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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2007
 -OR-
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 333-144625-01
                                333-144625
 RSC Holdings III, LLC
  RSC Equipment Rental, Inc.
  Delaware 
Arizona
(State or other jurisdiction of 
incorporation or organization)
    
    41-2218971
86-0933835
(I.R.S. Employer Identification No.)
 6929 E. Greenway Pkwy 
Scottsdale, Arizona
(Address of principal executive offices)
    
    85254
(zip code)
 Registrants telephone number, including area code:
 
 (480) 905-3300
 Securities registered pursuant to Section 12(b) of the Act:  Securities registered pursuant to Section 12(g) of the Act:
 The Registrants meet the conditions set forth in General Instructions I (1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format as permitted.
 o þ
 þ o
 þ o
 þ
  Large Accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Documents Incorporated by Reference:




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TABLE OF CONTENTS
 Cautionary Statement for Forward-Looking Information
    
    iiPART I
    
    
    
    1Item 1.
    
    Business
    
    1Item 1A.
    
    Risk Factors.
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    22Item 2.
    
    Properties
    
    22Item 3.
    
    Legal Proceedings
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    22PART II
    
    
    
    23Item 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    23Item 6.
    
    Selected Financial Data
    
    24Item 7.
    
    Managements Discussion and Analysis of Financial Conditions and Results of Operations
    
    27Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    39Item 8.
    
    Financial Statements and Supplementary Data
    
    40Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    40Item 9A.(T)
    
    Controls and Procedures
    
    40Item 9B.
    
    Other Information
    
    40PART III
    
    
    
    41Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    41Item 11.
    
    Executive Compensation
    
    41Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    41Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    41Item 14.
    
    Principal Accountant Fees and Services
    
    41PART IV
    
    
    
    42Item 15.
    
    Exhibits and Financial Statement Schedules
    
    42EX-12EX-31.1EX-31.2EX-32.1
  i




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Introductory Note
   
 Cautionary Statement for Forward-Looking Information
    
    
    the effect of an economic downturn or other factors resulting in a decline in
non-residential construction and capital investment;
    
    increased competition from other companies in our industry and our inability to
increase or maintain our prices;
    
    risks related to the credit markets willingness to continue to lend to borrowers
rated B- and Caa1;
    
    our ability to generate cash and/or incur additional indebtedness to finance
equipment purchases;
    
    heavy reliance on centralized information systems;
    
    exposure to claims for personal injury, death and property damage resulting from
the use of equipment rented or sold by us;
    
    the effect of changes in laws and regulations, including those relating to the
environment and customer privacy, among others;
 ii




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
    
    fluctuations in fuel or supply costs;
    
    claims that the software products and information systems on which we rely
infringe on the intellectual property rights of others; and
    
    the other factors described in Item 1A of this Annual Report under the caption Risk
Factors.
  iii




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PART I
 
 Item 1. Business
 Our Company
 Overview
   Organizational Overview
   1




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1 2
   Business Strategy
 Increase market share and pursue profitable growth.
 
    
    continuing to drive the profitability of existing branches and pursuing same store
growth;
    
    continuing to invest in and maintain our high quality fleet to meet local customer
demands;
    
    leveraging our reputation for superior customer service to increase our customer
base;
    
    increasing our market penetration by opening new branches in targeted markets to
leverage existing infrastructure and customer relationships;
    
    increasing our presence in complementary rental and service offerings to increase
same store revenues, margins and return on investment;
    
    continuing to align incentives for local management teams with both profit and
growth targets; and
    
    pursuing selected acquisitions in attractive markets, subject to economic
conditions.
 Further drive profitability, cash flow and return on capital.
 
    
    focus on the higher margin rental business;
    
    actively manage the quality, reliability and availability of our fleet and offer
superior customer service, which supports our premium pricing strategy;
    
    evaluate each new investment in fleet based on strict return guidelines;
 2




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
    
    deploy and allocate fleet among our operating regions based on pre-specified return
thresholds to optimize utilization; and
    
    use our size and market presence to achieve economies of scale in capital
investment.
 Further enhance our industry leading customer service.
 Business
    Operations
   Customers
  3




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
    
    run and maintain, which relates to day to day maintenance;
    
    turnaround, which relates to major planned general overhaul of operations; and
    
    capital projects, which relate to smaller expansion or modification work.
 ®
  Customer Service.
 Fleet
  4




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Equipment Rental Fleet Breakdown
 As of December 31, 2007
    
    % of TotalAerial Work Platform (AWP) booms
    
    
    29.3Fork lifts
    
    
    22.6Earth moving
    
    
    18.1AWP scissors
    
    
    11.1Trucks
    
    
    4.3Air
    
    
    3.4Generators/Light towers
    
    
    2.8Compaction
    
    
    2.6Other
    
    
    5.8
 Fleet Management Process.
     Fleet Procurement.
 5




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Fleet Age. Fleet Management Process
 Sales and Marketing
  
    
    a branch-based sales force operating out of our network of local branches;
    
    local and national advertising efforts; and
    
    our self-service, web-based solution: RSC Online®.
 Sales Force.
 RSC Online ® . ®
 Information Systems
  6




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
    
    fleet utilization and return on investment by individual asset, equipment category,
branch, district or region;
    
    pricing and discounting trends by branch, district, region, salesperson, equipment
category or customer;
    
    revenue trends by branch, district, region, salesperson, equipment category or
customer; and
    
    financial results and performance of branches, districts, regions and the overall
company.
  Intellectual Property
  Competition
   Employees
  7




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Regulatory Matters
 Environmental, Health and Safety Matters
     Transportation, Delivery and Sales Fleet
  Management
  Name
    
    Age
    
    PositionErik Olsson
    
    
    44
    
    
    President, Chief Executive Officer and DirectorCharles Foster
    
    
    48
    
    
    Senior Vice President of OperationsHomer Graham
    
    
    56
    
    
    Senior Vice President of OperationsKevin Groman
    
    
    37
    
    
    Senior Vice President, General Counsel and
Corporate SecretaryPhillip Hobson
    
    
    41
    
    
    Senior Vice President, Corporate OperationsDavid Ledlow
    
    
    49
    
    
    Senior Vice President of OperationsDavid Mathieson
    
    
    53
    
    
    Senior Vice President and Chief Financial OfficerJoseph Turturica
    
    
    40
    
    
    Senior Vice President and Chief People Officer
 Erik Olsson
 8




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Charles Foster
 Homer Graham
 Kevin Groman
 Phillip Hobson
 David Ledlow
 David Mathieson
 Joseph Turturica
 9




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Available Information
  http://www.sec.gov
 RECENT TRANSACTIONS
 The Recapitalization
  Recapitalization Agreement
  Contingent Earn-Out Notes
   (i)
    
    $250 million, if the 2008 EBITDA is $1.015 billion or greater;(ii)
    
    If the 2008 EBITDA is between $880 million and $1.015 billion, an amount equal
to (x) $250 million multiplied by (y) a fraction (A) the numerator of which is an amount
equal to the 2008 EBITDA minus $880 million and (B) the denominator of which is $135
million; and(iii)
    
    An additional amount, computed like interest (compounded semiannually) at the
lesser of 11.5% per annum and the applicable federal rate plus 4.99% per annum from
April 1, 2009 until the contingent earn-out note is issued, on the amount described in
clause (i) or clause (ii) above, as applicable.
  10




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Initial Public Offering
  11




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Item 1A.
    
    Risk Factors.
 Our business is subject to a number of important risks and uncertainties, some of which are
described below. Any of these risks may have a material adverse effect on our business, financial
condition, results of operations and cash flows.
 Risks Related to Our Business
 Our business could be hurt by a decline in non-residential construction and industrial activities
or a decline in the amount of construction equipment that is rented.
  
    
    weakness in the economy or the onset of a recession;
    
    an increase in the cost of construction materials;
    
    an increase in interest rates;
    
    adverse weather conditions or natural disasters; or
    
    terrorism or hostilities involving the United States or Canada.
  We face intense competition that may lead to our inability to increase or maintain our prices,
which could have a material adverse impact on our results of operations.
   12




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Our revenues and operating results may fluctuate and any unexpected periods of decline could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
  
    
    changes in demand for our equipment or the prices we charge due to changes in
economic conditions, competition or other factors;
    
    the timing of expenditures for new equipment and the disposal of used equipment;
    
    changes in the interest rates applicable to our variable rate debt;
    
    general economic conditions in the markets where we operate;
    
    the cyclical nature of our customers businesses, particularly those operating in
the non-residential construction and industrial sectors;
    
    price changes in response to competitive factors;
    
    seasonal rental patterns, with rental activity tending to be lowest in the winter;
    
    timing of acquisitions and new location openings and related costs;
    
    labor shortages, work stoppages or other labor difficulties;
    
    possible unrecorded liabilities of acquired companies;
    
    our effectiveness in integrating acquired businesses and new locations into our
existing operations; and
    
    possible write-offs or exceptional charges due to changes in applicable accounting
standards, impairment of obsolete or damaged equipment or other assets, or the
refinancing of our existing debt.
  Our expenses could increase and our relationships with our customers could be hurt if there is an
adverse change in our relationships with our equipment suppliers or if our suppliers are unable to
provide us with products we rely on to generate revenues.
  13




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If our operating costs increase as our rental fleet ages and we are unable to pass along such
costs, our earnings will decrease.
  The cost of new equipment we use in our rental fleet is increasing and therefore we may spend more
for replacement equipment, and in some cases we may not be able to procure equipment on a timely
basis due to supplier constraints.
  Our rental fleet is subject to residual value risk upon disposition.
  
    
    the market price for new equipment of a like kind;
    
    wear and tear on the equipment relative to its age and the performance of preventive
maintenance;
    
    the time of year that it is sold;
    
    worldwide and domestic demand for used equipment; and
    
    general economic conditions.
  Our reliance on available borrowings under our Senior ABL Facilities and cash from operating
activities to purchase new equipment subjects us to a number of risks, many of which are beyond our
control.
  14




