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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 June 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.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    22-1669012(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)6929 E. Greenway Pkwy.Scottsdale, Arizona
    
    85254(Address of principal executive offices)
    
    (Zip code)
 (480) 905-3300  (Registrants telephone number,
  N/A  (Former name, former address and former fiscal year, if changed since
   þ o
  o o
  Large accelerated filer o   
    Accelerated filer þ
    Non accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
  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 June 30, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2010 and June 30, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the  six months ended June 30, 2010 and June 30, 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7ITEM 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16ITEM 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    28ITEM 4.Controls and Procedures
    
    
    29PART II.Other Information
    
    
    29ITEM 1.Legal Proceedings
    
    
    29ITEM 1A.Risk Factors
    
    
    30ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30ITEM 3.Defaults Upon Senior Securities
    
    
    30ITEM 4.Reserved
    
    
    30ITEM 5.Other Information
    
    
    30ITEM 6.Exhibits
    
    
    31SIGNATURES
    
    
    32EX-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 testing springing covenants of leverage and fixed charge coverage contained in
our Senior ABL Revolving Facility credit agreement;
    
    our ability to comply with our debt covenants;
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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)
 June 30,
    
    
    December 31,2010
    
    
    2009AssetsCash and cash equivalents
    
    $
    11,029
    
    
    $
    4,535Accounts receivable, net of allowance for doubtful
accounts of $10,851 and $10,741 at June 30, 2010 and
December 31, 2009, respectively
    
    
    196,679
    
    
    
    181,975Inventory
    
    
    13,539
    
    
    
    14,421Rental equipment, net of accumulated depreciation of
$1,062,744 and $1,016,606 at June 30, 2010 and
December 31, 2009, respectively
    
    
    1,347,910
    
    
    
    1,384,999Property and equipment, net of accumulated
depreciation of $193,412 and $180,495 at June 30, 2010
and December 31, 2009, respectively
    
    
    111,896
    
    
    
    123,197Goodwill and other intangibles, net
    
    
    939,682
    
    
    
    940,063Deferred financing costs
    
    
    49,920
    
    
    
    55,539Other assets
    
    
    19,554
    
    
    
    24,590Total assets
    
    $
    2,690,209
    
    
    $
    2,729,319Liabilities and Stockholders (Deficit) EquityAccounts payable
    
    $
    168,728
    
    
    $
    46,275Accrued expenses and other liabilities
    
    
    172,470
    
    
    
    174,829Debt
    
    
    2,107,727
    
    
    
    2,172,109Deferred income taxes
    
    
    275,042
    
    
    
    312,465Total liabilities
    
    
    2,723,967
    
    
    
    2,705,678Commitments and contingenciesPreferred stock, no par value, (500,000 shares
authorized, no shares issued and outstanding at June
30, 2010 and December 31, 2009)
    
    
    
    
    
    
    Common stock, no par value, (300,000,000 shares
authorized, 103,456,886 shares issued and outstanding
at June 30, 2010 and 103,412,561 shares issued and
outstanding at December 31, 2009)
    
    
    831,854
    
    
    
    829,288Accumulated deficit
    
    
    (859,785
    )
    
    
    (799,842
    )Accumulated other comprehensive loss
    
    
    (5,827
    )
    
    
    (5,805
    )Total stockholders (deficit) equity
    
    
    (33,758
    )
    
    
    23,641Total liabilities and stockholders (deficit) equity
    
    $
    2,690,209
    
    
    $
    2,729,319
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RSC HOLDINGS INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Equipment rental revenue
    
    $
    259,734
    
    
    $
    270,500
    
    
    $
    481,947
    
    
    $
    557,970Sale of merchandise
    
    
    13,270
    
    
    
    13,588
    
    
    
    24,691
    
    
    
    27,488Sale of used rental equipment
    
    
    27,993
    
    
    
    42,470
    
    
    
    55,099
    
    
    
    92,373Total revenues
    
    
    300,997
    
    
    
