQuip, Manitowoc, John Deere, Ford, Broderson, Ingersoll-Rand, Miller
Electric, SkyJack, Tadano, Komatsu, Multiquip, Wacker and Mitsui. No single supplier accounted for more than 7.5% of the Company's total purchases. The Company believes it could readily replace any of
its suppliers if necessary.

Competition

The equipment rental industry is highly fragmented and competitive. Many of the markets in which the Company operates are served by numerous competitors, ranging
from national and multi-regional companies, such as Hertz Equipment Rental Corporation (an affiliate of Ford Motor Company), Neff Corp., RSC and United Rentals, Inc., to small, independent
businesses with a limited number of locations. Management believes that participants in the equipment rental industry compete on the basis of availability and quality of equipment, service, delivery
time and price. Geographic territories for competition usually are limited to 50 to 75 miles, due to servicing requirements and equipment
transportation costs. Certain specialized equipment renters, such as the Company's Industrial Hoist Services division, compete on a larger regional or national basis. In general, management believes
that national and multi-regional operators, such as the Company, enjoy substantial competitive advantages over small, independent rental businesses, which do not have the financial resources to
maintain the comprehensive rental equipment fleet and high level of maintenance and service that the Company offers.

Employees

At April 8, 2002, the Company had a total of approximately 3,430 employees, approximately 970 of which are represented by unions. Management believes that
its relationship with all of its employees is good. The Company is committed to, and has realized significant benefits from, its formal employee training programs. Management believes that this
investment in training and safety awareness programs for employees is a competitive advantage that positions the Company to be responsive to customer needs.

Governmental and Environmental Regulation

The Company's facilities are subject to federal, state and local environmental requirements relating to discharges to air, water and land; the handling and
disposal of solid and hazardous waste; and the cleanup of properties affected by hazardous substances. Certain environmental laws impose substantial penalties for noncompliance, and others, such as
the federal Comprehensive Environmental Response, Compensation, and Liability Act, as amended ("CERCLA"), impose strict, retroactive, joint and several liability for releases of hazardous substances.

Based
on environmental assessments conducted in connection with the Company's acquisitions, the Company believes that its facilities are in substantial compliance with environmental
requirements, and that the Company has no material liabilities arising under environmental requirements. However, some risk of environmental liability is inherent in the nature of the Company's
business, and in the future the Company may incur material costs to meet current or more stringent compliance, cleanup or other obligations under environmental laws.

The
Company dispenses petroleum products from storage tanks located at some of its locations. Although the Company is not aware of any leaks or spills involving its tank systems, there
can be no assurance that these systems have been or will at all times remain free from leaks, or that the use of these tanks has not resulted or will not result in spills or other releases. Management
does not believe that the presence or operation of these tanks will have a material adverse effect on the Company's operating results or financial position.

5

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The
Company uses hazardous substances, such as solvents, to clean and maintain its rental equipment fleet, and generates wastes, such as used motor oil, radiator fluid and solvents,
which are stored on site and disposed of at off-site locations. Although the Company is not aware of any material issues regarding its use of hazardous substances, under various
environmental laws, including CERCLA, the Company could be liable for contamination at sites where hazardous substances used in its operations have been disposed of or otherwise released.

Management
does not expect that compliance with environmental laws will have a material adverse effect on the Company's operating results, financial condition or competitive position to
date. The Company does not expect to incur material expenditures for environmental upgrades or controls in this or the succeeding fiscal year.

ITEM 2.    PROPERTIES

At December 31, 2001, the Company operated 243 equipment rental locations in the following 37 states and Canada: Alabama (9), Arizona (7),
Arkansas (5), California (6), Connecticut (1), Delaware (1), Florida (14), Georgia (9), Illinois (5), Indiana (9), Iowa (8),
Kansas (1), Kentucky (9), Louisiana (9), Maine (5), Maryland (1), Massachusetts (8), Michigan (14), Mississippi (4), Missouri (6),
Nevada (3), New Hampshire (4), New York (8), North Carolina (4), Ohio (7), Oklahoma (3), Oregon (4), Pennsylvania (3), Rhode Island (2),
Tennessee (14), Texas (31), Utah (1), Vermont (1), Virginia (3), Washington (4), West Virginia (5), Wisconsin (13) and Canada (2). The
Company's properties typically include an outside storage yard and a small building containing offices, a maintenance center and, in certain locations, a retail showroom. The Company owns 24 of its
equipment rental locations and leases the other 219, as well as its approximately 7,000 square foot headquarters space in Evanston, Illinois. The net book value of owned facilities was approximately
$13 million at December 31, 2001, and the average annual lease expense on leased facilities was approximately $45,000 in 2001. Management believes that none of the Company's leased
facilities, individually, is material to its operations, and that all of these leases can be readily replaced at similar terms. The Company's interests in each of these properties secure borrowings
under its credit facility.

ITEM 3.    LEGAL PROCEEDINGS

From time to time, the Company has been and is involved in various legal proceedings, all of which management believes are routine in nature and incidental to the
conduct of its business. Although the Company's ultimate legal and financial liability resulting from any of these proceedings cannot be estimated with certainty, the Company, after examining these
matters, believes that an adverse ruling in any of these proceedings would not have a material adverse effect on the Company's financial condition or results of operations.

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

No matters were submitted to a vote of security holders during the fourth quarter of 2001.

6

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PART II

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

As of April 8, 2002, there were 35 holders of record of the Company's common stock. The Company has never paid any dividends on its common stock and does
not expect to pay any dividends on its common stock in the foreseeable future. Dividend payments are restricted under the terms of the Company's credit facility and indentures.

Since
the Company's initial public stock offering in July 1998, the Company's common stock has been traded on the New York Stock Exchange under the symbol "NSV." The table below
lists the high and low sales price information for the common stock, as reported by the New York Stock Exchange, during each quarter of the Company's last two fiscal years.

Fiscal Quarter

High

Low2000:First quarter

$
7.25

$
5.88Second quarter

$
7.25

$
5.00Third quarter

$
6.00

$
4.38Fourth quarter

$
4.88

$
1.752001:First quarter

$
4.00

$
2.06Second quarter

$
4.00

$
2.60Third quarter

$
2.85

$
1.85Fourth quarter

$
2.25

$
1.15


ITEM 6.    SELECTED FINANCIAL DATA

The data presented below on the Company should be read in conjunction with Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data.

During
the periods presented below, the Company completed 42 business acquisitions that were accounted for using the purchase method of accounting. The accounts of the businesses
acquired in these transactions are included in the Company's results of operations from their respective acquisition dates. Since the Company's operating results for the periods presented below were
significantly affected by acquisitions, the Company believes that its results of operations for the years presented are not directly comparable. See Note 5 of the Notes to the Consolidated
Financial Statements of the Company
later in this report. As discussed in Note 3 to the consolidated financial statements of the Company, the data for 2000 and 1999 have been restated.

|                                                                    |  | 2001 |           | 2000 |   | 1999      |  | 1998 |           | 1997
|------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | ---- | --------- | ----
|
|Operating data for fiscal period ended December 31:                 |  |      |           |      |   |           |  |      |           |     
|Total revenues                                                      |  | $    | 610,748   |      | $ | 623,836   |  | $    | 473,194   |     
|Operating income                                                    |  |      | 29,394    |      |   | 95,402    |  |      | 92,345    |     
|Income (loss) before income taxes and extraordinary item            |  |      | (46,427   | )    |   | 11,613    |  |      | 32,878    |     
|Balance sheet data as of December 31:                               |  |      |           |      |   |           |  |      |           |     
|Rental equipment, net                                               |  | $    | 604,230   |      | $ | 614,426   |  | $    | 556,721   |     
|Intangible assets, net                                              |  |      | 359,054   |      |   | 365,819   |  |      | 383,074   |     
|Total assets                                                        |  |      | 1,202,331 |      |   | 1,238,623 |  |      | 1,215,578 |     
|Total liabilities and senior redeemable convertible preferred stock |  |      | 1,102,000 |      |   | 1,095,784 |  |      | 1,065,737 |     
|Total stockholders' equity                                          |  |      | 100,331   |      |   | 142,839   |  |      | 149,841   |     

7

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

The following discussion and analysis of the Company's results of operations and its financial condition and liquidity should be read in
conjunction with Item 1. Business, Item 6. Selected Financial Data and Item 8. Financial Statements and Supplementary Data.

General

The Company was founded in June 1996 to acquire and integrate businesses that focus on the rental of specialty and general equipment to industrial and
construction end users. Since January 1997, the Company has acquired 42 businesses (the "Acquired Businesses") in separate transactions. All acquisitions were accounted for using the purchase
method of accounting. The results of operations of the Acquired Businesses are included in the Company's financial statements only from their respective dates of acquisition.

The
Company derives its revenues from four sources: 1) rental of equipment, 2) new equipment sales, 3) rental equipment sales and 4) sales of complementary
parts and services. The Company's primary source of revenue is the rental of equipment to industrial and construction end users. The growth of rental revenues depends on several factors, including
demand for rental equipment, the amount and quality of equipment available for rent, rental rates, and general economic conditions. Revenues generated from the sale of new equipment are affected by
price and general economic conditions. Revenues generated from the sale of used rental equipment are affected by price, general economic conditions, and the Company's fleet management programs.
Revenues from the sale of complementary parts and services are primarily affected by equipment rental and sales volumes.

Cost
of revenues consists primarily of rental equipment depreciation, the cost of new equipment, the net book value of rental equipment sold, and other direct operating costs. Given the
varied, and in some cases specialized, nature of its rental equipment, the Company uses a range of periods over which it depreciates its equipment on a straight-line basis. On average, the
Company depreciates its equipment over an estimated useful life of eight to nine years with 0% to 20% salvage value for certain rental equipment acquired.

Revision of 2000 and 1999 Results

In the process of closing its books for 2001, the Company became aware that certain assets recorded on the 2001 and prior balance sheets were overstated.
Management performed a comprehensive analysis of the Company's assets and liabilities as well as a company-wide evaluation of its existing internal control structure.

As
a result of the analysis, the Company is revising its previously issued financial statements for the years ended December 31, 2000 and 1999. The effect of these revisions in
2000 is to reduce net income from $11 million, as previously reported, to $6 million and to reduce earnings per diluted share from $0.36 to $0.19. The effect of these revisions in 1999
is to reduce net income from the previously reported $21 million to $19 million and to reduce earnings per diluted share from $0.72 to $0.66.

Upon
completion of the analysis, management took several steps to strengthen its control environment. These steps included the addition of experienced senior management in selected
regions of the Company, the creation of a company-wide internal auditing function and the implementation of general improvements in the processes and controls surrounding the Company's
accounting and reporting functions. In addition, management is currently in the process of centralizing selected support functions to further strengthen its internal control structure.