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Any failure of ACAB and ACF to indemnify us against and defend us from certain claims in accordance
with the terms of the Recapitalization Agreement could have a material adverse effect on us.
  Disruptions in our information technology systems could limit our ability to effectively monitor
and control our operations and adversely affect our operating results.
  The Sponsors or their affiliates may compete directly against us.
  ACAB may compete against us in the future.
  15




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If we acquire any businesses in the future, they could prove difficult to integrate, disrupt our
business, or have an adverse effect on our results of operations.
  
    
    potential disruption of our ongoing business and distraction of management;
    
    difficulty integrating the acquired business; and
    
    exposure to unknown liabilities, including litigation against the companies we may
acquire.
  If we fail to retain key management and personnel, we may be unable to implement our business plan.
  We are exposed to various possible claims relating to our business and our insurance may not fully
protect us.
   We may be unable to establish and/or maintain an effective system of internal control over
financial reporting and comply with Section 404 of the Sarbanes-Oxley Act of 2002 and other related
provisions of the U.S. securities laws.
  16




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Environmental, health and safety laws, regulations and requirements and the costs of complying with
them, or any liability or obligation imposed under them, could adversely affect our financial
position, results of operations or cash flow.
      We may not be able to adequately protect our intellectual property and other proprietary rights
that are material to our business.
  17




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Certain of our existing stockholders have significant control.
   We face risks related to changes in our ownership.
  Risks Related to Our Indebtedness
 We have substantial debt and may incur substantial additional debt, which could adversely affect
our financial condition, our ability to obtain financing in the future and our ability to react to
changes in our business.
   
    
    make it more difficult for us to satisfy our obligations to the holders of our Notes
and to the lenders under our Senior Credit Facilities, resulting in possible defaults
on and acceleration of such indebtedness;
    
    require us to dedicate a substantial portion of our cash flow from operations to
make payments on our debt, which would reduce the availability of our cash flow from
operations to fund working capital, capital expenditures or other general corporate
purposes;
    
    increase our vulnerability to general adverse economic and industry conditions,
including interest rate fluctuations, because a portion of our borrowings, including
under the Senior Credit Facilities, is at variable rates of interest;
    
    place us at a competitive disadvantage to our competitors with proportionately less
debt or comparable debt at more favorable interest rates;
    
    limit our ability to refinance our existing indebtedness or borrow additional funds
in the future;
    
    limit our flexibility in planning for, or reacting to, changing conditions in our
business and industry; and
 18




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
    
    limit our ability to react to competitive pressures, or make it difficult for us to
carry out capital spending that is necessary or important to our growth strategy and
our efforts to improve operating margins.
  Despite our current indebtedness levels, we and our subsidiaries may be able to incur substantial
additional debt, which could further exacerbate the risks associated with our substantial
indebtedness.
  We may not be able to generate sufficient cash to service all of our debt, and may be forced to
take other actions to satisfy our obligations under such indebtedness, which may not be successful.
   A significant portion of our outstanding indebtedness is secured by substantially all of our
consolidated assets. As a result of these security interests, such assets would only be available
to satisfy claims of our general creditors or to holders of our equity securities if we were to
become insolvent to the extent the value of such assets exceeded the amount of our indebtedness and
other obligations. In addition, the existence of these security interests may adversely affect our
financial flexibility.
   19




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Restrictive covenants in certain of the agreements and instruments governing our indebtedness may
adversely affect our financial flexibility.
  
    
    incur additional indebtedness or provide guarantees;
    
    engage in mergers, acquisitions or dispositions;
    
    enter into sale-leaseback transactions;
    
    make dividends and other restricted payments;
    
    prepay other indebtedness;
    
    engage in certain transactions with affiliates;
    
    make other investments;
    
    change the nature of our business;
    
    incur liens;
    
    take actions other than those enumerated; and
    
    amend specified debt agreements.
   
    
    incur additional debt;
    
    pay dividends or distributions on their capital stock or repurchase their capital
stock;
    
    make certain investments;
    
    create liens on their assets to secure debt;
    
    enter into certain transactions with affiliates;
    
    create limitations on the ability of the restricted subsidiaries to make dividends
or distributions to their respective parents;
 20




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
    
    merge or consolidate with another company; and
    
    transfer and sell assets.
  The instruments governing our debt contain cross default or cross acceleration provisions that may
cause all of the debt issued under such instruments to become immediately due and payable as a
result of a default under an unrelated debt instrument.
  Risks Related to Market and Economic Factors
 Our operating and financial performance in any given period might not meet the guidance we have
provided to the public.
  The certificate of incorporation and by-laws of RSC Holdings and Delaware law may discourage
takeovers and business combinations that our stockholders might consider in their best interests.
  
    
    establishment of a classified Board of Directors, with staggered terms;
    
    granting to the Board of Directors sole power to set the number of directors and to
fill any vacancy on the Board of Directors, whether such vacancy occurs as a result of
an increase in the number of directors or otherwise;
    
    limitations on the ability of stockholders to remove directors;
    
    the ability of the Board of Directors to designate and issue one or more series of
preferred stock without stockholder approval, the terms of which may be determined at
the sole discretion of the Board of Directors;
 21




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
    
    prohibition on stockholders from calling special meetings of stockholders;
    
    establishment of advance notice requirements for stockholder proposals and
nominations for election to the Board of Directors at stockholder meetings; and
    
    prohibiting our stockholders from acting by written consent if the Sponsors cease to
collectively hold a majority of our outstanding common stock.
   
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
   
 Item 4. Submission of Matters to a Vote of Security Holders
  22




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PART II
 
 Item 5. Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
  Dividends
   Equity Compensation Plan Information
  Number of securitiesremaining available forNumber of securities to be(1)
    
    
    Weighted-average exercise
    
    
    future issuance underissued upon exercise of
    
    
    price of outstanding
    
    
    equity compensation plansoutstanding options,
    
    
    options, warrants and
    
    
    (excluding securitieswarrants and rights
    
    
    rights
    
    
    reflected in column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders(1)
    
    
    7,382,943
    
    
    $
    7.58
    
    
    
    1,488,543Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    7,382,943
    
    
    $
    7.58
    
    
    
    1,488,543
 
 (1)
    
    Represents the RSC Holdings Inc. Amended and Restated Stock
Incentive Plan. 23




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Item 6. Selected Financial Data
   Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003($ in thousands, except share data)Consolidated statements of income data:Revenues:Equipment rental revenue
    
    $
    1,543,175
    
    
    $
    1,368,712
    
    
    $
    1,140,329
    
    
    $
    984,517
    
    
    $
    899,203Sale of merchandise
    
    
    80,649
    
    
    
    92,524
    
    
    
    102,894
    
    
    
    162,720
    
    
    
    178,374Sale of used rental equipment
    
    
    145,358
    
    
    
    191,652
    
    
    
    217,534
    
    
    
    181,486
    
    
    
    140,424Total revenues
    
    
    1,769,182
    
    
    
    1,652,888
    
    
    
    1,460,757
    
    
    
    1,328,723
    
    
    
    1,218,001Cost of revenues:Cost of equipment rentals, excluding
depreciation
    
    
    642,199
    
    
    
    591,340
    
    
    
    527,208
    
    
    
    492,323
    
    
    
    494,056Depreciationrental equipment
    
    
    295,248
    
    
    
    253,379
    
    
    
    212,325
    
    
    
    192,323
    
    
    
    187,859Cost of sales of merchandise
    
    
    49,304
    
    
    
    57,636
    
    
    
    69,914
    
    
    
    122,873
    
    
    
    138,056Cost of rental equipment sales
    
    
    103,076
    
    
    
    145,425
    
    
    
    173,276
    
    
    
    147,131
    
    
    
    110,458Total cost of revenues
    
    
    1,089,827
    
    
    
    1,047,780
    
    
    
    982,723
    
    
    
    954,650
    
    
    
    930,429Gross profit
    
    
    679,355
    
    
    
    605,108
    
    
    
    478,034
    
    
    
    374,073
    
    
    
    287,572Other operating expenses:Selling, general, and administrative
    
    
    155,263
    
    
    
    134,967
    
    
    
    122,281
    
    
    
    118,130
    
    
    
    128,044Management fees and recapitalization
expenses (1)(2)
    
    
    23,000
    
    
    
    10,836
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and
amortizationnon-rental equipment
    
    
    46,226
    
    
    
    38,783
    
    
    
    33,776
    
    
    
    32,641
    
    
    
    32,320Total operating expenses
    
    
    224,489
    
    
    
    184,586
    
    
    
    156,057
    
    
    
    150,771
    
    
    
    160,364Operating income
    
    
    454,866
    
    
    
    420,522
    
    
    
    321,977
    
    
    
    223,302
    
    
    
    127,208Interest expense, net (3)
    
    
    253,478
    
    
    
    197,085
    
    
    
    134,556
    
    
    
    74,496
    
    
    
    79,850Other income, net
    
    
    (1,126
    )
    
    
    (311
    )
    
    
    (146
    )
    
    
    (74
    )
    
    
    (190
    )Income before provisions for income taxes
    
    
    202,514
    
    
    
    223,748
    
    
    
    187,567
    
    
    
    148,880
    
    
    
    47,548Provision for income taxes
    
    
    79,260
    
    
    
    86,568
    
    
    
    66,488
    
    
    
    56,003
    
    
    
    19,343Net income
    
    $
    123,254
    
    
    $
    137,180
    
    
    $
    121,079
    
    
    $
    92,877
    
    
    $
    28,205Preferred dividends
    
    
    
    
    
    
    (7,997
    )
    
    
    (15,995
    )
    
    
    (15,995
    )
    