    326,558
    
    
    
    561,737
    
    
    
    677,831Cost of revenues:Cost of equipment rentals, excluding
depreciation
    
    
    143,988
    
    
    
    135,365
    
    
    
    275,214
    
    
    
    284,844Depreciation of rental equipment
    
    
    67,398
    
    
    
    72,060
    
    
    
    134,043
    
    
    
    147,323Cost of merchandise sales
    
    
    9,880
    
    
    
    9,418
    
    
    
    17,954
    
    
    
    19,418Cost of used rental equipment sales
    
    
    23,931
    
    
    
    39,505
    
    
    
    48,568
    
    
    
    85,297Total cost of revenues
    
    
    245,197
    
    
    
    256,348
    
    
    
    475,779
    
    
    
    536,882Gross profit
    
    
    55,800
    
    
    
    70,210
    
    
    
    85,958
    
    
    
    140,949Operating expenses:Selling, general and administrative
    
    
    32,967
    
    
    
    35,613
    
    
    
    66,745
    
    
    
    75,126Depreciation and amortization of
non-rental equipment and intangibles
    
    
    9,910
    
    
    
    11,194
    
    
    
    19,967
    
    
    
    22,976Other operating gains, net
    
    
    (138
    )
    
    
    (222
    )
    
    
    (2,450
    )
    
    
    (114
    )Total operating expenses, net
    
    
    42,739
    
    
    
    46,585
    
    
    
    84,262
    
    
    
    97,988Operating income
    
    
    13,061
    
    
    
    23,625
    
    
    
    1,696
    
    
    
    42,961Interest expense, net
    
    
    48,233
    
    
    
    40,035
    
    
    
    98,026
    
    
    
    80,245Other expense (income), net
    
    
    99
    
    
    
    107
    
    
    
    (100
    )
    
    
    410Loss before benefit for income taxes
    
    
    (35,271
    )
    
    
    (16,517
    )
    
    
    (96,230
    )
    
    
    (37,694
    )Benefit for income taxes
    
    
    13,156
    
    
    
    5,027
    
    
    
    36,287
    
    
    
    12,700Net loss
    
    $
    (22,115
    )
    
    $
    (11,490
    )
    
    $
    (59,943
    )
    
    $
    (24,994
    )Weighted average shares outstanding used in
computing net loss per common share:Basic and diluted
    
    
    103,506
    
    
    
    103,435
    
    
    
    103,491
    
    
    
    103,432Net loss per common share:Basic and diluted
    
    $
    (0.21
    )
    
    $
    (0.11
    )
    
    $
    (0.58
    )
    
    $
    (0.24
    )
  4




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RSC HOLDINGS INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months Ended June 30,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net loss
    
    $
    (59,943
    )
    
    $
    (24,994
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    154,010
    
    
    
    170,299Amortization of deferred financing costs
    
    
    6,348
    
    
    
    5,215Amortization of original issue discount
    
    
    543
    
    
    
    Share-based compensation expense
    
    
    2,258
    
    
    
    2,294Gain on sales of rental and non-rental property and equipment, net of
non-cash writeoffs
    
    
    (5,325
    )
    
    
    (5,616
    )Deferred income taxes
    
    
    (37,442
    )
    
    
    (16,759
    )Gain on insurance settlement
    
    
    (1,736
    )
    
    
    Interest expense on hedge ineffectiveness
    
    
    33
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (15,304
    )
    
    
    73,167Inventory
    
    
    877
    
    
    
    3,367Other assets
    
    
    5,389
    
    
    
    3,680Accounts payable
    
    
    122,854
    
    
    
    (67,293
    )Accrued expenses and other liabilities
    
    
    (2,669
    )
    
    
    (20,176
    )Net cash provided by operating activities
    
    
    169,893
    
    
    
    123,184Cash flows from investing activities:Purchases of rental equipment
    
    
    (146,966
    )
    
    
    (18,337
    )Purchases of property and equipment
    
    
    (1,635
    )
    