All
financial information presented in this Annual Report on Form 10-K reflects the revisions discussed above.

8

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Critical Accounting Policies

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, which requires our
management to make estimates and general assumptions about the effects of matters that are inherently uncertain. We have summarized our significant accounting policies in Note 2 to our
consolidated financial statements. Of these accounting policies, we believe the following may involve a higher degree of judgment and complexity.

Allowance
for Doubtful Accounts - At December 31, 2001, we had an allowance for doubtful accounts totalling $6.3 million which we have established in the event that we are
unable to collect certain receivables. This allowance represents our best estimate of the total receivables recorded as of December 31, 2001 that we will be unable to collect. Future general
events, such as changes in the economy, and specific events, such as changes in the economic condition of our customers, could
significantly impact our ability to collect on these receivables, and therefore, cause us to change our allowance estimate.

Useful
Lives and Estimated Salvage Value of Rental Equipment and Property and Equipment. - At December 31, 2001, we had $604.2 million of net rental equipment and
$56.8 million of net property and equipment recorded on our balance sheet. Rental equipment is depreciated using the straight-line method over five to fifteen years, and a salvage value ranging
between 0-20% is used. Property and equipment is depreciated over 3 to 30 years, depending on the type of asset held. Our depreciable lives are based on our estimates of the useful lives of the
respective assets. Salvage value is based on our estimates of the minimum recoverable value we expect at the end of the asset's depreciable life. These estimates may require adjustment based on
changing circumstances in the marketplace. Changes to these estimates could result in us having to recognize an increase to or decrease in depreciation expense.

Goodwill
- We had approximately $359.0 million of goodwill and non-compete agreements related to acquisitions recorded on our balance sheet at December 31, 2001. We
regularly evaluate our acquired businesses for potential impairment indicators. Additionally, we adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets," on
January 1, 2002, which requires us to perform impairment testing at least annually. Our judgments regarding the existence of impairment indicators are based on, among other things, the
regulatory and market status and operational performance of each of our acquired businesses. Future events could significantly impact our judgments and any resulting impairment loss could have a
material adverse impact on our financial condition and results of operations.

Contractual Commitments

The following table summarizes our obligations and commitments to make future payments under certain contracts, including debt obligations, capitalized leases and
operating leases at December 31, 2001.

|                          |       | Payments Due By Year
|------------------------- | ----- | --------------------
|
|
|Debt (including revolver) |       | $                   
|Capital Leases            |       |                     
|Operating Leases          |       |                     
|                          |       |                     
|                          | Total |                     

Non-Recurring Charges

In the fourth quarter of 2001, the Company recorded a non-recurring, pre-tax $1.7 million restructuring charge related to the
acquisition of Brambles Equipment Services, Inc. ("BESI"). This charge consists primarily of a reserve for lease termination and severance costs. The Company also established a reserve of
$8 million related to the closure of selected BESI locations in conjunction with the purchase accounting for the acquisition.

9

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In
conjunction with the BESI acquisition and a review of current market demands for the Company's rental equipment, management recorded an asset impairment charge of $3.18 million
during the fourth quarter of 2001 for certain equipment no longer consistent with the Company's product lines.

Results of Operations(Unless otherwise specified, all dollar amounts are in thousands, except per share data.)

The
following table shows information from the Company's consolidated statements of operations as a percentage of total revenues, as restated for the years ended December 31, 2000
and 1999.

|                                             |  | Year Ended
December 31,
2001 |    | Year Ended
December 31,
2000 |   | Year Ended
December 31,
1999 |  
|-------------------------------------------- |  | ---------------------------- | -- | ---------------------------- | - | ---------------------------- | -
|Rental revenues                              |  | 74.4                         | %  | 75.4                         | % | 72.2                         | %
|New equipment sales                          |  | 8.7                          |    | 8.8                          |   | 8.9                          |  
|Rental equipment sales                       |  | 5.0                          |    | 4.3                          |   | 6.2                          |  
|Parts sales, service and other revenues      |  | 11.9                         |    | 11.5                         |   | 12.7                         |  
|                                             |  |                              |    |                              |   |                              |  
|Total revenues                               |  | 100.0                        |    | 100.0                        |   | 100.0                        |  
|Cost of revenues                             |  | 66.3                         |    | 59.0                         |   | 55.4                         |  
|                                             |  |                              |    |                              |   |                              |  
|Gross profit                                 |  | 33.7                         |    | 41.0                         |   | 44.6                         |  
|Selling, general and administrative expenses |  | 24.0                         |    | 21.2                         |   | 21.1                         |  
|Non-rental depreciation and amortization     |  | 4.9                          |    | 4.5                          |   | 4.0                          |  
|                                             |  |                              |    |                              |   |                              |  
|Operating income                             |  | 4.8                          |    | 15.3                         |   | 19.5                         |  
|Other income, net                            |  | 0.0                          |    | (0.1                         | ) | (0.1                         | )
|Interest expense, net                        |  | 12.4                         |    | 13.5                         |   | 12.7                         |  
|                                             |  |                              |    |                              |   |                              |  
|Income (loss) before income taxes            |  | (7.6                         | )  | 1.9                          |   | 6.9                          |  
|Income tax expense                           |  | (2.5                         | )  | .9                           |   | 2.8                          |  
|                                             |  |                              |    |                              |   |                              |  
|Net income (loss)                            |  | (5.1                         | %) | 1.0                          | % | 4.1                          | %
|                                             |  |                              |    |                              |   |                              |  

The
Company's historical consolidated financial statements included herein cover the years ended December 31, 2001, 2000 and 1999. Comparisons of the Company's results are
significantly impacted by the fact that the Company completed one, four and 19 acquisitions at different times during 2001, 2000 and 1999, respectively. The results of operations of the businesses
acquired in these acquisitions are included in the Company's financial statements only from their respective dates of acquisition.

Year Ended December 31, 2001, Compared With the Year Ended December 31, 2000

Revenues.Total revenues declined slightly from $623,836 in 2000 to $610,748 in 2001. A $15,800 decline in rental revenues
from 2000 to 2001 was partially offset by a $3,617 increase in rental equipment sales. Decreased demand in the general rental sector prompted the Company to discount rental rates and promote the sale
of otherwise under-utilized fleet. Revenues in the Traffic Safety segment were flat between 2000 and 2001.

Gross Profit.Gross profit declined to $206,030 in 2001 from $255,902 in 2000. Gross margin decreased to 33.7% from 41.0%
during these respective periods primarily due to the decline in rental rates, increased direct costs and the shift in revenue mix from the more profitable rental revenue to the less profitable sale of
rental equipment. Also, as discussed above, the write-down of off-brand fleet negatively impacted the Company's operating expenses in 2001 by $3,183.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased to $146,886 in 2001 from
$132,456 in 2000. A portion of this increase is attributable to the reserve for branch closures discussed in conjunction with the restructuring charge above. In addition, the Company

10

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incurred an increase in bad debt expense in connection with general economic conditions. The remainder of the increase is the result of the inclusion in 2001 of a full year of expenses related to
businesses acquired in 2000. As a percentage of total revenues, selling, general and administrative expenses increased from 21.2% in 2000 to 24.0% in 2001.

Non-rental Depreciation and Amortization.Non-rental depreciation and amortization increased from
$28,044 in 2000 to $29,750 in 2001. This increase was due primarily to the inclusion of a full year of depreciation and amortization expense related to the businesses acquired in 2000.

Operating Income.As a result of the performance described above, operating income declined from $95,402 in 2000 to $29,394
in 2001. Operating income approximated 4.8% of total revenues in 2001.

Operating
income within the Traffic Safety segment decreased by $2,794 due primarily to higher cost of revenues.

Interest Expense, net.Interest expense, net decreased from $84,182 in 2000 to $76,060 in 2001 due to the repayment during
2001 of approximately $102,000 in debt drawn on the Company's revolving credit line.

Income Tax Expense (Benefit).The Company incurred a ($15,520) income tax benefit in 2001 as compared to the $5,560 of
expense recognized in 2000. The Company's effective tax rate decreased from 47.9% in 2000 to 33.4% in 2001.

Year Ended December 31, 2000, Compared With the Year Ended December 31, 1999

Revenues.Total revenues increased to $623,836 in 2000 from $473,194 in 1999. Rental revenues increased to $470,211 from
$341,535 during these respective periods. The increases were primarily the result of the acquisition of additional businesses in 2000, as well as the inclusion in 2000 of a full year of revenue for
the businesses acquired in 1999, coupled with strong industry demand resulting in same-store rental revenue growth of 15%. Revenues in the Traffic Safety segment increased $47,938 due to
acquired businesses and generally strong demand for road construction projects.

Gross Profit.Gross profit increased to $255,902 in 2000 from $211,266 in 1999. Gross margin decreased to 41.0% from 44.6%
during these respective periods. The decrease in gross margin was primarily the result of higher costs associated with the opening of 15 start-up locations during 2000 and the decline in
rental rates in some markets.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased to $132,456 in 2000 from
$100,060 in 1999. This increase was primarily the result of the inclusion in 2000 of a full year of expenses related to businesses acquired in 1999. As a percentage of total revenues, selling, general
and administrative expenses remained a relatively constant 21.2% and 21.1% for 2000 and 1999, respectively.

Non-rental Depreciation and Amortization.Non-rental depreciation and amortization increased to
$28,044 in 2000 from $18,861 in 1999. This increase was due primarily to the inclusion of a full year of depreciation and amortization expense related to the businesses acquired in 1999.

Operating Income.As a result of the performance described above, operating income increased to $95,402 in 2000 from $92,345
in 1999. Operating income represented 15.3% of total revenues in 2000. An increase in operating income for the Traffic Safety segment accounted for $2,620 of the increase in 2000 and is due to
acquired companies.

Interest Expense, net.Interest expense, net increased to $84,182 in 2000 from $60,156 in 1999. This increase was due to
higher average debt levels resulting from increased financing required for the

11

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Company's 2000 and 1999 acquisitions, as well as an overall increase in interest rates on the Company's revolving line of credit.

Income Tax Expense.Income tax expense decreased to $5,560 in 2000 from $13,422 in 1999. The Company's effective tax rate
increased to 47.9% in 2000 from 40.8% in 1999 due to the non-deductibility for income tax purposes of amortization of goodwill related to certain acquisitions, offset by the effect of
lower state tax rates compared to the prior year.

