##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 001-33485
 
 RSC Holdings Inc.
 
 Delaware
    
    22-1669012(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
 
  þ o
  o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
(Do not check if a smaller reporting company)Smaller reporting company o  o þ




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Table of Contents
 Cautionary Note for Forward-Looking Information
    
    
    1PART I.Financial Information
    
    
    3ITEM 1.
    
    Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets at September 30, 2010 and December 31, 2009
    
    
    3Condensed Consolidated
Statements of Operations for the three and nine months ended September 30, 2010 and September 30, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2010 and September 30, 2009
    
    
    5Notes to Condensed
Consolidated Financial Statements
    
    
    7ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    29ITEM 4.
    
    Controls and Procedures
    
    
    30PART II.Other Information
    
    
    31ITEM 1.
    
    Legal Proceedings
    
    
    31ITEM 1A.
    
    Risk Factors
    
    
    31ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31ITEM 3.
    
    Defaults Upon Senior Securities
    
    
    31ITEM 4.
    
    Reserved
    
    
    31ITEM 5.
    
    Other Information
    
    
    31ITEM 6.
    
    Exhibits
    
    
    32SIGNATURES
    
    
    33EX-31.1EX-31.2EX-32.1
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Introductory Note
  
 Cautionary Note for Forward-Looking Information
    
    
    the effect of an economic downturn or other factors resulting in a decline in
non-residential construction, non-construction maintenance, capital improvements and
capital investment;
    
    intense rental rate price pressure from competitors, some of whom are heavily
indebted and may significantly reduce their prices to generate cash to meet debt
covenants; from contractor customers some of whom are bidding contracts at cost or below
to secure work for their remaining best employees; from industrial customers who
generally are experiencing profitability shortfalls in the current economic climate and
in return are asking all of their most significant suppliers for price reductions and
cost reduction ideas;
    
    the rental industrys ability to continue to sell used equipment through both the
retail and auction markets at prices sufficient to enable us to maintain orderly
liquidation values that support our borrowing base to meet our minimum availability and
to avoid covenant compliance requirements for leverage and fixed charge coverage
contained in our Senior ABL Revolving Facility;
    
    our ability to comply with our debt covenants;
 1




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
    
    risks related to the credit markets willingness to continue to lend to borrowers
rated B- and C;
    
    our ability to generate cash and/or incur additional indebtedness to finance
equipment purchases;
    
    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 employment
legislation, the environment and customer privacy, among others;
    
    fluctuations in fuel and, or supply costs;
    
    heavy reliance on centralized information technology systems;
    
    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 Part II, Item 1A of this Quarterly Report on Form 10-Q
under the caption Risk Factors.
  2




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PART I. Financial Information
 
 Item 1. Financial Statements
 
 RSC HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 September 30,
    
    
    December 31,2010
    
    
    2009AssetsCash and cash equivalents
    
    $
    5,564
    
    
    $
    4,535Accounts receivable, net of allowance for doubtful
accounts of $9,768 and $10,741 at September 30, 2010
and December 31, 2009, respectively
    
    
    221,463
    
    
    
    181,975Inventory
    
    
    13,528
    
    
    
    14,421Rental equipment, net of accumulated depreciation of
$1,082,072 and $1,016,606 at September 30, 2010 and
December 31, 2009, respectively
    
    
    1,374,053
    
    
    
    1,384,999Property and equipment, net of accumulated
depreciation of $201,790 and $180,495 at September 30,
2010 and December 31, 2009, respectively
    
    
    113,604
    
    
    
    123,197Goodwill and other intangibles, net
    
    
    939,492
    
    
    
    940,063Deferred financing costs
    
    
    46,758
    
    
    
    55,539Other assets
    
    
    21,969
    
    
    
    24,590Total assets
    
    $
    2,736,431
    
    
    $
    2,729,319Liabilities and Stockholders (Deficit) EquityAccounts payable
    
    $
    232,266
    
    
    $
    46,275Accrued expenses and other liabilities
    
    
    184,011
    
    
    
    174,829Debt
    
    
    2,060,824
    
    
    
    2,172,109Deferred income taxes
    
    
    296,798
    
    
    
    312,465Total liabilities
    
    
    2,773,899
    
    
    
    2,705,678Commitments and contingenciesPreferred stock, no par value, (500,000 shares
authorized, no shares issued and outstanding at
September 30, 2010 and December 31, 2009)
    
    
    
    
    
    
    Common stock, no par value, (300,000,000 shares
authorized, 103,458,811 shares issued and outstanding
at September 30, 2010 and 103,412,561 shares issued
and outstanding at December 31, 2009)
    
    
    833,577
    
    
    
    829,288Accumulated deficit
    
    
    (866,207
    )
    
    
    (799,842
    )Accumulated other comprehensive loss
    
    
    (4,838
    )
    
    
    (5,805
    )Total stockholders (deficit) equity
    
    
    (37,468
    )
    