    
    (1,889
    )Proceeds from sales of rental equipment
    
    
    55,099
    
    
    
    92,373Proceeds from sales of property and equipment
    
    
    1,652
    
    
    
    8,130Insurance proceeds from rental equipment and property claims
    
    
    1,736
    
    
    
    3,086Net cash (used in) provided by investing activities
    
    
    (90,114
    )
    
    
    83,363Cash flows from financing activities:Proceeds from Senior ABL Revolving Facility
    
    
    84,000
    
    
    
    60,816Payments on Senior ABL Revolving Facility
    
    
    (141,000
    )
    
    
    (250,038
    )Payments on Senior ABL Term Loan
    
    
    
    
    
    
    (1,250
    )Payments on capital leases and other debt
    
    
    (15,969
    )
    
    
    (22,197
    )Payments for deferred financing costs
    
    
    (1,109
    )
    
    
    (4,087
    )Proceeds from stock option exercises
    
    
    308
    
    
    
    256Increase in outstanding checks in excess of cash balances
    
    
    
    
    
    
    4,772Net cash used in financing activities
    
    
    (73,770
    )
    
    
    (211,728
    )Effect of foreign exchange rates on cash
    
    
    485
    
    
    
    238Net increase (decrease) in cash and cash equivalents
    
    
    6,494
    
    
    
    (4,943
    )Cash and cash equivalents at beginning of period
    
    
    4,535
    
    
    
    13,670Cash and cash equivalents at end of period
    
    $
    11,029
    
    
    $
    8,727
  5




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RSC HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
 Six Months Ended June 30,2010
    
    
    2009(In thousands)Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    93,354
    
    
    $
    84,088Cash (received) paid for taxes, net
    
    
    (73
    )
    
    
    5,635Supplemental schedule of non-cash investing and financing activities:Purchase of assets under capital lease obligations
    
    $
    8,043
    
    
    $
    895Accrued deferred financing costs
    
    
    254
    
    
    
    1,999
  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 (continued)
(Unaudited)
  (2) Fair Value of Financial Instruments
    (3) Net Loss per Share
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s except per share data)Numerator:Net loss
    
    $
    (22,115
    )
    
    $
    (11,490
    )
    
    $
    (59,943
    )
    
    $
    (24,994
    )Denominator:Weighted average shares  basic
    
    
    103,506
    
    
    
    103,435
    
    
    
    103,491
    
    
    
    103,432Employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares  diluted
    
    
    103,506
    
    
    
    103,435
    
    
    
    103,491
    
    
    
    103,432Net loss per common share  basic and diluted
    
    $
    (0.21
    )
    
    $
    (0.11
    )
    
    $
    (0.58
    )
    
    $
    (0.24
    )Anti-dilutive stock based awards excluded
    
    
    6,703
    
    
    
    5,385
    
    
    
    6,377
    
    
    
    5,339
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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
  (4) Accumulated Other Comprehensive (Loss) Income
  Foreign
    
    
    Fair Market
    
    
    Accumulated OtherCurrency
    
    
    Value of Cash
    
    
    ComprehensiveTranslation
    
    
    Flow Hedges
    
    
    (Loss) Income(in 000s)Balance at December 31, 2009
    
    $
    15,967
    
    
    $
    (21,772
    )
    
    $
    (5,805
    )Foreign currency translation
    
    
    (55
    )
    
    
    
    
    
    
    (55
    )Change in fair value of cash flow hedges, net of tax
    
    
    
    
    
    
    33
    
    
    
    33Balance at June 30, 2010
    
    $
    15,912
    
    
    $
    (21,739
    )
    
    $
    (5,827
    )
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s)Net loss
    
    $
    (22,115
    )
    
    $
    (11,490
    )
    
    $
    (59,943
    )
    
    $
    (24,994
    )Currency translation adjustments
    
    
    (3,622
    )
    
    
    7,320
    
    
    
    (55
    )
    