Liquidity and Capital Resources

The Company's primary capital requirements are for purchasing new rental equipment and for acquisitions. 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
$23 million, $166 million and $197 million in 2001, 2000 and 1999, respectively. The Company's expenditures for rental fleet are expected to be approximately $35 million in
2002. The Company's principal existing sources of cash are 1) cash generated from operations and 2) borrowings available under its credit facility ($9 million as of
April 8, 2002).

For
the years ended December 31, 2001, 2000 and 1999, the Company's net cash provided by operations was $102 million, $111 million and $72 million,
respectively. The consistent cash flow from operations in 2001 and 2000 is the result of increased cash generated from accounts receivable in 2001 offset by the decrease in earnings as compared to the
prior year and a decrease in accounts payable balance at the end of 2001 due to large purchases at the end of 2000 which did not recur in 2001. The increase in 2000 relative to 1999 is due primarily
to higher earnings before depreciation and amortization. For the same three years, the Company's net cash used in investing activities was $94 million, $148 million and
$469 million, respectively. Net cash used in investing activities consists primarily of expenditures for new acquisitions and purchases of rental equipment and other property, plant and
equipment. The decreases in 2001 and 2000 are attributable to consistently declining fleet purchases as well as significantly lower acquisition expenditures as compared to 1999. Fleet purchases in
2001 were further offset by increased proceeds on the sale of rental equipment. Net cash (used in) provided by financing activities was $(7) million in 2001, $6 million in 2000 and
$430 million in 1999. Net cash provided by financing activities consists primarily of borrowings, net of repayments, under the Company's credit facility. The decrease in 2001 is a result of
repayment of approximately $102 million of borrowings under the Company's credit facility essentially offset by borrowings for the BESI acquisition. The decrease in 2000 was due primarily to
reduced acquisition spending, offset by an increase in purchases of shares under the Company's stock repurchase program.

The
Company's credit facility provides for a $100 million term loan and a revolving credit facility up to a maximum of $550 million (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 December 31, 2001,
$592 million was outstanding under the credit facility with $28 million of additional availability based on the Company's borrowing certificate. The credit facility contains certain
covenants that require the Company to, among other things, satisfy certain financial 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 agreements governing the credit facility also contain 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. While the Company expects to be
in compliance with the covenants and satisfy the financial ratios and tests related to the credit facility in the future, there can be no assurance that the Company will meet such financial ratios and
tests.

12

---

During
1997, the Company issued $100 million of Senior Subordinated Notes due 2004 (the "Series A Notes") at a discount netting proceeds of $99 million. During 1998,
the Company completed its exchange of $100 million of Senior Subordinated Notes due 2004, Series B (the "Series B Notes"), which have been registered for public trading, for the
Series A Notes.

Also
during 1998, the Company issued $125 million of Senior Subordinated Notes due 2004, Series C (the "Series C Notes") at a discount netting proceeds of
$122 million. During 1999, the Company issued $50 million of additional Series C Notes, at a discount netting proceeds of $49 million. Later during 1999, the Company
completed its exchange of $175 million 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 the 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 and its Series B Notes and
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 on favorable terms, which could have a material 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 this 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 are expected to fluctuate due to the seasonal nature of the industry in which the Company operates, with rental activity tending to be lower
in the winter.

Recently Issued Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and
Other Intangible Assets," that supersede Accounting Principles Board ("APB"), Opinion No. 16, Business Combinations, and APB Opinion No. 17, Intangible Assets. The two statements modify
the method of accounting for business combinations and address the accounting and reporting for goodwill and intangible assets. 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. SFAS No. 142 is effective for
fiscal years beginning after December 15, 2001. Beginning in fiscal year 2002, the Company will no longer amortize goodwill, but will, however, evaluate goodwill for impairment on an annual
basis. For the years ended December 31, 2001, 2000 and 1999, goodwill amortization was $10 million, $10 million and $7.6 million, respectively. The Company is currently
reviewing these statements to determine their effect on the Company's consolidated financial statements. Based upon preliminary calculations of fair value pursuant

13

---

to SFAS No. 142, it appears that the Company will record a charge upon adoption of SFAS No. 142 in the range of $100 million to $200 million.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which supersedes SFAS No. 121 and the
accounting and reporting provisions of APB No. 30, Reporting the Result of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently occurring Events and Transactions. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Company plans to adopt this standard at the beginning of 2002 and is currently
reviewing this statement to determine its effect on the Company's consolidated financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's credit facility provides the Company with a $100 million term loan and permits the Company to borrow up to an additional $550 million
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 April 8, 2002, the Company had total borrowings under the revolving credit facility and the term loan of
$594 million. Each 100 basis point increase in interest rates on the variable rate debt would decrease pretax earnings by approximately $2 million.

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 million 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 report 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 judgment 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.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated financial statements are listed in Part IV, Item 14, of this report and begin on page 16.

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

None.

14

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Information regarding the Company's directors and executive officers is set forth in the Company's 2002 Proxy Statement, under the captions "ELECTION OF
DIRECTORS" and "MANAGEMENT." This information is incorporated herein by reference.

ITEM 11.    EXECUTIVE COMPENSATION

Information on the cash compensation of the executive officers, compensation available under employee benefit plans, employee benefit plans and compensation of
directors is included in the Company's 2002 Proxy Statement under the caption "MANAGEMENT" and "EXECUTIVE COMPENSATION." This information is incorporated herein by reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information about security ownership of certain beneficial owners and management appears in the Company's 2002 Proxy Statement under the caption "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." This information is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions can be found in the Company's 2002 Proxy Statement under the caption "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS." This information is incorporated herein by reference.

15

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PART IV

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







16

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REPORT OF INDEPENDENT ACCOUNTANTS

To
the Board of Directors and Shareholders
    of National Equipment Services, Inc.

In
our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) (as restated) on page 16 present fairly, in all material respects,
the financial position of National Equipment Services, Inc. and its subsidiaries (the "Company") at December 31, 2001 and 2000, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 14(a)(2) on page 16 presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The
consolidated financial statements for the years ended December 31, 2000 and 1999 have been restated as discussed in Note 3.

/s/ PricewaterhouseCoopers LLP

Chicago,
Illinois
April 15, 2002

17

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NATIONAL EQUIPMENT SERVICES, INC.        CONSOLIDATED BALANCE SHEETS  December 31, 2001 and 2000        (Amounts in thousands, except per share data)

|                     |                                                                                                      | December 31,                               |  
|-------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------------------------ | -
|
|
|Assets               |                                                                                                      |                                            |  
|                     | Cash and cash equivalents                                                                            |                                            | $
|                     | Trade accounts receivable, net of allowance for doubtful accounts of $6,251 and $5,484, respectively |                                            |  
|                     | Inventory, net (Note 6)                                                                              |                                            |  
|                     | Rental equipment, net                                                                                |                                            |  
|                     | Property and equipment, net (Note 7)                                                                 |                                            |  
|                     | Intangible assets, net (Note 8)                                                                      |                                            |  
|                     | Loan origination costs, net                                                                          |                                            |  
|                     | Deferred income taxes, net                                                                           |                                            |  
|                     | Prepaid expenses and other assets                                                                    |                                            |  
|                     |                                                                                                      |                                            |  
|                     |                                                                                                      | Total assets                               |  
|                     |                                                                                                      |                                            |  
|Liabilities          |                                                                                                      |                                            |  
|                     | Cash overdraft                                                                                       |                                            | $
|                     | Trade accounts payable                                                                               |                                            |  
|                     | Accrued interest                                                                                     |                                            |  
|                     | Deferred income taxes, net                                                                           |                                            |  
|                     | Accrued expenses and other liabilities (Note 9)                                                      |                                            |  
|                     | Debt (Note 10)                                                                                       |                                            |  
|                     |                                                                                                      |                                            |  
|                     |                                                                                                      | Total liabilities                          |  
|                     |                                                                                                      |                                            |  
|                     | Senior redeemable convertible preferred stock                                                        |                                            |  
|                     | Commitments and contingencies (Notes 15 and 16)                                                      |                                            |  
|Stockholders' equity |                                                                                                      |                                            |  
|                     | Common stock, $0.01 par value, 100,000 shares authorized, 24,170 shares issued                       |                                            |  
|                     | Additional paid-in capital                                                                           |                                            |  
|                     | Retained earnings                                                                                    |                                            |  
|                     | Stock subscriptions receivable                                                                       |                                            |  
|                     | Treasury stock at cost, 3,019 shares                                                                 |                                            |  
|                     | Accumulated other comprehensive loss                                                                 |                                            |  
|                     |                                                                                                      |                                            |  
|                     |                                                                                                      | Total stockholders' equity                 |  
|                     |                                                                                                      |                                            |  
|                     |                                                                                                      | Total liabilities and stockholders' equity |  
|                     |                                                                                                      |                                            |  

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

18

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NATIONAL EQUIPMENT SERVICES, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS  For the Years Ended December 31, 2001, 2000 and 1999
(Amounts in thousands, except per share data)

|                                                            |                                         | For the Year Ended December 31, |        
|----------------------------------------------------------- | --------------------------------------- | ------------------------------- | -------
|
|
|Revenues                                                    |                                         |                                 |        
|                                                            | Rental revenues                         |                                 | $      
|                                                            | New equipment sales                     |                                 |        
|                                                            | Rental equipment sales                  |                                 |        
|                                                            | Parts sales, service and other revenues |                                 |        
|                                                            |                                         |                                 |        
|                                                            |                                         | 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                                                |                                         |                                 | 206,030
|Selling, general and administrative expenses                |                                         |                                 | 146,886
|Non-rental depreciation and amortization                    |                                         |                                 | 29,750 
|                                                            |                                         |                                 |        
|Operating income                                            |                                         |                                 | 29,394 
|Other income, net                                           |                                         |                                 | (239   
|Interest expense, net                                       |                                         |                                 | 76,060 
|                                                            |                                         |                                 |        
|(Loss) income before income taxes                           |                                         |                                 | (46,427
|Income tax (benefit) expense                                |                                         |                                 | (15,520
|                                                            |                                         |                                 |        
|Net (loss) income                                           |                                         | $                               | (30,907
|                                                            |                                         |                                 |        
|Net (loss) income                                           |                                         | $                               | (30,907
|Other comprehensive loss                                    |                                         |                                 | (11,101
|                                                            |                                         |                                 |        
|Comprehensive (loss) income                                 |                                         | $                               | (42,008
|                                                            |                                         |                                 |        
|Basic (loss) earnings per common share                      |                                         | $                               | (1.50  
|                                                            |                                         |                                 |        
|Average number of common shares used in basic calculation   |                                         |                                 | 20,956 
|                                                            |                                         |                                 |        
|Diluted (loss) earnings per common share                    |                                         | $                               | (1.50  
|                                                            |                                         |                                 |        
|Average number of common shares used in diluted calculation |                                         |                                 | 20,956 
|                                                            |                                         |                                 |        