    
    (3,999
    )Net income available for common
stockholders
    
    $
    123,254
    
    
    $
    129,183
    
    
    $
    105,084
    
    
    $
    76,882
    
    
    $
    24,206Weighted average shares outstanding used
in computing net income per common
share:Basic and diluted
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Net income per common share:Basic and diluted
    
    $
    123.25
    
    
    $
    129.18
    
    
    $
    105.08
    
    
    $
    76.88
    
    
    $
    24.21
 24




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Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003($ in thousands)Other financial data:Depreciation of rental equipment and
depreciation and amortization of
non-rental equipment
    
    $
    341,474
    
    
    $
    292,162
    
    
    $
    246,101
    
    
    $
    224,964
    
    
    $
    220,179Capital expenditures:Rental
    
    $
    580,194
    
    
    $
    721,258
    
    
    $
    691,858
    
    
    $
    419,900
    
    
    $
    243,777Non-rental
    
    
    20,674
    
    
    
    28,592
    
    
    
    4,641
    
    
    
    33,490
    
    
    
    9,727Proceeds from sales of used
equipment and non-rental equipment
    
    
    (156,678
    )
    
    
    (207,613
    )
    
    
    (233,731
    )
    
    
    (215,622
    )
    
    
    (146,956
    )Net capital expenditures
    
    $
    444,190
    
    
    $
    542,237
    
    
    $
    462,768
    
    
    $
    237,768
    
    
    $
    106,548Other operational data (unaudited):Utilization (4)
    
    
    72.8
    %
    
    
    72.0
    %
    
    
    70.6
    %
    
    
    67.7
    %
    
    
    63.9
    %Average fleet age (months)
    
    
    26
    
    
    
    25
    
    
    
    30
    
    
    
    40
    
    
    
    44Same store rental revenues growth (5)
    
    
    11.1
    %
    
    
    18.9
    %
    
    
    17.6
    %
    
    
    11.8
    %
    
    
    0.9
    %Employees (6)
    
    
    5,486
    
    
    
    5,187
    
    
    
    4,938
    
    
    
    4,812
    
    
    
    5,083Original equipment fleet cost (in
millions) (7)
    
    $
    2,670
    
    
    $
    2,346
    
    
    $
    1,975
    
    
    $
    1,754
    
    
    $
    1,742Consolidated balance sheet data:Rental equipment, net
    
    $
    1,929,514
    
    
    $
    1,738,670
    
    
    $
    1,420,545
    
    
    $
    1,127,481
    
    
    $
    1,045,574Total assets
    
    
    3,454,369
    
    
    
    3,304,976
    
    
    
    2,764,431
    
    
    
    2,421,674
    
    
    
    2,330,297Debt
    
    
    2,736,225
    
    
    
    3,006,426
    
    
    
    2,352,380
    
    
    
    2,312,626
    
    
    
    2,435,121Total liabilities
    
    
    3,498,467
    
    
    
    3,739,609
    
    
    
    2,978,981
    
    
    
    2,744,220
    
    
    
    2,733,204Total stockholders equity (deficit)
    
    
    (44,098
    )
    
    
    (434,633
    )
    
    
    (214,550
    )
    
    
    (322,546
    )
    
    
    (402,907
    )
 25




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##### Table of Contents



(1)
    
    In conjunction with the Recapitalization, we entered into a monitoring agreement whereby we would pay management fees of $1.5
million per quarter to the Sponsors. The management fee was terminated in connection with our initial public offering and a $20.0 million termination fee (also included in management fees) was paid.(2)
    
    The 2006 amount includes Recapitalization expenses of approximately $10.3 million for fees and expenses related to the
consummation of the Recapitalization that were not otherwise capitalized or applied to stockholders equity.(3)
    
    Interest expense for the year ended December 31, 2007 includes a $4.6 million prepayment penalty related to the $230.7
million repayment of Senior Term Facility debt and the write-off of $5.0 million of deferred financing costs associated with
the repayment.(4)
    
    Utilization is defined as the average aggregate dollar value of equipment rented by customers (based on original rented
equipment cost) for the relevant period divided by the average aggregate dollar value of all equipment (based on original
equipment cost) for the relevant period.The following table shows the calculation of utilization for each period presented. For the Year ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(in millions)Average aggregate dollar value of all equipment (original
cost)
    
    $
    2,535.7
    
    
    $
    2,197.8
    
    
    $
    1,861.1
    
    
    $
    1,779.0
    
    
    $
    1,796.0Average aggregate dollar value of equipment on rent
    
    
    1,844.9
    
    
    
    1,582.8
    
    
    
    1,314.7
    
    
    
    1,205.1
    
    
    
    1,148.2Utilization
    
    
    72.8
    %
    
    
    72.0
    %
    
    
    70.6
    %
    
    
    67.7
    %
    
    
    63.9
    %
 (5)
    
    Same store rental revenue growth is calculated as the year over year change in rental revenue for branches that are open at the end of the period reported and have
been operating under our direction for more than 12 months.(6)
    
    Employee count is given as of the end of the period indicated and the data reflect the actual head count
as of each period presented.(7)
    
    Original Equipment Fleet Cost (OEC) is defined as the original dollar value of equipment purchased from the original equipment
manufacturer (OEM). Fleet purchased from non-OEM sources are assigned comparable OEC dollar value at the time of purchase. 26




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Conditions and Results of Operations
 Overview
    Factors Affecting Our Results of Operations
   Critical Accounting Policies and Estimates
   Rental Equipment
  27




---



##### Table of Contents



Reserve for Claims
  Derivative Instruments and Hedging Activities
 Accounting for Derivative Instruments and Hedging
Activities
 Share-Based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation
  Long-Lived Assets and Goodwill
   28




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##### Table of Contents



Revenue Recognition
   Income Taxes
  Accounting for Income Taxes Accounting
for Uncertainty in Income Taxes
  29




---



##### Table of Contents



The Recapitalization
 Structure of the Recapitalization
  Accounting Treatment
  Initial Public Offering
  Results of Operations
 Revenues:
 
    
    Equipment rental revenue consists of fees charged to customers for use of equipment
owned by us over the term of the rental as well as other fees charged to customers for
items such as, delivery and pickup, fuel and damage waivers.
    
    Merchandise sales revenues represent sales of contractor supplies, consumables and
ancillary products and, to a lesser extent, new equipment.
    
    Sale of used rental equipment represents revenues derived from the sale of rental
equipment that has previously been included in our rental fleet.
 Cost of revenues:
 
    
    Cost of revenues for equipment rentals consists primarily of wages and benefits for
employees involved in the delivery and maintenance of rental equipment, rental location
facility costs and rental equipment repair and maintenance expenses.
    
    Depreciation  rental equipment consists of straight-line depreciation of equipment
included in our rental fleet.
    
    Cost of sales of merchandise represents the costs of acquiring those items.
    
    Cost of rental equipment sales represents the net book value of rental equipment at the
date of sale.
 30




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##### Table of Contents



Year Ended December 31, 2007 Compared with Year Ended December 31, 2006
  Percent of RevenueTwelve Months Ended
    
    
    Twelve Months EndedDecember 31,
    
    
    December 31,
    
    
    Increase (decrease)2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007 versus 2006Revenues:Equipment rental revenue
    
    $
    1,543,175
    
    
    $
    1,368,712
    
    
    
    87.2
    %
    
    
    82.8
    %
    
    $
    174,463
    
    
    
    12.7
    %Sale of merchandise
    
    
    80,649
    
    
    
    92,524
    
    
    
    4.6
    
    
    
    5.6
    
    
    
    (11,875
    )
    
    
    (12.8
    )Sale of used rental equipment
    
    
    145,358
    
    
    
    191,652
    
    
    
    8.2
    
    
    
    11.6
    
    
    
    (46,294
    )
    
    
    (24.2
    )Total revenues
    
    
    1,769,182
    
    
    
    1,652,888
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    116,294
    
    
    
    7.0Cost of revenues:Cost of equipment rentals,
excluding depreciation
    
    
    642,199
    
    
    
    591,340
    
    
    
    36.3
    
    
    
    35.8
    
    
    
    50,859
    
    
    
    8.6Depreciation rental equipment
    
    
    295,248
    
    
    
    253,379
    
    
    
    16.7
    
    
    
    15.3
    
    
    
    41,869
    
    
    
    16.5Cost of merchandise sales
    
    
    49,304
    
    
    
    57,636
    
    
    
    2.8
    
    
    
    3.5
    
    
    
    (8,332
    )
    
    
    (14.5
    )Cost of used rental
equipment sales
    
    
    103,076
    
    
    
    145,425
    
    
    
    5.8
    
    
    
    8.8
    
    
    
    (42,349
    )
    
    
    (29.1
    )Total cost of revenues
    
    
    1,089,827
    
    
    
    1,047,780
    
    
    
    61.6
    
    
    
    63.4
    
    
    
    42,047
    
    
    
    4.0Gross profit
    
    
    679,355
    
    
    
    605,108
    
    
    
    38.4
    
    
    
    36.6
    
    
    
    74,247
    
    
    
    12.3Operating expensesSelling, general and
administrative
    
    
    155,263
    
    
    
    134,967
    
    
    
    8.8
    
    
    
    8.2
    
    
    
    20,296
    
    
    
    15.0Management fees and
Recapitalization expenses
    
    
    23,000
    
    
    
    10,836
    
    
    
    1.3
    
    
    
    0.7
    
    
    
    12,164
    
    
    
    112.3Depreciation and
amortization nonrental
equipment
    
    
    46,226
    
    
    
    38,783
    
    
    
    2.6
    
    
    
    2.3
    
    
    
    7,443
    
    
    
    19.2Total operating expenses
    
    
    224,489
    
    
    
    184,586
    
    
    
    12.7
    
    
    
    11.2
    
    
    
    39,903
    
    
    