    
    5,277Change in fair value of cash flow hedges, net of tax
    
    
    (101
    )
    
    
    5,955
    
    
    
    33
    
    
    
    4,723Comprehensive (loss) income
    
    $
    (25,838
    )
    
    $
    1,785
    
    
    $
    (59,965
    )
    
    $
    (14,994
    )
 (5) Closed Location Charges
   9




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
   Lease Exitand Other
    
    
    EmployeeRelated Costs
    
    
    Termination
    
    
    Other Exit Costs(a)
    
    
    Costs (b)
    
    
    (c)
    
    
    TotalClosed location reserves at December 31, 2009
    
    $
    (6,492
    )
    
    $
    (122
    )
    
    $
    
    
    
    $
    (6,614
    )Charges incurred to close locations
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    (30
    )Cash payments
    
    
    1,296
    
    
    
    135
    
    
    
    30
    
    
    
    1,461Adjustments to reserve
    
    
    251
    
    
    
    (20
    )
    
    
    
    
    
    
    231Closed location reserves at June 30, 2010
    
    $
    (4,945
    )
    
    $
    (7
    )
    
    $
    
    
    
    $
    (4,952
    )
 
 (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 June 30, 2010 are expected to be paid over the remaining contractual term
of the leases, which range from three to 93 months.(b)
    
    Employee termination costs primarily consist of severance payments and related benefits. For
the six months ended June 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.  10




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
 (6) Debt
  June 30,
    
    
    December 31,2010
    
    
    2009DeferredInterest
    
    
    Maturity
    
    FinancingRate (a)
    
    
    Date
    
    Costs
    
    
    Debt
    
    
    Debt(in 000s)Senior ABL Revolving Facility
    
    
    3.65
    %
    
    (b)
    
    $
    16,907
    
    
    $
    344,195
    
    
    $
    401,195Second Lien Term Facility
    
    
    9.83
    %
    
    Nov. 2013
    
    
    6,092
    
    
    
    479,395
    
    
    
    479,3952014 Notes
    
    
    9.50
    %
    
    Dec. 2014
    
    
    13,136
    
    
    
    620,000
    
    
    
    620,0002017 Notes
    
    
    10.50
    %
    
    Jul.   2017
    
    
    8,779
    
    
    
    400,000
    
    
    
    400,0002019 Notes
    
    
    10.50
    %
    
    Nov. 2019
    
    
    5,006
    
    
    
    200,000
    
    
    
    200,000Capitalized lease obligations
    
    
    0.72
    %
    
    Various
    
    
    
    
    
    
    76,908
    
    
    
    84,833Total
    
    
    
    
    
    
    
    $
    49,920
    
    
    
    2,120,498
    
    
    
    2,185,423Original issue discounts (c)
    
    
    n/a
    
    
    n/a
    
    
    
    
    
    
    (12,771
    )
    
    
    (13,314
    )Total, net
    
    
    
    
    
    
    
    
    
    
    
    $
    2,107,727
    
    
    $
    2,172,109
 
 (a)
    
    Estimated interest rate presented is the effective interest rate as of June 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 June 30, 2010, $88.8
million is due November 2011 (the Non-Extending portion) with the remaining $255.4 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.   Fair ValueSenior ABL Revolving Facility
    
    $
    344,195Second Lien Term Facility
    
    
    435,0512014 Notes
    
    
    620,1552017 Notes
    
    
    428,0002019 Notes
    
    
    200,000Capitalized lease obligations
    
    
    76,908Total
    
    $
    2,104,309
  11




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




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RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
    June 30, 2010
    
    December 31, 2009
    
    June 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)
    
    $
    35,733
    
    
    $
    35,755
    
    
    $
    21,739
    
    
    $
    21,772Interest rate swaps
not designated as
hedges (a)
    
    $
    3,438
    
    
    $
    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 $11.2 million of losses in accumulated
other comprehensive loss at June 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
    
    $
    7,393
    
    
    $
    7,426
    
    
    $
    33
 13




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##### Table of Contents



RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
  (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.
  SignificantQuoted Prices in
    