    
    23,641Total liabilities and stockholders (deficit) equity
    
    $
    2,736,431
    
    
    $
    2,729,319
  3




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RSC HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Equipment rental revenue
    
    $
    291,671
    
    
    $
    271,547
    
    
    $
    773,618
    
    
    $
    829,517Sale of merchandise
    
    
    12,897
    
    
    
    12,633
    
    
    
    37,588
    
    
    
    40,121Sale of used rental equipment
    
    
    29,216
    
    
    
    31,384
    
    
    
    84,315
    
    
    
    123,757Total revenues
    
    
    333,784
    
    
    
    315,564
    
    
    
    895,521
    
    
    
    993,395Cost of revenues:Cost of equipment rentals, excluding
depreciation
    
    
    149,445
    
    
    
    138,723
    
    
    
    424,659
    
    
    
    423,567Depreciation of rental equipment
    
    
    68,878
    
    
    
    70,169
    
    
    
    202,921
    
    
    
    217,492Cost of merchandise sales
    
    
    9,312
    
    
    
    8,775
    
    
    
    27,266
    
    
    
    28,193Cost of used rental equipment sales
    
    
    24,575
    
    
    
    30,117
    
    
    
    73,143
    
    
    
    115,414Total cost of revenues
    
    
    252,210
    
    
    
    247,784
    
    
    
    727,989
    
    
    
    784,666Gross profit
    
    
    81,574
    
    
    
    67,780
    
    
    
    167,532
    
    
    
    208,729Operating expenses:Selling, general and administrative
    
    
    34,511
    
    
    
    31,970
    
    
    
    101,256
    
    
    
    107,096Depreciation and amortization of
non-rental equipment and intangibles
    
    
    10,012
    
    
    
    10,696
    
    
    
    29,979
    
    
    
    33,672Other operating gains, net
    
    
    (1,167
    )
    
    
    (119
    )
    
    
    (3,617
    )
    
    
    (233
    )Total operating expenses, net
    
    
    43,356
    
    
    
    42,547
    
    
    
    127,618
    
    
    
    140,535Operating income
    
    
    38,218
    
    
    
    25,233
    
    
    
    39,914
    
    
    
    68,194Interest expense, net
    
    
    48,446
    
    
    
    50,666
    
    
    
    146,472
    
    
    
    130,911Gain on extinguishment of debt, net
    
    
    
    
    
    
    (12,489
    )
    
    
    
    
    
    
    (12,489
    )Other (income) expense, net
    
    
    (264
    )
    
    
    (75
    )
    
    
    (364
    )
    
    
    335Loss before benefit for income taxes
    
    
    (9,964
    )
    
    
    (12,869
    )
    
    
    (106,194
    )
    
    
    (50,563
    )Benefit for income taxes
    
    
    3,542
    
    
    
    7,034
    
    
    
    39,829
    
    
    
    19,734Net loss
    
    $
    (6,422
    )
    
    $
    (5,835
    )
    
    $
    (66,365
    )
    
    $
    (30,829
    )Weighted average shares outstanding used in
computing net loss per common share:Basic and diluted
    
    
    103,521
    
    
    
    103,435
    
    
    
    103,501
    
    
    
    103,433Net loss per common share:Basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.64
    )
    
    $
    (0.30
    )
  4




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RSC HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months EndedSeptember 30,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net loss
    
    $
    (66,365
    )
    
    $
    (30,829
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    232,900
    
    
    
    251,164Amortization of deferred financing costs
    
    
    9,553
    
    
    
    8,574Amortization of original issue discount
    
    
    826
    
    
    
    213Share-based compensation expense
    
    
    3,966
    
    
    
    3,473Gain on sales of rental and non-rental property and equipment, net of
non-cash writeoffs
    
    
    (9,635
    )
    
    
    (6,329
    )Deferred income taxes
    
    
    (16,261
    )
    
    
    (8,618
    )Gain on insurance settlement
    
    
    (1,736
    )
    
    
    Gain on extinguishment of debt, net
    
    
    
    
    
    
    (12,489
    )Interest expense on hedge ineffectiveness
    
    
    95
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (39,456
    )
    
    
    73,229Inventory
    
    
    903
    
    
    
    4,654Other assets
    
    
    2,925
    
    
    
    4,975Accounts payable
    
    
    186,517
    
    
    
    (60,730
    )Accrued expenses and other liabilities
    
    
    8,217
    
    
    
    2,930Net cash provided by operating activities
    
    
    312,449
    
    
    
    230,217Cash flows from investing activities:Purchases of rental equipment
    
    
    (265,714
    )
    
    
    (33,488
    )Purchases of property and equipment
    
    
    (5,630
    )
    
    
    (2,597
    )Proceeds from sales of rental equipment
    
    
    84,315
    
    
    
    123,757Proceeds from sales of property and equipment
    
    
    2,185
    
    
    
    10,539Insurance proceeds from rental equipment and property claims
    
    
    1,736
    
    
    