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

19

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NATIONAL EQUIPMENT SERVICES, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS  For the Years Ended December 31, 2001, 2000 and 1999    (Amounts in thousands,
except per share data)

|                                                     |                                                                                          | For the Year Ended December 31,                                   |                                                          
|---------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ---------------------------------------------------------
|
|
|Cash flows from operating activities                 |                                                                                          |                                                                   |                                                          
|                                                     | Net (loss) income                                                                        |                                                                   | $                                                        
|                                                     | Adjustments to reconcile net (loss) income to net cash provided by operating activities: |                                                                   |                                                          
|                                                     |                                                                                          | Depreciation and amortization                                     |                                                          
|                                                     |                                                                                          | Gain on sale of equipment                                         |                                                          
|                                                     |                                                                                          | Deferred income taxes                                             |                                                          
|                                                     |                                                                                          | Writedown of rental equipment                                     |                                                          
|                                                     |                                                                                          | Changes in operating assets and liabilities, net of acquisitions: |                                                          
|                                                     |                                                                                          |                                                                   | Trade accounts receivable                                
|                                                     |                                                                                          |                                                                   | Inventory                                                
|                                                     |                                                                                          |                                                                   | Prepaid expenses and other assets                        
|                                                     |                                                                                          |                                                                   | Trade accounts payable                                   
|                                                     |                                                                                          |                                                                   | Accrued expenses and other liabilities                   
|                                                     |                                                                                          |                                                                   |                                                          
|                                                     |                                                                                          |                                                                   | Net cash flows provided by operating activities          
|                                                     |                                                                                          |                                                                   |                                                          
|Cash flows from investing activities                 |                                                                                          |                                                                   |                                                          
|                                                     | Acquisitions, net of cash received                                                       |                                                                   |                                                          
|                                                     | Cash received in connection with business combination                                    |                                                                   |                                                          
|                                                     | Purchases of rental equipment                                                            |                                                                   |                                                          
|                                                     | Proceeds from sale of rental equipment                                                   |                                                                   |                                                          
|                                                     | Purchases of property and equipment                                                      |                                                                   |                                                          
|                                                     | Proceeds from sale of property and equipment                                             |                                                                   |                                                          
|                                                     |                                                                                          |                                                                   |                                                          
|                                                     |                                                                                          |                                                                   | Net cash flows used in investing activities              
|                                                     |                                                                                          |                                                                   |                                                          
|Cash flows from financing activities                 |                                                                                          |                                                                   |                                                          
|                                                     | Proceeds from long-term debt                                                             |                                                                   |                                                          
|                                                     | Payments on long-term debt                                                               |                                                                   |                                                          
|                                                     | Cash overdraft                                                                           |                                                                   |                                                          
|                                                     | Net proceeds from issuance of preferred stock                                            |                                                                   |                                                          
|                                                     | Net proceeds from sales of common stock                                                  |                                                                   |                                                          
|                                                     | Repurchase of treasury stock                                                             |                                                                   |                                                          
|                                                     | Payments of loan origination costs                                                       |                                                                   |                                                          
|                                                     |                                                                                          |                                                                   |                                                          
|                                                     |                                                                                          |                                                                   | Net cash flows (used in) provided by financing activities
|                                                     |                                                                                          |                                                                   |                                                          
|Net increase (decrease) in cash and cash equivalents |                                                                                          |                                                                   | 1,059                                                    
|Cash and cash equivalents at beginning of period     |                                                                                          |                                                                   | 3,162                                                    
|                                                     |                                                                                          |                                                                   |                                                          
|Cash and cash equivalents at end of period           |                                                                                          | $                                                                 | 4,221                                                    
|                                                     |                                                                                          |                                                                   |                                                          
|Supplemental cash flow information                   |                                                                                          |                                                                   |                                                          
|                                                     | Cash paid for interest                                                                   |                                                                   | $                                                        
|                                                     | Cash paid for income taxes                                                               |                                                                   |                                                          

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

20

---

NATIONAL EQUIPMENT SERVICES, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  For the Years Ended December 31, 2001, 2000 and 1999    (Amounts in
thousands, except per share data)

|                                                              |  | Common Stock |  |   |     |  |   |  |   |   |  | Accumulated
Other
Compre-
hensive
Loss |  |   |  
|------------------------------------------------------------- |  | ------------ |  | - | --- |  | - |  | - | - |  | -------------------------------------- |  | - | -
|
|
|Balance at December 31, 1998                                  |  | 24,122       |  | $ | 241 |  |  |  | $ |  |  |                                       |  | $ | 
|Issuance of common stock                                      |  | 1            |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Accretion of preferred stock                                  |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Repurchase of treasury shares, 905 shares                     |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Net income                                                    |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|                                                              |  |              |  |   |     |  |   |  |   |   |  |                                        |  |   |  
|Balance at December 31, 1999 (Restated)                       |  | 24,123       |  |   | 241 |  |  |  |   |  |  |                                       |  |   | 
|Issuance of common stock                                      |  | 47           |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Accretion of preferred stock                                  |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Repurchase of treasury shares, 2,114 shares                   |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Net income                                                    |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|                                                              |  |              |  |   |     |  |   |  |   |   |  |                                        |  |   |  
|Balance at December 31, 2000 (Restated)                       |  | 24,170       |  |   | 241 |  |  |  |   |  |  |                                       |  |   | 
|Accretion of preferred stock                                  |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Net change in fair value of derivative instrument, net of tax |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|Net loss                                                      |  |             |  |   |    |  |  |  |   |  |  |                                       |  |   | 
|                                                              |  |              |  |   |     |  |   |  |   |   |  |                                        |  |   |  
|Balance at December 31, 2001                                  |  | 24,170       |  | $ | 241 |  |  |  | $ |  |  |                                       |  | $ | 
|                                                              |  |              |  |   |     |  |   |  |   |   |  |                                        |  |   |  

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

21

---

NATIONAL EQUIPMENT SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2001, 2000 and 1999

(Amounts in thousands, except per share data)

1. Organization and Basis of Presentation

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

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

2. Significant Accounting Policies



Cash and cash equivalents are highly liquid investments with original maturities of three months or less.



Trade accounts receivable represents amounts due from customers on rental and service contracts and equipment sales.



Inventory primarily consists of new and used equipment held for sale, supplies and spare parts held for sale and internal maintenance. Inventory is stated at the
lower of cost or market. Cost is determined using the first-in, first-out method or the weighted average cost method.



Rental equipment is recorded at cost. Depreciation for rental equipment is computed using the straight-line method over five to fifteen year useful
lives, with 0% to 20% salvage values. Accumulated depreciation on rental equipment was $239,786 and $174,332 at December 31, 2001 and 2000, respectively. When rental equipment is sold, the
related cost and accumulated depreciation are removed from the respective accounts. Proceeds from the sale and the related net book value of the equipment are recognized in the period of disposal and
reported as revenue from rental equipment sales and cost of rental equipment sales in the consolidated statements of operations and comprehensive loss.

Ordinary
repairs and maintenance costs are charged to operations as incurred.

22

---



Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as
follows:

Buildings and improvements

30 yearsVehicles

3-5 yearsMachinery and equipment

5-7 yearsComputers, furniture and fixtures

3-7 yearsLeasehold improvements

Over the term of the lease


When
property and equipment are disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gains or losses are included in the
consolidated statements of operations and comprehensive loss as other income (loss).

Ordinary
repairs and maintenance costs are charged to operations as incurred.



Goodwill consists of the excess cost over acquired net assets which has been capitalized and is being amortized on a straight-line basis over fifteen
to forty years. Non-compete agreements are recorded at cost and amortized on a straight-line basis over five years.



The Company makes regular periodic assessments to determine if factors are present which indicate that an impairment of long-lived assets may exist.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," if factors indicate that an impairment may exist, the assessment of recoverability and measurement of impairment of identifiable intangibles is based on an undiscounted cash flow basis.



Loan origination costs primarily consist of $10,532 related to the First Union Credit Facility and $9,193 related to the Senior Subordinated Notes, all of which
are stated at cost and amortized to interest expense using the effective interest rate method over the life of the related debt. Accumulated amortization related to loan origination costs aggregated
$9,828 and $6,717 at December 31, 2001 and 2000, respectively.



Provisions are made to record deferred income taxes in recognition of items reported differently for financial reporting purposes than for federal and state
income tax purposes. The Company records deferred income taxes using the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes."

23

---



The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, trade accounts receivable, inventory, trade accounts payable and
accrued expenses and other liabilities approximate fair value due to the immediate to short-term maturity of these financial instruments. The carrying value of the revolving credit
facility loan and term loan approximates fair value as the interest rate is reset every thirty to ninety days to reflect current market rates. The Company's interest rate swap is recorded at fair
value (Note 12). The fair value of the Senior Subordinated Notes was $233,750
and $160,875 based on the December 31, 2001 and 2000 monthly closing bids in the over-the-counter markets, respectively. It is not practical to estimate the fair
value of the senior redeemable convertible preferred stock as the security is not actively traded and has numerous unique features as described in Note 11.



Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and its related
amendment, SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" (collectively referred to as "SFAS No. 133"). These standards require that all
derivative financial instruments be recorded on the consolidated balance sheet at their fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded each period in
income or accumulated other comprehensive loss, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and
losses on derivative instruments reported in accumulated other comprehensive loss are included in income in the periods in which income is affected by the hedged item. As of January 1, 2001,
the adoption of these new standards did not have an impact on the consolidated financial statements.



Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and trade
accounts receivable from construction and industrial customers. Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers and the Company's
geographic dispersion. The Company performs credit evaluations of its customers' financial condition and generally does not require collateral on trade accounts receivable. The Company maintains an
allowance for doubtful accounts on its trade accounts receivable based upon expected collectibility.



The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates relate to useful lives and recoverability of long-lived assets, residual
values of rental equipment and reserves and allowances for trade accounts receivable and inventory. Actual results could differ from those estimates.

24

---



Revenues from equipment rentals are recognized ratably over the contract term and, for certain contracts, based upon actual work completed to date. Revenues from
equipment and part sales are recognized at the point of delivery.



Shipping and handling costs are included in cost of revenues in the accompanying statements of operations and comprehensive loss.



Certain reclassifications of prior year consolidated financial statement amounts have been made to conform to the current year presentation.