    OtherActive Markets for
    
    Observable
    
    SignificantFair Value
    
    Identical Assets
    
    Inputs
    
    UnobservableJune 30, 2010
    
    (Level 1)
    
    (Level 2)
    
    Inputs (Level 3)Liabilities from interest rate derivatives (a)
    
    $
    39,171
    
    
    $
    
    
    
    $
    39,171
    
    
    $
    Assets from interest rate derivatives (a)
    
    
    203
    
    
    
    
    
    
    
    203
    
    
    
    
 
 (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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##### Table of Contents



RSC HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
  15




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##### Table of Contents



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 six months ended June 30, 2010 included in this
Quarterly Report on Form 10-Q.
 Overview
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009Total revenues
    
    $
    301.0
    
    
    $
    326.6
    
    
    $
    561.7
    
    
    $
    677.8Loss before benefit for income taxes
    
    
    (35.3
    )
    
    
    (16.5
    )
    
    
    (96.2
    )
    
    
    (37.7
    )Net loss
    
    
    (22.1
    )
    
    
    (11.5
    )
    
    
    (59.9
    )
    
    
    (25.0
    )
  Three Months Ended (or at)
    
    Six Months Ended (or at)June 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009Adjusted EBITDA (in millions) (a)
    
    $
    92.0
    
    
    $
    108.0
    
    
    $
    158.0
    
    
    $
    215.6Fleet utilization (b)
    
    
    63.5
    %
    
    
    57.5
    %
    
    
    59.2
    %
    
    
    57.6
    %Average fleet age at period end (months) (c)
    
    
    42
    
    
    
    36
    
    
    
    42
    
    
    
    36Original equipment fleet cost (in millions) (d)
    
    $
    2,337
    
    
    $
    2,455
    
    
    $
    2,337
    
    
    $
    2,455
 16




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##### Table of Contents



(a)
    
    Defined as consolidated net loss before net interest expense, income taxes and
depreciation and amortization and before certain other items, including, share-based
compensation and other expense (income), 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.     Business Environment and Outlook
  17




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Factors Affecting Our Results of Operations
  18




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##### Table of Contents



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.
    19




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##### Table of Contents



Three Months Ended June 30, 2010, Compared to Three Months Ended June 30, 2009
  Percent of RevenueThree Months Ended
    
    
    Three Months EndedJune 30,
    
    
    June 30,
    
    
    Increase (decrease)2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010 versus 2009(unaudited)Revenues:Equipment rental revenue
    
    $
    259,734
    
    
    $
    270,500
    
    
    
    86.3
    %
    
    
    82.8
    %
    
    $
    (10,766
    )
    
    
    (4.0
    )%Sale of merchandise
    
    
    13,270
    
    
    
    13,588
    
    
    
    4.4
    
    
    
    4.2
    
    
    
    (318
    )
    
    
    (2.3
    )Sale of used rental equipment
    
    
    27,993
    
    
    
    42,470
    
    
    
    9.3
    
    
    
    13.0
    
    
    
    (14,477
    )
    
    
    (34.1
    )Total revenues
    
    
    300,997
    
    
    
    326,558
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    (25,561
    )
    
    
    (7.8
    )Cost of revenues:Cost of equipment rentals,
excluding depreciation
    
    
    143,988
    
    
    
    135,365
    
    
    
    47.8
    
    
    
    41.5
    
    
    
    8,623
    
    
    
    6.4Depreciation of rental equipment
    
    
    67,398
    
    
    
    72,060
    
    
    
    22.4
    
    
    
    22.1
    
    
    
    (4,662
    )
    
    
    (6.5
    )Cost of merchandise sales
    
    
    9,880
    
    
    
    9,418
    
    
    
    3.3
    
    
    
    2.9
    
    
    
    462
    
    
    
    4.9Cost of used rental equipment
sales
    
    
    23,931
    
    
    
    39,505
    
    
    
