##### Table of Contents



FORM 10-Q
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 333-144625
 RSC
Holdings III, LLC
 RSC
Equipment Rental, Inc.
  Delaware 
Arizona
    
    41-2218971
86-0933835(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification Number)6929 E. Greenway Pkwy. 
Scottsdale, Arizona
    
    85254(Address of principal executive offices)
    
    (Zip code)
 (480) 905-3300
 
 N/A
 
  o þ
  o o þ
  o þ




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##### Table of Contents



Table of Contents
 Cautionary Note Regarding Forward-Looking Information
    
    
    1PART I.Financial Information
    
    
    2ITEM 1.
    
    Unaudited Condensed Consolidated Financial Statements
    
    
    2Condensed Consolidated Balance Sheets at June 30, 2007 and December 31, 2006
    
    
    2Condensed Consolidated Statements of Income for the three and six months ended June 30, 2007 and June 30, 2006
    
    
    3Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and June 30, 2006
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24ITEM 4.
    
    Controls and Procedures
    
    
    25PART
II. Other Information
    
    25ITEM 1.
    
    Legal Proceedings
    
    
    25ITEM 1A.
    
    Risk Factors
    
    
    25ITEM 5.
    
    Other Information
    
    
    26ITEM 6.
    
    Exhibits
    
    
    26SIGNATURES
    
    
    27EX-31.1EX-31.2EX-32.1




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Cautionary Note Regarding 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;
    
    our ability to obtain equipment at competitive prices;
    
    changes in the attitude of our customers toward renting, as compared with purchasing, equipment;
    
    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 ability and willingness of Atlas Copco AB (ACAB) and Atlas Copco Finance S.à.r.l
(ACF) to continue to meet and/or perform their obligations under the Recapitalization
Agreement (as defined herein) to indemnify and defend us against various matters,
including, but not limited to, litigation relating to alleged exposure to silica and
asbestos;
    
    the effect of changes in laws and regulations, including those relating to the
environment and customer privacy, among others;
    
    risks related to our substantial amount of indebtedness;
    
    fluctuations in fuel or supply costs; and
    
    claims that the software products and information systems on which we rely infringe on
the intellectual property rights of others;
  1




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##### Table of Contents



PART I. Financial Information
 
 Item 1. Financial Statements
 
 RSC HOLDINGS III, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 June 30,
    
    
    December 31,2007
    
    
    2006AssetsCash and cash equivalents
    
    $
    3,345
    
    
    $
    46,188Accounts receivable, net
    
    
    282,830
    
    
    
    268,383Inventory
    
    
    19,065
    
    
    
    18,489Rental equipment, net
    
    
    1,873,102
    
    
    
    1,738,670Property and equipment, net
    
    
    189,526
    
    
    
    170,192Goodwill
    
    
    925,621
    
    
    
    925,621Deferred financing costs
    
    
    59,493
    
    
    
    67,915Other assets
    
    
    54,656
    
    
    
    69,518Total assets
    
    $
    3,407,638
    
    
    $
    3,304,976Liabilities and Stockholders DeficitAccounts payable
    
    $
    333,109
    
    
    $
    296,086Accrued expenses and other liabilities
    
    
    152,657
    
    
    
    143,016Debt
    
    
    2,746,400
    
    
    
    3,006,426Deferred income taxes
    
    
    304,243
    
    
    
    294,081Total liabilities
    
    
    3,536,409
    
    
    
    3,739,609Commitments and contingenciesStockholders deficitCommon stock, no par value, (1,000 shares
authorized, issued and outstanding at June
30, 2007 and December 31, 2006)
    
    
    277,391
    
    
    
    15,955Accumulated deficit
    
    
    (421,704
    )
    
    
    (459,372
    )Accumulated other comprehensive income
    
    
    15,542
    
    
    
    8,784Total stockholders deficit
    
    
    (128,771
    )
    
    
    (434,633
    )Total liabilities and stockholders deficit
    
    $
    3,407,638
    
    
    $
    3,304,976
  2




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Equipment rental revenue
    
    $
    384,646
    
    
    $
    340,102
    
    
    $
    732,621
    
    
    $
    642,226Sale of merchandise
    
    
    20,389
    
    
    