    3,086Net cash (used in) provided by investing activities
    
    
    (183,108
    )
    
    
    101,297Cash flows from financing activities:Proceeds from Senior ABL Revolving Facility
    
    
    104,000
    
    
    
    218,016Proceeds from issuance of 2017 Notes
    
    
    
    
    
    
    389,280Payments on Senior ABL Revolving Facility
    
    
    (210,000
    )
    
    
    (495,193
    )Payments on Senior ABL Term Loan
    
    
    
    
    
    
    (244,375
    )Payments on Second Lien Term Facility
    
    
    
    
    
    
    (137,145
    )Payments on capital leases and other debt
    
    
    (21,928
    )
    
    
    (31,946
    )Payments for deferred financing costs
    
    
    (1,401
    )
    
    
    (23,145
    )Payments for non-deferred financing costs
    
    
    
    
    
    
    (3,290
    )Proceeds from stock option exercises
    
    
    323
    
    
    
    256Increase in outstanding checks in excess of cash balances
    
    
    
    
    
    
    347Net cash used in financing activities
    
    
    (129,006
    )
    
    
    (327,195
    )Effect of foreign exchange rates on cash
    
    
    694
    
    
    
    1,001Net increase in cash and cash equivalents
    
    
    1,029
    
    
    
    5,320Cash and cash equivalents at beginning of period
    
    
    4,535
    
    
    
    13,670Cash and cash equivalents at end of period
    
    $
    5,564
    
    
    $
    18,990
  5




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RSC HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
 Nine Months EndedSeptember 30,2010
    
    
    2009(In thousands)Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    126,655
    
    
    $
    104,402Cash received for taxes, net
    
    
    25,562
    
    
    
    7,098Supplemental schedule of non-cash investing and financing activities:Purchase of assets under capital lease obligations
    
    $
    15,817
    
    
    $
    895Accrued deferred financing costs
    
    
    5
    
    
    
    174Accrued non-deferred financing costs
    
    
    
    
    
    
    100
  6




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (1) Organization
 Business and Basis of Presentation
 Description of Business
  Basis of Presentation
  Use of Estimates
  Recent Accounting Pronouncements
    7




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  (2) Fair Value of Financial Instruments
    (3) Net Loss per Share
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s except per share data)Numerator:Net loss
    
    $
    (6,422
    )
    
    $
    (5,835
    )
    
    $
    (66,365
    )
    
    $
    (30,829
    )Denominator:Weighted average shares  basic
    
    
    103,521
    
    
    
    103,435
    
    
    
    103,501
    
    
    
    103,433Employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares  diluted
    
    
    103,521
    
    
    
    103,435
    
    
    
    103,501
    
    
    
    103,433Net loss per common share  basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    
    $
    (0.64
    )
    
    $
    (0.30
    )Anti-dilutive stock-based awards excluded
    
    
    6,587
    
    
    
    5,350
    
    
    
    6,447
    
    
    
    5,343
  8




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (4) Accumulated Other Comprehensive Income (Loss)
  AccumulatedForeign
    
    
    Fair Market
    
    
    OtherCurrency
    
    
    Value of Cash
    
    
    ComprehensiveTranslation
    
    
    Flow Hedges
    
    
    Income (Loss)(in 000s)Balance at December 31, 2009
    
    $
    15,967
    
    
    $
    (21,772
    )
    
    $
    (5,805
    )Foreign currency translation
    
    
    1,934
    
    
    
    
    
    
    
    1,934Change in fair value of cash flow hedges, net of tax
    
    
    
    
    
    
    (967
    )
    
    
    (967
    )Balance at September 30, 2010
    
    $
    17,901
    
    
    $
    (22,739
    )
    
    $
    (4,838
    )
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s)Net loss
    
    $
    (6,422
    )
    
    $
    (5,835
    )
    
    $
    (66,365
    )
    
    $
    (30,829
    )Currency translation adjustments
    
    
    1,989
    
    
    
    6,621
    
    
    
    1,934
    
    
    
    11,898Change in fair value of cash flow hedges, net of tax
    
    
    (1,000
    )
    
    
    (3,290
    )
    
    
    (967
    )
    
    
    1,433Comprehensive loss
    
    $
    (5,433
    )
    
    $
    (2,504
    )
    
    $
    (65,398
    )
    
    $
    (17,498
    )
 (5) Closed Location Charges
   9




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Lease Exit and
    
    
    EmployeeOther Related
    
    
    Termination Costs
    
    
    Other Exit CostsCosts (a)
    
    
    (b)
    
    
    (c)
    
    
    TotalClosed location reserves at December 31, 2009
    
    $
    (6,492
    )
    
    $
    (122
    )
    
    $
    
    
    
    $
    (6,614
    )Charges incurred to close locations
    
    
    (50
    )
    
    
    
    
    
    
    (27
    )
    
    
    (77
    )Cash payments
    
    
    1,895
    
    
    
    164
    
    
    