In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and
Other Intangible Assets," that supersede Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations," and APB Opinion No. 17, "Intangible Assets." These two statements
modify the method of accounting for business combinations and address the accounting and reporting for goodwill and intangible assets. 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. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. Beginning in fiscal year 2002, the Company will no longer amortize goodwill, but will, however, evaluate goodwill for impairment on
an annual basis. For the years ended December 31, 2001, 2000 and 1999, goodwill amortization was $10,124, $10,155 and $7,567, respectively. The Company is currently reviewing these statements
to determine
their effect on the Company's consolidated financial statements. Based upon preliminary calculations of fair value pursuant to SFAS No. 142, it appears that the Company will record a charge
upon adoption of SFAS No. 142 in the range of $100,000 to $200,000.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121 and the
accounting and reporting provisions of APB No. 30, "Reporting the Result of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
occurring Events and Transactions." This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Company plans to adopt this standard at the beginning of 2002 and is currently reviewing this
statement to determine its effect on the Company's consolidated financial statements.

3. Revision of Prior Year Consolidated Financial Statements

In 2001, the Company became aware that certain assets recorded on the 2001 and prior consolidated balance sheets were overstated. Following a comprehensive
accounting investigation, the Company is, by means of this filing, revising its previously issued consolidated financial statements for the years ended

25

---

December 31, 2000 and 1999 to reflect write-downs of trade accounts receivable, inventory and rental equipment.

The
following table reconciles the amounts previously reported to the amounts currently being reported in the consolidated financial statements of operations and comprehensive loss for
the years ended December 31, 2000 and 1999:

|                                  |  | 2000 |         | 1999
|--------------------------------- |  | ---- | ------- | ----
|
|Total revenues                    |  | $    | 623,836 |     
|Cost of revenues                  |  |      | 362,658 |     
|Other operating expenses          |  |      | 157,730 |     
|                                  |  |      |         |     
|Operating income                  |  |      | 103,448 |     
|Non-operating expenses            |  |      | 83,789  |     
|                                  |  |      |         |     
|Income before income taxes        |  |      | 19,659  |     
|Income tax expense                |  |      | 8,650   |     
|                                  |  |      |         |     
|Net income                        |  | $    | 11,009  |     
|                                  |  |      |         |     
|Basic earnings per common share   |  | $    | 0.50    |     
|Diluted earnings per common share |  | $    | 0.36    |     

Total
assets as previously reported at December 31, 2000 and 1999 were reduced by $10,313 and $4,036, respectively, due to these revisions as follows:

|                                              |  | 2000 |           | 1999
|--------------------------------------------- |  | ---- | --------- | ----
|
|Trade accounts receivable, net                |  | $    | 138,459   |     
|Inventory, net                                |  |      | 33,267    |     
|Rental equipment, net                         |  |      | 616,212   |     
|All other assets                              |  |      | 460,998   |     
|                                              |  |      |           |     
|Total assets                                  |  | $    | 1,248,936 |     
|                                              |  |      |           |     
|Total liabilities                             |  | $    | 1,003,707 |     
|                                              |  |      |           |     
|Senior redeemable convertible preferred stock |  | $    | 95,797    |     
|                                              |  |      |           |     
|Total stockholders' equity                    |  | $    | 149,432   |     
|                                              |  |      |           |     

26

---

4. (Loss) Earnings Per Share

| |  |                                                                                                                           |  | 2001 |         | 2000 |   | 1999   |  
| |  | ------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------ | -
|
| |  | Net (loss) income                                                                                                         |  | $    | (30,907 | )    | $ | 6,053  |  
| |  | Less: Accretion on preferred stock                                                                                        |  |      | (500    | )    |   | (500   | )
| |  |                                                                                                                           |  |      |         |      |   |        |  
| |  | Basic (loss) income available to common stockholders                                                                      |  | $    | (31,407 | )    | $ | 5,553  |  
| |  | Plus: Interest on the Shaughnessy 8% convertible junior subordinated promissory note (the "Convertible Note"), net of tax |  |      |        |      |   |       |  
| |  |                                                                                                                           |  |      |         |      |   |        |  
| |  | Diluted (loss) income available to common stockholders                                                                    |  | $    | (31,407 | )    | $ | 5,553  |  
| |  |                                                                                                                           |  |      |         |      |   |        |  
| |  | Basic weighted average shares                                                                                             |  |      | 20,956  |      |   | 21,221 |  
| |  | Effect of dilutive securities                                                                                             |  |      |         |      |   |        |  
| |  | Unvested stock                                                                                                            |  |      |        |      |   | 455    |  
| |  | Convertible Note                                                                                                          |  |      |        |      |   |       |  
| |  | Convertible preferred stock                                                                                               |  |      |        |      |   | 7,692  |  
| |  |                                                                                                                           |  |      |         |      |   |        |  
| |  | Diluted weighted average shares                                                                                           |  |      | 20,956  |      |   | 29,368 |  
| |  |                                                                                                                           |  |      |         |      |   |        |  
| |  | Basic (loss) earnings per share                                                                                           |  | $    | (1.50   | )    | $ | 0.26   |  
| |  | Diluted (loss) earnings per share                                                                                         |  | $    | (1.50   | )    |   | 0.19   |  

The
effect of dilutive securities in 2001 is omitted from the computation of dilutive earnings per share because inclusion would be anti-dilutive by reducing the loss per
share.

5. Acquisitions

In 2001, the Company purchased Brambles Equipment Services, Inc. ("BESI"), an equipment rental company based in Taylor, Michigan, for a total purchase
price of $95,359. The purchase price was allocated as follows:

Rental equipment

$
97,525Property and equipment


7,443Inventory


4,703Intangibles and other assets


6,121Accounts payable and accrued expenses


(12,433
)Integration reserve


(8,000
)$
95,359


The Company allocated $63,533 of negative goodwill to the long-lived assets. The Company is in the process of completing a valuation of certain
property, intangibles, and goodwill; thus the allocation of the purchase price is subject to refinement.

In
2000, the Company completed the acquisition of four companies with a total purchase price of $15,500. Effective April 1, 2000, the Company completed an exchange of certain
assets and liabilities and all of the stock of its subsidiary, Safety Lights & Leasing, Inc., for certain assets and liabilities and all of the

27

---

stock of Texoma, Inc., a rental equipment company, and approximately $18,000 in cash. This transaction was accounted for as a fair value transaction and no gain or loss was recognized.

In
1999, the Company completed the acquisition of nineteen companies with a total purchase price of $284,000.

These
transactions have been accounted for by the purchase method of accounting and are included in the Company's results of operations from the closing date of each respective
acquisition. The purchase prices were allocated based on the fair values of assets acquired and liabilities assumed.

The
following unaudited consolidated financial information represents the pro forma results of operations as if the 2001 and 2000 acquisitions had been completed on January 1,
2000, 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) earnings 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 these
acquisitions been completed as of January 1, 2000, nor are the results indicative of the Company's future results of operations.

2001

2000(Unaudited)

(Unaudited)Revenues

$
778,548

$
814,636Operating income


43,194


116,802Net (loss) income


(26,207
)

15,353Pro forma net (loss) earnings per share:Basic

$
(1.27
)
$
0.70Diluted


(1.27
)

0.51Pro forma weighted average shares outstanding:Basic


20,956


21,221Diluted


20,956


29,368


6. Inventory

Inventory, net consists of the following at December 31:

2001

2000(Restated)New equipment

$
7,757

$
11,812Used equipment


4,512


4,801Supplies


4,495


4,910Parts


17,166


12,69233,930


34,215Less: Reserves for excess and obsolete inventory


(4,767
)

(2,116
)$
29,163

$
32,099


28

---

7. Property and Equipment

Property and equipment, net consists of the following at December 31:

2001

2000(Restated)Land

$
3,628

$
3,397Buildings and improvements


13,545


10,658Vehicles


42,380


40,330Machinery and equipment


13,904


10,854Computers, furniture and fixtures


16,209


12,306Leasehold improvements


7,865


6,59797,531


84,142Less: Accumulated depreciation


(40,681
)

(26,069
)$
56,850

$
58,073


Property
and equipment depreciation expense aggregated $17,923, $16,054 and $9,667 for the years ended December 31, 2001, 2000 and 1999, respectively.

8. Intangible Assets

Intangible assets, net consists of the following at December 31:

2001

2000Goodwill

$
386,583

$
382,742Non-compete agreements and other


10,094


8,873396,677


391,615Less: Accumulated amortization


(37,623
)

(25,796
)$
359,054

$
365,819


Amortization
expense aggregated $11,827, $11,990 and $9,194 for the years ended December 31, 2001, 2000 and 1999, respectively.

29

---

9. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consists of the following at December 31:

2001

2000(Restated)Interest rate swap payable

$
11,101

$
Integration and restructuring reserve (Note 20)


9,700


Accrued compensation and benefits


15,036


7,208Accrued inventory expenses


3,070


1,824Accrued insurance reserves


5,988


5,098Accrued property and sales taxes


5,085


4,856Liabilities to former owners of acquired businesses


3,311


1,424Other


10,800


6,705$
64,091

$
27,115


10. Debt and Liquidity

Debt consists of the following at December 31:

2001

2000Revolving credit facility loan, interest at prime rate plus 1.75% or the eurodollar rate plus 3%, due July 17, 2003

$
492,000

$
497,000Term loan, interest at prime rate plus 1.75% or the eurodollar rate plus 3%, due July 17, 2003


100,000


100,000Senior Subordinated Notes, Series B and D, interest at 10% payable semi-annually on May 30 and November 30, due November 30, 2004


272,656


271,861Capital lease obligations


4,359


1,950$
869,015

$
870,811


During
1997, the Company entered into a credit facility agreement with First Union Commercial Corporation (as amended, the "Old Credit Facility"). The Old Credit Facility provided for a
secured revolving line of credit of $140,000. During 1998, the Company entered into a new credit facility with First Union National Bank, as the agent, and certain other financial institutions (as
amended, the "Credit Facility"). This provided for a secured credit facility, including a term loan of $100,000 and a revolving credit facility loan of $300,000. Proceeds from the Credit Facility were
used to repay approximately $59,513 of indebted ness under the Company's Old Credit Facility. In conjunction with the extinguishment, the Company reported an extraordinary item of $1,424 ($0.06 per
share), net of a tax benefit of $969 related to the write-off of unamortized loan costs associated with the Old Credit Facility. During 1999, the Company amended its Credit Facility to
increase the available borrowings from $400,000 up to a maximum amount of $750,000. In 2001, the Company amended its Credit Facility to decrease the maximum available borrowings to $650,000. Based
upon the available borrowing base at December 31, 2001, the Company had $27,706 available on the revolving credit facility loan. The Credit Facility is collateralized by substantially all of
the Company's assets.