    23,537
    
    
    
    40,987
    
    
    
    48,188Sale of used rental equipment
    
    
    37,793
    
    
    
    50,183
    
    
    
    75,567
    
    
    
    109,299Total revenues
    
    
    442,828
    
    
    
    413,822
    
    
    
    849,175
    
    
    
    799,713Cost of revenues:Cost of equipment rentals,
excluding depreciation
    
    
    159,974
    
    
    
    144,751
    
    
    
    315,983
    
    
    
    285,207Depreciation  rental equipment
    
    
    71,517
    
    
    
    63,690
    
    
    
    140,068
    
    
    
    120,289Cost of merchandise sales
    
    
    12,448
    
    
    
    14,096
    
    
    
    24,800
    
    
    
    29,601Cost of used rental equipment sales
    
    
    26,949
    
    
    
    38,389
    
    
    
    53,892
    
    
    
    83,411Total cost of revenues
    
    
    270,888
    
    
    
    260,926
    
    
    
    534,743
    
    
    
    518,508Gross profit
    
    
    171,940
    
    
    
    152,896
    
    
    
    314,432
    
    
    
    281,205Operating expenses:Selling, general, and administrative
    
    
    38,100
    
    
    
    33,158
    
    
    
    70,689
    
    
    
    65,004Management fees
    
    
    21,500
    
    
    
    
    
    
    
    23,000
    
    
    
    Depreciation and amortization 
non-rental equipment
    
    
    11,453
    
    
    
    9,341
    
    
    
    22,309
    
    
    
    18,433Total operating expenses
    
    
    71,053
    
    
    
    42,499
    
    
    
    115,998
    
    
    
    83,437Operating income
    
    
    100,887
    
    
    
    110,397
    
    
    
    198,434
    
    
    
    197,768Interest expense, net
    
    
    72,689
    
    
    
    45,702
    
    
    
    136,889
    
    
    
    89,425Other income, net
    
    
    (291
    )
    
    
    (48
    )
    
    
    (202
    )
    
    
    (209
    )Income before provision for income
taxes
    
    
    28,489
    
    
    
    64,743
    
    
    
    61,747
    
    
    
    108,552Provision for income taxes
    
    
    11,064
    
    
    
    23,969
    
    
    
    24,079
    
    
    
    39,548Net income
    
    $
    17,425
    
    
    $
    40,774
    
    
    $
    37,668
    
    
    $
    69,004Preferred dividends
    
    
    
    
    
    
    (3,998
    )
    
    
    
    
    
    
    (7,997
    )Net income available for common
stockholders
    
    $
    17,425
    
    
    $
    36,776
    
    
    $
    37,668
    
    
    $
    61,007Weighted average shares outstanding used
in computing net income per common share:Basic and diluted
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Net income per common share:Basic and diluted
    
    $
    17.43
    
    
    $
    36.78
    
    
    $
    37.67
    
    
    $
    61.01
  3




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended June 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    37,668
    
    
    $
    69,004Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    162,377
    
    
    
    138,722Amortization of deferred financing costs
    
    
    8,945
    
    
    
    Share-based compensation expense
    
    
    1,872
    
    
    
    959Gain on sales of rental and non-rental property and equipment, net of
non-cash writeoffs
    
    
    (23,388
    )
    
    
    (25,888
    )Deferred income taxes
    
    
    10,450
    
    
    
    43,900Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (14,426
    )
    
    
    (9,356
    )Inventory
    
    
    100
    
    
    
    (152
    )Other assets
    
    
    2,827
    
    
    
    2,672Accounts payable
    
    
    73,868
    
    
    
    85,538Accrued expenses and other liabilities
    
    
    23,078
    
    
    
    1,409Net cash provided by operating activities
    
    
    283,371
    
    
    
    306,808Cash flows from investing activities:Purchases of rental equipment
    
    
    (329,974
    )
    