    21.6Operating income
    
    
    454,866
    
    
    
    420,522
    
    
    
    25.7
    
    
    
    25.4
    
    
    
    34,344
    
    
    
    8.2Interest expense, net
    
    
    253,478
    
    
    
    197,085
    
    
    
    14.3
    
    
    
    11.9
    
    
    
    56,393
    
    
    
    28.6Other income, net
    
    
    (1,126
    )
    
    
    (311
    )
    
    
    (.1
    )
    
    
    
    
    
    
    (815
    )
    
    
    262.1Income before provision for
income taxes
    
    
    202,514
    
    
    
    223,748
    
    
    
    11.4
    
    
    
    13.5
    
    
    
    (21,234
    )
    
    
    (9.5
    )Provision for income taxes
    
    
    79,260
    
    
    
    86,568
    
    
    
    4.5
    
    
    
    5.2
    
    
    
    (7,308
    )
    
    
    (8.4
    )Net income
    
    $
    123,254
    
    
    $
    137,180
    
    
    
    7.0
    %
    
    
    8.3
    %
    
    $
    (13,926
    )
    
    
    (10.2
    )
     31




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32




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##### Table of Contents



Year Ended December 31, 2006 Compared with Year Ended December 31, 2005
  Percent of RevenueTwelve Months Ended
    
    
    Twelve Months EndedDecember 31,
    
    
    December 31,
    
    
    Increase (decrease)2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006 versus 2005Revenues:Equipment rental revenue
    
    $
    1,368,712
    
    
    $
    1,140,329
    
    
    
    82.8
    %
    
    
    78.1
    %
    
    $
    228,383
    
    
    
    20.0
    %Sale of merchandise
    
    
    92,524
    
    
    
    102,894
    
    
    
    5.6
    
    
    
    7.0
    
    
    
    (10,370
    )
    
    
    (10.1
    )Sale of used rental equipment
    
    
    191,652
    
    
    
    217,534
    
    
    
    11.6
    
    
    
    14.9
    
    
    
    (25,882
    )
    
    
    (11.9
    )Total revenues
    
    
    1,652,888
    
    
    
    1,460,757
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    192,131
    
    
    
    13.2Cost of revenues:Cost of equipment rentals,
excluding depreciation
    
    
    591,340
    
    
    
    527,208
    
    
    
    35.8
    
    
    
    36.1
    
    
    
    64,132
    
    
    
    12.2Depreciation  rental
equipment
    
    
    253,379
    
    
    
    212,325
    
    
    
    15.3
    
    
    
    14.5
    
    
    
    41,054
    
    
    
    19.3Cost of merchandise sales
    
    
    57,636
    
    
    
    69,914
    
    
    
    3.5
    
    
    
    4.8
    
    
    
    (12,278
    )
    
    
    (17.6
    )Cost of used rental
equipment sales
    
    
    145,425
    
    
    
    173,276
    
    
    
    8.8
    
    
    
    11.9
    
    
    
    (27,851
    )
    
    
    (16.1
    )Total cost of revenues
    
    
    1,047,780
    
    
    
    982,723
    
    
    
    63.4
    
    
    
    67.3
    
    
    
    65,057
    
    
    
    6.6Gross profit
    
    
    605,108
    
    
    
    478,034
    
    
    
    36.6
    
    
    
    32.7
    
    
    
    127,074
    
    
    
    26.6Operating expenses:Selling, general, and
administrative
    
    
    134,967
    
    
    
    122,281
    
    
    
    8.2
    
    
    
    8.4
    
    
    
    12,686
    
    
    
    10.4Management fees and
Recapitalization expenses
    
    
    10,836
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    10,836
    
    
    
    100.0Depreciation and
amortization nonrental
equipment
    
    
    38,783
    
    
    
    33,776
    
    
    
    2.3
    
    
    
    2.3
    
    
    
    5,007
    
    
    
    14.8Total operating expenses
    
    
    184,586
    
    
    
    156,057
    
    
    
    11.2
    
    
    
    10.7
    
    
    
    28,529
    
    
    
    18.3Operating income
    
    
    420,522
    
    
    
    321,977
    
    
    
    25.4
    
    
    
    22.0
    
    
    
    98,545
    
    
    
    30.6Interest expense, net
    
    
    197,085
    
    
    
    134,556
    
    
    
    11.9
    
    
    
    9.2
    
    
    
    62,529
    
    
    
    46.5Other income, net
    
    
    (311
    )
    
    
    (146
    )
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    113.0Income before provision
for income taxes
    
    
    223,748
    
    
    
    187,567
    
    
    
    13.5
    
    
    
    12.8
    
    
    
    36,181
    
    
    
    19.3Provision for income taxes
    
    
    86,568
    
    
    
    66,488
    
    
    
    5.2
    
    
    
    4.6
    
    
    
    20,080
    
    
    
    30.2Net income
    
    $
    137,180
    
    
    $
    121,079
    
    
    
    8.3
    %
    
    
    8.3
    %
    
    $
    16,101
    
    
    
    13.3
    %
     33




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##### Table of Contents



34




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##### Table of Contents



Liquidity and Capital Resources
 Cash and Cash Flows
     Indebtedness
  Senior ABL Facilities.
 35




---



##### Table of Contents



ConsolidatedFiscal Quarter Ending
    
    Leverage RatioDecember 31, 2007
    
    
    5.00:1.00March 31, 2008
    
    
    4.75:1.00June 30, 2008
    
    
    4.75:1.00September 30, 2008
    
    
    4.75:1.00December 31, 2008
    
    
    4.75:1.00March 31, 2009
    
    
    4.50:1.00June 30, 2009
    
    
    4.50:1.00September 30, 2009
    
    
    4.50:1.00December 31, 2009
    
    
    4.50:1.00March 31, 2010 and at all times thereafter
    
    
    4.25:1.00
  Senior Term Facility.
 The Notes. 1 2
 1 2 1 2
 Liquidity
  36




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##### Table of Contents



Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(in millions)Contractual ObligationsDebt
    
    $
    2,594.2
    
    
    $
    2.5
    
    
    $
    5.0
    
    
    $
    1,067.4
    
    
    $
    1,519.3Capital Leases
    
    
    142.0
    
    
    
    33.6
    
    
    
    58.4
    
    
    
    35.0
    
    
    
    15.0Interest on Debt and Capital Leases(1)
    
    
    1,185.6
    
    
    
    215.6
    
    
    
    426.7
    
    
    
    358.4
    
    
    
    184.9Operating Leases
    
    
    172.7
    
    
    
    47.2
    
    
    
    74.7
    
    
    
    39.4
    
    
    
    11.4Purchase Obligations (2)
    
    
    17.7
    
    
    
    17.7
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4,112.2
    
    
    $
    316.6
    
    
    $
    564.8
    
    
    $
    1,500.2
    
    
    $
    1,730.6
 
 (1)
    
    Estimated interest for debt for all periods presented is calculated using the interest rate effective as of
December 31, 2007 of (i) 7.0% for the Senior ABL Facilities, (ii) 8.75% for the unhedged portion and 8.14% for
the hedged portion of the Senior Term Facility, (iii) .25% on the $622.0 million of undrawn capacity under the
revolving portion of the Senior ABL Facilities and (iv) 9.50% on the Notes and (v) 4.6% for capital leases.
Principal payments are reflected when contractually required, and no early paydowns are reflected.(2)
    
    As of December 31, 2007, we had outstanding purchase orders with our equipment suppliers. These purchase
orders, which were negotiated in the ordinary course of business, total approximately $17.7 million.
Generally, these purchase orders can be cancelled by us with 30 days notice and without cancellation penalties. 37




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##### Table of Contents



Capital Expenditures
  Rental Equipment
    
    Property and Non-Rental EquipmentGross Capital
    
    Disposal
    
    Net Capital
    
    Gross Capital
    
    Disposal
    
    Net CapitalExpenditures
    
    Proceeds
    
    Expenditures
    
    Expenditures
    
    Proceeds
    
    Expenditures(in millions)2007
    
    $
    580.2
    
    
    $
    145.4
    
    
    $
    434.8
    
    
    $
    20.7
    
    
    $
    11.3
    
    
    $
    9.42006
    
    
    721.3
    
    
    
    191.7
    
    
    
    529.6
    
    
    
    28.6
    
    
    
    16.0
    
    
    
    12.62005
    
    
    691.9
    
    
    
    217.5
    
    
    
    474.4
    
    
    
    4.6
    
    
    
    16.2
    
    
    
    (11.6
    )
 Recent Accounting Pronouncements
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
 Business Combinations
 38




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
    Currency Exchange Risk
  Inflation
  39




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Consolidated Financial Statements
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
  Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   
 Item 9B. Other Information
  40




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  December 31,(in 000s)2007
    
    
    2006Audit fees
    
    $
    1,860
    
    
    $
    3,142Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    9All other fees
    
    
    
    
    
    
    0Total
    
    $
    1,860
    
    
    $
    3,151
 
 (1)
    
    Audit fees were for services rendered in connection with the
audit of the financial statements included in the reports of
RSC Holdings and RSC on Form 10-K for 2007 and Form S-1 for
2006 and reviews of the financial statements included in RSC
Holdings and RSCs Quarterly Reports on Form 10-Q. Audit fees for 2007 included approximately
$0.3 million of fees for non-recurring services related to
filings in connection with the Registration Statement on
Form S-1 of RSC Holdings, which related to RSC Holdings
initial public offering, and filings in connection with our
Registration Statement on Form S-4, which related to
our exchange offer for our outstanding high-yield
securities. Audit fees for 2006 included approximately $1.1
million relating to a three-year carve out audit for 2003, 2004, and 2005, which was
required as part of the filing of the Registration Statement on Form S-1.(2)
    