30

---

The
Company accretes the original issue discount of the Senior Subordinated Notes due 2004, Series B (the "Series B Notes") and the Senior Subordinated Notes due 2004,
Series D (the "Series D Notes") over the term of the notes using the effective interest rate method.

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. In addition, the Company has pledged the stock of each of its subsidiaries as further security for the
Company's obligations under the Credit Facility. The Company's weighted average interest rate was 8.9% in 2001, 8.9% in 2000 and 8.6% in 1999.

The
Credit Facility contains certain covenants that, among other things, require the Company to satisfy certain financial 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 Notes and the 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 governing the Series B Notes and the Series D Notes, and while the Company expects to be in compliance with the covenants and satisfy the financial ratios and tests related to
the Credit Facility in the future, it is possible that the Company may not meet such financial ratios and tests.

The
Company believes that the 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 the Credit Facility and the Series B Notes and the
Series D Notes. There can be no assurance that the Company will be able to raise the necessary capital on favorable terms, which could have a material effect on the Company's future financial
condition and results of operations.

During
1998, the Company issued a convertible note (the "Convertible Note") for $15,000 in connection with its acquisition of all of the issued and outstanding capital stock of
Shaughnessy Crane Services, Inc. During 1999, the Company repaid the Convertible Note plus accrued interest of $937.

The
Company's debt, including capital lease obligations matures as follows:

2002

$
1,9442003


593,4482004


273,3982005


2092006


16$
869,015


31

---

11. Senior Redeemable Convertible Preferred Stock

During 1999, the Company issued 100 shares of Senior Redeemable Convertible Preferred Stock, Series A (the "Preferred Shares") for proceeds of
approximately $100,000, less a 5% facility fee. Each Preferred Share is convertible at the option of the holder into a number of shares of the Company's Common Stock equal to $1,000 divided by the
conversion price (the "Conversion Price") then in effect. The Conversion Price is $13, subject to adjustment based upon (i) certain issuances of Common Stock at a price per share below the then
current Conversion Price and (ii) standard anti-dilution adjustments. Each Preferred Share is convertible at the option of the Company into a number of shares of Common Stock equal
to $1,000 divided by the then current Conversion Price if at any time after one year from the issue date of the Preferred Shares the average closing market price of the Common Stock over a sixty
consecutive trading day period equals or exceeds $20 per share. Each holder of Preferred Shares is entitled to vote with the Company's Common Stock on an as-if converted basis. The $5,000
facility fee is being accreted over the life of the Preferred Stock as a reduction of stockholders' equity.

Each
holder of Preferred Shares is entitled to receive dividends and other distributions on a parity with each holder of Common Stock in an amount equal to the dividends per share
payable on the number of shares of Common Stock into which such Preferred Shares would be convertible on the record date. On April 30, 2009, the Company will be obligated to redeem all of the
shares of Preferred Stock then outstanding, at a price per share equal to $1,000 plus an amount per share equal to all declared and unpaid dividends thereon.

If
a change of control occurs, the Company will within five business days thereafter offer to purchase from each holder of Preferred Shares all outstanding Preferred Shares then held by
such holder at a purchase price equal to the greater of (i) the amount, if any, that each holder of Preferred Shares would be entitled to receive per share of Common Stock in connection with
the change of control if such holder had converted its Preferred Shares and (ii) $20 in cash per share of Common Stock assuming such holder had converted its Preferred Shares. If a liquidation
or winding-up of the Company (other
than a change of control) occurs, no distribution will be made to the holders of shares of any class of junior stock (including Common Stock) unless, prior thereto, the holders of Preferred Shares
have received an amount per Preferred Share equal to the greater of (i) $1,000 plus all declared and unpaid dividends and (ii) the proceeds in liquidation that the holders of Preferred
Shares would have received in respect of all shares of Common Stock issuable to such holders upon conversion.

12. Financial Instruments

Derivative financial instruments are used by the Company principally to reduce exposures to market risks resulting from fluctuations in interest rates by creating
offsetting exposures. The Company is not a party to leveraged derivatives. For a derivative to qualify as a hedge at inception and throughout the hedged period, the Company formally documents the
nature and relationships between the hedging instruments and hedged items, as well as its risk-management objectives, strategies for undertaking the various hedge transactions and method
of assessing hedge effectiveness. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both
at inception and throughout the hedged period.

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 Company uses the

32

---

interest rate swap for hedging purposes. For the interest rate swap, the net amounts paid or received and net amounts accrued through the end of the accounting period are included in interest
expense. Unrealized gains or losses on the interest rate swap contract are not recognized in income. Gains or losses on any contracts terminated early are deferred and amortized to income over the
remaining average life of the terminated contract. During the year ended December 31, 2001, there was no ineffectiveness relating to the cash flow hedge.

13. Stock Option Plan

During 1998, the Company established a plan in which options to purchase shares of Common Stock can be granted to directors, officers and key employees of the
Company, and other individuals. Up to 4,461 shares of Common Stock may be issued under this plan. Granted options under the plan vest over five years from the grant date and expire ten years from the
grant date. A summary of options activity for the years ended December 31, 2001, 2000 and 1999 is as follows:

Number of
Shares

Exercise Price
per Share

Weighted-Average
Exercise Price per
ShareShares under Option:December 31, 1998

909

$
13.50

$
13.50Granted

1,095


8.81 to 13.50


9.85December 31, 1999

2,004


8.81 to 13.50


11.78Granted

593


2.25 to 6.00


5.97Forfeited

(148
)

6.00 to 13.50


12.11December 31, 2000

2,449


2.25 to 13.50


10.35Granted

593


1.79 to 2.90


2.56Forfeited

(206
)

2.90 to 13.50


9.28December 31, 2001

2,836

$
1.79 to $13.50

$
8.80


SFAS
No. 123, "Accounting for Stock-Based Compensation," allows entities to choose between a fair value based method of accounting for employee stock options or similar equity
instruments and the current intrinsic value based method of accounting prescribed by APB No. 25. Entities electing to
account for employee stock options or similar equity instruments under APB No. 25 must make pro forma disclosures of net income and earnings per share as if the fair value method of accounting
has been applied. The Company has elected to account for its employee stock options under APB No. 25.

Had
compensation expense for the Company's stock based compensation plan been determined based on the fair value at the assumed grant date for awards under this plan consistent with the
method of SFAS No. 123, the Company's net (loss) income and net (loss) earnings per share would have been as follows for the years ended December 31:

2001

2000

1999Net (loss) income

$
(32,107
)
$
4,967

$
19,139Basic (loss) earnings per share


(1.56
)

0.21


0.82Diluted (loss) earnings per share


(1.56
)

0.15


0.65


33

---

The
determination of compensation expense for the pro forma information was based upon the estimated fair value of the options granted on the date of their grant using the Black-Scholes
option pricing model at the following weighted average assumptions by grant year:

2001

2000

1999Risk-free interest rate

4.98
%
6.00
%
6.02
%Expected life

5 years

5 years

5 yearsExpected volatility

76
%
70
%
33
%Expected dividend yield

0

0

0


The
weighted average fair value of options granted was $1.67, $3.90 and $3.83 in 2001, 2000 and 1999, respectively. The number of options exercisable was 532, 456 and 366 at
December 31, 2001, 2000 and 1999, respectively.

14. Income Taxes

The provision for income taxes differs from the amount of income tax determined by applying the U.S. statutory federal income tax rate of 35% to income before
income taxes as a result of the following:

2001

2000
(Restated)

1999
(Restated)Federal income taxes at 35%

$
(16,249
)
$
4,065

$
11,507State income taxes, net of federal benefit


(953
)

501


617Goodwill


1,090


1,000


980Other


592


(6
)

318$
(15,520
)
$
5,560

$
13,422


Income
tax (benefit) expense was as follows:

2001

2000
(Restated)

1999
(Restated)Current income tax expense:Federal

$


$


$
State








Total current income tax expense








Deferred income tax (benefit) expense:Federal


(13,999
)

5,059


12,805State


(1,521
)

501


617Total deferred income tax (benefit) expense


(15,520
)

5,560


13,422Total income tax (benefit) expense

($
15,520
)
$
5,560

$
13,422


Deferred
income tax assets and liabilities are computed based on temporary differences between the financial statement and income tax bases of assets and liabilities using the enacted
marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expenses or benefits are based on the changes in the deferred income tax assets or
liabilities from period to period.

34

---

Deferred
income taxes have been provided for the temporary differences between the financial statement and the income tax bases of the Company's assets and liabilities as follows:

2001

2000(Restated)Trade accounts receivable and inventory

$
7,323

$
4,563Non-compete agreements


1,754


1,415Accrued expenses


3,346


1,293Minimum tax credits


1,851


1,851Net operating losses


93,506


69,087Other


1,389


508Deferred income tax asset

$
109,169

$
78,717Goodwill

$
(11,598
)
$
(8,473
)Depreciation


(122,198
)

(111,160
)Other


(969
)

(201
)Deferred income tax liability

$
(134,765
)
$
(119,834
)


Realization
of deferred income tax assets is dependent upon generating sufficient future taxable income in the periods in which the assets reverse or the benefits expire. The Company has
not provided a valuation allowance for its deferred income tax assets as management believes it is more likely than not that the Company's deferred income tax assets will be realized through future
taxable earnings. The net operating loss carryforward of approximately $243,137 expires principally in 2012 through 2021.

15. Lease Commitments

The Company leases certain rental fleet equipment, facilities, office equipment and vehicles under operating leases, some of which contain renewal options. Future
minimum rental commitments under operating leases consists of the following at December 31, 2001:

2002

$
27,9472003


20,9232004


13,2692005


7,2162006


4,619Thereafter


15,765$
89,739


Rent expense was $25,682, $19,947 and $7,256 for the years ended December 31, 2001, 2000 and 1999, respectively.

16. Contingencies

The Company is party to legal proceedings and potential claims arising in the ordinary course of its business. In the opinion of management, the ultimate
resolution of these matters will have no material adverse effect on the Company's financial position, results of operations or cash flows.

35

---

17. Employee Benefit Plans

The Company sponsors a profit sharing and 401(k) plan (the "Plan") in which employees over twenty-one years of age with greater than
one-half year of service are eligible, as defined by the Plan. Under the Plan, the Company makes a discretionary contribution to a trust based on each eligible employee's base annual
wages. In addition, eligible employees can defer up to 15% of their salary with a partially matching contribution by the Company of 50% of the first 5% of the employee contribution. The employer
contributions vest over a five-year period. Contributions by the Company to the Plan were $4,068, $3,840 and $2,726 for the years ended December 31, 2001, 2000 and 1999,
respectively.