    27
    
    
    
    2,086Adjustments to reserve
    
    
    250
    
    
    
    (42
    )
    
    
    
    
    
    
    208Closed location reserves at September 30, 2010
    
    $
    (4,397
    )
    
    $
    
    
    
    $
    
    
    
    $
    (4,397
    )
 
 (a)
    
    Lease exit and other related costs are included within cost of equipment rentals in the
condensed consolidated statements of operations. The lease exit portion of the closed
location reserves at September 30, 2010 are expected to be paid over the remaining contractual
term of the leases, which range from seven to 90 months.(b)
    
    Employee termination costs primarily consist of severance payments and related benefits. For
the nine months ended September 30, 2010, the adjustments to the reserve are included within
cost of equipment rentals in the condensed consolidated statements of operations.(c)
    
    Other exit costs include costs incurred primarily to transport fleet from closed locations to
other locations. These costs are included within cost of equipment rentals in the condensed
consolidated statements of operations.  (6) Debt
  September 30,
    
    
    December 31,2010
    
    
    2009DeferredInterest
    
    
    Maturity
    
    
    FinancingRate (a)
    
    
    Date
    
    
    Costs
    
    
    Debt
    
    
    Debt(in 000s)Senior ABL Revolving Facility
    
    
    3.56
    %
    
    
    (b)
    
    
    $
    14,996
    
    
    $
    295,195
    
    
    $
    401,195Second Lien Term Facility
    
    
    9.83
    %
    
    Nov. 2013
    
    
    5,675
    
    
    
    479,395
    
    
    
    479,3952014 Notes
    
    
    9.50
    %
    
    Dec. 2014
    
    
    12,542
    
    
    
    620,000
    
    
    
    620,0002017 Notes
    
    
    10.50
    %
    
    Jul. 2017
    
    
    8,568
    
    
    
    400,000
    
    
    
    400,0002019 Notes
    
    
    10.50
    %
    
    Nov. 2019
    
    
    4,977
    
    
    
    200,000
    
    
    
    200,000Capitalized lease obligations
    
    
    1.16
    %
    
    Various
    
    
    
    
    
    
    78,722
    
    
    
    84,833Total
    
    
    
    
    
    
    
    
    
    $
    46,758
    
    
    
    2,073,312
    
    
    
    2,185,423Original issue discounts (c)
    
    
    n/a
    
    
    
    n/a
    
    
    
    
    
    
    
    (12,488
    )
    
    
    (13,314
    )Total, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,060,824
    
    
    $
    2,172,109
 
 (a)
    
    Estimated interest rate presented is the effective interest rate as of September 30, 2010
including the effect of interest rate swaps and original issue discounts, where applicable,
and excluding the effects of deferred financing costs.(b)
    
    Of the outstanding balance on the Senior ABL Revolving Facility at September 30, 2010, $76.1
million is due November 2011 (the Non-Extending portion) with the remaining $219.1 million
due August 2013 (the Extending portion).(c)
    
    The original issue discount represents the unamortized difference between the $400.0 million
aggregate principal amount of the 2017 Notes and the proceeds received upon issuance and the
unamortized difference between the $200.0 million aggregate principal amount of the 2019 Notes
and the proceeds received upon issuance. 10




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Fair ValueSenior ABL Revolving Facility
    
    $
    295,195Second Lien Term Facility
    
    
    463,5752014 Notes
    
    
    644,1802017 Notes
    
    
    443,5002019 Notes
    
    
    212,500Capitalized lease obligations
    
    
    78,722Total
    
    $
    2,137,672
  (7) Derivative Instruments
   11




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
      12




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 September 30, 2010
    
    December 31, 2009
    
    September 30, 2010
    
    December 31, 2009Loss in
    
    Loss inFair Value of
    
    Fair Value of
    
    accumulated OCL
    
    accumulated OCLDerivative Type
    
    Swap Liabilities
    
    Swap Liabilities
    
    (net of tax) (b)
    
    (net of tax)Interest rate
swaps designated as
hedges (a)
    
    $
    37,435
    
    
    $
    35,755
    
    
    $
    22,739
    
    
    $
    21,772Interest rate swaps
not designated as
hedges (a)
    
    $
    1,691
    
    
    $
    7,068
    
    
    
    N/A
    
    
    
    N/A
 
 (a)
    
    See Note 8 for further discussion on measuring the fair value of the interest rate
swaps.(b)
    
    The Company estimates that approximately $12.4 million of losses in accumulated
other comprehensive loss at September 30, 2010 will be reclassified into earnings during
the next twelve months.   LossLoss recognized in
    
    Loss reclassified from
    
    recognized onaccumulated OCL
    
    accumulated OCL into
    
    ineffective portionDerivative Type
    
    (net of tax)
    
    expense (net of tax)
    
    of derivativeInterest rate swaps
    
    $
    11,489
    
    
    $
    10,522
    
    
    $
    95
  (8) Fair Value
 Measurements
  
    
    Level 1  Observable inputs such as quoted prices in active markets;
    