    Tax fees related to tax compliance; preparation of tax
returns; tax planning; and tax assistance for international
service employeesThe Audit Committee of the Board of Directors of RSC Holdings
has established procedures for the pre-approval of all audit and
permitted non-audit related services provided by our independent
registered public accounting firm. 41




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
  1.
 2.
 3.
 42




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##### Table of Contents



SIGNATURES
  RSC Holdings III, LLCRSC Equipment Rental, Inc.By:
    /s/  Erik OlssonName:
    Erik OlssonTitle:
    Chief Executive Officer and President POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ Erik Olsson

Erik Olsson
    
    Chief Executive Officer,
President and Director*
(Principal Executive Officer)
    
    March 14, 2008/s/ David Mathieson

David Mathieson
    
    Chief Financial Officer
(Principal Financial and Principal
Accounting Officer)
    
    March 14, 2008/s/ Denis Nayden

Denis Nayden
    
    Chairman of the Board, Director*
    
    March 14, 2008/s/ Timothy Collins

Timothy Collins
    
    Director*
    
    March 14, 2008/s/ Edward Dardani

Edward Dardani
    
    Director*
    
    March 14, 2008/s/ Douglas Kaden

Douglas Kaden
    
    Director*
    
    March 14, 2008/s/ Christopher Minnetian

Christopher Minnetian
    
    Director*
    
    March 14, 2008/s/ John R. Monsky

John R. Monsky
    
    Director*
    
    March 14, 2008/s/ James Ozanne

James Ozanne
    
    Director*
    
    March 14, 2008/s/ Scott Spielvogel

Scott Spielvogel
    
    Director*
    
    March 14, 2008
 
 *
    
    Member of the Board of Directors of RSC Holdings Inc. and RSC Equipment Rental, Inc. RSC Holdings III, LLC is an indirect, wholly-owned subsidiary of RSC Holdings Inc. and the board functions of RSC Holdings III, LLC are performed by RSC Holdings Inc. 43




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Donald Wagner

Donald Wagner
    
    Director*
    
    March 14, 2008/s/ Mark Cohen

Mark Cohen
    
    Director*
    
    March 14, 2008/s/ Donald C. Roof

Donald C. Roof
    
    Director*
    
    March 14, 2008
 
 *
    
    Member of the Board of Directors of RSC Holdings Inc. and RSC Equipment Rental, Inc. RSC Holdings III, LLC is an indirect, wholly-owned subsidiary of RSC Holdings Inc. and the board functions of RSC Holdings III, LLC are performed by RSC Holdings Inc. 44




---



##### 



RSC HOLDINGS III, LLC AND SUBSIDIARIES
   
 PageAudited Consolidated Financial Statements:Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets at December 31, 2007 and 2006
    
    F-3Consolidated Statements of Income for the years ended December 31, 2007, 2006 and 2005
    
    F-4Consolidated Statements of Stockholders Deficit and Comprehensive Income for the years
ended December 31, 2007, 2006 and 2005
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
    
    F-6Notes to Consolidated Financial Statements
    
    F-7Supplementary Financial Data:The following supplementary financial data of the Registrant and its subsidiaries
required to be included in Item 15(a)(2) of Form 10-K are listed below:Schedule II  Valuation and Qualifying Accounts
    
    S-1
   F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Share-Based Payment Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No.109
  
 F-2




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 December 31,2007
    
    
    2006AssetsCash and cash equivalents
    
    $
    10,039
    
    
    $
    46,188Accounts receivable, net
    
    
    284,570
    
    
    
    268,383Inventory
    
    
    21,563
    
    
    
    18,489Rental equipment, net
    
    
    1,929,514
    
    
    
    1,738,670Property and equipment, net
    
    
    191,901
    
    
    
    170,192Goodwill
    
    
    925,621
    
    
    
    925,621Deferred financing costs
    
    
    55,660
    
    
    
    67,915Other assets
    
    
    35,501
    
    
    
    69,518Total assets
    
    $
    3,454,369
    
    
    $
    3,304,976Liabilities and Stockholders DeficitAccounts payable
    
    $
    264,384
    
    
    $
    296,086Accrued expenses and other liabilities
    
    
    173,655
    
    
    
    143,016Debt
    
    
    2,736,225
    
    
    
    3,006,426Deferred income taxes
    
    
    324,203
    
    
    
    294,081Total liabilities
    
    
    3,498,467
    
    
    
    3,739,609Commitments and contingenciesStockholders deficitCommon stock, no par value, (1,000 shares
authorized, issued and outstanding at
December 31, 2007 and 2006)
    
    
    279,817
    
    
    
    15,955Accumulated deficit
    
    
    (336,118
    )
    
    
    (459,372
    )Accumulated other comprehensive income
    
    
    12,203
    
    
    
    8,784Total stockholders deficit
    
    
    (44,098
    )
    
    
    (434,633
    )Total liabilities and stockholders deficit
    
    $
    3,454,369
    
    
    $
    3,304,976
  F-3




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Revenues:Equipment rental revenue
    
    $
    1,543,175
    
    
    $
    1,368,712
    
    
    $
    1,140,329Sale of merchandise
    
    
    80,649
    
    
    
    92,524
    
    
    
    102,894Sale of used rental equipment
    
    
    145,358
    
    
    
    191,652
    
    
    
    217,534Total revenues
    
    
    1,769,182
    
    
    
    1,652,888
    
    
    
    1,460,757Cost of revenues:Cost of equipment rentals, excluding depreciation
    
    
    642,199
    
    
    
    591,340
    
    
    
    527,208Depreciation rental equipment
    
    
    295,248
    
    
    
    253,379
    
    
    
    212,325Cost of merchandise sales
    
    
    49,304
    
    
    
    57,636
    
    
    
    69,914Cost of used rental equipment sales
    
    
    103,076
    
    
    
    145,425
    
    
    
    173,276Total cost of revenues
    
    
    1,089,827
    
    
    
    1,047,780
    
    
    
    982,723Gross profit
    
    
    679,355
    
    
    
    605,108
    
    
    
    478,034Operating expenses:Selling, general, and administrative
    
    
    155,263
    
    
    
    134,967
    
    
    
    122,281Management fees and Recapitalization expenses
    
    
    23,000
    
    
    
    10,836
    
    
    
    Depreciation and amortization
non-rental equipment
    
    
    46,226
    
    
    
    38,783
    
    
    
    33,776Total operating expenses
    
    
    224,489
    
    
    
    184,586
    
    
    
    156,057Operating income
    
    
    454,866
    
    
    
    420,522
    
    
    
    321,977Interest expense, net
    
    
    253,478
    
    
    
    197,085
    
    
    
    134,556Other income, net
    
    
    (1,126
    )
    
    
    (311
    )
    
    
    (146
    )Income before provision for income taxes
    
    
    202,514
    
    
    
    223,748
    
    
    
    187,567Provision for income taxes
    
    
    79,260
    
    
    
    86,568
    
    
    
    66,488Net income
    
    $
    123,254
    
    
    $
    137,180
    
    
    $
    121,079Preferred dividends
    
    
    
    
    
    
    (7,997
    )
    
    
    (15,995
    )Net income available for common
stockholders
    
    $
    123,254
    
    
    $
    129,183
    
    
    $
    105,084Weighted average shares outstanding used in computing
net income per common share:Basic and diluted
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Net income per common share:Basic and diluted
    
    $
    123.25
    
    
    $
    129.18
    
    
    $
    105.08
  F-4




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND COMPREHENSIVE
INCOME
 AccumulatedSeries A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Common Stock
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    Income
    
    
    Income
    
    
    TotalBalance, January 1,
2005
    
    
    154
    
    
    $
    350,000
    
    
    
    1,000
    
    
    $
    722
    
    
    $
    (680,648
    )
    
    
    
    
    
    $
    7,380
    
    
    $
    (322,546
    )Components of
comprehensive
income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,079
    
    
    $
    121,079
    
    
    
    
    
    
    
    121,079Foreign currency
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,070
    
    
    
    2,070
    
    
    
    2,070Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    123,149Cash dividends on
Series A preferred
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,995
    )
    
    
    
    
    
    
    
    
    
    
    (15,995
    )Capital
contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842Balance, December
31, 2005
    
    
    154
    
    
    
    350,000
    
    
    
    1,000
    
    
    
    1,564
    
    
    
    (575,564
    )
    
    
    
    
    
    
    9,450
    
    
    
    (214,550
    )Components of
comprehensive
income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,180
    
    
    $
    137,180
    
    
    
    
    
    
    
    137,180Foreign currency
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (666
    )
    
    
    (666
    )
    
    
    (666
    )Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    136,514Cash dividends on
Series A preferred
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,997
    )
    
    
    
    
    
    
    
    
    
    
    (7,997
    )Capital
contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,079
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,079Effect of
Recapitalization
    
    
    (154
    )
    
    
    (350,000
    )
    
    
    
    
    
    
    
    
    
    
    (12,991
    )
    
    
    
    
    
    
    
    
    
    
    (362,991
    )Share-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    312
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    312Balance, December
31, 2006
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    15,955
    
    
    
    (459,372
    )
    
    
    
    
    
    
    8,784
    
    
    
    (434,633
    )Components of
comprehensive
income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,254
    
    
    $
    123,254
    
    
    
    
    
    
    
    123,254Foreign currency
translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,914
    
    
    
    12,914
    
    
    
    12,914Change in fair
value of
derivatives
qualifying as cash
flow hedges, net of
tax of $6,071
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,495
    )
    
    
    (9,495
    )
    
    
    (9,495
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    126,673Capital
contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    259,564
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    259,564Share-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,298Balance, December
31, 2007
    
    
    
    
    
    $
    
    
    
    
    1,000
    
    
    $
    279,817
    
    
    $
    (336,118
    )
    
    
    
    
    
    $
    12,203
    
    
    $
    (44,098
    )
  F-5




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Cash flows from operating activities:Net income
    