    8.0
    
    
    
    12.1
    
    
    
    (15,574
    )
    
    
    (39.4
    )Total cost of revenues
    
    
    245,197
    
    
    
    256,348
    
    
    
    81.5
    
    
    
    78.5
    
    
    
    (11,151
    )
    
    
    (4.3
    )Gross profit
    
    
    55,800
    
    
    
    70,210
    
    
    
    18.5
    
    
    
    21.5
    
    
    
    (14,410
    )
    
    
    (20.5
    )Operating expenses:Selling, general and
administrative
    
    
    32,967
    
    
    
    35,613
    
    
    
    11.0
    
    
    
    10.9
    
    
    
    (2,646
    )
    
    
    (7.4
    )Depreciation and amortization
of non-rental equipment and
intangibles
    
    
    9,910
    
    
    
    11,194
    
    
    
    3.3
    
    
    
    3.4
    
    
    
    (1,284
    )
    
    
    (11.5
    )Other operating gains, net
    
    
    (138
    )
    
    
    (222
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    84
    
    
    
    n/aTotal operating expenses,
net
    
    
    42,739
    
    
    
    46,585
    
    
    
    14.2
    
    
    
    14.3
    
    
    
    (3,846
    )
    
    
    (8.3
    )Operating income
    
    
    13,061
    
    
    
    23,625
    
    
    
    4.3
    
    
    
    7.2
    
    
    
    (10,564
    )
    
    
    (44.7
    )Interest expense, net
    
    
    48,233
    
    
    
    40,035
    
    
    
    16.0
    
    
    
    12.3
    
    
    
    8,198
    
    
    
    20.5Other expense, net
    
    
    99
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    n/aLoss before benefit for
income taxes
    
    
    (35,271
    )
    
    
    (16,517
    )
    
    
    (11.7
    )
    
    
    (5.1
    )
    
    
    (18,754
    )
    
    
    n/aBenefit for income taxes
    
    
    13,156
    
    
    
    5,027
    
    
    
    4.4
    
    
    
    1.5
    
    
    
    8,129
    
    
    
    n/aNet loss
    
    $
    (22,115
    )
    
    $
    (11,490
    )
    
    
    (7.3
    )%
    
    
    (3.5
    )%
    
    $
    (10,625
    )
    
    
    n/a
    20




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21




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Six Months Ended June 30, 2010, Compared to Six Months Ended June 30, 2009
  Percent of RevenueSix Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    Increase (decrease)2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010 versus 2009(unaudited)Revenues:Equipment rental revenue
    
    $
    481,947
    
    
    $
    557,970
    
    
    
    85.8
    %
    
    
    82.3
    %
    
    $
    (76,023
    )
    
    
    (13.6
    )%Sale of merchandise
    
    
    24,691
    
    
    
    27,488
    
    
    
    4.4
    
    
    
    4.1
    
    
    
    (2,797
    )
    
    
    (10.2
    )Sale of used rental equipment
    
    
    55,099
    
    
    
    92,373
    
    
    
    9.8
    
    
    
    13.6
    
    
    
    (37,274
    )
    
    
    (40.4
    )Total revenues
    
    
    561,737
    
    
    
    677,831
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    (116,094
    )
    
    
    (17.1
    )Cost of revenues:Cost of equipment rentals,
excluding depreciation
    
    
    275,214
    
    
    
    284,844
    
    
    
    49.0
    
    
    
    42.0
    
    
    
    (9,630
    )
    
    
    (3.4
    )Depreciation of rental equipment
    
    
    134,043
    
    
    
    147,323
    
    
    
    23.9
    
    
    
    21.7
    
    
    
    (13,280
    )
    
    
    (9.0
    )Cost of merchandise sales
    
    
    17,954
    
    
    
    19,418
    
    
    
    3.2
    
    
    
    2.9
    
    
    
    (1,464
    )
    
    
    (7.5
    )Cost of used rental equipment
sales
    
    
    48,568
    
    
    
    85,297
    
    
    