    Level 2  Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
    
    Level 3  Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own assumptions.
 13




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  SignificantQuoted Prices in
    
    OtherFair Value
    
    Active Markets for
    
    Observable
    
    SignificantSeptember
    
    Identical Assets
    
    Inputs
    
    Unobservable30, 2010
    
    (Level 1)
    
    (Level 2)
    
    Inputs (Level 3)Liabilities from interest rate derivatives (a)
    
    $
    39,126
    
    
    $
    
    
    
    $
    39,126
    
    
    $
    Assets from interest rate derivatives (a)
    
    
    362
    
    
    
    
    
    
    
    362
    
    
    
    
 
 (a)
    
    The Companys interest rate derivative instruments are not traded on a market exchange
and therefore the fair values are determined using valuation models which include
assumptions about interest rates and the Companys and the counterpartys credit risk based
on those observed in the underlying markets (LIBOR swap rate).  (9) Income Tax
    14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Statements in this managements discussion and analysis regarding industry outlook, our
expectations regarding the performance of our business and other non-historical statements are
forward-looking statements. These forward-looking statements are subject to numerous risks and
uncertainties. See Cautionary Note for Forward-Looking Information on page 1 of this Quarterly
Report on Form 10-Q . 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 business
operations and present business environment. It should be read in conjunction with our 2009 Form
10-K, the section entitled Risk Factors in Part II, Item 1A herein and our unaudited condensed
consolidated financial statements for the three and nine months ended September 30, 2010 included
in this Quarterly Report on Form 10-Q .
 Overview
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2010
    
    2009
    
    2010
    
    2009Total revenues
    
    $
    333,784
    
    
    $
    315,564
    
    
    $
    895,521
    
    
    $
    993,395Loss before benefit for income taxes
    
    
    (9,964
    )
    
    
    (12,869
    )
    
    
    (106,194
    )
    
    
    (50,563
    )Net loss
    
    
    (6,422
    )
    
    
    (5,835
    )
    
    
    (66,365
    )
    
    
    (30,829
    )
  Three Months Ended (or at)
    
    Nine Months Ended (or at)September 30,
    
    September 30,2010
    
    2009
    
    2010
    
    2009Adjusted EBITDA (in millions) (a)
    
    $
    118.8
    
    
    $
    107.3
    
    
    $
    276.8
    
    
    $
    322.8Fleet utilization (b)
    
    
    68.7
    %
    
    
    58.9
    %
    
    
    62.4
    %
    
    
    58.0
    %Average fleet age at period end (months) (c)
    
    
    43
    
    
    
    38
    
    
    
    43
    
    
    
    38Original equipment fleet cost (in millions) (d)
    
    $
    2,375
    
    
    $
    2,394
    
    
    $
    2,375
    
    
    $
    2,394
 15




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(a)
    
    Defined as consolidated net loss before net interest expense, income taxes and
depreciation and amortization and before certain other items, including gain on
extinguishment of debt, net, share-based compensation and other (income) expense, net.
Adjusted EBITDA is not a recognized measure under GAAP. See reconciliation between net
loss and Adjusted EBITDA under Liquidity and Capital Resources  Adjusted EBITDA.(b)
    
    Defined as the average aggregate dollar value of equipment rented by customers (based
on original equipment fleet cost OEC) during the relevant period, divided by the average
aggregate dollar value of all equipment owned (based on OEC) during the relevant period.(c)
    
    Defined as the number of months since an equipment unit was first placed in service,
weighted by multiplying individual equipment ages by their respective original costs and
dividing the sum of those individual calculations by the total original cost. Equipment
refurbished by the original equipment manufacturer is considered new.(d)
    
    Defined as the original dollar value of rental equipment purchased from the original
equipment manufacturer (OEM). Fleet purchased from non-OEM sources is assigned a
comparable OEC dollar value at the time of purchase.      16




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Business Environment and Outlook
    Factors Affecting Our Results of Operations
  17




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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.
    
    Sale of merchandise 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 equipment rentals, excluding depreciation, 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 of rental equipment consists of straight-line depreciation of equipment
included in our rental fleet.
    
    Cost of merchandise sales represents the costs of acquiring those items.
    