18. Related Party Transactions

Stock subscriptions receivable of $102 as of December 31, 2001 and 2000 represents notes due from officers of the Company related to purchases of Common
Stock and is secured by the purchased shares. Interest on the notes accrues at 8.3% and is payable in full at maturity on January 6, 2007 or upon termination of employment.

The
Company incurred expenses of $3,015, $2,067 and $1,252 for rent under certain lease obligations to former owners, members of management and their affiliates during the years ended
December 31, 2001, 2000 and 1999, respectively.

During
2000, the Company acquired St. Clair Equipment Company for $2,300 from one of the Company's directors.

19. Segment Information

All operations are managed on a branch basis. The Company has two reporting segments, Traffic Safety, and General Rental & Other. The Traffic Safety operations
have different contractual, regulatory and capital requirements than the General Rental operations. The accounting policies for these segments are the same as those described in Note 2.
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 10% of the Company's consolidated revenues. Identifiable assets are those used in the Company's operations in each segment.

36

---

The
following table presents the information for the reported segments for the years ending December 31:

Traffic Safety

General Rental and Other

Consolidated2001Total revenues

$
109,037

$
501,711

$
610,748Operating earnings


9,748


19,649


29,394Identifiable assets


111,656


1,090,675


1,202,331Depreciation and amortization


13,426


122,898


136,324Capital expenditures


5,014


29,759


34,7732000Total revenues

$
108,462

$
515,374

$
623,836Operating earnings


12,542


82,860


95,402Identifiable assets


122,632


1,115,991


1,238,623Depreciation and amortization


13,151


106,439


119,590Capital expenditures


15,563


165,085


180,6481999Total revenues

$
60,704

$
412,490

$
473,194Operating earnings


10,531


81,814


92,345Identifiable assets


142,449


1,073,129


1,215,578Depreciation and amortization


7,030


76,701


83,731Capital expenditures


13,745


207,504


221,249


20. 2001 Restructuring and Impairment Charges

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 5). The restructuring reserve consists of the following as of December 31, 2001:

Lease termination and other facility closure costs

$
5,059Severance


4,641$
9,700


In conjunction with the BESI acquisition and a review of current market demands for the Company's rental equipment, the Company evaluated the recoverability of
its rental equipment in accordance with SFAS No. 121. The Company recorded an asset impairment charge of $3,183 during the fourth quarter of
2001 as an increase in depreciation expense. The carrying value of the related assets approximates $1,000 at December 31, 2001 and the Company expects to dispose of these assets in 2002.

37

---

22. Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data for the years ended December 31, 2001 and 2000 is as follows:

|                                                     |  | 2001 |        
|---------------------------------------------------- |  | ---- | -------
|
|Revenues                                             |  | $    | 138,782
|Gross profit                                         |  |      | 49,188 
|Net loss as reported                                 |  |      | (7,304 
|Adjustments                                          |  |      | (999   
|                                                     |  |      |        
|Net (loss) income as restated                        |  | $    | (8,303 
|Basic loss per common share as reported              |  | $    | (0.36  
|Adjustments                                          |  |      | (0.04  
|                                                     |  |      |        
|Basic (loss) earnings per common share as restated   |  | $    | (0.40  
|Diluted loss per common share as reported            |  | $    | (0.36  
|Adjustments                                          |  |      | (0.04  
|                                                     |  |      |        
|Diluted (loss) earnings per common share as restated |  | $    | (0.40  

|                                                     |  | 2000 |        
|---------------------------------------------------- |  | ---- | -------
|
|Revenues                                             |  | $    | 134,298
|Gross profit                                         |  |      | 53,335 
|Net income (loss) as reported                        |  |      | (1,821 
|Adjustments                                          |  |      | (936   
|                                                     |  |      |        
|Net income (loss) as restated                        |  | $    | (2,757 
|Basic earnings (loss) per common share as reported   |  | $    | (0.09  
|Adjustments                                          |  |      | (0.04  
|                                                     |  |      |        
|Basic earnings (loss) per common share as restated   |  | $    | (0.13  
|Diluted earnings (loss) per common share as reported |  | $    | (0.09  
|Adjustments                                          |  |      | (0.04  
|                                                     |  |      |        
|Diluted earnings (loss) per common share as restated |  | $    | (0.13  

38

---



NATIONAL EQUIPMENT SERVICES, INC. AND SUBSIDIARIES        Schedule IIValuation and Qualifying Accounts and Reserves  (Amounts in thousands)

|Column A                        |  | Column B |       | Column C |   | Column D |  | Column E
|------------------------------- |  | -------- | ----- | -------- | - | -------- |  | --------
|
|
|2001:                           |  |          |       |          |   |          |  |         
|Allowance for doubtful accounts |  | $        | 5,484 |          | $ | 11,011   |  | $       
|Reserve for obsolete inventory  |  |          | 2,116 |          |   | 3,648    |  |         
|2000 (restated):                |  |          |       |          |   |          |  |         
|Allowance for doubtful accounts |  |          | 5,425 |          |   | 5,791    |  |         
|Reserve for obsolete inventory  |  |          | 2,258 |          |   | 906      |  |         
|1999:                           |  |          |       |          |   |          |  |         
|Allowance for doubtful accounts |  |          | 2,590 |          |   | 2,866    |  |         
|Reserve for obsolete inventory  |  |          | 1,161 |          |   | 975      |  |         

---

39

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, National Equipment
Services, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Evanston, State of Illinois, on April 16, 2002.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on April 16, 2002, by the following persons in the
capacities indicated:

|Signature                                 |  | Capacity                                                                              
|----------------------------------------- |  | --------------------------------------------------------------------------------------
|                                          |  |                                                                                       
|/s/KEVIN P. RODGERSKevin P. Rodgers       |  | President, Chief Executive Officer and Director (Principal Executive Officer)         
|/s/MICHAEL D. MILLIGANMichael D. Milligan |  | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|/s/CARL D. THOMACarl D. Thoma             |  | Chairman of the Board                                                                 
|/s/JOHN MOLNERJohn Molner                 |  | Director                                                                              
|/s/JOHN L. GROVEJohn L. Grove             |  | Director                                                                              
|/s/RONALD ST. CLAIRRonald St. Clair       |  | Director                                                                              
|/s/MARK HARRISMark Harris                 |  | Director                                                                              

40

---



INDEX TO EXHIBITS

|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Reference |  
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------- | -
|3.1            |  | Restated Certificate of Incorporation of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                    |  | (1        | )
|3.2            |  | Restated By-laws of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | (1        | )
|4.1(i)         |  | Indenture dated November 25, 1997, by and among the Company, the subsidiary guarantors named therein and Harris Savings and Trust Company, as trustee.                                                                                                                                                                                                                                                                                                                   |  | (2        | )
|4.1(ii)        |  | Supplemental Indenture dated April 1, 1998, by and among NES East Acquisition Corp.; NES Michigan Acquisition Corp.; Albany Ladder Company, Inc. and Harris Savings and Trust Company, as trustee.                                                                                                                                                                                                                                                                       |  | (2        | )
|4.1(iii)       |  | Supplemental Indenture dated July 23, 1998, by and among Falconite, Inc.; Carl's Mid South Rent-All Center Incorporated; Falconite Aviation, Inc.; Falconite Equipment, Inc.; Falconite Rebuild Center, Inc.; McCurry &
Falconite Equipment Co., Inc.; M&M Properties, Inc. and Harris Savings and Trust Company, as trustee.                                                                                                                                            |  | (2        | )
|4.1(iv)        |  | Supplemental Indenture dated as of April 9, 1999, by and between Barricade & Light Rental, Inc.; Mayer-Hammant Equipment, L.L.C.; Wellesley Crane Service Co., Inc. and Harris Savings and Trust Company, as
trustee.                                                                                                                                                                                                                                                    |  | (7        | )
|4.2            |  | Forms of Series B 10% Senior Subordinated Notes (contained in Exhibit 4.1(i) as Exhibit A thereto).                                                                                                                                                                                                                                                                                                                                                                      |  | (2        | )
|4.3            |  | Form of Subsidiary Guarantee relating to Series B Senior Subordinated Notes (contained in Exhibit 4.1[i] as Exhibit D thereto).                                                                                                                                                                                                                                                                                                                                          |  | (2        | )
|4.4            |  | Registration Rights Agreement dated as of November 25, 1997, among the Company; Aerial Platforms, Inc.; NES Acquisition Corp.; BAT Acquisition Corp.; MST Enterprises, Inc. and the initial purchasers named therein.                                                                                                                                                                                                                                                    |  | (2        | )
|4.5            |  | Purchase Agreement dated as of November 20, 1997, among the Company; Aerial Platforms, Inc.; NES Acquisition Corp.; BAT Acquisition Corp.; MST Enterprises, Inc. and the initial purchasers named therein.                                                                                                                                                                                                                                                               |  | (2        | )
|4.6            |  | Amended and Restated Credit Agreement dated as of August 6, 1999 and amended as of December 31, 2001 among National Equipment Services, Inc., as Borrower, and Certain Subsidiaries of the Borrower From Time to Time Party Hereto, as
Guarantors, The Several Lenders from Time to Time Party Hereto and First Union National Bank, as Agent.                                                                                                                           |  |           |  
|4.7            |  | Pledge Agreement dated as of July 17, 1998, by and among the Company; NES Acquisition Corp.; BAT Acquisition Corp.; NES East Acquisition Corp.; NES Michigan Acquisition Corp.; Albany Ladder Company, Inc.; Falconite, Inc.; Falconite
Equipment, Inc.; M&M Properties, Inc.; Carl's Mid South Rent-All Center Incorporated; Falconite Rebuild Center, Inc.; Falconite Aviation, Inc.; McCurry & Falconite Equipment Co., Inc. and First Union National
Bank, as Agent. |  | (2        | )
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |           |  