    
    (461,322
    )Purchases of property and equipment
    
    
    (13,696
    )
    
    
    (12,466
    )Proceeds from sales of rental equipment
    
    
    75,567
    
    
    
    109,299Proceeds from sales of property and equipment
    
    
    7,079
    
    
    
    9,737Net cash used in investing activities
    
    
    (261,024
    )
    
    
    (354,752
    )Cash flows from financing activities:Cash consideration paid to Atlas
    
    
    (17,995
    )
    
    
    Proceeds from senior ABL revolver
    
    
    20,458
    
    
    
    Payments on senior ABL term revolver
    
    
    (61,166
    )
    
    
    Payments on senior ABL term loan
    
    
    (1,250
    )
    
    
    Payments on Senior Term Facility
    
    
    (230,700
    )
    
    
    Payments on capital leases and other
    
    
    (19,099
    )
    
    
    (19,743
    )Net proceeds (payments on) affiliated debt
    
    
    
    
    
    
    67,941Deferred financing costs
    
    
    (186
    )
    
    
    Proceeds from the issuance of common stock
    
    
    255,064
    
    
    
    Dividends paid
    
    
    
    
    
    
    (7,997
    )Capital contributions from Atlas
    
    
    4,500
    
    
    
    1,108Decrease in outstanding checks in excess of cash balances
    
    
    (14,774
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (65,148
    )
    
    
    41,309Effect of foreign exchange rates on cash
    
    
    (42
    )
    
    
    154Net decrease in cash and cash equivalents
    
    
    (42,843
    )
    
    
    (6,481
    )Cash and cash equivalents at beginning of period
    
    
    46,188
    
    
    
    7,134Cash and cash equivalents at end of period
    
    $
    3,345
    
    
    $
    653Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    128,803
    
    
    $
    15,131Supplemental schedule of non-cash investing and financing activities:Purchase of assets under capital lease obligations
    
    $
    31,731
    
    
    $
    38,786
  4




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 (1) Organization
 Business and Basis of Presentation
 Description of Business
  Basis of Presentation
     Prior to the Recapitalization
   5




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 (2) Summary of Significant Accounting Policies
  Use of Estimates
  Cash Equivalents
  Foreign Currency Translation
 Foreign Currency Translation
 Reporting
Comprehensive Income
 Fair Value of Financial Instruments
  6




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Accounts Receivable
  Inventory
  Rental Equipment
    June 30,
    
    
    December 31,2007
    
    
    2006(in 000s)Rental equipment
    
    $
    2,606,325
    
    
    $
    2,399,109Less accumulated depreciation
    
    
    (733,223
    )
    
    
    (660,439
    )Rental equipment, net
    
    $
    1,873,102
    
    
    $
    1,738,670
 Property and Equipment
  Long-Lived Assets and Goodwill
  7




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
    Revenue Recognition
   Reporting Revenue
Gross as a Principal versus Net as an Agent
 Cost of Revenues
  Selling, General and Administrative Expenses
  8




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Reserves for Claims
  Earnings per Share
 Earnings Per Share
 Income Taxes
  Accounting for Income Taxes
  Consideration Received from Vendors
  9




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor
  Marketing and Advertising costs
  Share-Based Compensation
 Share Based Payment.
 Deferred Financing Costs
  Concentration of Credit Risk
  New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109
 Fair Value Measurements .
 10




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 .
 (3) Comprehensive Income
 Six Months Ended June 30,2007
    
    
    2006(in 000s)Net income
    
    $
    37,668
    
    
    $
    69,004Currency translation adjustments
    
    
    6,758
    
    
    
    2,379Comprehensive income
    
    $
    44,426
    
    
    $
    71,383
 4) Debt
  June 30,
    
    
    December 31,2007
    
    
    2006(in 000s)Senior ABL revolving credit facility
    
    $
    837,583
    
    
    $
    878,291Senior ABL term loan
    
    
    248,125
    
    
    
    249,375Senior Term Facility
    
    
    899,300
    
    
    
    1,130,000Senior Notes
    
    
    620,000
    
    
    