    $
    123,254
    
    
    $
    137,180
    
    
    $
    121,079Adjustments to reconcile net income to net cash provided by
operating activities:Bonus expense paid by Atlas
    
    
    
    
    
    
    4,730
    
    
    
    Depreciation and amortization
    
    
    341,474
    
    
    
    292,162
    
    
    
    246,101Amortization of deferred financing costs
    
    
    13,435
    
    
    
    1,001
    
    
    
    Share-based compensation expense
    
    
    4,298
    
    
    
    2,061
    
    
    
    3,077Gain on sales of rental and non-rental property and
equipment, net of non-cash writeoffs
    
    
    (43,284
    )
    
    
    (43,866
    )
    
    
    (45,227
    )Deferred income taxes
    
    
    35,524
    
    
    
    48,458
    
    
    
    50,217Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (13,745
    )
    
    
    (22,776
    )
    
    
    (31,065
    )Inventory
    
    
    (2,844
    )
    
    
    412
    
    
    
    6,203Other assets
    
    
    (705
    )
    
    
    414
    
    
    
    (3,014
    )Accounts payable
    
    
    (1,414
    )
    
    
    (49,890
    )
    
    
    120,177Accrued expenses and other liabilities
    
    
    48,947
    
    
    
    73,034
    
    
    
    21,093Net cash provided by operating activities
    
    
    504,940
    
    
    
    442,920
    
    
    
    488,641Cash flows from investing activities:Purchases of rental equipment
    
    
    (580,194
    )
    
    
    (721,258
    )
    
    
    (691,858
    )Purchases of property and equipment
    
    
    (20,674
    )
    
    
    (28,592
    )
    
    
    (4,641
    )Proceeds from sales of rental equipment
    
    
    145,358
    
    
    
    191,652
    
    
    
    217,534Proceeds from sales of property and equipment
    
    
    11,320
    
    
    
    15,961
    
    
    
    16,197Net cash used in investing activities
    
    
    (444,190
    )
    
    
    (542,237
    )
    
    
    (462,768
    )Cash flows from financing activities:Cash consideration paid to RSC Holdings
    
    
    (17,995
    )
    
    
    (2,794,921
    )
    
    
    Issuance of senior ABL facilities
    
    
    
    
    
    
    1,124,000
    
    
    
    Issuance of senior term facility
    
    
    
    
    
    
    1,130,000
    
    
    
    Issuance of senior notes
    
    
    
    
    
    
    620,000
    
    
    
    Proceeds from senior ABL revolver
    
    
    99,457
    
    
    
    4,291
    
    
    
    Payments on senior ABL term revolver
    
    
    (150,274
    )
    
    
    
    
    
    
    Payments on senior ABL term loan
    
    
    (2,500
    )
    
    
    (625
    )
    
    
    Payments on Senior Term Facility
    
    
    (230,700
    )
    
    
    
    
    
    
    Payments on capital leases and other debt
    
    
    (39,030
    )
    
    
    (33,010
    )
    
    
    (26,785
    )Net proceeds (payments on) affiliated debt
    
    
    
    
    
    
    141,428
    
    
    
    13,738Deferred financing costs
    
    
    (842
    )
    
    
    (68,916
    )
    
    
    Capital contributions from RSC Holdings
    
    
    255,064
    
    
    
    6,440
    
    
    
    Cash dividends paid
    
    
    
    
    
    
    (7,997
    )
    
    
    (15,995
    )Capital contributions from Atlas
    
    
    4,500
    
    
    
    2,909
    
    
    
    842Increase (decrease) in outstanding checks in excess of cash balances
    
    
    (14,774
    )
    
    
    14,774
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (97,094
    )
    
    
    138,373
    
    
    
    (28,200
    )Effect of foreign exchange rates on cash
    
    
    195
    
    
    
    (2
    )
    
    
    4,938Net increase (decrease) in cash and cash equivalents
    
    
    (36,149
    )
    
    
    39,054
    
    
    
    2,611Cash and cash equivalents at beginning of year
    
    
    46,188
    
    
    
    7,134
    
    
    
    4,523Cash and cash equivalents at end of year
    
    $
    10,039
    
    
    $
    46,188
    
    
    $
    7,134Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    218,488
    
    
    $
    33,759
    
    
    $
    20,932Supplemental schedule of non-cash investing and financing activities:Purchase of assets under capital lease obligations
    
    $
    52,320
    
    
    $
    62,886
    
    
    $
    47,870
  F-6




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Organization
 Business and Basis of Presentation
 Description of Business
  Basis of Presentation
       F-7




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  (in 000s)Base consideration paid to RSC Holdings
    
    $
    2,760,521Working capital adjustment (paid to RSC Holdings in 2006 and 2007)
    
    
    52,395Total consideration paid to RSC Holdings
    
    
    2,812,916Contribution of Series A preferred stock from ACAB to the Company
    
    
    (350,000
    )Relief of intercompany debt with affiliate of ACAB
    
    
    (2,394,924
    )Assumption by ACAB of certain liabilities of the Company
    
    
    (55,001
    )Consideration paid to RSC Holdings in excess of book value
    
    $
    12,991
       F-8




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Prior to the Recapitalization
   (2) Summary of Significant Accounting Policies
 Use of Estimates
  Cash Equivalents
  Accounts Receivable
  December 31,(in 000s)2007
    
    
    2006Trade receivables
    
    $
    281,449
    
    
    $
    270,707Other receivables
    
    
    11,719
    
    
    
    4,654Less allowance for doubtful accounts
    
    
    (8,598
    )
    
    
    (6,978
    )Accounts receivable, net
    
    $
    284,570
    
    
    $
    268,383
 F-9




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Rental Equipment
    December 31,
    
    
    December 31,2007
    
    
    2006(in 000s)Rental equipment
    
    $
    2,748,656
    
    
    $
    2,399,109Less accumulated depreciation
    
    
    (819,142
    )
    
    
    (660,439
    )Rental equipment, net
    
    $
    1,929,514
    
    
    $
    1,738,670
 Property and Equipment
   December31,
    
    
    December31,2007
    
    
    2006(in 000s)Leased equipment
    
    $
    215,988
    
    
    $
    190,076Buildings and leasehold improvements
    
    
    50,621
    
    
    
    43,800Non-rental machinery and equipment
    
    
    37,546
    
    
    
    32,529Data processing hardware and purchased software
    
    
    18,024
    
    
    
    13,237Furniture and fixtures
    
    
    11,022
    
    
    
    9,931Construction in progress
    
    
    4,600
    
    
    
    4,183Land and improvements
    
    
    714
    
    
    
    714338,515
    
    
    
    294,470Less accumulated depreciation and amortization.
    
    
    (146,614
    )
    
    
    (124,278
    )Property and equipment, net
    
    $
    191,901
    
    
    $
    170,192
 F-10




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Long-Lived Assets and Goodwill
    Reserves for Claims
  Foreign Currency Translation
 Foreign Currency Translation.
 F-11




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Derivative Instruments and Hedging Activities
 Accounting for Derivative Instruments and Hedging Activities
 Comprehensive Income
 Reporting Comprehensive Income
 Fair Value of Financial Instruments
  Revenue Recognition
   Reporting Revenue Gross as a
Principal versus Net as an Agent
  Marketing and Advertising costs
 Accounting by a Customer (Including a Reseller) for Certain Consideration
 F-12




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Received from a Vendor
 Income Taxes
  Accounting for Income Taxes Accounting for
Uncertainty in Income Taxes
  Consideration Received from Vendors
   Share-Based Compensation
 Accounting for Certain
Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25
 Share Based Payment.
 Earnings per Share
  F-13




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  New Accounting Pronouncements
  Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 Value Measurements
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 .
 Business Combinations
 F-14




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 (3)
    
    Accrued Expenses and Other Liabilities
  December 31,(in 000s)2007
    
    
    2006Compensation-related accruals.
    
    $
    34,629
    
    
    $
    28,815Accrued income and other taxes
    
    
    40,107
    
    
    
    53,136Reserves for claims
    
    
    35,580
    
    
    
    35,940Accrued interest payable
    
    
    41,249
    
    
    
    19,095Interest rate swap liability
    
    
    15,740
    
    
    
    Other
    
    
    6,350
    
    
    
    6,030Total
    
    $
    173,655
    
    
    $
    143,016
 (4)
    
    Debt
  December 31,(in 000s)2007
    
    
    2006Senior ABL revolving credit facility
    
    $
    828,000
    
    
    $
    878,291Senior ABL term loan
    
    
    246,875
    
    
    
    249,375Senior Term Facility
    
    
    899,300
    
    
    
    1,130,000Senior Notes
    
    
    620,000
    
    
    
    620,000Capitalized lease obligations
    
    
    142,007
    
    
    
    128,688Other
    
    
    43
    
    
    
    72Total
    
    $
    2,736,225
    
    
    $
    3,006,426
  2008
    
    $
    36,1512009
    
    
    34,1082010
    
    
    29,3192011
    
    
    851,0042012
    
    
    251,391Thereafter
    
    
    1,534,252Total
    
    $
    2,736,225
  Senior ABL Facilities.
 F-15




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     Senior Term Facility
     Senior Notes. 1 2
 F-16




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Redemption Period
    
    Price2010
    
    
    104.750
    %2011
    
    
    102.375
    %2012 and thereafter
    
    
    100.000
    %
   1 2 1 2
  Contingent earn-out note
 Capital leases
  (5)
    
    Derivative Instruments
   F-17




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  (6) Comprehensive Income
  Accumulated OtherForeign Currency
    
    
    Fair Market Value of
    
    
    ComprehensiveTranslation
    
    
    Cash Flow Hedge
    
    
    Income(in 000s)Balance at December 31, 2006
    
    $
    8,784
    
    
    $
    
    
    
    $
    8,784Foreign currency
translation
    
    
    12,914
    
    
    