41

---

|4.8      |  | Security Agreement dated as of July 17, 1998, among the Company; NES Acquisition Corp.; BAT Acquisition Corp.; NES East Acquisition Corp.; NES Michigan Acquisition Corp.; Albany Ladder Company, Inc.; Falconite, Inc.; Falconite
Equipment, Inc.; M&M Properties, Inc.; Carl's Mid South Rent-All Center Incorporated; Falconite Rebuild Center, Inc.; Falconite Aviation, Inc.; McCurry & Falconite Equipment Co., Inc. and First Union National
Bank, as Agent.                                                                               |  | (2 | )
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -- | -
|4.9      |  | Junior Subordinated Convertible Promissory Note, dated September 17, 1998, in the principal amount of $15,000,000.                                                                                                                                                                                                                                                                                                                                                                                                                                |  | (3 | )
|4.10(i)  |  | Indenture dated December 11, 1998, by and among the Company, the Subsidiary Guarantors and Harris Savings and Trust Company, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                          |  | (4 | )
|4.10(ii) |  | Supplemental indenture dated as of April 9, 1999, by and between Barricade & Light Rental, Inc.; Mayer-Hammant Equipment, L.L.C.; Wellesley Crane Service Co., Inc. and Harris Savings and Trust Company, as
trustee.                                                                                                                                                                                                                                                                                                                             |  | (7 | )
|4.11     |  | Forms of Series C and Series D 10% Senior Subordinated Notes (contained in Exhibit 4.10 as Exhibit A thereto).                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | (4 | )
|4.12     |  | Form of Subsidiary Guarantee relating to Series C and Series D 10% Senior Subordinated Notes (contained in Exhibit 4.10 as Exhibit D thereto).                                                                                                                                                                                                                                                                                                                                                                                                    |  | (4 | )
|4.13     |  | Registration Rights Agreement dated as of December 11, 1998, among the Company; Albany Ladder Company, Inc.; BAT Acquisition Corp.; Carl's Mid South Rent-All Center Incorporated; Falconite Aviation, Inc.; Falconite Equipment, Inc.;
Falconite, Inc.; Falconite Rebuild Center, Inc.; McCurry & Falconite Equipment Co., Inc.; M&M Properties, Inc.; NES Acquisition Corp.; NES East Acquisition Corp.; NES Michigan Acquisition Corp.; Rebel Studio Rentals,
 Inc.; Shaughnessy Crane Service, Inc. and the initial purchasers named therein. |  | (4 | )
|4.14     |  | Purchase Agreement dated as of December 8, 1998, among the Company; Albany Ladder Company, Inc.; BAT Acquisition Corp.; Carl's Mid South Rent-All Center Incorporated; Falconite Aviation, Inc.; Falconite Equipment, Inc.; Falconite,
 Inc.; Falconite Rebuild Center, Inc.; McCurry & Falconite Equipment Co., Inc.; M&M Properties, Inc.; NES Acquisition Corp.; NES East Acquisition Corp.; NES Michigan Acquisition Corp.; Rebel Studio Rentals, Inc.;
Shaughnessy Crane Service, Inc. and the initial purchasers named therein.             |  | (4 | )
|4.15     |  | Registration Rights Agreement dated as of January 8, 1999, among the Company; Albany Ladder Company, Inc.; BAT Acquisition Corp.; Carl's Mid South Rent-All Center Incorporated; Falconite Aviation, Inc.; Falconite Equipment, Inc.;
Falconite, Inc.; Falconite Rebuild Center, Inc.; McCurry & Falconite Equipment Co., Inc.; M&M Properties, Inc.; NES Acquisition Corp.; NES East Acquisition Corp.; NES Michigan Acquisition Corp.; Rebel Studio Rentals,
 Inc.; Shaughnessy Crane Service, Inc. and the initial purchasers named therein.   |  | (4 | )
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |    |  

42

---

|4.16      |  | Purchase Agreement dated as of January 5, 1999, among the Company; Albany Ladder Company, Inc.; BAT Acquisition Corp.; Carl's Mid South Rent-All Center Incorporated; Falconite Aviation, Inc.; Falconite Equipment, Inc.; Falconite,
 Inc.; Falconite Rebuild Center, Inc.; McCurry & Falconite Equipment Co., Inc.; M&M Properties, Inc.; NES Acquisition Corp.; NES East Acquisition Corp.; NES Michigan Acquisition Corp.; Rebel Studio Rentals, Inc.;
Shaughnessy Crane Service, Inc. and the initial purchasers named therein. |  | (4 | )
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -- | -
|10.1      |  | Purchase Agreement dated as of June 4, 1996, between the Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P.                                                                                                                                                                                                                                                                                                                                                                                                                    |  | (2 | )
|10.2(i)   |  | Stockholders Agreement dated as of June 4, 1996, by and between the Company; Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein.                                                                                                                                                                                                                                                                                                                                                                      |  | (2 | )
|10.2(ii)  |  | Amendment No. 1 to Stockholders Agreement dated December 31, 1996, by and among the Company; Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein.                                                                                                                                                                                                                                                                                                                                                      |  | (2 | )
|10.3(i)   |  | Registration Agreement dated as of June 4, 1996, between the Company; Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein.                                                                                                                                                                                                                                                                                                                                                                             |  | (2 | )
|10.3(ii)  |  | Amendment No. 1 to Registration Agreement dated as of December 31, 1996, by and among the Company; Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein.                                                                                                                                                                                                                                                                                                                                                |  | (2 | )
|10.3(iii) |  | Amendment No. 2 to Registration Agreement dated as of July 24, 1998, by and among the Company; Golder, Thoma, Cressey, Rauner Fund IV, L.P. and R & R Rentals, Inc.                                                                                                                                                                                                                                                                                                                                                                  |  | (2 | )
|10.3(iv)  |  | Amendment No. 3 to Registration Agreement dated as of May 14, 1999, by and among National Equipment Services, Inc.; Golder, Thoma, Cressey, Rauner Fund IV, L.P.; The 1818 Fund III, L.P.; Co-Investment Partners,
 L.P.; Erie Indemnity Company; Erie Insurance Exchange; Aquila Limited Partnership; GTR Associates V, Corp., and certain Executives and other persons named therein.                                                                                                                                              |  | (7 | )
|10.4(i)   |  | Senior Management Agreement dated as of June 4, 1996, between the Company and Kevin Rodgers.*                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | (2 | )
|10.4(ii)  |  | Amendment No. 1 to Senior Management Agreement dated December 31, 1996, between the Company and Kevin Rodgers.*                                                                                                                                                                                                                                                                                                                                                                                                                      |  | (2 | )
|10.5(i)   |  | Senior Management Agreement dated as of June 4, 1996, between the Company and Paul Ingersoll.*                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | (2 | )
|10.5(ii)  |  | Amendment No. 1 to Senior Management Agreement dated December 31, 1996, between the Company and Paul Ingersoll.*                                                                                                                                                                                                                                                                                                                                                                                                                     |  | (2 | )
|10.6      |  | Senior Management Agreement dated as of December 31, 1996, between the Company and Dennis O'Connor.*                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | (2 | )
|10.7      |  | Executive Stock Pledge Agreement dated as of June 4, 1996, between the Company and Kevin Rodgers.                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | (2 | )
|10.8      |  | Executive Stock Pledge Agreement dated as of June 4, 1996, between the Company and Paul Ingersoll.                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | (2 | )
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |    |  

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|10.9  |  | Executive Stock Pledge Agreement dated as of December 31, 1996, between the Company and Dennis O'Connor.                                                                                                                                                                                                                                                                                                               |  | (2  | )
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | -
|10.10 |  | Promissory Note dated as of January 6, 1997, by Kevin Rodgers in favor of the Company in the principal amount of $63,232.                                                                                                                                                                                                                                                                                              |  | (2  | )
|10.11 |  | Promissory Note dated as of January 6, 1997, by Paul Ingersoll in favor of the Company in the principal amount of $9,880.                                                                                                                                                                                                                                                                                              |  | (2  | )
|10.12 |  | Promissory Note dated as of January 6, 1997, by Dennis O'Connor in favor of the Company in the principal amount of $19,760.                                                                                                                                                                                                                                                                                            |  | (2  | )
|10.13 |  | Securities Transfer Agreement dated as of December 31, 1996, by and among the Company; Golder, Thoma, Cressey, Rauner Fund IV, L.P.; Golder, Thoma, Cressey, Rauner Fund V, L.P.; Kevin Rodgers; Paul Ingersoll and Dennis
O'Connor.                                                                                                                                                                                   |  | (2  | )
|10.14 |  | Stock Purchase Agreement dated as of April 1, 1998, by and among the Company; Falconite, Inc. and the stockholders of Falconite, Inc.                                                                                                                                                                                                                                                                                  |  | (2  | )
|10.15 |  | First Amendment and Restatement of the National Equipment Services, Inc. 1998 Long-Term Incentive Plan.                                                                                                                                                                                                                                                                                                                |  |     |  
|10.16 |  | Form of Underwriting Agreement among the Company; Salomon Smith Barney; Smith Barney, Inc.; William Blair & Company, L.L.C.; Credit Suisse First Boston Corporation; Donaldson, Lufkin & Jenrette Securities Corporation and
NationsBanc Montgomery Securities LLC.                                                                                                                                                    |  | (1  | )
|10.17 |  | Stock Purchase Agreement dated as of September 1, 1998, by and among the Company; Shaughnessy Crane Service, Inc. and the stockholders of Shaughnessy Crane Service, Inc.                                                                                                                                                                                                                                              |  | (3  | )
|10.18 |  | Employment Letter Agreement dated September 10, 1998, by and between the Company and James W. O'Neil.                                                                                                                                                                                                                                                                                                                  |  | (5  | )
|10.19 |  | Stock Purchase Agreement dated April 27, 1999, by and among National Equipment Services, Inc.; The 1818 Fund III, L.P.; Co-Investment Partners, L.P.; Erie Indemnity Company; Erie Insurance Exchange and Aquila Limited
Partnership.                                                                                                                                                                                  |  | (6  | )
|10.20 |  | Purchase Agreement dated July 31, 1999, by and among The Plank Companies, L.P.; The Plank Companies, Inc.; Plank Management, Inc.; Michael J. Plank and NES Shoring Acquisition, Inc.                                                                                                                                                                                                                                  |  | (8  | )
|10.21 |  | Purchase Agreement, dated as of December 31, 2001, by and among National Equipment Services, Inc., a Delaware corporation, NES Equipment Rental, L.P., a Delaware limited partnership, NES Equipment Services Corporation, an Illinois
corporation, Brambles Equipment Services Holding, Inc., a Delaware corporation, Brambles U.S.A., Inc. a Delaware corporation, and Brambles Canada Inc., an Ontario corporation. |  | (10 | )
|10.22 |  | Employment Letter Agreement dated November 1, 2001, by and between the Company and Stephen A. Shaughnessy.                                                                                                                                                                                                                                                                                                             |  |     |  
|10.23 |  | Employment Letter Agreement dated December 26, 2001, by and between the Company and Michael D. Milligan.                                                                                                                                                                                                                                                                                                               |  |     |  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                        |  |     |  

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|11.1 |  | Statement RE Computation of Per Share Earnings. Not required because the relevant computations can be determined clearly from the material contained in the financial statements included herein. |  |  | 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | 
|21.1 |  | Subsidiaries of the Company.                                                                                                                                                                      |  |  | 
|23.1 |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                            |  |  | 

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*Management
contract or compensatory plan or arrangement.

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