    620,000Capitalized lease obligations
    
    
    141,335
    
    
    
    128,688Other
    
    
    57
    
    
    
    72Total
    
    $
    2,746,400
    
    
    $
    3,006,426
    11




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 (5) Common and Preferred Stock
 Common Stock
  Preferred Stock
   (6) Income Taxes
    12




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 (7) Commitments and Contingencies
    (8) Legal and Insurance Matters
  (9) Affiliated Company Transactions
     13




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RSC HOLDINGS III, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
  (10) Business Segment and Geographic Information
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(in 000s)
    
    
    (in 000s)Revenues from external customers:Domestic
    
    $
    422,222
    
    
    $
    398,784
    
    
    $
    811,117
    
    
    $
    770,642Foreign
    
    
    20,606
    
    
    
    15,038
    
    
    
    38,058
    
    
    
    29,071Total
    
    $
    442,828
    
    
    $
    413,822
    
    
    $
    849,175
    
    
    $
    799,713
  June 30,
    
    
    December 31,2007
    
    
    2006(in 000s)Rental equipment, netDomestic
    
    $
    1,796,484
    
    
    $
    1,670,181Foreign
    
    
    76,618
    
    
    
    68,489Total
    
    $
    1,873,102
    
    
    $
    1,738,670Property and equipment, netDomestic
    
    $
    180,618
    
    
    $
    163,049Foreign
    
    
    8,908
    
    
    
    7,143Total
    
    $
    189,526
    
    
    $
    170,192
 (11) Subsequent Event
  14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our results of operations and financial condition
includes periods prior to the Recapitalization discussed below under The Recapitalization.
Accordingly, the discussion and analysis of prior periods does not reflect the significant impact
of the Recapitalization. Statements in the discussion and analysis regarding industry outlook, our
expectations regarding the performance of our business and other non-historical statements in the
discussion and analysis are forward-looking statements. These forward-looking statements are
subject to numerous risks and uncertainties. See Cautionary Note Regarding Forward-Looking
Information on page 1 of this report. Our actual results may differ materially from those
contained in, or implied by, any forward-looking statements.
 The following discussion is intended to enhance the readers understanding of our company
operations and present business environment. It should be read in conjunction with the section
entitled Risk Factors in Item 1A and our unaudited condensed consolidated financial statements
for the period ended June 30, 2007 included in this report.
 Overview
    Factors Affecting Our Results of Operations
   Critical Accounting Policies and Estimates
  15




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Accounts Receivable
  Rental Equipment
   Long-Lived Assets and Goodwill
    16




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Revenue Recognition
   Reporting Revenue Gross as a Principal versus Net as
an Agent
 Cost of Revenues
  Selling, General and Administrative Expenses
  Reserve for Claims
  Income Taxes
  17




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Consideration Received from Vendors
   The Recapitalization
    18




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Results of Operations
  Percent of RevenueThree Months Ended
    
    
    Three Months EndedJune 30,
    
    
    June 30,
    
    
    Increase (decrease)2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007 versus 2006(unaudited)Revenues:Equipment rental
revenue
    
    $
    384,646
    
    
    $
    340,102
    
    
    
    86.9
    %
    
    
    82.2
    %
    
    $
    44,544
    
    
    
    13.1
    %Sale of merchandise
    
    
    20,389
    
    
    
    23,537
    
    
    
    4.6
    
    
    
    5.7
    
    
    
    (3,148
    )
    
    
    (13.4
    )Sale of used
rental equipment
    
    
    37,793
    
    
    
    50,183
    
    
    
    8.5
    
    
    
    12.1
    
    
    
    (12,390
    )
    
    
    (24.7
    )Total revenues
    
    
    442,828
    
    
    
    413,822
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    29,006
    
    
    
    7.0Cost of revenues:Cost of equipment
rentals, excluding
depreciation
    
    
    159,974
    
    
    
    144,751
    
    
    
    36.1
    
    
    
    35.0
    
    
    
    15,223
    
    
    
    10.5Depreciation 
rental equipment
    
    
    71,517
    
    
    