    8.6
    
    
    
    12.6
    
    
    
    (36,729
    )
    
    
    (43.1
    )Total cost of revenues
    
    
    475,779
    
    
    
    536,882
    
    
    
    84.7
    
    
    
    79.2
    
    
    
    (61,103
    )
    
    
    (11.4
    )Gross profit
    
    
    85,958
    
    
    
    140,949
    
    
    
    15.3
    
    
    
    20.8
    
    
    
    (54,991
    )
    
    
    (39.0
    )Operating expenses:Selling, general and
administrative
    
    
    66,745
    
    
    
    75,126
    
    
    
    11.9
    
    
    
    11.1
    
    
    
    (8,381
    )
    
    
    (11.2
    )Depreciation and amortization
of non-rental equipment and
intangibles
    
    
    19,967
    
    
    
    22,976
    
    
    
    3.6
    
    
    
    3.4
    
    
    
    (3,009
    )
    
    
    (13.1
    )Other operating gains, net
    
    
    (2,450
    )
    
    
    (114
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (2,336
    )
    
    
    n/aTotal operating expenses,
net
    
    
    84,262
    
    
    
    97,988
    
    
    
    15.0
    
    
    
    14.5
    
    
    
    (13,726
    )
    
    
    (14.0
    )Operating income
    
    
    1,696
    
    
    
    42,961
    
    
    
    0.3
    
    
    
    6.3
    
    
    
    (41,265
    )
    
    
    (96.1
    )Interest expense, net
    
    
    98,026
    
    
    
    80,245
    
    
    
    17.5
    
    
    
    11.8
    
    
    
    17,781
    
    
    
    22.2Other (income) expense, net
    
    
    (100
    )
    
    
    410
    
    
    
    
    
    
    
    0.1
    
    
    
    (510
    )
    
    
    n/aLoss before benefit for
income taxes
    
    
    (96,230
    )
    
    
    (37,694
    )
    
    
    (17.1
    )
    
    
    (5.6
    )
    
    
    (58,536
    )
    
    
    n/aBenefit for income taxes
    
    
    36,287
    
    
    
    12,700
    
    
    
    6.5
    
    
    
    1.9
    
    
    
    23,587
    
    
    
    n/aNet loss
    
    $
    (59,943
    )
    
    $
    (24,994
    )
    
    
    (10.7
    )%
    
    
    (3.7
    )%
    
    $
    (34,949
    )
    
    
    n/a
    22




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23




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows and Liquidity
   Six months endedJune 30,2010
    
    
    2009(in 000s)Net cash provided by operating activities
    
    $
    169,893
    
    
    $
    123,184Net cash (used in) provided by investing activities
    
    
    (90,114
    )
    
    
    83,363Net cash used in financing activities
    
    
    (73,770
    )
    
    
    (211,728
    )Effect of foreign exchange rates on cash
    
    
    485
    
    
    
    238Net increase (decrease) in cash and cash equivalents
    
    $
    6,494
    
    
    $
    (4,943
    )
  Operating activities  ,
  Investing activities 
 24




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##### Table of Contents



Financing activities 
 Indebtedness
    25




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##### Table of Contents



Outlook
   Adjusted EBITDA
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s)Net loss
    
    $
    (22,115
    )
    
    $
    (11,490
    )
    
    $
    (59,943
    )
    
    $
    (24,994
    )Depreciation of rental
equipment and depreciation
and amortization of
non-rental equipment and
intangibles
    
    
    77,308
    
    
    
    83,254
    
    
    
    154,010
    
    
    
    170,299Interest expense, net
    
    
    48,233
    
    
    
    40,035
    
    
    
    98,026
    
    
    
    80,245Benefit for income taxes
    
    
    (13,156
    )
    
    
    (5,027
    )
    
    
    (36,287
    )
    
    
    (12,700
    )EBITDA
    
    $
    90,270
    
    
    $
    106,772
    
    
    $
    155,806
    
    
    $
    212,850Adjustments:Share-based compensation
    
    
    1,595
    
    
    