    Cost of used rental equipment sales represents the net book value of rental equipment at
the date of sale.
    18




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Three Months Ended September 30, 2010, Compared to Three Months Ended September 30, 2009
  Three
Months EndedSeptember 30,
    
    

Percent
of RevenueThree
Months EndedSeptember 30,Increase (decrease)2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010 versus 2009(unaudited)Revenues:Equipment rental revenue
    
    $
    291,671
    
    
    $
    271,547
    
    
    
    87.4
    %
    
    
    86.1
    %
    
    $
    20,124
    
    
    
    7.4
    %Sale of merchandise
    
    
    12,897
    
    
    
    12,633
    
    
    
    3.9
    
    
    
    4.0
    
    
    
    264
    
    
    
    2.1Sale of used rental equipment
    
    
    29,216
    
    
    
    31,384
    
    
    
    8.7
    
    
    
    9.9
    
    
    
    (2,168
    )
    
    
    (6.9
    )Total revenues
    
    
    333,784
    
    
    
    315,564
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    18,220
    
    
    
    5.8Cost of revenues:Cost of equipment rentals,
excluding depreciation
    
    
    149,445
    
    
    
    138,723
    
    
    
    44.8
    
    
    
    44.0
    
    
    
    10,722
    
    
    
    7.7Depreciation of rental equipment
    
    
    68,878
    
    
    
    70,169
    
    
    
    20.6
    
    
    
    22.2
    
    
    
    (1,291
    )
    
    
    (1.8
    )Cost of merchandise sales
    
    
    9,312
    
    
    
    8,775
    
    
    
    2.8
    
    
    
    2.8
    
    
    
    537
    
    
    
    6.1Cost of used rental equipment
sales
    
    
    24,575
    
    
    
    30,117
    
    
    
    7.4
    
    
    
    9.5
    
    
    
    (5,542
    )
    
    
    (18.4
    )Total cost of revenues
    
    
    252,210
    
    
    
    247,784
    
    
    
    75.6
    
    
    
    78.5
    
    
    
    4,426
    
    
    
    1.8Gross profit
    
    
    81,574
    
    
    
    67,780
    
    
    
    24.4
    
    
    
    21.5
    
    
    
    13,794
    
    
    
    20.4Operating expenses:Selling, general and
administrative
    
    
    34,511
    
    
    
    31,970
    
    
    
    10.3
    
    
    
    10.1
    
    
    
    2,541
    
    
    
    7.9Depreciation and amortization
of non-rental equipment and
intangibles
    
    
    10,012
    
    
    
    10,696
    
    
    
    3.0
    
    
    
    3.4
    
    
    
    (684
    )
    
    
    (6.4
    )Other operating gains, net
    
    
    (1,167
    )
    
    
    (119
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (1,048
    )
    
    
    n/aTotal operating expenses,
net
    
    
    43,356
    
    
    
    42,547
    
    
    
    13.0
    
    
    
    13.5
    
    
    
    809
    
    
    
    1.9Operating income
    
    
    38,218
    
    
    
    25,233
    
    
    
    11.4
    
    
    
    8.0
    
    
    
    12,985
    
    
    
    51.5Interest expense, net
    
    
    48,446
    
    
    
    50,666
    
    
    
    14.5
    
    
    
    16.1
    
    
    
    (2,220
    )
    
    
    (4.4
    )Gain on extinguishment of debt, net
    
    
    
    
    
    
    (12,489
    )
    
    
    
    
    
    
    (4.0
    )
    
    
    12,489
    
    
    
    n/aOther income, net
    
    
    (264
    )
    
    
    (75
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (189
    )
    
    
    n/aLoss before benefit for
income taxes
    
    
    (9,964
    )
    
    
    (12,869
    )
    
    
    (3.0
    )
    
    
    (4.1
    )
    
    
    2,905
    
    
    
    n/aBenefit for income taxes
    
    
    3,542
    
    
    
    7,034
    
    
    
    1.1
    
    
    
    2.2
    
    
    
    (3,492
    )
    
    
    n/aNet loss
    
    $
    (6,422
    )
    
    $
    (5,835
    )
    
    
    (1.9
    )%
    
    
    (1.8
    )%
    
    $
    (587
    )
    
    
    n/a
    19




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Nine Months Ended September 30, 2010, Compared to Nine Months Ended September 30, 2009
  Nine
Months EndedSeptember 30,
    
    

Percent
of RevenueNine
Months EndedSeptember 30,Increase (decrease)2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010 versus 2009(unaudited)Revenues:Equipment rental revenue
    
    $
    773,618
    
    
    $
    829,517
    
    
    
    86.4
    %
    
    
    83.5
    %
    
    $
    (55,899
    )
    
    
    (6.7
    )%Sale of merchandise
    
    
    37,588
    
    
    
    40,121
    
    
    
    4.2
    
    
    
    4.0
    
    
    
    (2,533
    )
    
    
    (6.3
    )Sale of used rental equipment
    
    
    84,315
    
    
    
    123,757
    
    
    
    9.4
    
    
    
    12.5
    
    
    
    (39,442
    )
    
    
    (31.9
    )Total revenues
    
    
    895,521
    
    
    
    993,395
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    (97,874
    )
    
    
    (9.9
    )Cost of revenues:Cost of equipment rentals,
excluding depreciation
    
    
    424,659
    
    
    
    423,567
    
    
    
    47.4
    
    
    
    42.6
    
    
    
    1,092
    
    
    
    0.3Depreciation of rental equipment
    
    
    202,921
    
    
    
    217,492
    
    
    
    22.7
    
    
    
    21.9
    
    
    
    (14,571
    )
    