    63,690
    
    
    
    16.2
    
    
    
    15.4
    
    
    
    7,827
    
    
    
    12.3Cost of
merchandise sales
    
    
    12,448
    
    
    
    14,096
    
    
    
    2.8
    
    
    
    3.4
    
    
    
    (1,648
    )
    
    
    (11.7
    )Cost of used
rental equipment
sales
    
    
    26,949
    
    
    
    38,389
    
    
    
    6.1
    
    
    
    9.3
    
    
    
    (11,440
    )
    
    
    (29.8
    )Total cost of
revenues
    
    
    270,888
    
    
    
    260,926
    
    
    
    61.2
    
    
    
    63.1
    
    
    
    9,962
    
    
    
    3.8Gross profit
    
    
    171,940
    
    
    
    152,896
    
    
    
    38.8
    
    
    
    36.9
    
    
    
    19,044
    
    
    
    12.5Operating expenses:Selling, general,
and administrative
    
    
    38,100
    
    
    
    33,158
    
    
    
    8.6
    
    
    
    8.0
    
    
    
    4,942
    
    
    
    14.9Management fees
    
    
    21,500
    
    
    
    
    
    
    
    4.9
    
    
    
    
    
    
    
    21,500
    
    
    
    Depreciation and
amortization 
nonrental
equipment
    
    
    11,453
    
    
    
    9,341
    
    
    
    2.6
    
    
    
    2.3
    
    
    
    2,112
    
    
    
    22.6Total operating
expenses
    
    
    71,053
    
    
    
    42,499
    
    
    
    16.0
    
    
    
    10.3
    
    
    
    28,554
    
    
    
    67.2Operating income
    
    
    100,887
    
    
    
    110,397
    
    
    
    22.8
    
    
    
    26.7
    
    
    
    (9,510
    )
    
    
    (8.6
    )Interest expense, net
    
    
    72,689
    
    
    
    45,702
    
    
    
    16.4
    
    
    
    11.0
    
    
    
    26,987
    
    
    
    59.0Other income, net
    
    
    (291
    )
    
    
    (48
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (243
    )
    
    
    506.3Income before
provision for
income taxes
    
    
    28,489
    
    
    
    64,743
    
    
    
    6.4
    
    
    
    15.6
    
    
    
    (36,254
    )
    
    
    (56.0
    )Provision for income
taxes
    
    
    11,064
    
    
    
    23,969
    
    
    
    2.5
    
    
    
    5.8
    
    
    
    (12,905
    )
    
    
    (53.8
    )Net income
    
    $
    17,425
    
    
    $
    40,774
    
    
    
    3.9
    %
    
    
    9.9
    %
    
    $
    (23,349
    )
    
    
    (57.3
    )
 19




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##### Table of Contents



Six Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    Increase (decrease)2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007 versus 2006(unaudited)Revenues:Equipment rental revenue
    
    $
    732,621
    
    
    $
    642,226
    
    
    
    86.3
    %
    
    
    80.3
    %
    
    $
    90,395
    
    
    
    14.1
    %Sale of merchandise
    
    
    40,987
    
    
    
    48,188
    
    
    
    4.8
    
    
    
    6.0
    
    
    
    (7,201
    )
    
    
    (14.9
    )Sale of used rental
equipment
    
    
    75,567
    
    
    
    109,299
    
    
    
    8.9
    
    
    
    13.7
    
    
    
    (33,732
    )
    
    
    (30.9
    )Total revenues
    
    
    849,175
    
    
    
    799,713
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    49,462
    
    
    
    6.2Cost of revenues:Cost of equipment
rentals, excluding
depreciation
    
    
    315,983
    
    
    
    285,207
    
    
    
    37.2
    
    
    
    35.7
    
    
    
    30,776
    
    
    
    10.8Depreciation  rental
equipment
    
    
    140,068
    
    
    
    120,289
    
    
    
    16.5
    
    
    
    15.0
    
    
    
    19,779
    
    
    
    16.4Cost of merchandise sales
    
    
    24,800
    
    
    