    
    
    
    
    12,914Change in fair value of
cash flow hedges, net of
tax
    
    
    
    
    
    
    (9,495
    )
    
    
    (9,495
    )Balance at December 31, 2007
    
    $
    21,698
    
    
    $
    (9,495
    )
    
    $
    12,203
 (7) Common and Preferred Stock
 Common Stock
   Preferred Stock
  F-18




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 (8) Income Taxes
  Year ended December 31,(in 000s)2007
    
    
    2006
    
    
    2005Domestic federal:Current
    
    $
    31,661
    
    
    $
    26,869
    
    
    $
    8,566Deferred
    
    
    31,057
    
    
    
    46,428
    
    
    
    50,15562,718
    
    
    
    73,297
    
    
    
    58,721Domestic stateCurrent
    
    
    5,661
    
    
    
    7,861
    
    
    
    5,000Deferred
    
    
    3,132
    
    
    
    770
    
    
    
    (1,275
    )Total domestic
    
    
    71,511
    
    
    
    81,928
    
    
    
    62,446Foreign federal:Current
    
    
    6,413
    
    
    
    3,349
    
    
    
    2,705Deferred
    
    
    1,336
    
    
    
    1,291
    
    
    
    1,337Total foreign
    
    
    7,749
    
    
    
    4,640
    
    
    
    4,042$
    79,260
    
    
    $
    86,568
    
    
    $
    66,488
   Year ended December 31,(in 000s)2007
    
    
    2006
    
    
    2005Computed tax at statutory tax rate
    
    $
    70,880
    
    
    $
    78,312
    
    
    $
    65,648Permanent items
    
    
    793
    
    
    
    875
    
    
    
    (4,938
    )State income taxes, net of federal tax benefit
    
    
    7,152
    
    
    
    9,300
    
    
    
    2,421Difference between federal statutory and
foreign tax rate
    
    
    (323
    )
    
    
    (208
    )
    
    
    (61
    )Change in valuation allowance
    
    
    
    
    
    
    
    
    
    
    (1,486
    )Other
    
    
    758
    
    
    
    (1,711
    )
    
    
    4,904Provision for income taxes
    
    $
    79,260
    
    
    $
    86,568
    
    
    $
    66,488
 Accounting for Income TaxesSpecial Areas
 F-19




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   December 31,(in 000s)2007
    
    
    2006Deferred tax assets:Accruals
    
    $
    25,845
    
    
    $
    20,080Federal tax benefit of state reserves
    
    
    834
    
    
    
    Deferred financing costs (derivative)
    
    
    6,071
    
    
    
    Total deferred tax assets
    
    
    32,750
    
    
    
    20,080Deferred tax liabilities:Intangibles
    
    
    38,555
    
    
    
    29,942Capitalized leases
    
    
    8,609
    
    
    
    7,178Property and equipment
    
    
    303,326
    
    
    
    271,770Foreign
    
    
    6,463
    
    
    
    5,271Total deferred tax liabilities
    
    
    356,953
    
    
    
    314,161Net deferred tax liability
    
    $
    324,203
    
    
    $
    294,081
    F-20




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Unrecognized Tax Benefits(in millions)Balance at January 1, 2007
    
    $
    22.8Additions based on tax positions related to the current year
    
    
    4.8Reductions for tax positions related of prior years
    
    
    (10.5
    )Balance at December 31, 2007
    
    $
    17.1
  (9) Commitments and Contingencies
   (10) Leases
  December 31,(in 000s)2007
    
    
    2006Leased equipment
    
    $
    215,988
    
    
    $
    190,076Less accumulated depreciation and amortization
    
    
    (71,236
    )
    
    
    (60,088
    )Leased equipment
    
    $
    144,752
    
    
    $
    129,988
   F-21




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  December 31,(in 000s)Capital
    
    
    Operatingleases
    
    
    leases2008
    
    $
    39,278
    
    
    $
    47,1792009
    
    
    35,740
    
    
    
    41,2172010
    
    
    29,605
    
    
    
    33,4922011
    
    
    22,229
    
    
    
    24,9242012
    
    
    15,470
    
    
    
    14,489Thereafter
    
    
    15,473
    
    
    
    11,398Total minimum lease payments
    
    $
    157,795
    
    
    $
    172,699Less amount representing interest (4.62% at December 2007)
    
    
    15,788Capital lease obligations
    
    $
    142,007
  (11) Legal and Insurance Matters
  (12) Affiliated Company Transactions
    F-22




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   (13) Employee Benefit Plans
  Accounting
for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested,
 (14) Share-Based Compensation Plans
 Accounting for Stock-Based Compensation
 Accounting for Stock Appreciation Rights and Other Variable Stock
Option or Award Plans, an interpretation of APB Opinions No. 15 and 25.
 Share Appreciation Rights
  F-23




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Stock Incentive Plan
   Year ended December 31,2007
    
    2006Expected volatility
    
    
    40.0
    %
    
    
    45.8
    %Dividend yield
    
    
    
    
    
    
    Expected term (in years)
    
    
    4.2
    
    
    
    5.0Risk-free interest rate
    
    
    3.9
    %
    
    
    4.5
    %Weighted average grant date fair value of options granted
    
    $
    5.19
    
    
    $
    2.98
 F-24




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Weighted-AverageWeighted-
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    IntrinsicExercise
    
    Term
    
    ValueOptions
    
    Shares
    
    Price
    
    (years)
    
    (in 000s)Outstanding January 1, 2006
    
    
    Granted
    
    
    4,395,921
    
    
    $
    6.52Exercised
    
    
    Forfeited or expired
    
    
    Outstanding December 31, 2006
    
    
    4,395,921
    
    
    
    6.52Granted
    
    
    714,000
    
    
    
    13.82Exercised
    
    
    Forfeited or expired
    
    
    (206,529
    )
    
    
    6.52Outstanding December 31, 2007
    
    
    4,903,392
    
    
    
    7.58
    
    
    
    8.9
    
    
    $
    25,262Exercisable at December 31, 2007
    
    
    896,049
    
    
    
    6.52
    
    
    
    8.0
    
    
    
    5,403
     (15) Business Segment and Geographic Information
   Year ended December 31,(in 000s)2007
    
    
    2006
    
    
    2005Revenues from external customers:Domestic
    
    $
    1,682,279
    
    
    $
    1,586,714
    
    
    $
    1,411,517Foreign
    
    
    86,903
    
    
    
    66,174
    
    
    
    49,240Total
    
    $
    1,769,182
    
    
    $
    1,652,888
    
    
    $
    1,460,757
 F-25




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  December 31,(in 000s)2007
    
    
    2006Rental equipment, netDomestic
    
    $
    1,838,148
    
    
    $
    1,670,181Foreign
    
    
    91,366
    
    
    
    68,489Total
    
    $
    1,929,514
    
    
    $
    1,738,670Property and equipment, netDomestic
    
    $
    181,483
    
    
    $
    163,049Foreign
    
    
    10,418
    
    
    
    7,143Total
    
    $
    191,901
    
    
    $
    170,192
 (16) Selected Unaudited Quarterly Financial Data (in 000s)
 Three months ending2007
    
    March 31
    
    June 30
    
    September 30
    
    December 31Total revenues
    
    $
    406,347
    
    
    $
    442,828
    
    
    $
    461,954
    
    
    $
    458,053Gross profit
    
    
    142,492
    
    
    
    171,940
    
    
    
    188,408
    
    
    
    176,515Income before provision for income
taxes
    
    
    33,258
    
    
    
    28,489
    
    
    
    77,952
    
    
    
    62,815Net income available for common
stockholders
    
    
    20,243
    
    
    
    17,425
    
    
    
    47,549
    
    
    
    38,037Diluted net income per common share
    
    
    20.24
    
    
    
    17.43
    
    
    
    47.55
    
    
    
    38.04
 Three months ending2006
    
    March 31
    
    June 30
    
    September 30
    
    December 31Total revenues
    
    $
    385,891
    
    
    $
    413,822
    
    
    $
    427,599
    
    
    $
    425,576Gross profit
    
    
    128,309
    
    
    
    152,896
    
    
    
    166,953
    
    
    
    156,950Income before provision for income
taxes
    
    
    43,809
    
    
    
    64,743
    
    
    
    74,156
    
    
    
    41,040Net income available for common
stockholders
    
    
    24,231
    
    
    
    36,776
    
    
    
    46,290
    
    
    
    21,886Diluted net income per common share
    
    
    24.23
    
    
    
    36.78
    
    
    
    46.29
    
    
    
    21.89
  F-26




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES
 
 
  2007
    
    
    2006
    
    
    2005Beginning balance at January 1,
    
    $
    6,978
    
    
    $
    7,474
    
    
    $
    9,166Provision for bad debt
    
    
    5,653
    
    
    
    5,076
    
    
    
    5,395Charge offs, net
    
    
    (4,033
    )
    
    
    (5,572
    )
    
    
    (7,087
    )Ending balance at December 31,.
    
    $
    8,598
    
    
    $
    6,978
    
    
    $
    7,474
 S-1




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##### Table of Contents



RSC HOLDINGS III, LLC AND SUBSIDIARIES.
 ANNUAL REPORT ON 10-K
 EXHIBIT INDEX
 Exhibit No.
    