    
    (6.7
    )Cost of merchandise sales
    
    
    27,266
    
    
    
    28,193
    
    
    
    3.0
    
    
    
    2.8
    
    
    
    (927
    )
    
    
    (3.3
    )Cost of used rental equipment
sales
    
    
    73,143
    
    
    
    115,414
    
    
    
    8.2
    
    
    
    11.6
    
    
    
    (42,271
    )
    
    
    (36.6
    )Total cost of revenues
    
    
    727,989
    
    
    
    784,666
    
    
    
    81.3
    
    
    
    79.0
    
    
    
    (56,677
    )
    
    
    (7.2
    )Gross profit
    
    
    167,532
    
    
    
    208,729
    
    
    
    18.7
    
    
    
    21.0
    
    
    
    (41,197
    )
    
    
    (19.7
    )Operating expenses:Selling, general and
administrative
    
    
    101,256
    
    
    
    107,096
    
    
    
    11.3
    
    
    
    10.8
    
    
    
    (5,840
    )
    
    
    (5.5
    )Depreciation and amortization
of non-rental equipment and
intangibles
    
    
    29,979
    
    
    
    33,672
    
    
    
    3.3
    
    
    
    3.4
    
    
    
    (3,693
    )
    
    
    (11.0
    )Other operating gains, net
    
    
    (3,617
    )
    
    
    (233
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (3,384
    )
    
    
    n/aTotal operating expenses,
net
    
    
    127,618
    
    
    
    140,535
    
    
    
    14.3
    
    
    
    14.1
    
    
    
    (12,917
    )
    
    
    (9.2
    )Operating income
    
    
    39,914
    
    
    
    68,194
    
    
    
    4.5
    
    
    
    6.9
    
    
    
    (28,280
    )
    
    
    (41.5
    )Interest expense, net
    
    
    146,472
    
    
    
    130,911
    
    
    
    16.4
    
    
    
    13.2
    
    
    
    15,561
    
    
    
    11.9Gain on extinguishment of debt, net
    
    
    
    
    
    
    (12,489
    )
    
    
    
    
    
    
    (1.3
    )
    
    
    12,489
    
    
    
    n/aOther (income) expense, net
    
    
    (364
    )
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    (699
    )
    
    
    n/aLoss before benefit for
income taxes
    
    
    (106,194
    )
    
    
    (50,563
    )
    
    
    (11.9
    )
    
    
    (5.1
    )
    
    
    (55,631
    )
    
    
    n/aBenefit for income taxes
    
    
    39,829
    
    
    
    19,734
    
    
    
    4.4
    
    
    
    2.0
    
    
    
    20,095
    
    
    
    n/aNet loss
    
    $
    (66,365
    )
    
    $
    (30,829
    )
    
    
    (7.4
    )%
    
    
    (3.1
    )%
    
    $
    (35,536
    )
    
    
    n/a
    22




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23




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Liquidity and Capital Resources
 Cash Flows and Liquidity
   24




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Nine months endedSeptember 30,2010
    
    
    2009(in 000s)Net cash provided by operating activities
    
    $
    312,449
    
    
    $
    230,217Net cash (used in) provided by investing activities
    
    
    (183,108
    )
    
    
    101,297Net cash used in financing activities
    
    
    (129,006
    )
    
    
    (327,195
    )Effect of foreign exchange rates on cash
    
    
    694
    
    
    
    1,001Net increase in cash and cash equivalents
    
    $
    1,029
    
    
    $
    5,320
  Operating activities  ,
 .
 Investing activities 
  Financing activities 
  Indebtedness
   25




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Outlook
  26




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Adjusted EBITDA
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s)Net loss
    
    $
    (6,422
    )
    
    $
    (5,835
    )
    
    $
    (66,365
    )
    
    $
    (30,829
    )Depreciation of rental equipment
and depreciation and amortization
of non-rental equipment and
intangibles
    
    
    78,890
    
    
    
    80,865
    
    
    
    232,900
    
    
    
    251,164Interest expense, net
    
    
    48,446
    
    
    
    50,666
    
    
    
    146,472
    
    
    
    130,911Benefit for income taxes
    
    
    (3,542
    )
    
    
    (7,034
    )
    
    
    (39,829
    )
    
    
    (19,734
    )EBITDA
    
    $
    117,372
    
    
    $
    118,662
    
    
    $
    273,178
    
    
    $
    331,512Adjustments:Gain on extinguishment of debt, net
    
    
    
    
    
    
    (12,489
    )
    
    
    
    
    
    
    (12,489
    )Share-based compensation
    
    
    1,708
    
    
    
    1,179
    
    
    
    3,966
    
    
    
    3,473Other (income) expense, net
    
    
    (264
    )
    
    
    (75
    )
    
    
    (364
    )
    
    
    335Adjusted EBITDA
    
    $
    118,816
    
    
    $
    107,277
    
    
    $
    276,780
    
    
    $
    322,831
 27




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s)Net cash provided by operating activities
    