    29,601
    
    
    
    2.9
    
    
    
    3.7
    
    
    
    (4,801
    )
    
    
    (16.2
    )Cost of used rental
equipment sales
    
    
    53,892
    
    
    
    83,411
    
    
    
    6.3
    
    
    
    10.4
    
    
    
    (29,519
    )
    
    
    (35.4
    )Total cost of revenues
    
    
    534,743
    
    
    
    518,508
    
    
    
    63.0
    
    
    
    64.8
    
    
    
    16,235
    
    
    
    3.1Gross profit
    
    
    314,432
    
    
    
    281,205
    
    
    
    37.0
    
    
    
    35.2
    
    
    
    33,227
    
    
    
    11.8Operating expenses:Selling, general, and
administrative
    
    
    70,689
    
    
    
    65,004
    
    
    
    8.3
    
    
    
    8.1
    
    
    
    5,685
    
    
    
    8.7Management fees
    
    
    23,000
    
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    23,000
    
    
    
    Depreciation and
amortization 
nonrental equipment
    
    
    22,309
    
    
    
    18,433
    
    
    
    2.6
    
    
    
    2.3
    
    
    
    3,876
    
    
    
    21.0Total operating
expenses
    
    
    115,998
    
    
    
    83,437
    
    
    
    13.7
    
    
    
    10.4
    
    
    
    32,561
    
    
    
    39.0Operating income
    
    
    198,434
    
    
    
    197,768
    
    
    
    23.4
    
    
    
    24.7
    
    
    
    666
    
    
    
    0.3Interest expense, net
    
    
    136,889
    
    
    
    89,425
    
    
    
    16.1
    
    
    
    11.2
    
    
    
    47,464
    
    
    
    53.1Other income, net
    
    
    (202
    )
    
    
    (209
    )
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (3.3
    )Income before
provision for income
taxes
    
    
    61,747
    
    
    
    108,552
    
    
    
    7.3
    
    
    
    13.6
    
    
    
    (46,805
    )
    
    
    (43.1
    )Provision for income taxes
    
    
    24,079
    
    
    
    39,548
    
    
    
    2.8
    
    
    
    4.9
    
    
    
    (15,469
    )
    
    
    (39.1
    )Net income
    
    $
    37,668
    
    
    $
    69,004
    
    
    
    4.4
    %
    
    
    8.6
    %
    
    $
    (31,336
    )
    
    
    (45.4
    )
 Three and Six Months Ended June 30, 2007, Compared to Three and Six Months Ended June 30, 2006
 Revenues.
 20




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21




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##### Table of Contents



Operating Income
 Interest Expense, net
 Provision for Income Taxes
 Liquidity and Capital Resources
 Cash and Cash Flows.
   22




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##### Table of Contents



Indebtedness and Liquidity
     23




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##### Table of Contents



New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Fair Value Measurements
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Currency Exchange Risk
  24




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 PART II. Other Information
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
   25




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##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits and Financial Statement Schedules
 ExhibitNumber
    
    Description3.1
    
    Articles of Incorporation of RSC Equipment Rental, Inc. (Incorporated by
reference to Exhibit 3.1 to RSC Holdings III, LLCs Form S-4, dated July 17, 2007
(file no. 333-144625))3.2
    
    Articles of Amendment to the Articles of Incorporation of RSC Equipment Rental,
Inc. (Incorporated by reference to Exhibit 3.2 to RSC Holdings III, LLCs Form
S-4, dated July 17, 2007 (file no. 333-144625))3.3
    
    Amended and Restated By-Laws of RSC Equipment Rental, Inc. (Incorporated by
reference to Exhibit 3.3 to RSC Holdings III, LLCs Form S-4, dated July 17, 2007
(file no. 333-144625))3.4
    
    Certificate of Formation of RSC Holdings III, LLC (Incorporated by reference to
Exhibit 3.4 to RSC Holdings III, LLCs Form S-4, dated July 17, 2007 (file no.
333-144625))3.5
    