    Description of Exhibit2.1(1)
    
    Recapitalization Agreement, dated as of October 6, 2006, by and among
by and among Atlas Copco AB, Atlas Copco Finance S.à.r.l., Atlas
Copco North America Inc., RSC Acquisition LLC, RSC Acquisition II
LLC, OHCP II RSC, LLC, OHCMP II RSC, LLC and OHCP II RSC COI, LLC3.1(2)
    
    Articles of Incorporation of RSC
Equipment Rental, Inc.3.2(3)
    
    Articles of Amendment to the
Articles of Incorporation of RSC Equipment Rental, Inc.3.3(4)
    
    Amended and Restated By-Laws of RSC
Equipment Rental, Inc.3.4(5)
    
    Certificate of Formation of RSC
Holdings III, LLC3.5(6)
    
    Amended and Restated Limited
Liability Company Agreement of RSC Holdings III, LLC4.1(7)
    
    Indenture, dated as of November 27, 2006, by and among Rental Service
Corporation, RSC Holdings III, LLC and Wells Fargo Bank, National
Association4.2(8)
    
    Registration Rights Agreement, dated November 27, 2006, by and among
Rental Service Corporation, RSC Holdings III, LLC, Deutsche Bank
Securities Inc., Citigroup Global Markets Inc. and GE Capital
Markets, Inc.4.3(9)
    
    U.S. Guarantee and Collateral Agreement, dated as of November 27,
2006, by and among RSC Holdings II, LLC, RSC Holdings III, LLC,
Rental Service Corporation and certain domestic subsidiaries of RSC
Holdings III, LLC that may become party thereto from time to time,
Deutsche Bank AG, New York Branch, as collateral agent and
administrative agent4.4(10)
    
    Canadian Security Agreement, dated as of November 27, 2006, by and
among Rental Service Corporation of Canada Ltd., Deutsche Bank AG,
Canada Branch as Canadian collateral agent4.5(11)
    
    Guarantee and Collateral Agreement, dated as of November 27, 2006, by
and between RSC Holdings II, LLC, RSC Holdings III, LLC, Rental
Service Corporation, and certain domestic subsidiaries of RSC
Holdings III, LLC that may become party thereto from time to time and
Deutsche Bank AG, New York Branch as collateral agent and
administrative agent4.6(12)
    
    Intercreditor Agreement, dated as of November 27, 2006, by and among
RSC Holdings, II, LLC, RSC Holdings III, LLC, Rental Service
Corporation, each other grantor from time to time party thereto,
Deutsche Bank AG, New York Branch as U.S. collateral agent under the
first-lien loan documents and Deutsche Bank AG, New York Branch in
its capacity as collateral agent under the second-lien loan documents4.7(13)
    
    Amended and Restated Stockholders Agreement10.1(14)+
    
    Amended and Restated RSC Holdings Stock Incentive Plan Agreement10.2(15)+
    
    Employee Stock Option Agreements10.3(16)+
    
    Employee Stock Subscription Agreements10.4(17)+
    
    Form of Employment Agreement for executive officers10.5(18)
    
    Indemnification Agreement, dated as of November 27, 2006, by and
among Atlas Copco North America Inc., Rental Service Corporation, RSC
Acquisition LLC, RSC Acquisition II LLC, OHCP II RSC, LLC, OHCMP OO
RSC, LLC, OHCP II RSC COI, LLC, Ripplewood Holdings L.L.C., Oak Hill
Capital Management and Atlas Copco Finance S.à.r.l.10.6(19)
    
    Monitoring Agreement, dated as of November 27, 2006, by and among RSC
Holdings Inc., Rental Service Corporation, Ripplewood Holdings L.L.C.
and Oak Hill Capital Management, LLC10.7(20)
    
    Credit Agreement, dated as of November 27, 2006, by and among RSC
Holdings II, LLC, RSC Holdings III, LLC, Rental Service Corporation,
Rental Service Corporation of Canada Ltd., Deutsche Bank AG, New York
Branch, Deutsche Bank AG, Canada Branch, Citicorp North America,
Inc., Bank of America, N.A., LaSalle Business Credit, LLC and
Wachovia Capital Finance Corporation (Western)10.8(21)
    
    Second Lien Term Loan Credit Agreement, dated as of November 27,
2006, by and among RSC Holdings II, LLC, RSC Holdings III, LLC,
Rental Service Corporation, Deutsche Bank AG, New York Branch,
Citicorp North America, Inc., GE Capital markets, Inc., Deutsche Bank
Securities Inc., Citigroup Global Markets Inc. and General Electric
Capital Corporation
 E-1




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.9(22)+
    
    RSC Holdings Inc. 2007 Annual Incentive Plan10.10(23)+
    
    Form of Indemnification Agreement10.11(24)+
    
    Form of Cost Reimbursement Agreement10.12(25)+
    
    Form of Director Restricted Stock Unit Agreement10.13(26)
    
    Executive Employment and Non competition Agreement by and between
David Mathieson and RSC Holdings Inc. effective January 2, 200810.14(27)
    
    Separation and Release Agreement by and between Keith Sawottke and
RSC Holdings Inc., dated November 30, 200712*
    
    Computation of Consolidated Ratio of Earnings to Fixed Charges for
the five years ended December 31, 200721.1
    
    Omitted pursuant to General Instruction I to Form 10-K31.1*
    
    Certification of Chief Executive Officer as required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended31.2*
    
    Certification of Chief Financial Officer as required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended32.1*
    
    Certifications of Chief Executive Officer and Chief Financial Officer
as required by Rule 13a-14(b) of the Securities Exchange Act of 1934,
as amended.
 
 +
    
    Compensation plans or arrangements in which directors or executive officers are eligible to
participate*
    
    Filed Herewith(1)
    
    Incorporated by reference to Exhibit 2.1 to RSC Holdings Inc.s Form S-1, dated February 13,
2007 (file no. 333-140644)(2)
    
    Incorporated by reference to Exhibit 3.1 to RSC
Equipment Rental, Inc. and RSC Holding III, LLCs Form S-4, dated
July 16, 2007 (file no. 333-144615)(3)
    
    Incorporated by reference to Exhibit 3.2 to RSC
Equipment Rental, Inc. and RSC Holding III, LLCs Form S-4, dated
July 16, 2007 (file no. 333-144615)(4)
    
    Incorporated by reference to Exhibit 3.3 to RSC
Equipment Rental, Inc. and RSC Holding III, LLCs Form S-4, dated
July 16, 2007 (file no. 333-144615)(5)
    
    Incorporated by reference to Exhibit 3.4 to RSC
Equipment Rental, Inc. and RSC Holding III, LLCs Form S-4, dated
July 16, 2007 (file no. 333-144615)(6)
    
    Incorporated by reference to Exhibit 3.5 to RSC
Equipment Rental, Inc. and RSC Holding III, LLCs Form S-4, dated
July 16, 2007 (file no. 333-144615)(7)
    
    Incorporated by reference to Exhibit 4.1 to RSC Holdings Inc.s Form S-1, dated February 13,
2007 (file no. 333-140644)(8)
    
    Incorporated by reference to Exhibit 4.2 to RSC Holdings Inc.s Form S-1, dated February 13,
2007 (file no. 333-140644)(9)
    
    Incorporated by reference to Exhibit 4.5 to RSC Holdings Inc.s Form S-1, dated February 13,
2007 (file no. 333-140644)(10)
    
    Incorporated by reference to Exhibit 4.6 to RSC Holdings Inc.s Form S-1, dated February 13,
2007 (file no. 333-140644)(11)
    
    Incorporated by reference to Exhibit 4.7 to RSC Holdings Inc.s Form S-1, dated February 13,
2007 (file no. 333-140644)(12)
    
    Incorporated by reference to Exhibit 4.8 to RSC Holdings Inc.s Form S-1, dated February 13,
2007 (file no. 333-140644)(13)
    
    Incorporated by reference to Exhibit 4.7 to RSC Equipment Rental Inc.s and RSC Holdings
III, LLCs Form S-4, dated July 16, 2007 (file no. 333-144625)(14)
    
    Incorporated by reference to Exhibit 10.2 to RSC Equipment Rental Inc.s and RSC Holdings
III, LLCs Form S-4, dated July 16, 2007 (file no. 333-144625)(15)
    
    Incorporated by reference to Exhibit 10.2 to RSC Holdings Inc.s Form S-1, dated February 13, 2007 (file no. 333-140644)(16)
    
    Incorporated by reference to Exhibit 10.3 to RSC Holdings Inc.s Form S-1, dated February 13, 2007 (file no. 333-140644)(17)
    
    Incorporated by reference to Exhibit 10.4 to RSC Holdings Inc.s Form S-1, dated February 13, 2007 (file no. 333-140644)(18)
    
    Incorporated by reference to Exhibit 10.5 to RSC Holdings Inc.s Form S-1, dated February 13, 2007 (file no. 333-140644)(19)
    
    Incorporated by reference to Exhibit 10.6 to RSC Holdings Inc.s Form S-1, dated February 13, 2007 (file no. 333-140644)(20)
    
    Incorporated by reference to Exhibit 10.7 to RSC Holdings Inc.s Form S-1/A, dated March 27, 2007 (file no. 333-140644)(21)
    
    Incorporated by reference to Exhibit 10.8 to RSC Holdings Inc.s Form S-1/A, dated March 27, 2007 (file no. 333-140644)(22)
    
    Incorporated by reference to Exhibit 10.9 to RSC Holdings Inc.s Form S-1/A, dated April 18, 2007 (file no. 333-140644)(23)
    
    Incorporated by reference to Exhibit 10.10 to RSC Holdings Inc.s Form S-1/A, dated May 21, 2007 (file no. 333-140644)(24)
    
    Incorporated by reference to Exhibit 10.11 to RSC Holdings Inc.s Form S-1/A, dated May 21, 2007 (file no. 333-140644)(25)
    
    Incorporated by reference to Exhibit 10.12 to RSC Holdings Inc.s Form S-1/A, dated May 21, 2007 (file no. 333-140644)(26)
    
    Incorporated by reference to Exhibit 10.1 to RSC Holdings Inc.s Current Report on 8-K, dated November 27, 2007 (file no. 001-33485)(27)
    
    Incorporated by reference to Exhibit 10.2 to RSC Holdings Inc.s Current Report on 8-K, dated November 27, 2007 (file no. 001-33485) E-2