    1,162
    
    
    
    2,258
    
    
    
    2,294Other expense (income), net
    
    
    99
    
    
    
    107
    
    
    
    (100
    )
    
    
    410Adjusted EBITDA
    
    $
    91,964
    
    
    $
    108,041
    
    
    $
    157,964
    
    
    $
    215,554
 26




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##### Table of Contents



Free Cash Flow
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in 000s)Net cash provided by operating activities
    
    $
    104,412
    
    
    $
    57,054
    
    
    $
    169,893
    
    
    $
    123,184Purchase of rental equipment
    
    
    (102,060
    )
    
    
    (9,746
    )
    
    
    (146,966
    )
    
    
    (18,337
    )Purchases of property and equipment
    
    
    (1,304
    )
    
    
    (782
    )
    
    
    (1,635
    )
    
    
    (1,889
    )Proceeds from sales of rental equipment
    
    
    27,993
    
    
    
    42,470
    
    
    
    55,099
    
    
    
    92,373Proceeds from sale of property and equipment
    
    
    356
    
    
    
    4,671
    
    
    
    1,652
    
    
    
    8,130Insurance proceeds from rental equipment
and property claims
    
    
    
    
    
    
    1,086
    
    
    
    1,736
    
    
    
    3,086Net capital (expenditures) inflows
    
    
    (75,015
    )
    
    
    37,699
    
    
    
    (90,114
    )
    
    
    83,363Free cash flow
    
    $
    29,397
    
    
    $
    94,753
    
    
    $
    79,779
    
    
    $
    206,547
 Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
    27




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
     28




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##### Table of Contents



Currency Exchange Risk
  
 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
   29




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##### Table of Contents



Item 1A.  
Risk Factors
   
 Item 2.
 Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
 Defaults Upon Senior Securities
  
 Item 4.
 Reserved
 
 Item 5.
 Other Information
  30




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##### Table of Contents



Item 6.  Exhibits
 Exhibits and Financial Statement Schedules
 Incorporated By ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.1
    
    Amended and Restated Executive Employment and
Noncompetition Agreement by and between
Patricia D. Chiodo and RSC Equipment Rental,
Inc. effective November 28, 2006
    
    10-Q
    
    001-33485
    
    
    10.1
    
    
    4/23/201010.2
    
    Form of Stock Option Agreement
    
    8-K
    
    001-33485
    
    
    10.1
    
    
    4/23/201010.3
    
    Form of Stock Option Agreement for Long-Term
Incentive Equity Awards
    
    8-K
    
    001-33485
    
    
    10.2
    
    
    4/23/201010.4
    
    Form of Employee Restricted Stock Unit Agreement
    
    8-K
    
    001-33485
    
    
    10.3
    
    
    4/23/201031.1
    
    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
 31




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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)
    
    July 22, 2010/s/ Patricia D. Chiodo

Patricia D. Chiodo
    
    Vice President, Controller and Interim
Chief Financial Officer (Principal
Financial and
Principal Accounting Officer)
    
    July 22, 2010
 32




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##### Table of Contents



EXHIBIT INDEX
 Incorporated By ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.1
    
    Amended and
Restated Executive
Employment and
Noncompetition
Agreement by and
between Patricia D.
Chiodo and RSC
Equipment Rental,
Inc. effective
November 28, 2006
    
    10-Q
    
    001-33485
    
    
    10.1
    
    
    4/23/201010.2
    
    Form of Stock Option Agreement
    
    8-K
    
    001-33485
    
    
    10.1
    
    
    4/23/201010.3
    
    Form of Stock Option Agreement for Long-Term
Incentive Equity Awards
    
    8-K
    
    001-33485
    
    
    10.2
    
    
    4/23/201010.4
    
    Form of Employee Restricted Stock Unit Agreement
    
    8-K
    
    001-33485
    
    
    10.3
    
    
    4/23/201031.1
    
    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
 33