    Amended and Restated Limited Liability Company Agreement of RSC Holdings III, LLC
(Incorporated by reference to Exhibit 3.5 to RSC Holdings III, LLCs Form S-4,
dated July 17, 2007 (file no. 333-144625))10.1
    
    Termination Agreement, dated as of May 29, 2007, by and among RSC Holdings Inc.,
RSC Equipment Rental, Inc., Ripplewood Holdings L.L.C. and Oak Hill Capital
Management, LLC Agreement (Incorporated by reference to Exhibit 10.8 to RSC
Holdings Inc.s Form S-1, dated February 13, 2007 (file no. 333-140644))10.2
    
    Cost Reimbursement Agreement, dated May 29, 2007, with Ripplewood Holdings L.L.C.
(Incorporated by reference to Exhibit 10.11 to RSC Holdings III, LLCs Form S-4,
dated July 17, 2007 (file no. 333-144625))10.3
    
    Cost Reimbursement Agreement, dated May 29, 2007, with Oak Hill Capital
Management LLC (Incorporated by reference to Exhibit 10.12 to RSC Holdings III,
LLCs Form S-4, dated July 17, 2007 (file no. 333-144625))10.4
    
    Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.13 to
RSC Holdings III, LLCs Form S-4, dated July 17, 2007 (file no. 333-144625))31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer32.1
    
    Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
 
  26




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##### Table of Contents



SIGNATURES
  RSC Holdings III, LLC  RSC Equipment Rental, Inc.
 Signature
    
    Title
    
    Date/s/ Erik Olsson
    
    President and Director (Principal Executive Officer)
    
    August 28, 2007Erik Olsson/s/ Keith Sawottke
    
    Chief Financial Officer (Principal Financial andKeith Sawottke
    
    Principal Accounting Officer)
    
    August 28, 2007
 27




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Articles of Incorporation of RSC Equipment Rental, Inc. (Incorporated by
reference to Exhibit 3.1 to RSC Holdings III, LLCs Form S-4, dated July 17, 2007
(file no. 333-144625))3.2
    
    Articles of Amendment to the Articles of Incorporation of RSC Equipment Rental,
Inc. (Incorporated by reference to Exhibit 3.2 to RSC Holdings III, LLCs Form
S-4, dated July 17, 2007 (file no. 333-144625))3.3
    
    Amended and Restated By-Laws of RSC Equipment Rental, Inc. (Incorporated by
reference to Exhibit 3.3 to RSC Holdings III, LLCs Form S-4, dated July 17, 2007
(file no. 333-144625))3.4
    
    Certificate of Formation of RSC Holdings III, LLC (Incorporated by reference to
Exhibit 3.4 to RSC Holdings III, LLCs Form S-4, dated July 17, 2007 (file no.
333-144625))3.5
    
    Amended and Restated Limited Liability Company Agreement of RSC Holdings III, LLC
(Incorporated by reference to Exhibit 3.5 to RSC Holdings III, LLCs Form S-4,
dated July 17, 2007 (file no. 333-144625))10.1
    
    Termination Agreement, dated as of May 29, 2007, by and among RSC Holdings Inc.,
RSC Equipment Rental, Inc., Ripplewood Holdings L.L.C. and Oak Hill Capital
Management, LLC Agreement (Incorporated by reference to Exhibit 10.8 to RSC
Holdings Inc.s Form S-1, dated February 13, 2007 (file no. 333-140644))10.2
    
    Cost Reimbursement Agreement, dated May 29, 2007, with Ripplewood Holdings L.L.C.
(Incorporated by reference to Exhibit 10.11 to RSC Holdings III, LLCs Form S-4,
dated July 17, 2007 (file no. 333-144625))10.3
    
    Cost Reimbursement Agreement, dated May 29, 2007, with Oak Hill Capital
Management LLC (Incorporated by reference to Exhibit 10.12 to RSC Holdings III,
LLCs Form S-4, dated July 17, 2007 (file no. 333-144625))10.4
    
    Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.13 to
RSC Holdings III, LLCs Form S-4, dated July 17, 2007 (file no. 333-144625))31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer32.1
    
    Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
 
  28