    $
    142,556
    
    
    $
    107,033
    
    
    $
    312,449
    
    
    $
    230,217Gain on sales of rental and non-rental
property and equipment, net of non-cash
writeoffs
    
    
    4,310
    
    
    
    713
    
    
    
    9,635
    
    
    
    6,329Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    1,736
    
    
    
    Cash paid for interest
    
    
    33,301
    
    
    
    20,314
    
    
    
    126,655
    
    
    
    104,402Cash received for taxes, net
    
    
    (25,489
    )
    
    
    (12,733
    )
    
    
    (25,562
    )
    
    
    (7,098
    )Other (income) expense, net
    
    
    (264
    )
    
    
    (75
    )
    
    
    (364
    )
    
    
    335Changes in other operating assets and liabilities
    
    
    (35,598
    )
    
    
    (7,975
    )
    
    
    (147,769
    )
    
    
    (11,354
    )Adjusted EBITDA
    
    $
    118,816
    
    
    $
    107,277
    
    
    $
    276,780
    
    
    $
    322,831
 Free Cash Flow
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s)Net cash provided by operating activities
    
    $
    142,556
    
    
    $
    107,033
    
    
    $
    312,449
    
    
    $
    230,217Purchases of rental equipment
    
    
    (118,748
    )
    
    
    (15,151
    )
    
    
    (265,714
    )
    
    
    (33,488
    )Purchases of property and equipment
    
    
    (3,995
    )
    
    
    (708
    )
    
    
    (5,630
    )
    
    
    (2,597
    )Proceeds from sales of rental equipment
    
    
    29,216
    
    
    
    31,384
    
    
    
    84,315
    
    
    
    123,757Proceeds from sale of property and equipment
    
    
    533
    
    
    
    2,409
    
    
    
    2,185
    
    
    
    10,539Insurance proceeds from rental equipment
and property claims
    
    
    
    
    
    
    
    
    
    
    1,736
    
    
    
    3,086Net capital (expenditures) inflows
    
    
    (92,994
    )
    
    
    17,934
    
    
    
    (183,108
    )
    
    
    101,297Free cash flow
    
    $
    49,562
    
    
    $
    124,967
    
    
    $
    129,341
    
    
    $
    331,514
 Critical Accounting Policies and Estimates
  28




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Recent Accounting Pronouncements
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
   29




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Currency Exchange Risk
  
 Item 4. Controls and Procedures
  Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  30




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PART II. Other Information
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  Certain existing stockholders of RSC Holdings have significant control over our company and large
ownership positions that could be sold, transferred or distributed.
  We have elected to be exempt from certain corporate governance requirements since we are a
controlled company within the meaning of the NYSE Rules and, as a result, our stockholders do not
have the protections afforded by these corporate governance requirements for so long as our
election continues.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Reserved
 
 Item 5. Other Information
  31




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##### Table of Contents



Item 6. Exhibits
 Exhibits and Financial Statement Schedules
 Incorporated By ReferenceExhibit Number
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Filed Herewith10.1
    
    Executive
Employment and
Noncompetition
Agreement, by and
between Patricia D.
Chiodo and RSC
Holdings Inc.,
effective October
1, 2010
    
    8-K
    
    001-33485
    
    
    10.1
    
    
    9/27/201031.1
    
    Certification of
Chief Executive
Officer as required
by Rule 13a-14(a)
of the Securities
Exchange Act of
1934, as amended
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of
Chief Financial
Officer as required
by Rule 13a-14(a)
of the Securities
Exchange Act of
1934, as amended
    
    
    
    
    
    
    
    
    
    
    
    X32.1
    
    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
    
    
    
    
    
    
    
    
    
    
    
    X
 32




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##### Table of Contents



SIGNATURES
  RSC Holdings Inc.
 Signature
    
    Title
    
    Date/s/ Erik Olsson

Erik Olsson
    
    President, Chief Executive Officer and Director
(Principal Executive Officer)
    
    October 21, 2010/s/ Patricia D. Chiodo

Patricia D. Chiodo
    
    Senior Vice President and Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
    
    October 21, 2010
 33




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##### Table of Contents



EXHIBIT INDEX
 Incorporated By ReferenceExhibit Number
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Filed Herewith10.1
    
    Executive
Employment and
Noncompetition
Agreement, by and
between Patricia D.
Chiodo and RSC
Holdings Inc.,
effective October
1, 2010
    
    8-K
    
    001-33485
    
    
    10.1
    
    
    9/27/201031.1
    
    Certification of
Chief Executive
Officer as required
by Rule 13a-14(a)
of the Securities
Exchange Act of
1934, as amended
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of
Chief Financial
Officer as required
by Rule 13a-14(a)
of the Securities
Exchange Act of
1934, as amended
    
    
    
    
    
    
    
    
    
    
    
    X32.1
    
    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
    
    
    
    
    
    
    
    
    
    
    
    X
 34